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How to design for intelligent decision making? Mental models

By | All, Behavioural Science, Personal Development

We want to introduce you to one of our intellectual heroes. A man who turned 95 on January 1st of 2019. There’s a fair chance that you’ve never heard about him. But you definitely have heard about his 88 years old associate, Warren Buffett. The man we’re talking about is Charlie Munger.

Charlie Munger

Worldly Wisdom

Charlie Munger became a hero to many people who are interested in better decision-making with a famous lecture he gave in 1994 at USC business school. The talk was called “A Lesson on Elementary, Worldly Wisdom As It Relates To Investment Management & Business”. You can’t find it on Youtube, but the transcript was published on the blog of startup Incubator Ycombinator and in the curious book “Poor Charlie’s Almanack, The Wit and Wisdom of Charles T. Munger“.

I want to urge you to read the transcript of the lecture. It’s one of the most exciting texts you will ever read. I re-read it at least three times per year. In this lecture on Worldly Wisdom, Charlie Munger argues that the reason why Munger and Buffett beat the market with their investments, for more than 60 years is that they have a different approach to decision making. Munger argues that if you want to make better decisions, you need to use more than one mental models to look a the problem. One of his famous quotes to make his point is the following:

“To a man with a hammer, every problem looks like a nail”.

He argues that most people in business, everyday life and investing approach problems from a single mental model. If you work in branding, everything looks like a branding problem, if you work in business consulting, everything sounds like a transformation problem. If you are an economist, everything looks like a market-problem.

Munger and Buffett pride themselves with locking themselves up most of the day, reading books. What they are looking for is elementary worldly wisdom.They are obsessed with learning interesting “mental models”. Mental models are concepts from all kinds of sciences that offer elegant explanations to the world. To quote Munger:

“What is elementary, worldly wisdom? Well, the first rule is that you can’t really know anything if you just remember isolated facts and try and bang ’em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form.

You’ve got to have models in your head. And you’ve got to array your experience—both vicarious and direct—on this latticework of models. You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life. You’ve got to hang experience on a latticework of models in your head”.

A list of mental models.

There’s a lot of renewed excitement for Munger’s idea of Mental Models. Shane Parish, host of the amazing podcast “The Knowledge Project” and author of Farnamstreet, the ultimate blog on better decision-making by learning from the smartest people in the world. Shane Parish is writing a book on the subject. He recently published a post called “Mental Models, the best way to make intelligent decisions (109 models explained)“. It’s a list of all the mental models that he is using in his daily life. A lot of these models are concepts from cognitive psychology and the science of influence.  BTW, Munger is also fascinated with how human decision-making works. If you understand how people think and why they do what they do, you can do a much better job at predicting and changing their behaviour.

Want to learn more:

  1. Here’s another great blogposts on Mental models (Thanks for sharing: Ed Borsboom)
  2. Start making a list of your favorite mental models in your todo-list. I use Wunderlist. I created a folder “Mental Models” and started the habit to post concepts I use a lot in my thinking. My most recent one is this: “You are the sum of the five people you hang around with”.
  3. Re-read your mental model list regularly. Once you use them to look at challenges or problems, they will always provide you with new ways of looking at the problem and its solutions.

Enjoy Munger while he’s still alive. 🙂
Kind regards,

Tom, Astrid and the SUE | Behavioural Design Team

PS: We had Munger’s mental models in mind when we designed the program of the Behavioural Design Acacademy master classes. Our program is designed to teach you some very powerful and easy to remember mental models for finding human insights and for coming up with smart interventions for behavioural change. #funfact.

A clusterfuck

How to live a meaningful life in a world that is spinning out of control?

By | All, Personal Development

A slightly modified version of this blog was posted on our Behavioural Design Digest Newsletter (subscribe now). 

In this blog I want to share a couple of thoughts on how we can use a better understanding of human decision making to cope with the complicated challenges of our time. I want to make the case for living an anti-fragile life. It’s a bit of a provocative story, but it has a happy ending with some very practical guidelines on how live a great life. So please bear with me.

I’m not going to make silly predictions of what will be big next year. These forecasts are utterly pointless. On the one hand, because these forecasts are not meant to predict the future, but to show off the depth of expertise for the one who’s making them. On the other hand, because the future is becoming increasingly complex and complicated at an accelerating speed. Please allow me to zoom in on these two concepts.

Accelerating Complexity

The future is complex because of exponential technologies. Technological progress is now accelerating so fast that a lot of things that seemed impossible two years ago are already achieved. Just to give you a couple of recent examples that were featured in Peter Diamandis’ amazing newsletter on exponential technologies.

The speed with which radical technological changes are being introduced is so beyond the scope of what we can imagine, that I think it’s just pointless to think about which technology will grow incrementally in 2019.

Accelerating Complications

The second problem with forecasting is that the future is that we have to deal with accelerating complications. Stability is rapidly crumbling on a global scale. The failure of the radicalised free-market to create prosperity and wealth for the many, instead of the few, has set into motion accelerating public anger towards the leading elites. This resulted in a global rise in the demand for radical leaders. This accelerating demand for radical nationalistic leaders has created a critical threshold of leaders that make any coordinated attempt to fight the wicked problems of this time impossible. The Trumps, Putin’s, Orban’s, etc. of this world continuously need to signal their virility to their base. In the world of the alpha male leader, compromises are for pussies.

The big problem of this critical decade is that the demand for strong leadership is only understood by radical demagogues who seize the moment to offer the public what they need –  which is simple explanations and simple answers -, thereby making the complexity of both the problems and the solutions even further out of reach.

