Strategy

The Secret Formula – AD in Finance

Published date: September 30, 2022 в 12:36 pm

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Category: New Product Development,Organizational Innovation,Strategy

Some years ago, we were invited to work with a large Chinese bank in Singapore. The bank’s challenge was that banking products are heavily regulated, and almost identical, and therefore the market was saturated. Coming up with new and attractive saving and personal loan product was almost impossible. We were sent to work in an effort to enrich their pipeline with differentiated products.

Finance is an extremely controlled category; these heavy and strict regulations make innovation seem harder (a perception we understand but disagree with 😊) and create very little divergence in offerings. Furthermore, given that the banking industry has been operating for over two hundred years, it is fair to assume that people in this field will carry a lot of cognitive bias regarding the ways business is done.

Given this context, some would have passed on this proposal. However, at SIT, we really like these types of challenges.

Who said that innovation is easy work😊?

While preparing for the project, we reviewed many banking products and financial tools, both old and new, realizing that from the point of view of innovation, there are many developments around automation, accessibility, and accuracy, but not many about the way these tools are used or how their value is perceived. In one of our interviews with the team before the workshop started, a team member even said to us explicitly: “a loan is a loan is a loan! There is not much to change or invent here…”.

For us, at SIT, this comment was a good provocation – we wanted to find out how our tools can be effective in changing this preposition.

So, let’s turn our attention to Cognitive Fixedness. In this case, we want to delve into Relational Fixedness – or the tendency to view relationships and dependencies between variables of a situation, as static and permanent.  A simple and common way to illustrate this type of bias will be by looking at the price of alcoholic beverages in a bar: back in the days, the price of a pint of beer, for example, was determined by its cost, popularity, and expected profit margins. This was uniform across the world. Imagine that at some point, someone, thought that it might be more attractive to customers to create a new ‘relationship’ between, say, the cost of the beverage and the time of day(!). In this new relationship, two variables (cost of the beverage and time of day) were put together to create a new set of possibilities – the price will change according to the time one order or pay for one’s drink. This can be applied in several configurations: at given hours the price will go up (possible value could be to decrease overflow of customers or to generate premium in peak hours), the price can go down in some hours of the day (possible value could be to increase visits and consumption on the ‘slow’ hours of the afternoon and early evening, the price will change according to shift-time, light time and nighttime, etc.  By now, you have probably guessed – we are referring to the now-well-known idea of Happy Hour – when price is dropped in the slow hours in bars.

Sometimes people come up with ideas and solutions that create these types of new connections, but when this happens, the concept of creating a “relationship” or “dependence” is usually intuitive and implicit in the idea, rather than leading to it.

In our world of innovation, one of the most powerful and interesting tools that we use, is designed to achieve exactly this: Attribute Dependency is a thinking tool that can create an infinite number of new ‘relationships’ based on the variables you choose. It does so in a structured and organized way, that is useful in two respects: by helping you manage many possible configurations (pre-ideas) in a short time, and given its systematic nature, it suspends your intuition and forces you to consider possibilities that are unique and counter intuitive.

What do these concepts have to do with our innovation project? During preparations, we noticed that checking, savings, and loan products are often constructed by creating relationships between two or more variables. For example – the value of a savings account is determined by the relationships between (1) the saving sum, (2) the saving period and (3) the paid interest. Traditionally, these were the only variables that are considered. Now, understanding that this was due to some kind of Relational Fixedness, it should be very interesting to see what happens if we change the existing relationships and also bring in more variables.

And this is exactly what the team did. The project team, a mix of product, market, service, finance, and IT experts, started to collect many different attributes. We made a point NOT to choose or priorities any of the new attributes, mainly because we didn’t want to limit ourselves to only ‘reasonable’ and ‘logical’ ideas. This is based on the SIT Function Follows Form (FFF) principal that ensure that you will first create a “virtual Idea” and only than work on making business sense out of it. It leads into combinations and configurations that are counter intuitive, hence – considered highly innovative. Most of the work was around this idea of creating, very systematically, new relationships between internal attributes (variables that we, the Bank, can control or influence) and external attributes (variables that we, the Bank, cannot control or influence), and trying to identify unique value propositions.

The project ended up with many exclusive and valuable ideas, as well as with a long list of insights and future opportunities. This motivated us to research and validate our discovery that that many, if not all, banking product and financial instruments are easy to explain with the SIT thinking tool of Attribute Dependency.

