Strategic Planning Analogy #577: What do you March To?

THE STORY

John Philip Sousa (1854-1932) was considered to be the best composer and conductor of American marches who ever lived. His nickname was the “American March King.”

When I was in college, I heard a story about a time when Sousa had visited my college. He supposedly told the heads of the college that he thought our college fight song was one of the best marches he had ever heard. That made me feel proud.

However, now that I am older, I have heard many additional stories about Sousa. As it turns out, John Philip Sousa visited a lot of colleges over his lifetime. And each college tells a similar story about how Sousa told them that their college fight song was one of the best he had ever heard.

Suddenly, Sousa’s stated opinion of my alma mater’s fight song seems a lot more meaningless.

THE ANALOGY
Strategists talk a lot about how companies should try to please their customer. But you hear far less about how customers often try to please the company…and this is a bad thing.  Sousa is a perfect example of this phenomenon.

Think of the college as being like a company and their fight song is their product. Sousa is the customer. In an attempt to try to please all of the “companies” Sousa tells them all that he loves their “product” (the fight song). So, in his attempt to please all of the “companies,” Sousa’s opinion of their “product” becomes worthless.

Customers in today’s world are often giving as worthless an opinion to companies as Sousa did to colleges—all in an attempt to please (not offend) the company. This desire to be nice and no-offensive results in consumer opinions which are as worthless as Sousa’s.

Many companies today use customer opinion surveys as a Key Performance indicator (KPI) to judge their strategic success. Unfortunately, there is often a Sousa-like bias in the customer to please the company and give opinions which turn out to be meaningless. KPIs with meaningless data can be very dangerous.

THE PRINCIPLE
The principle here is that even though it is important to please the customer, don’t judge your success by asking customers if they were pleased. There is too much bias in the desire of many customers to please companies, making answers to those types of questions worthless.

One example which comes to mind are the quick auto oil change companies. After you get your car’s oil changed, they send out a survey to ask you if you were pleased with the service. This sounds reasonable until one digs deeper.

As it turns out, many of the mechanics will tell their customers about the survey they are about to receive. Then the mechanic tells them that if they rate him with anything lower than a perfect score, the mechanic will get no credit towards his performance bonus. Many customers don’t want to keep their mechanic from getting a bonus and besides, who wants to return to a mechanic who is upset at them for giving him a low score? You want your mechanic to like you. So all of the sudden, almost all the mechanics are getting superior grades (the Sousa phenomenon—worthless information).

To remedy the situation, on a recent oil change survey I saw a new question asking if the mechanic told you in advance how your ranking would affect him. I guess that was put in there to “weed out” some of the bias. Unfortunately, just putting that question in the survey creates more of that same bias. Who wants to get their mechanic in trouble for talking about the scores?

Preference is Better than Opinion

One way to get around opinion bias is to stop asking people’s opinion about your product. For example, you could instead ask about preferences. Using our analogy, that would be like instead of asking Sousa about his opinion of your fight song, you would ask him to rank order the top 25 fight songs from favorite to least favorite. Sousa may still like them all, but at least now you will know which ones he likes more.

Knowing customer preference (compared to numerous options) is more important than opinion about a single product, because we don’t always buy what we like, but are more likely to buy what we prefer.

I might like nearly all cars, but I don’t buy nearly all cars. I am more likely to buy the car I prefer. Therefore preference among choices is a better indicator of future success than mere opinion on a single item.

Behavior is Better than Preference

But even here biases can creep in to distort the results. In a desire to please the company, I might rank it higher in preference than I should. Therefore, an even better question is to ask about past behavior. For example, I could have asked Sousa how many times he listened to each of the college fight songs in the past two years. Past behavior is less prone to bias. Looking at what Sousa actually listens to is probably a better indicator of what he actually likes than asking his opinion.

I would have far more confidence in a KPI measuring behavior than one that measures opinion or preference.

SUMMARY
KPIs are a key part of strategy. Choosing a KPI that gives inaccurate or distorted information can be very dangerous. KPIs based on asking customers if they like you is one such dangerous KPI. It is better to ask for preferences against competition. Better yet, just ask about past behavior.

FINAL THOUGHTS
This problem is even worse if you are asking customers about new concepts or products for which they have to prior experience. As Steve Jobs of Apple used to say: “You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new.”  And when commenting on what kind of consumer research Apple did for the iPad, Jobs said, “None. It is not the consumers’ job to know what they want.” In other words, KPIs on future concepts should steer clear of consumer opinion even more than others. When it came to the future, Jobs marched to the tune of the future, not to the obsolete marches still in the heads of the customers.