Meanwhile, the clock is ticking, An ecosystem collapse is taking place. The bottom of the food pyramid is crumbling. Populations of Insects, birds, bees are rapidly declining. Global warming is spinning out of control, creating rising sea levels and more draught, leading to more refugees, leading to more instability. It’s basically a clusterfuck running out of control.

Human irrationality is making things worse

So we have to deal with accelerating complexity and accelerating complications. To make matters worse: humans have all kinds of mental flaws that make it impossible for us to make rational decisions and judgements to solve these challenges. In an accelerating complex world, we just have to revert to simple shortcuts for decisionmaking to make sense of things. Elites feel more and more entitled to their wealth because they think they earned it. It’s not: It’s the system that decides who gets the opportunities and who’s not. The middle-class is more and more sold for the story that it’s the immigrants and the politicians are responsible for their declining wealth. It’s not: it’s global financial markets and the monopolistic multi-nationals. It’s not too far fetched to think of global capitalism as a virus that turned into cancer, whereby rogue cells are rapidly killing all the healthy cells that keep an organism alive. Local politicians are powerless.

Another bias is the presence bias: we are not able to see changes, because they are not changing our surroundings fast enough. We like to look at the future as a simple continuous line evolving from what we know from the presence and the past. The optimism bias is also related to this: We tend to think the future will be positive and problems will be solved in time.

I hate to say it, but let’s face it: It looks pretty grim, doesn’t it?

A happy ending

Am I a pessimist? No! Those of you who know me, know I’m a very lighthearted person. But I’m not stupid. And I’m not blind. I know we much rather prefer to turn our head away, but this is the – fascinating – time we’re living in. So we have to put our big boy and girls pants on and face things as they are.

In the context of little positive outlooks, how can you remain optimistic and positive? It definitely helps to be an atheist. The only point in life is to experience love, find passions and explore curiosity. If you are able to design your life around these three principles, then you’re going to live a happy life as long as you live. Because – in case you missed the meeting – we’re all going to die.

A second thing you can do is to practice anti-fragility.  I love the concept of anti-fragility as proposed by Nicolas Nassim Taleb. Anti-fragile systems increase in strength, because of stress, shocks, attacks or failures. The better we get in dealing with randomness, change, bad luck and errors, the stronger we will become. Being an entrepreneur creates a natural context for becoming anti-fragile: you’re always experimenting, tinkering and failing your way forward. Taleb also suggests staying out of debt as fast as you can.  And take a lot of small risks instead of significant risks. You can find more tips on how to live an anti-fragile life here.

I can’t predict what 2019 will look like. The only thing I can wish for is to be prepared for unexpected shocks in the system that follows from accelerating complexity and accelerating complications. And if these shocks won’t come in 2019, then my practicing in anti-fragility will have helped me to have a year as great as 2018. I wish you a lot of anti-fragility in 2019.

Enjoy the holidays!
Tom

Image courtesy: A great metaphor for a clusterfuck.

System 1 and 2 quick guide

By | All

In our post ‘Kahneman Fast and Slow thinking explained‘ we have elaborated in depth on system 1 and 2 thinking and Daniel Kahneman’s work. This post is meant for those who already grasp the groundbreaking concepts of Kahneman on human decision making as explained in his book ‘Thinking Fast and Slow‘. But now and then need a visual reminder of the differences between system 1 and 2. We have made an overview with the main characteristics of both the system 1 and system 2 operating systems in our brain by highlighting the differences between the two.

system 1 and 2

Thinking Fast and Slow is all about how our brain uses short-cuts to base our decisions upon. One of the short-cuts that have been tested in scientific research is the use of the picture of a brain, as depicted above. The research showed that if you use a picture of a brain, for example on your keynote slides, the system 1 of your listeners will think you are smart.

We thought it was a nice tip, before we give you the overview or quick guide, that we’ve very smartly put together. It is just one of the examples of how powerful the understanding of system 1 and 2 thinking can be. And if you start accepting that we are all irrational human beings, driven by our subconscious you start to understand how you can influence behaviour without changing minds.

                     

      System 1 System 2
Unconscious reasoning Conscious reasoning
Judgments based on intuition Judgments based on examination
Processes information quickly Processes information slowly
Hypothetical reasoning Logical reasoning
Large capacity Small capacity
Prominent in humans and animals Prominent only in humans
Unrelated to working memory Related to working memory
Effortlessly and automatically With effort and control
Unintentional thinking Intentional thinking
Influenced by experiences, emotions and memories Influenced by facts, logic and evidence
Can be overridden by System 2 Used when System 1 fails to form a logical/acceptable conclusion
Prominent since human origins Developed over time
Includes recognition, perception, orientation, etc. Includes rule following, comparisons, weighing of options, etc.

Would you like to know more?

How to create Excitement for a Design Sprint?

By | All, Service Design, SUE Amsterdam & Behavioural Design Academy originals

A Design Sprint is a thrilling experience. You get to collaborate with your clients on trying to crack problems that deeply concerns them. However, a Design Sprint also requires a big leap of faith. What you ask them is to agree on a process, much more than an outcome. That’s not a small thing to ask. You will need to take away a couple of anxieties first. Not only to reassure them, but also to give them the ammunition to persuade their stakeholders. I want to share five insights we’ve learned over the last couple of years.

Tip 1: Address process anxiety at the start of the sprint.