Furthermore, the SIT tool is not only good in explaining the way these product and services are constructed, but in giving us a structured and systematic way to manipulate and change the existing products. Breaking relational fixedness make these new offerings more unique, valuable, and exciting.

Back to the project with the bank, here are some ideas that best illustrate the value in using SITs’.

Please note that ideas are shared because they were both new and unique at the time, AND were believed to be commercially viable by the experts in the room:

— A savings account, where the Tier of interest and Type of Transaction were connected – the more scheduled transactions you conduct, the higher the rate of interest you receive.

  • Value for the customer: good for cash management, higher interest, rewarding the client for being organized
  • Value for the bank: strong point of differentiation, motivates clients to be more organized

— A checking account, where the Type of Transaction and Type of Statement were connected – a customer that owns an account with many different transactions and a higher rate of activities will get a very detailed statement, with high resolution info, analytics, and recommendations. A customer with similar account but with low number of activities and simple, routine transactions will receive a brief and minimal statement.

  • Value for the customer: the more sophisticated you are, the more involved, the more information on different channels you will receive. It also contributes to one’s self- esteem and prestige. For account owners with ‘simple’ checking accounts, the promise is to relieve them from these long, standard, high-resolution statements.
  • Value for the bank: strong point of differentiation, feeds the bank with insights for high-profile customers, that in turn will lead to more successful sales.

— The Network Effect (today we will probably call it “the influencer model” 😊) – connecting Number of Other Bank Customers You Have Business Interaction With, and the Types of Discounts, Gifts and Status Points you get. 

  • Value for the customer: discounts, gifts, and status points, as well as being perceived as well-connected and trusted.
  • Value for the bank: strong point of differentiation, encouraging relationships among clients, establishing and managing communities, and reducing risks by adding social context to working with the bank.

By recognizing the underlying structure of all financial products and instrument, and connecting it to an innovation tool, we felt that we ‘cracked’ the Secret Formula for these types of products.

Since then, we have used this approach many times in creating new products and services, business models and application. This ability, of systematically generating many unique ideas in very short time, in a format that combines both the ‘what’ and the ‘how’, yields concepts and configurations that are later on easy for management to access, approve, and implement.

It is good to remember that Relational Fixedness is present in many other aspects of our lives and is not limited to banking products and financial instruments. Can you think of other industry sectors that can be explained by AD?

Finance for Innovation, Innovation for Finance

Published date: September 21, 2022 в 9:14 am

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Category: Innovation,Organizational Innovation,Strategy

This is a riddle/story that I like to use in workshops:

You want a sleek sports car on which you can drive crazily fast. Which component of the car is most crucial for driving at high speeds?

Most times I hear the expected answers: motor, steering wheel, fuel, wheels, maybe driver. All true, but from time to time someone brings up a different component: the brakes. I use this response to explain the important role of finance in an innovation project.

Just as you would never dream of accelerating a car unless you’re confident that it has a well-functioning brake system, never ideate without someone who can give you a reality check.

BUT – message for finance professionals: although the better the car’s brake system, the more confidently it can speed, if the brakes are working so strongly that you can’t even pull out of the garage, they become useless. I would have liked to say, “you’re better off without them”, but that’s the drama of the financier’s role: you can’t set out on an innovation journey without them, but so often they tend to be naysayers, seemingly intent on making sure that nothing new and exciting ever happens.

A recent article by McKinsey (see below) has a misleading name but some sound advice for CFOs that aspire to promote innovation in their companies.

How can CFOs rebrand themselves as innovation allies?

The authors offer 5 concrete actions to be taken, although they either did not notice, or decided it wasn’t worth mentioning, that they fall into two distinct categories:

1)   Finance for innovation: As in the brakes puzzle, actions that ensure that the financier serve as a constructive guide to innovation rather than a barrier. This means being there when innovation is being discussed; contributing expertise on costing, pricing, forecasting; assisting with the definition of KPIs and their monitoring; and being helpful in outlining a business plan.

2)   Innovation for Finance: processes in Finance, like those in any other business area, need to be refreshed, redesigned, reconsidered. Very often, these processes – from expense reporting to annual budget plans and reviews – tend to be cumbersome and inefficient. Applying innovation to these processes can be a powerful way to both improve Finance’s performance and, since these processes tend to encompass most or all units of the organization, serve as a model to be emulated by others seeking to innovate.