Strategic Planning Analogy #319: Take the “F” Out

THE STORY
At the exercise club where I work out, there are a series of TV monitors by the equipment, so that you can watch TV while exercising. Each monitor is set to a different channel. Some of the channels include a few of those political news cable channels.

It is interesting watching simultaneously how the different political cable channels report on the same news items. One would think they must be reporting from different planets, because their conclusions have absolutely nothing in common. Often, even their so-called “facts” of the situation have almost nothing in common. The “liberal” channels and the “conservative” channels each seem to live in their own little world.

I guess I shouldn’t be surprised. Emory University in Atlanta released the results of a political study back in January of 2006. Test subjects were given statements by a prominent conservative politician (a Republican) and a prominent liberal politician (a Democrat). The statements contradicted each other.

When shown these statements, both Democrat and Republican test subjects ignored the contradictions for their own party but saw the contradictions made by the other side. Worse yet, while going through the test, the test subjects did not show any increased activation of the parts of the brain normally engaged during reasoning. In other words, political opinions and mental reasoning appear to have nothing in common.

That explains a lot.

THE ANALOGY
One part of the strategic planning process is fact-gathering. Different people place different levels of importance on the fact-gathering phase. As we talked about in an earlier blog, some people become obsessed with “fact-based decision-making” as being a top priority.

However, as we saw in the story, one person’s facts may be another person’s fiction. And even if we could agree on the facts, the story shows that mental reasoning regarding those facts may not occur. As a result, opinions and behaviors may have very little to do with the facts.

Therefore, when you are trying to develop a strategy to get consumers to behave in a particular manner (to your benefit), facts may be irrelevant. It may be more important to align yourself with a particular opinion segment (something like a political party) than to align yourself with the facts.

THE PRINCIPLE
The principle here is that actions are more important than facts. Profit occurs when the right actions occur. Since actions are not necessarily determined by facts, then facts should not necessarily be the focal point of your strategy.

We need to get the “F” out. In other words, instead of focusing on “facts,” we should be focusing on “acts” (facts without the F).

This is not to imply that we should lie to our customers or intentionally deceive them. Not only is this wrong behavior, it is ultimately stupid behavior over the long haul. The global banking industry is feeling a lot of negative pressure and new restrictive regulations because of the perception that they deceived the public.

Losing the trust of your customer base can be a death sentence. And in today’s internet-connected, socially-conscious climate, bad corporate deeds always seem to find a way out into the public eye to your detriment. (Even if the facts aren’t 100% accurate, the damage is done).

Therefore, the idea is not to throw away the facts (and deceive), but rather to give higher preference to the mindsets in particular activity groups.

For example, let’s assume you want to sell lawn care products/services. You could dig up all the facts around the most productive way to care for a lawn, but this may not result in the ideal lawn care strategy. When you look at actions, what you will probably find is that there are two distinct types of actions regarding lawn care. One group hates lawn care—sees it as a burdensome chore—and wants as little activity as possible. Another group sees lawn care as a passion—like a pleasurable hobby—and enjoys their time in the activity.

The first group wants to do less than what the facts would say are ideally productive. The second group wants to do more than what is necessary. Neither is looking for the factually most efficient. Instead, a good strategy would be to pick a segment (no matter how “irrational” their actions seem) and appeal to the way they want to act. Either position your strategy as “the brand that minimizes the chore” or “the brand that enhances the satisfaction of the hobby.”

Another example could be cat food. If one were to look at the facts, one might come to the conclusion that the most appropriate food for a cat would be one that is high in meat, fat and bone meal. However, many of the people who put a high priority on their pets (and are willing to pay a premium to feed them) behave as if their cats were miniature people. They want them to eat what they believe is a good people diet, full of lean protein, grains and vegetables.

If you want these folks to act in a way that gets them to purchase your brand of premium cat food, you probably need to cave in to some of these pre-conceived notions and behaviors and put in some vegetables. This is like the political candidate who can only get elected by his party if he agrees to some of the party’s long-held notions.

So how can we apply this to the fact-gathering stage of strategic planning?