I always begin my sprints with a “trust the process” slide. I acknowledge that their will be times when they will become a bit impatient, or that they will become worried about where the outcome is heading. I warn them that a design sprint is a systematic creative approach to turn profound insights on how their customers think and behave into innovative solutions. The best way to come up with new answers to solving problems is to be patient and to resist the urge to come up with ideas and solutions too fast. When you address this at the start of your sprint, you can come back to it easily whenever friction arises.

Tip 2: Explain why research and prototyping is so valuable

Whether the goal of the sprint is to create new value propositions or service and product innovations, the underlying promise is that the Sprint will provide them with a systematic approach to solve customer problems. The beauty of a (behavioural) design sprint is that its setup forces the participants to approach the problem with a rigor they haven’t probably experienced before: The sprint method forces them to get a better understanding the problem. It forces them to formulate hypotheses on how to solve those problems. It forces them to prototype multiple solutions, and finally, it forces them to learn which prototype works and why it works. By going through these steps, the (Behavioural) Design Sprint protects client teams against their own biases, and it protects them from the HIPPO in the room. The HIPPO is the Highest Paid Person in the Organization, who believes he/she is being paid to know best what the right strategy is. This alone already makes a sprint incredibly valuable.

Tip 3: Take away budget anxieties by anchoring the alternative

A Behavioural Design Sprint requires a considerable investment of time and money. You can’t do a sprint properly if you haven’t got a full-time dedication from your clients. Moreover, a Sprint with experienced Sprint Facilitators also requires a financial commitment. However, look at it this way: First of all, there’s a huge hidden cost of not developing a strategy through rapid prototyping. Imagine you come up with a strategy yourself and you ask your advertising/digital/design agency to execute it. Only to find out that you acted on the wrong assumptions after you produced the whole campaign or designed the product innovation. A (Behavioural) Design Sprint – and the act of prototyping and testing – at the start of your process minimizes this risk and maximizes the chances that you will be doing the right things and doing them right.

“There’s no such thing as a smooth waterfall from research to strategy to creativity to production. In every step of the process, everyone always wants to reinvent the wheel all over again”.

Another way to look at the cost of a behavioural Design Sprint is to compare it with how things are usually done. First clients pay a research agency to do the research. Then they hire a strategy consultancy to help with the strategy. Then they hire a design or advertising agency to bring the strategy to life. Not only do they need to pay three different agencies, but the level of noise and the loss of insights that this process produces is just gigantic. There’s no such thing as a smooth waterfall from research to strategy to creativity to production. In every step of the process, everyone always wants to reinvent the wheel all over again.

Tip 4: Make your client fall in love with the customer problem

A design sprint is a highly structured process to explore new answers for critical marketing or business problems. One of the first things you realize when you start with your customer interviews is that the briefing nearly always is asking the wrong question. The question we tend to ask is the question of how to improve our products and services to get people to buy them. After a couple of customer interviews, you always realize you’re asking the wrong question. You will come up with more intriguing answers when you turn the question outside-in:

“How might we help people to achieve their goals, dreams, and desires in the best possible way?”

Once the sprint team falls in love with the Job-To-Be-Done of the target audience at the offset of the sprint, the sprint becomes way more interesting. (Check out this 4 minute video in which we explain Job-to-be-Done thinking)

Tip 5: Create a shared language

I always found that once the sprint team embraces a shared language to look at the sprint goal, to define the real customer problem and to ask the right questions in the ideation round, magic starts to happen. For us, this is one of the most powerful benefits of our Behavioral Design Method. However, this applies to every human-centric framework you will use. When everyone is trying to answer the same customer-centric questions like “Are we really solving the customer’s Job-To-Be-Done, or “Is this a real customer pain?” or “Are we sufficiently taking away anxieties and other barriers” or “What can we do to make the desired behaviour easier?”, you will witness that you have created a group that is will dedicate itself to solve the problem together.

More on this topic:

Three Cardinal Sins against Customer Centricity in Finance

Three Techniques that will Supercharge your team’s creativity

Video: The Influence Framework: A magical tool to turn human understanding into ideas for Behavioural Change.

Why research is too important to leave it to market research agencies (Dutch)

De onzin van het opsplitsen van onderzoek, strategie, creatie en productie


Learn more about SUE’s Behavioural Design Sprint, a five-day sprint to solve critical marketing and business problems. We combine the method of Design Thinking with principles from Behavioural Psychology to discover human insights, come up with solutions that change behaviour and test them right away with the target audience to learn what works and why.

How can we help with your Challenges?

1. Get inspired, Subscribe for free to our popular bi-weekly mail on Behavioural Design skills.
2. Get answers, Do a Behavioural Design Sprint with us and come up with proven strategies to change behaviour.
3. Get skills, Book a seat at a two-day masterclass to become a certified Behavioural Designer.

 

 

 

How Brett Kavanaugh and his Republican Senators only made it worse

How The Senate Hearing of Brett Kavanaugh turned into a framing nightmare for Republicans

By | All, Government & Politics

Framing Blunder 1: Attack a likable opponent

In theory, a Senate hearing is supposed to be nothing more than a carefully crafted show to shape public perception. The stakes for the hearing last night were enormous. Republicans have a small window of opportunity to install an extreme conservative Supreme Court Judge who can block every progressive legislation for the next 40 years. There’s only little problem: The guy is being accused by several women to be an alcohol abusing sexual predator.