In sum, although finance functions in organizations are often a hindrance to innovation, it is entirely in their power to become promoters and allies of innovation efforts. Indeed, being most qualified to calculate exactly how much organic innovation the organization needs to hit its financial goals gives them the responsibility to be the most vocal champions of innovation as well as the guardians of its ROI (Return on Innovation).

When to Innovate

Published date: August 31, 2022 в 1:39 pm

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Category: Innovation,Organizational Innovation,Strategy

People often ask when is the best time to innovate: early in the pipeline process, middle, or late. Teams tend to resist innovation late in the process when they are busy launching a new product. Teams tend to resist innovating in the middle of the NPD process because they are too busy developing the next generation product. Teams tend to resist innovating early in the process because they are too busy developing franchise strategy.

So when is the best time to innovate? Anytime.

Early in the process, you need innovation to develop a large stock of potential novel product ideas. Tie these early ideas to your franchise marketing strategy. This makes your strategy more robust and believable.

Early in the process, you need innovation to trigger modifications or enhancements to the product now in development. This gives you potential differentiating features that you can still build into the new product.

Late in the process, you need new concepts just when launching a new product to show your company and your customers that you have a sustainable pipeline of ideas behind you. This gives you credibility. Innovating is like putting in golf. Never leave yourself short.

Innovation is a Skill, Not a Gift

Published date: July 28, 2022 в 12:39 pm

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Category: Innovation,Methodology,Strategy

Companies want innovation more than anything as a way to drive true organic growth. Yet leaders often feel frustrated in their ability to bring successful innovation to their organizations. When I speak to executives, I hear this frustration, and I hear a list of reasons or excuses why innovation is so difficult. That list includes: lack of resources, lack of time, company culture, and lack of process of innovation. Many executives feel innovation is unpredictable and therefore too risky to invest in, even if they had the resources.

Innovation does not have to be unpredictable. A method called Systematic Inventive Thinking is a set of tools used in a facilitated environment to generate predictable, progressive ideas. This innovation process uses templates to help regulate individual thinking and channel the ideation process in a structured way that overcomes the randomness of brainstorming. Briefly, the method works by taking a product, concept, situation, service, process, or other construct, and breaking it into its component parts or attributes. The templates manipulate the components or variables to create new to the world constructs that the inventor of less than find a valuable use. This notion of taking the solution and finding a problem that can solve is called function follows form, and it is at the heart of the systematic inventive thinking method. This method of innovation can be used across a wide range of business issues. For example, it can be used to create new products, new services, or new processes. It can also be used to create new strategy including both corporate and marketing strategy. It can be used to create new organizational designs. You can also be used to create new marketing communications or launch tactics.

Innovation should be viewed as a skill, not as a gift reserved only for special or uniquely-talented people. Innovation can be learned as with any other business skill such as finance, process excellence, or leadership. By embracing a method like systematic inventive thinking, companies have a clear pathway to bring innovation to their firms to drive growth.

Diversity: A Driver of Innovation

Published date: July 21, 2022 в 12:26 pm

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Category: Organizational Innovation,Strategy

Take a look at the people around you at work. What do you notice? Well, we all differ from one another. But appearances aren’t the only way we differ, it’s the unique views and backgrounds that we bring that can help you boost your creativity at work. Diversity is a driver of creativity. When you invite a group of colleagues to an ideation session, it’s important that you have diversity in your team. And you want diversity in these three ways. First, you want functional diversity. Next, you want gender diversity. And finally, cultural diversity.

When you invite people to a team ideation session, try to get people from at least these three departments. First, you need commercial marketing people. The marketers are the ones that it can help you figure out if an idea has commercial potential. They’ll filter out any idea that won’t make it into the marketplace. You also need technical people. They’re the ones that understand how your products and services work. And they’re going to help you identify those ideas that just aren’t viable. They may be great ideas but technically they can’t be made. And finally, you need people who are customer centric. These are the people that deal with your customers every day. People like your sales people or people in your call center. They’re the ones that advocate for your customers, and they’re the ones that, that will help you identify those ideas that will resonate the most with them. Taken together, these three perspectives help you answer the questions, will our customers want it? Can we make it? And how do we commercialize it?

You also want gender diversity on your team. Research suggests that men tend to generate ideas that are more risky, while women tend to create ideas that are more practical. When they work together, these biases tend to average out and you end up with ideas that are both interesting and practical.