1) Put more emphasis on what people do than on what people say.
One of my favorite cartoons has someone going door-to-door taking a survey about what people are watching. One man goes to his door and tells the survey-taker that he only watches educational documentaries. In the background, you can see a TV set showing a low-brow comedy program. The moral of the story: Don’t believe what people say, but what people do.

This is why a behavior-based system to determine what people watch, like Nielsen (who has a box connected to your TV set) will get a more accurate reading than asking people what they watch (like in the cartoon).

The old joke used to be that nobody knew who Playboy was selling all those magazines to, since nobody claimed to be buying them. And if you did find someone who admitted to buying the magazine, they would claim they bought it for the articles, not the photos. If that were the case, why does Playboy bother to put photos in the magazine? Don’t trust the “facts” of what people say; trust the facts of what they do.

Rather than getting bogged down in endless pre-product scenario testing with consumers, get a prototype out there in the real world to test. One of the beauties of the digital age is that it is so easy to get a beta test out into the field. This allows you to get feedback based on actual activity.

If you want to develop a product to help people in doing their work, watch how they work at their place of work. If you want to improve the meal-making process in the kitchen, watch how people act in the kitchen.

2) Understand that different segments operate under a different set of “facts”—Pick One
Just as Democrats and Republicans seem to operate under a different set of facts, so do other segments. We saw this also in the lawn hobbyists versus the lawn-work haters. These segments have a different way of looking at the world.

It is nearly impossible to build a political position that would be equally loved by both Democrats and Republicans. They love totally different things. Similarly, it is nearly impossible to win by trying to pick a business strategy which tries to make everyone in the market happy. Broad middle-of-the-road strategies are rarely as successful as those which target specific segments or niches.

If you target a like-minded, similar-behaving segment, you can focus on specializing in exactly what they are looking for. You can appeal to their set of “facts.” You can speak their language. You can be a clear “winner” in the eyes of that segment. By contrast, if you try to appeal to conflicting points of view, you end up being the best option for nobody. So pick a segment for your strategy.

3) Interpret facts via a chosen filter
Once you choose a segment, try to see the world through their eyes. Filter the facts through the same filter they use. Don’t try to force them into buying what you think they should want. Give them what would make the most sense within their view of the world. Even something as simple as different views on lawn care can create heated battles among neighbors—as heated as political discussions. So don’t assume your business is too mundane to be beyond having different filters. Take heed or they may rebel against you.

SUMMARY
The world is not a homogeneous mass of people sharing a similar point of view. Not only do we have different opinions, we often cannot even agree on the facts. Instead of being homogeneous, the world tends to cluster into a number of segments based on how one acts. Therefore, when designing a strategy, pay more attention to how people act than fretting over the precision of various facts.

FINAL THOUGHTS
Even if your targeted segment seems irrational, it only appears irrational because you are looking at the behavior through the wrong lens. Through their lens, it seems perfectly logical. Find the lens that helps you see the “logic” that they see.

Strategic Planning Analogy #298: Don’t Do That

THE STORY
I heard a story about a hotel located along the gulf coast of Texas. The balconies overlooked the gulf. One time, one of the guests thought the balcony was close enough to the water that he could fish from the balcony. Therefore, he put a heavy weight on his fishing line so that he could cast the line a long way. Then he tried casting the line out into the gulf.

Unfortunately, the gulf was farther away than he thought. The line did not go out that far. Instead, the line swung back towards the hotel. The heavy weight on the end of the line crashed through one of the hotel’s glass windows, creating an expensive and dangerous mess.

Although this had never happened before, the hotel officials wanted to make sure that it never happened again. Therefore, they put signs on all the balcony windows saying “Do Not Fish Off the Balcony.”

When future guests saw these signs, it put the idea into their head that perhaps it is possible to fish off the balcony. Suddenly, lots of people were trying to fish off the balcony. And lots of windows were being broken.

Not knowing what else to do, management took the “Do Not Fish Off the Balcony” signs off the windows and threw them away. Immediately, the fishing off the balcony stopped.

THE ANALOGY
Normally, one of the outcomes of a strategic plan is a desire to get people to act in a particular way, be that employees or customers or the government or competitors, etc. As we saw in the story, sometimes the direct approach will fail. Telling people not to fish actually increased the fishing.

The direct approach often fails with business strategies as well. Telling competition not to attack you in a particular way rarely stops them. In fact, it may make them want to do it more, because your insistence makes you appear vulnerable in that area. Worse yet, if you work too directly together with your competition, you could face criminal charges of collusion.