How Brett Kavanaugh and his Republican Senators only made it worse

So what do you do? How do you solve this problem? The classic Republican approach is following one of Roger Stone’s Rules: Attack, Attack, Attack, Never Defend. They knew they had to discredit the female accuser. But they had two big problems:

  1. Mrs Ford is a Professor in Psychology. A woman who can’t be out-bluffed. She’s tough as a nail.
  2. The similar case of Anita Hill, who accused a Supreme Court Judge in 1991, had taught them that a group of old male Senators, attacking the credibility of a victim of sexual abuse, resulted in both a PR and an electoral nightmare

Framing blunder 2: Misjudge the setting

They had figured it all out: They would avoid making this mistake again by letting a female prosecutor doing the questioning of Mrs Ford. And they would do the questioning of Brett Kavanaugh. The spectacle that followed was a disaster. A hand grenade exploding in their face. As fans of political framing it reminded us of watching a Bruce Willis movie with your friends, eating popcorn and yelling at the scream. This is what happend:

  1. First of all the prosecutor turned out to be an ice cold woman. The contrast with the decent and likable Mrs Ford couldn’t be sharper.
  2. As a result the Senators in the back looked like a bunch of cowards for not daring to do the dirty work themselves.
  3. The contrast with Brett Kavanaugh was enormous. He acted agitated, bothered, offended, throwing all kinds of accusations at everyone, interrupting senators, etc. Let’s say that he did a great job in confirming the image of a high school bully called Brett. Not the kind of temper you want for a Supreme Court judge.
  4. Mrs Ford did a brilliant job in speaking in System 1 terms. She captured the imagination, which is way much powerful than talking to the rational mind. When she was asked about the strongest memory of the abuse she painted an incredibly powerful image: ““Indelible in the hippocampus is the laughter, the uproarious laughter, and their having fun at my expense. I was underneath one of them while the two laughed. Two friends having a really good time with one another.”

Framing blunder 3: Don’t Think of an Elephant

The most disastrous part had yet to come. Republican Senators tried to help Kavanaugh by posing all kinds of questions about his drinking behaviour. That would allow him to deny the accusations. But one of the first rules of political framing, named after the essential book by George Lakoff: Don’t Think of an Elephant. If you repeat the frame, even if you try to deny it, you make the frame stronger. The classic example of this is when President Nixon said: I am not a crook. That’s the moment when his days were over. He got stuck with the word “Crook”.

Now picture this: A group of old Republican Senators, who kept asking questions to Kavanaugh about sex and alcohol. The more they asked the worse he sounded. They asked him if he ever passed out. If he ever woke up not knowing where he was? How much of a drinking problem does he really have? It was a gift that kept on giving. The only conclusion you could think of when watching this spectacle: This guy is guilty.

More Behavioural Design Thinking on Framing:

The consumer behind the rise of Trump (English)
Power Talk: How framing reality determines our perception (English)
Campagnes zijn smerige Framing oorlogen (Dutch)
Hoe progressieven moeten leren Framen (Dutch)

——–

Curious for more?

  1. Get inspired, Subscribe for free to our popular bi-weekly mail on Behavioural Design skills.
  2. Get answers, Do a Behavioural Design Sprint with us and come up with strategies and ideas that work quickly.
  3. Get skills, Book a seat at a two-day masterclass to become a certified Behavioural Designer.

 

Why Nir Eyal is a bit of a hypocrite

By | All, Behavioural Science, SUE Amsterdam & Behavioural Design Academy originals

Nir Eyal – the author of the book Hooked – taught a whole generation of designers and developers how to make people addicted to technology, by using techniques from behavioural psychology. Eyal demonstrated in his book how to design habits – a newspeak word for addiction – through the principle of variable rewards. The more a product or service rewards you in unpredictable ways, the more we will get hooked. There’s nothing our brain finds more appealing than the joy of anticipation.

The principle of variable rewards

Gambling addicts know this all too well. Casino’s designed gambling machines in such a way that they reward the gambler once in a while. Just enough to keep the player in a psychological status of being “on the verge of an epic win.” The effect is that the player continues to play until he runs out of money.

Well designed games use the same mechanisms. Jane McGonigal included in her fantastic book “Reality is Broken” pictures of the facial expression of people who are on the verge of an epic win. It’s like they’re about to get an orgasm.

Face of a gamer who's on the verge of an epic dwin, illustrating the power of variable rewards.

Face of a gamer who’s on the verge of an epic dwin, illustrating the power of variable rewards.

The secret behind gambling addiction and game addiction is a carefully designed reward system. And by writing the book Hooked, Nir Eyal brought these dark principles to the world of technology to teach technology companies to get their users addicted to their products. And based on the time we spend on our devices, they paid great attention. We’re always alert for this one crucial e-mail, that one little instant message, or the Facebook notification that could make our day. Most of the time it’s nothing, but once in a while, it’s a bingo! That’s variable rewards.

Why Nir Eyal is a hypocrite for blaming the user

My problem with Nir Eyal is not his work. On the contrary. I think Hooked – and the principle of variable rewards – holds enormous opportunities to apply these design principles to design positive behaviours. Think about the worldwide wave of positive Karma that the Japanese soccer fans received for cleaning up the stadium after their national team got beaten in the second round of the World Cup last month.

Japanese fans cleaning up after their national team lost the 1/16 final of the World Cup against Belgium

Japanese fans cleaning up after their national team lost the 1/16 final of the World Cup against Belgium

What I do think is problematic, is that Nir Eyal refuses to be held accountable for the global wave of smartphone addiction. In a recent interview with Dutch newspaper NRC, he claims that we are entirely responsible for our addictive behaviours. We shouldn’t blame Facebook. It’s us who lack discipline. That’s utter bollocks of course. The simple truth is that we’re fighting an unfair battle. Our mental control can’t possibly win from the refined techniques that continuously attack, exploit and reward our unconscious desires. Technology Ethicist Tristan Harris calls “a race to the bottom of the brain stem.”