You also want to make sure your team has good cultural diversity. People with different backgrounds will help you create ideas that are applicable in many different global regions. Without cultural diversity, you end up creating ideas that are perhaps only appropriate for a certain region of the world.

Diversity is a driver of creativity. Diverse teams see new possibilities, they hold each other accountable to bring their best thinking. And it helps you boost your creativity at work.

Ideating by Breaking Silos: 6 Common Bugs and their Fixes

Published date: July 13, 2022 в 4:11 pm

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Category: Innovation,Organizational Innovation,Strategy

Companies are all too aware of “silos” and the difficulty of sharing and collaborating among departments or units. They therefore embark on joint ideation exercises, that often end with disappointingly meager results. Why?

1. Sharing starts in meeting

An effective encounter of teams, be they warring tribes or (more difficult still) adjacent units in a corporation, requires meticulous preparation. Just throwing together people from different cultures doesn’t bring out the best in them. Minimum preparation includes defining what they would like to achieve in the meeting and what they are willing to contribute to its success, and (as detailed in #4 below) a sincere mapping of potential conflicts of interest.

2. Inter-unit meetings often start with mutual presentations of achievements

But listeners can usually put into practice very little of what they hear, due to limits to one’s capacity to absorb when passively listening, especially when the subject matter is, by definition here, not yours.

Facilitated properly, the session should consist of alternating presentations and interactive exercises. Presentations should be broken up into chunks, each followed by questions from the audience and the facilitator. Listeners should be encouraged to both interact with the presenter and take notes for use later when ideating.

3. Incentives and motivations to collaborate are not analyzed and aligned

Yes, we are all in this together, yes, we all know “it’s important to collaborate”, but what are the actual incentives to do so? Most chances are that if you present something of use to another of the participating units: a) they may end up doing better than your unit, b) they may use up even more of your time later, coming back with questions and additional requests, c) your boss will be unhappy with both (a) and (b).

While planning the silo-busting session ask yourself (and answer): apart from overall benefits for the organization as a whole, how can these specific units and participants be incentivized to share and collaborate? Can you keep score of “assists”? Celebrate those who share most? Formalize the accounting of knowledge-transfer between units?

4. Hidden agenda stays… hidden

I’ve often been asked to facilitate an encounter of two teams called upon to collaborate, in which all are aware that success for team A would entail damage to team B and/or vice-versa. Example: a successful product launch of A would cannibalize and therefore decrease sales of a B product. Common practice in these cases is to avoid conflict, going through “creativity exercises” pretending that no conflict exists. We recommend the opposite approach: put the elephant on the table at the outset and discuss potential ways of overcoming, or at least moderating risks to one of the parties or both.

5. A-priori blinders

Imagine an organization in which business unit A targets, say, women (or the elderly) and BU B targets men (or youth). A (commendable) silo-breaking approach leads management to throw together a mixed team of A and B, so they can invent by learning from each other. But participants will tend to listen with their professional blinders on, and therefore, even if fully motivated to collaborate, they will find it difficult to imagine how a feature designed for the other team’s women can inspire novelty for their men, or how an insight about teenagers can spark an innovation for the over-80’s. This phenomenon will limit not only the listeners, but also the presenters who will tend to limit themselves to what they a priori consider to be relevant to the other team.

The solution is to engage the team – from the outset – in some preliminary exercises of fixedness-breaking, opening their consciousness to their current limitations, whet their appetites with examples of crossover ideas that have been successful, and then, throughout the sharing presentations, challenge them to force-fit some of what they hear to their reality, even if the exercise initially feels contrived and useless. It never is.

6.

Sharing processes typically end when the silo-breaking session ends. But these exercises, even in when most productive, are only the initial step. If participants run out from the session only to shut themselves back into their respective silos, the chances of translating budding insights into development projects are slim.

The optimal solution to this phenomenon is to build into the plan, from the outset, mechanisms for continuing collaboration efforts beyond the initial attempt. This is easy to agree upon in principle, but is very rarely implemented in practice, for a variety of reasons, mostly related to the incentives of the players involved. The BUs will return from an offsite, especially if it lasts several days and/or requires travel, to find their desks and calendars even more cluttered than when they left, and most chances are that initial ideas that were sparked by sharing with colleagues from other silos will be low on their de facto priorities. Meanwhile, the corporate organizers of the multi-unit event will have spent considerable amounts of time and energy on preparing and running it and will now either lick their corporate wounds or hopefully bask in the glory of their successful event for a brief moment as they dive back to their regular responsibilities. No one, therefore, including all those who absolutely promised to do so once the event has ended, will have the time or disposition to follow up properly. Unless it has been firmly embedded into the program from the start.