As a result, often the best way to get people to act in a particular manner is through indirect persuasion. Rather than directly mandating or banishing certain behavior, use a tactic which indirectly results in the behavior you want.

THE PRINCIPLE
The principle here is that the fastest way from point A to point B may not be a straight line. If people can see you coming straight at them in a straight line, they can build up defenses to your path. However, if you come after them indirectly, they may not be able to perceive what your ultimate objective is. Not knowing the ultimate objective can reduce resistance to the behavior change you are trying to create.

I was reminded of this principle in reading an interview with Ryanair’s chief executive Michael O’Leary in the Wall Street Journal. O’Leary was talking about their leadership in being one of the first airlines to charge a fee for checking in baggage. This was not a direct ploy to get more money out of its passengers. No, it was an indirect ploy to dramatically reduce total fees, thereby improving Ryanair’s strategy of having by far the lowest prices.

The idea was that one of the more expensive aspects of the airline business is running the check-in counters at the airports. Ryanair knew that if they could eliminate these costs, they could increase their relative value. However, if they would have directly commanded people to no longer carry bags and no longer use a check-in counter, there would have been a revolt. People resist such direct orders to change behavior. Such a direct banishment would have been as effective as those “Do Not Fish Off the Balcony” signs.

Instead, Ryanair started charging fees on checked baggage so that people VOLUNTARILY stopped checking in bags. Without bags to check in, Ryanair could eliminate the labor at the check-in counter. It is now 100% web-based. Rather than creating a revolt, the customers are happy because they no longer have to wait in long check-in lines and ticket prices were kept low.

Now, Ryanair is considering the idea of charging money to use the lavatories on the airplanes. Again, the idea is not to get additional income off the toilets. Instead, it would be an indirect means to change behavior. The thought is that this would cause passengers to voluntarily use the lavatories at the airport prior to boarding. This would reduce the demand for toilets during the flight, allowing Ryanair to reduce the number of lavatories on the plane. Fewer lavatories would mean room for more seats. Having more seats per flight means they would need to charge less per seat to make a profit. Hence, the strategy of having the lowest fares would be strengthened.

Another example occurred in the attempt to stop smoking among youth in the United States in the 1990s. The direct approach of telling teens “Do not smoke” was not working. Therefore, the anti-smoking advertisers switched to an indirect approach. They used fellow teens to tell the youth that the evil big-business tobacco companies had no respect for them and were trying to manipulate them with lies.

Well, no teen wants to be manipulated by adult authority figures, so the new message got teens angry with the tobacco companies. To “punish” these companies, the teens decided on their own not to smoke. This indirect approach was more effective in cutting down teen smoking than the direct approach.

So how do we apply this principle to your strategy?

Step #1: Identify the New Behavior Required by the Strategy
The first step is to determine what behaviors are needed to make your strategy a reality. What different behavior is required by your company and its employees? What different behavior is desired from your supply chain? Your customers? Your competition? Your shareholders?

If you cannot easily identify the new behaviors then how do you expect those behaviors to happen?

Step #2: Look for Incentives That Indirectly Create Voluntary Behavior Change
The next step is to use the Ryanair approach and look for ways to make people voluntarily want to do what you desire. This usually requires an indirect approach that prioritizes what is in the best interest of the people whose behavior you want to change. The idea is to find that ideal intersection where their selfishly desired behavior just so happens to be the same behavior you selfishly desire.

Then appeal to their selfishly desired behavior. This will indirectly get you your selfishly desired behavior without ever having to mention it. Ryanair selfishly wants to put more seats on the plane, but the appeal is by making it in the passenger’s selfish best interest to use the lavatories at the airport.

Step #3: Integrate Indirect Incentives Into Your Strategic Action Plan
If you want something to happen, spell it out and make it known. So once the indirect incentives are figured out, spell it out in the strategic action plan. Don’t make the indirect tactic a mystery. Just because it is an indirect tactic does make it less critical to your success. The link to your success is direct even if the customer/employee/supplier cannot see the connection.

SUMMARY
People often resist direct appeals to change their behavior. In fact, they may rebel and do more of the opposite of what you want. Therefore, the best approach is often to appeal to them indirectly—get voluntary compliance by finding something in their best interest which indirectly is also in your best interest.

FINAL THOUGHTS
When people are asked to do something, a common response is WIIFM (What’s In It For Me?). The more you appeal to their WIIFM, the more likely you’ll also get what’s in it for yourself.