I think that we need to get in terms with the fact that the science of influence is out in the open. The clock can’t be turned back on this. Ever since the invention of fire, humanity both did terrific as well as horrifying things with their newly acquired superpowers. However, in the right hands, we can do amazing things with these superpowers, such as designing healthy habits or altruistic behaviours. But in the wrong, greedy hands, the knowledge can go evil. Think Facebook, think Trump. Think Brexit. It seems like Nir Eyal opened pandora’s box and can’t close it anymore. It would suit him if he stopped being a hypocrite about it.

Related blogs:

The Dark Wisdom: How Design Manipulates the Way we Think, Feel and Behave.

How to create Change by Design, a blog on how to apply Behavioural Design to solving wicked problems.


Get your ticket for Behavioural Design Fest, September 21st, Amsterdam

Three Cardinal Sins against Customer-Centricity in Finance

By | All, Finance & Money, SUE Amsterdam & Behavioural Design Academy originals

Last week, I was attending a keynote presentation by the CEO of one of the biggest Belgian banks. He was presenting the story of the digital transformation of his bank and he brought it as if it was a visionary story. And although the man certainly had excellent presentation skills, I somehow got annoyed with his storyline. Probably in the first place because it felt like 2007 was back with cliché-slides as “Shift Happens”, “The Consumer is in Control” and “Remember Altavista? Look at what Google Did!”. But the second reason for my annoyance had to do with something more profound. He was preaching the “customer-first”-mantra, while in reality, his story had absolutely nothing to do with customer-first. It was very obviously “Bank-First”, under the disguise of “we want to make it more simple for the customer to buy more stuff”.

In my view, his keynote sinned against three cardinal sins of customer-centric innovation. And I want to argue that you can find these three cardinal sins in every digital transformation pitch by gurus, consultants and managers. So what I want to do is to put the spotlight on each of these three sins and I want to use the next blog post to suggest how you can transform these cardinal sins into decisive action.

Cardinal Sin 1: The customer as consumer at the heart of the strategy

At the heart of all these digital transformation keynotes sits the demanding, narcissistic customer. This customer is said to be spoiled by the speed and simplicity of Google, the absurd logistics of Amazon and the mobile interface-perfection of Apple and Facebook. What follows is that all these corporations assume that it’s exactly this demanding and spoiled attitude what makes this customer so different from the good old days. The CEO shared an example in his keynote of how his bank redesigned a front-office and back-office process to allow a customer to open an account in a couple of minutes on his smartphone. The bank would reward this customer with € 5, allowing him to walk into a Starbucks and buy a coffee just minutes after opening his account.

The problem with this example is that the banker looks at his customer with a “consumer”-frame in his mind. But when you look at the customer as a moody, demanding, click-trigger happy cowboy, and you build your processes and services around this persona, you’re doomed to lose the battle. Because the real challenges where every digital transformation project should focus on, are the challenges and problems that the human behind the customer is facing. And those problems are on an entirely different level: An incapability to build wealth, or to become financially independent. 95% of the people are financially illiterate and could really use some help to construct financial buffers, make smarter investments, generate passive income, etc. Thát’s the real design-briefing for which financial institutions need to develop intelligent answers. A better interface just a simple hygiene-factor for which they do need to catch up. To design your entire digital infrastructure around a spoiled persona is, to put it mildly, incomplete. And to put it more bluntly: out of touch with the real world.

Cardinal Sin 2: Evil KPI’s

Every time you hear Mark Zuckerberg doing an interview, he keeps insisting that the interest of the Facebook-community is central to everything the company does. In a recent interview on Reid Hofmann’s Masters of Scale-podcast, he says: “Our mission at Facebook is to discover where our community wants us to go.” With this mission in mind, Facebook employees conduct hundreds of experiments each day. Mark Zuckerberg is convinced that the world will be a better place if Facebook discovers what people want.

The only problem with this mantra is that Facebook has become a public company in 2012. And once a company goes public, its primal reason for existence is to create shareholder value. And the number one metric to create shareholder value is “engagement”: when as many people as possible, return to Facebook as many times as possible to serve them as many ads as possible.

Facebook-scientists, Facebook-algorithms and the Facebook-AI work really hard to generate a maximum amount of “engagement”, which, frankly, is newspeak for addiction: 1) The company has perfected the way notifications trigger little dopamine-shots in the brain in order to get people to return to the platform over and over again. Nir Eyal describes this addictive design in the book Hooked. 2) The algorithms and the Facebook-AI also know that the best way to get people more engaged is by fueling outrage. Nothing fuels better engagement than extreme content. The reason why a relatively small Russian troll-farm could have such a significant impact on the US-elections is that they correctly understood that outrage is the fuel that drives the Facebook-algoritms.

The point I’m making is this: Although Facebook’s rhetoric may be full of storytelling on “connecting” and “creating a better, more open world”, it’s business metric drives the behaviour of the company in a different direction. To maximize “time-on-device” and “engagement” to generate as many opportunities as possible to serve ads to people, has, in reality, led Facebook, its employees, its algorithms and its Artificial Intelligence to steer on more evil KPI’s like Facebook-addiction, craving for constant social recognition and political polarization.

This brings me back to the banker. His “digital transformation with the customer at the center” eventually also steers on traditional banking-KPI’s of selling as many products and triggering as many transactions as possible. Of course, there’s nothing wrong with this. The bank needs to make a living. However, if they would also steer on real customer-centric KPI’s, I guess they would be much more successful. If they were to focus on maximizing spending power, maximizing investment capacity or capacity to loan, maximizing interest,… they would easily be able to come up with tons of new services for which their customers would never want to switch to another bank again.