Conducting a poorly planned or badly executed silo-breaking session is usually worse than not holding one in the first place. And the difference, as is often the case, is in the details. Remember:

  • Preparations
  • Interactive
  • Incentives
  • Conflicts
  • Agendas
  • Follow up

Enjoy!

WFH, WFO, or Hybrid – The Guide to Finding Your Sweet Spot

Published date: June 16, 2022 в 3:44 pm

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Category: Organizational Innovation,Strategy

Are you team WFH or WFO?

 

I worked from home long before it was considered fashionable, much to the jealousy of my friends and family. Little did they realize that they would join me quickly and abruptly. In just two years the pandemic has expedited WFH, with 70% of the U.S. workforce working remotely in mid-2020, compared to only 2% prior. Everyone remembers stories of corporate CEOs packing up their desks as they paved the way to a new era, without any plan in place. It was a sudden cold turkey move, with the reality and regulations of the time leading the decision making. As time progressed and everyone caught their bearings, new working models, technologies, and support systems evolved. The benefits of these new working models were quickly noted, and included a combination of expected and unexpected advantages. Now, even with the lifting of all social distancing and Covid regulations, companies are not quick to rustle their troops back into the office and are now adapting to find the model that works best for them.

The concept of WFH is being promoted top down and bottom up in organizations. On the one hand companies are noting a reduction in overhead due to releasing office space, and on the other hand employees needs and motivations around work have changed, and they are demanding continued flexibility post-pandemic. According to Accenture’s Future of Work Study 2021, 83% of employees prefer a hybrid work model. And as companies want to attract and retain the best talent, the WFH policies are now becoming part of the competitive job market.

 

While there used to be two clear camps – WFO or WFH, a new player has entered: Hybrid. So first thing first – let’s make some order amongst the different types of working models. Like you can’t walk into a Starbucks and just ask for coffee, saying hybrid nowadays isn’t clear enough with all the options. The Pumble blog has identified different types of working models, that run the gamut from full WFO to full WFH:

  • Fully in office – Everyone is in the office full time, no remote option.
  • Office-first (remote-friendly) hybrid model – Employees come to the office most of the time and with an option to work remotely a fraction of their working time (usually 1-2 days).
  • Partly remote hybrid model – Some teams are fully remote (e.g. content team), whereas others are office-bound (e.g. the HR department).
  • Flexible hybrid model –  Employees have the flexibility to choose when they want to work from the office and when from home or elsewhere.
  • Choose-your-own-adventure hybrid model – The company provides multiple work models and employees decide on one of the offered work arrangement options and stick to it.
  • Remote-first hybrid model – Remote work is the default, yet the company still maintains some office space so that people can occasionally go to the office. (All operations and policies are in alignment with remote work)
  • Fully remote model – The organization doesn’t have any office spaces or headquarters and everyone works remotely.

 

Believe me, there’s for sure even more sub-models. So with so many options, what’s the best way to choose what’s right for your company?

 

I suggest considering four factors:

  1. Employer preference: What management style do you have in your company and what type of working model can it support?  What do you feel would contribute more to the productivity and culture of your company? Is one model more cost effective for the company? Where are your employees located geographically and does one model support them better than another
  2. Employee preference: How do people feel they work better and more efficiently? Is there a consensus amongst employees’ desires? Remember, people who live in closer proximity to the company location may feel differently than people with a larger commute. People who live alone may prefer the quiet set up of their homes, whereas people with large families or roommates may favor the solitude provided at the office.
  3. Types of projects: Think of the types of projects people work on in your company. Do they require equipment that can only be found in the office or can it be available at home? Do they require collaboration in real-time and space or not? (And if so, can technology help overcome?) Are there different roles/projects that have different requirements?
  4. Flexibility: Are you looking for a one size fits all model? Or are you willing to offer flexibility on choosing a model based on a personal or department level? Do managers have any leeway in making their own decisions for their team?

 

Once you’ve worked out the model for your company, remember to treat this as you would any “startup” in your company. Create an official policy so everyone will be aligned, and KPIs to monitor and measure the model’s success. There will probably be a need to pivot from time to time as you learn. But if this pandemic has taught us anything, it’s that things can change in an instant.