Cardinal Sin 3: An inadequate understanding of the good life.

Behind all these digital transformation stories I never hear the philosophical question whether all these changes are actually meaningful. If the goal of all these digital transformation projects is to help a spoiled consumer to buy everything faster and more frictionless, then the vision they have on humanity is incredibly limited. You can read in it the fulfilment of the ultimate corporate wet dream of reducing every human to a consumer.

Today, this reductionist consumerist vision leads to two crises of epic proportion. Of course, there’s first and foremost the ecological crisis. The speed with which our consumption behaviour is exhausting the earth and its vital resources is not sustainable. Read Kate Raworth’s “Doughnut Economics” or watch her Ted-talk.

But next to this ecological crisis we are also in the middle of a more profound psychological crisis. The more gratification we can buy, the less we seem to enjoy. The more we pursue impulses and individual greed, the emptier our existence appears to become. This crisis of meaning could well become the biggest crisis of the 21st century. It is funny in that context to observe that all those “Silicon Valley”-bobos are utterly obsessed with Stoic philosophy. Because they no longer know how to enjoy, they go back to the answers formulated two millennia ago.

In his keynote, the banker does not say a word about how the derailed banking world wants to play a meaningful role again in the lives its customers. We know what happened in 2008 with the money people entrusted to the banks. That turned out to be nothing more than casino money for speculation to increase the profits of the banks and the bonuses of the bankers. The fantastic challenges for the banks are nevertheless obvious: Helping freelancers to make ends meet. Protecting the middle class from loss of wealth and poverty in their old age (which is something the Dutch Rabobank is actively working on for example). Investing in projects that promote public prosperity. Boosting general well-being. Helping people to make their capital work for them. Looking for new ways to let the abundance of capital in the market find their way to entrepreneurs. Managing an aging population. Speeding up urbanization. Financing sustainability,…

There are so many opportunities to use digital transformation to become truly indispensable in the economy. So many possibilities to become incredibly relevant, once you put the human behind the customer at the center of your digital transformation. Simply start with replacing this spoiled persona at the heart of your transformation story with the citizen who has more and more difficulties to live a carefree life in increasingly difficult times.

 

Tom De Bruyne
Co-Founder SUE Amsterdam and the Behavioural Design Academy.

 

Cover image by April under Creative Commons License.

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What’s Neymar worth? A lesson in price psychology.

By | All, Finance & Money, SUE Amsterdam & Behavioural Design Academy originals

Behavioural economics has always been fascinated by pricing. Classic economic thinking has taught us that a price is a fair representation of supply and demand. A rational or even objective evaluation of worth. But in practice, nothing holds further from the truth than this assumption. Almost nothing is more subjective or manipulative than the price of things. Our unconsciousness uses price as an irrational shortcut to evaluate the value of things. Driving up prices or value perception without any logical or objective explanation: Something is expensive so it must be good.

Some examples to illustrate this. For most wine buyers the price of a bottle of wine is the only cue on which they base their quality judgment of wine. A bottle of wine that is priced from 9,99 to 5,99 gives you the feeling that within your wanted price range of a table wine you suddenly get access to a high-quality wine. If the same bottle of wine were just priced 5,99, it just would feel like a table wine. Something happens in your value perception by the price indication. Another classic example of irrational value perception is the introduction of the black pearls in the twenties. When the first black pearls were discovered, nobody wanted to have them. People were used to white pearls and had no idea if black pearls were as valuable as white pearls. The distributor of the black pearls than made a genius move. He retracted all black pearls from the market and paid the world famous Tiffany’s New York to expose them in their window next to ridiculously expensive jewelry items. Suddenly everybody had to have the black pearls, and they were willing to pay a price that was a multitude of the original market price of the black pearls. The rest is history. Black pearls are still more expensive than their white sisters and brothers.

One of the key concepts of psychology is called price cluelessness. We don’t have any concept of what the price of something should be. Our brain solves this problem, by unconsciously looking for clues to help us answer a simple question: Is this product a bargain or is it overpriced? And that’s where things go wrong because most mental shortcuts we use aren’t only incorrect, they are also professionally abused by product suppliers.

A perfect example of this is the recent price escalation in soccer. This summer Neymar was sold by FC Barcelona to Paris Saint-Germain for a staggering 220 million Euros. The story behind this outrageous price is that Barcelona had put a leaver clause in Neymar’s contract of 200 million Euros to protect themselves from people buying this crucial player from them. They never expected that somebody would be that crazy to pay for such an excessive amount. But that was just peanuts for some wealthy oil sheiks that simply wanted Neymar to play for their Paris club.

The price that paid for Neymar just became the price that someone was prepared to pay for something he wants to own. But the effect was greater than this: What happened next is that the whole soccer transfer world went berserk. The price paid for Neymar became the new price anchor against which the value of all players is measured. In a few days time, the prices that used to be paid for players have been wiped off the table. Lionel Messi got a leaver clause of 300 million Euros in his contract, Ronaldo has to do with a clause of mere one milliard Euros. On the last day of the transfer period, Barcelona paid a 100 million Euros for 20-year-old Dembele, who ‘just’ had an estimated worth of 40 million Euros a few days before. Early summer, Manchester United bought the Belgian player Romelu Lukaku for 85 million from Everton. Jose Mourinho, the coach of Manchester United, actually called this a bargain. One month later, when the whole Neymar price spectacle took place, the transfer of Lukaku could easily have cost the club 115 million Euros.