 

Nurturing the (Potential/Jaded/Allstar) Innovators in Your Company

Published date: June 2, 2022 в 4:32 pm

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Category: Organizational Innovation,Strategy

I adore a good scent. Give me hand creams, candles, soaps, lotions smelling of sandalwood or citrus and I am hooked. Therefore, you can imagine my excitement when buying a new plug-in for my guest bathroom. The excitement lessened when I realized that the safety cover protecting the outlet from moisture prevented me from plugging it in properly. Too lazy to go downstairs and rummage in the toolbox for the right screwdriver, I took the discarded cap from when I opened the plug-in and shoved it on top to hold the safety protector up so the scent could flow freely. Frankly, I didn’t think much of it until my guests happened upon it and they were enthralled, to say the least. “That’s such a great idea!”, they exclaimed over my contraption, “We have one too and couldn’t figure out how to keep it up!”

I found their reaction rather peculiar. Was it really that creative or innovative?

Judging by the looks on their faces, this actually was a very BIG deal. Certainly to them, where it was plain that they had been grappling with this issue for some time. And there I went and solved it in less than two seconds. What they wanted to know was – what made me think of it? The fact is, having been involved in innovation consulting for almost two decades, modes of thinking like this have become second nature, without my brain announcing what it’s doing. Nonetheless, I took the opportunity to share with them the Closed World Principle, which could explain the rationale behind my MacGyver-like solution. (I’m happy to explain more about this to those who are interested, but as this is not the topic of this article, we’ll be moving on now.)

Minds were blown. And I have to say I found their enthusiasm refreshing. Where so many people view innovation as a buzzword, standing before me were highly intellectual professionals who just went through an eye-opening experience and wanted to learn more.

What would you estimate is the percentage of these wide-eyed, eager to learn-and-apply people in an organization? High or low? I recently came across an article in the HBR that stated that although innovation is still one of the top agendas for companies, and innovation skills are ranked high in employee reviews, most employees hate innovation to the point of eye-rolling (or worse). But, given the fact that there are about 70,000 books on innovation, as well as other gripping statistics regarding the amount of websites and methodologies, we can conclude that there are still people like me and you (presumably because you’re reading this) that find innovation fascinating, exciting and constantly evolving.

So we see that in every organization we have three types of people: The Untouched, The Uninspired, and the Unfaltering. Here’s a breakdown of each group, what characterizes them, and what they need to be successful:

  • The Untouched – These are people that have somehow fallen through the cracks. Whether because they are new to the organization, their roles don’t directly align with the company’s innovation goals, or their direct manager doesn’t engage them. If innovation is part of your company agenda, these people are part of your target audience. Perhaps they are not directly developing a new product, but you still want them to learn skills to solve their own “plug-in problem” with efficiency. They need skills. An enthusiastic thinker can offer a fresh perspective even if the topic doesn’t pertain to them per se.
  • The Uninspired – These are people who are already involved in innovation processes to some degree. They may have received minor or intense training. However, the spark has gone out, due quite possibly to the overuse and generalization of the term innovation (I’ll try not to count how many times I’ve written it myself in these paragraphs). Or perhaps due to many initiatives not seeing the light of day. And of course, there’s the risk aspect – with already full plates, why would anyone want to take a chance on an extra-credit project that might fail? These are all issues that can and should be addressed. We need to reignite the passion. Whether it’s by letting go of the term innovation and breaking it into clearer goals, introducing new methodologies and tools, and most importantly – crafting your organization’s answer to the question of “What’s in it for me?”
  • The Unfaltering – These are your black belts. These are the people that drive innovation processes forward. They understand the potential that is waiting to be uncovered, and they are excited to be a part. They know it works and that it will work, no matter the topic, no matter the challenge. The danger is if these people switch to the “Uninspired” group. What this group needs are resources – time, budget, and people. They need continuous recognition for themselves and their efforts.

How would you estimate the breakdown of these groups in your company? Which group is the largest? The size of each group determines the level of enthusiasm for innovation in a company overall. As time evolves, the numbers can shift. Each group can become larger or smaller. Once you leave the “Untouched” group you never go back, yet it’s possible to travel back and forth between “Uninspired” and “Unfaltering”. Having this division in mind can help you discern the steps you need to take to make innovation bigger than a buzzword.