Markets are irrational. The price paid for Neymar was nothing more than an excess of ultra-rich oil billionaires. But the price paid for Newmar ignited a chain reaction of reactions, tactics, and strategies that caused every player transfer to conform to this new price benchmark. In the end, the soccer market is not that much different from the housing market: It is an artificial bubble that will implode. Behind the game with a ball, there is a game with aggressive investors that will earn crazy amounts of money by blowing up this bubble. When the bubble pops, as it always does eventually, it will be only a few already filthy rich people that will profit while others will have to pay the painful and sometimes lifelong price of having bought something overpriced that has suddenly has lost its value. No billionaire will help you there; they are buying something outrageously new already.

 

SUE Amsterdam is helping clients to conquer the challenges of fast-changing markets by making their marketing and communication smarter using insights from behavioural psychology. We’ll help you get a grip on the needs, wants, and decisions of your customers by becoming radically human-centered. Exposing new opportunities and developing creative ideas that will influence the choices of your users and nudge them to the desired behaviour. We apply our Behavioural Design Method in which we train and coach our clients on the project. This way we can not only come up with winning ideas together, but client teams also master the method themselves. Do you want master behavioural psychology? Take part in the Behavioural Design Academy. You’ll learn the science of influence in just two days.

 

Cover image by Leonid Domnitser under Creative Commons license.

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3 techniques that will supercharge your team’s creativity

By | All, HR & Organisation, Personal Development, SUE Amsterdam & Behavioural Design Academy originals

Brainstorms must die

Before we get to the goods of supercharging your team’s creativity, there’s one thing that needs to be taken care of first: Dead to the brainstorm. Maybe it sounds a bit harsh, but sorry, there’s no pardoning act. Brainstorms should die. The ‘inventor’ of the brainstorm Alex F. Osborn gave birth to brainstorms in 1939. So, it’s about time for a makeover. But let’s not question his intentions. According to Wikipedia Mr. Osborn “Was frustrated by employees’ inability to develop creative ideas individually for ad campaigns, in response, he began hosting group-thinking sessions.” And it still holds true: Solitary creative processes have an entirely different dynamic and output than a process in which great minds collide.

But why, oh why, are we then all still trapped in those everlasting flip-over led sessions that feel like such a waste of time and resources and where great minds tend to collapse instead of connecting?

But why, oh why, are we then all still trapped in those everlasting flip-over led sessions that feel like such a waste of time and resources and where great minds tend to collapse instead of connecting? Looking at brainstorms from a human psychology perspective, there’s a quite simple explanation. When a group engages in a group think process, the leader of the pack prevails. It is just nature. The one who is the loudest is heard the most. And the highest in rank at the table is often followed. The real problem with this is that a group only delivers a fraction of the possible number of ideas in a brainstorm.

 

How to supercharge the creative capital of a group

But there’s an upside to this: Research shows that teams are terrible in coming up with ideas but great in selecting ideas. So, if we fix the ideation part of the process, we can create magic. In fact, three simple behavioural design techniques can have a massive impact on the creative output of a group. They will help you to unlock the creative potential of a group, even of presumed non-creatives.

Research shows that teams are terrible in coming up with ideas but great in selecting ideas.

 

How Might We Questions

The first technique has to do with a human psychology principle that’s called the Framing Effect: How information is presented shapes our opinions about it. In this case, it is the question from which you jump-start your creative thinking. You can drive creative output by designing the problem using these three magic words: “How Might We?” Feel how the “Might” instantly liberates you: It urges you to go ahead and explore, to free your mind, be boundary-less, an explorer or pioneer even. Compared to its tight ass brother ‘Can’ it makes a world of difference. Just feel what it does to you when you frame the question as ‘How Can We?”. The ‘Can’ immediately forces you to think about the possibilities and even worse the impossibilities; practicalities also, harshly limiting the number of ideas already at the start of the process.

 

Brainwriting

When getting to the ideation part of the creative process we’ve to keep a few human psychology principles in mind. The first is social proof: People tend to follow the lead of others. Sometimes this manifest itself in the social bias of Authority: We have a strong tendency to comply with authority figures. Or we adjust our behaviour to reflect positively on how peers see us: The Reputation bias. The job to be done in the ideation phase is to reduce the biases that could potentially reduce the creative output and install a free-flowing non-judgmental exchange and ideation process that sparks everyone’s creative fire.

You’ll be amazed by the number and diversity of ideas you as a group will come up with in such limited time. From everyone. The bold and the timid. The upper rankers and the climbing uppers. The creatives and the presumed non-creatives.

A technique to do so is Brainwriting. Instead of coming up with ideas as a group, you start by thinking about ideas as an individual. The method is simple. Determine a ‘How Might We Question’. Give every person a stack of post-its. Set a timer for a brief period, somewhere between 5 and 10 minutes, and then as an individual write down as many ideas as possible, no talking, just go wild by yourself. Write down every idea that pops into your mind on a separate post-it. After time’s up, everyone shares his/her ideas with the group. Stick them on a large piece of paper. Describe them if necessary. But don’t comment on each other’s ideas just yet. All you do is grouping the ideas that seem similar. You’ll be amazed by the number and diversity of ideas you as a group will come up with in such limited time. From everyone. The bold and the timid. The upper rankers and the climbing uppers. The creatives and the presumed non-creatives. Then use the third technique to select the ideas.

 

Dotmocracy

A fundamental concept in behavioural psychology is making target behaviour easier to do. A well-known psychological phenomenon in groups is social compliance. It’s very challenging for an individual to go against the norm, breaking the rules, to think differently. Social deviance is a hard behaviour to show, as it triggers another psychological principle: Loss Aversion. Humans prefer eliminating the risks of loss over increasing the odds of winning. And the most significant loss in a group process is rubbing against the hairs of the highest ranked person in the group and dealing with the personal retributions. But it’s precisely that kind of social deviance of going up against the top-ranked person in the group that helps to select the best ideas. A simple technique to eliminate this pressure and to fight compliance is called dotmocracy.

Loss aversion: Humans prefer eliminating the risks of loss over increasing the odds of winning.

 

The technique is simple: Everyone gets two same colored dots. Everyone groups around the paper with all ideas and at the same moment, you stick a dot on your two favorite ideas. Could be two dots at the same idea, could be dots on your ideas, could be dots on two different ideas. Just pick the ideas that you think have the most potential. Nobody can follow the lead of others, and you instantly get a clear overview of the best ideas. Usually, as a group, you discuss the selected ideas with two dots or more where people are asked to elaborate on the reason for picking the idea. After the explanation, the second round of dotmocracy should be done, placing dots on the ideas that came out as best in the first round. Although sometimes sticking dots at the same time is sometimes impossible (the best group size is therefore 5/6 people), the process shows people authority is not an issue. Everyone’s vote has the same weight. There are no larger dots. No different colored dots. No order of placing the dots.

 

If you only have 30 seconds of reading time, this is what you have to know:

  • Three behavioural psychology techniques can help you to boost the quality and diversity of your creative output;
  • It can help you make your creative output more qualitative as you can involve stakeholders from very different backgrounds, making your ideas more multi-layered and distinct;
  • It offers you a method to come up with ideas on your own without being distracted or disturbed, but at the same time the process involves interaction with others to make ideas better;
  • Instead of working for days on ideas, you come up with ideas fast, and you already get feedback after 15 minutes. Enabling you to make your ideas better or to kill the ideas that appeared not to be as good as you thought at first;
  • It offers new established multidisciplinary teams, such as scrum teams, easy to apply techniques to come up with creative output.

 


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Astrid is the founder of SUE Amsterdam and The Behavioural Design Academy. Our mission is to unlock the power of behavioural psychology to nudge people into making positive choices in work, life, and play.

In two days of high-end master classes, we train people as certified behavioural change directors. We teach them to unlock the powerful principles of behavioural psychology and use The Behavioural Design Method™ to translate this knowledge into actionable skills to influence personal behaviour or the behaviour of customers, employees, family members or the general public.

Cover image by BntOman ♥ Ƹ̵̡Ӝ̵̨̄Ʒ✿ under Creative Commons license.

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How To Make an Agile Team Customer-Centric?

By | All, HR & Organisation, SUE Amsterdam & Behavioural Design Academy originals

Digital Transformation, Agile Transformation, and Customer Centricity are the three major challenges that are causing sleep deprivation of managers nowadays.

You could summarise that Digital Transformation is meant to be the driving force to be able to help a client faster, smarter and cheaper. Agile Transformation should give teams the speed and agility to catch up with this ever rapidly changing the client. And Customer-Centric Transformation should enable you to develop better product and services based on better client insights.

Recent research of FD (Financial Daily) and Vlerick Business school exposes all pains of digital and agile transformation projects. And basically, it all comes down to one thing: Where agile, digital and customer-centric transformation are initially started to gain a competitive advantage by becoming truly customer-centered, they turned out to be organizational oriented pitfalls.

Where agile, digital and customer-centric transformation are initially started to gain a competitive advantage by becoming truly customer-centered, they turned out to be organizational oriented pitfalls.

Chief Digital Officers complain they feel sabotaged by the traditional oriented management; managers complain that after investing in expensive SCRUM training, their teams keep doing what that have done before, but mask this by performing some SCRUM rituals; and teams complain that the bi-weekly SCRUM sprints deprive them of time to talk to consumers.

The only way out of this impasse is when you rigorously put the customer first in your Digital, Agile or Customer-Centric transformation.

The only way out of this impasse is when you rigorously put the customer first in your Digital, Agile or Customer-Centric transformation. If you make quantitative and qualitative insights into customer behaviour the starting point of the SCRUM team projects, of the digital innovations and the management team decisions, you’ll put the focus back on the actual purpose of the transformations: Gaining a competitive advantage by becoming customer-centric.

But unfortunately, that’s where things again tend to go sour, as organizations have outsourced this pivotal competence of gaining deep human insights to research agencies and marketing consultancies. The result being nobody in the team is still – literally – in touch with the client. It’s all secondhand information.

Adding a Customer Insight Lead to teams shifts the pain of organizational transformation to getting to knowing the pains of the consumer.

But one intervention could be the solution to all problems. Every SCRUM team, every Digital Transformation team, every Management Team or Board of Directors should get a Customer Insight Lead. Someone who’s responsible for delivering insights into customer behaviour on a continuous basis. This single intervention would shift the pain of organizational transformation to a focus on getting to know the pains of the consumer. Something people can comply with much easier.

Tom

 

 


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Tom is the founder of SUE Amsterdam and The Behavioural Design Academy. Our mission is to unlock the power of behavioural psychology to nudge people into making positive choices in work, life, and play.

In two days of high-end master classes, we train people in unlocking the powerful principles of behavioural psychology and teach them our Behavioural Design Method™ that translates this knowledge into actionable skills to influence personal behaviour or the behaviour of customers, employees, family members or the general public.

Cover image by Birger Kühnel under Creative Commons license.

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