How Nudgers can be Nudged to Nudge

Published date: March 30, 2022 в 4:00 pm

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Category: Innovation,Strategy

The work of the duo Amos Tversky and Daniel Kahneman, further developed and popularized by Dan Ariely and others, has led to the growing popularity and use of Behavioral Economics in general, and the practice of “nudging” specifically, in advertising, marketing and communications. We refer to “nudging” here as the act of creating positive reinforcement and indirect suggestions to influence the behavior and decision-making of groups or individuals. A heated discussion has developed of late as to the validity of the idea that these small nudges can indeed move their targets to action, following what seem to be inconsistencies in the research and even some accusations of misrepresentation of data and results.  Nevertheless, in this post we assume that, at least in some scenarios, it is useful to utilize so called nudges, and the task is finding the most effective way to perform them. [If you do not believe that “nudges” exist or can be useful, we recommend that you use your time to read other posts, ours or others’. If you do believe in nudges, this can be useful stuff for you].

In essence, we wish to nudge the nudgers to utilize a specific set of tools that can help them come up with effective ideas quickly and consistently. We will, therefore, focus here on HOW to create these prods.

This year I (Idit) reached the ripe age of 50. I’m not a big fan of counting my years, but my HMO does take age seriously, so they keep sending me notifications and requests to perform a set of examinations. I consistently ignored these well-intentioned messages (probably a topic for another post…) including repeated invitations for a mammograph, until, one day, a nurse called my mobile and declared: “I’ve scheduled a mammography for you, for next Thursday at 5pm. If you can’t make it, please send us a cancellation.” [What did I do?, you may ask]. I went 😊. The nudge nudged me into the desired action. Let us review a few additional examples, to point out some interesting patterns.

Many campaigns have been run across cultures to raise awareness to and combat drunken driving. How can nudges be enlisted for this purpose?

Aurora Bar, in Sao Paulo, Brazil, with the help of their ad agency (Ogilvy), came up with a set of creative solutions. A valet parking service was offered to clients, with a small twist: the driver in whose hands you were to deposit your car was visibly drunk. Customers were obviously reluctant to hand over their car keys to a drunkard, clearly unfit to drive anyone’s car. Some were even upset to the point of raising their voice and rebuking the driver for being unprofessional and irresponsible. At that point, angry customers were handed a note by the drunk valet parking attendant. The note read: “Do not let any drunk driver drive your car, even if the driver is you yourself”. [Watch the customers reactions here]:

https://www.adforum.com/creative-work/ad/player/34464465/drunk-valet/bar-aurora-e-boteco-ferraz

Another solution implemented in the bar was a first-of-its-kind karaoke breathalyzer. The karaoke system’s microphone was adapted to become an alcohol breathalyzer, so that when happy customers who had had their fill of alcohol took the stage and opened their mouth to sing, they were surprised to see, at the end of the song, their alcohol level displayed on the karaoke screen. The singers got the message, and so did their friends.

https://youtu.be/HGCfzlpAhgQ

Brilliant solutions, aren’t they? Looking for commonalities between the two ideas, one can see that in both cases there is a “free-riding” element. Valet parking services were there anyway, they were just assigned an additional task – reminding the still-sober customer of the perils of drunken driving. The karaoke system was there anyway – it was just assigned the additional task of revealing the revelers’ blood alcohol level, both to them and to their friends.

In SIT, we call this pattern of thinking, or thinking tool: Task Unification. But, before we delve into the specifics, a word about thinking tools in general. SIT’s thinking tools are defined by observing and analyzing thousands of inventions, detecting common patterns among them and converting them into tools that have been used in the past 26+ years in thousands of companies and organizations to invent products, solutions, services, strategies, and communication campaigns.

Task Unification (TU), in SIT, means assigning an additional task to an existing resource.

The Aurora Bar solutions are examples of applying Task Unification, since new and additional tasks were assigned respectively to the parking attendant and the microphone.

[You are welcome to try this yourself, continuing with the bar example. What elements does one typically find in a bar? Components that are there anyway? For example: stools, coasters, ceiling, toilets, music, food, smartphones, social media, speakers. Can you think of another nudge idea – assigning the task of reminding people not to drink and drive to one of the components mentioned above? Could you share this idea with us as a comment to this post? Or as a personal message to one of us?]

To introduce a second tool that leads efficiently to effective nudges, we will share an old example from a medium that is rapidly going out of fashion. We will then show how the very same logic is applied some 20+ years later using updated media, finally, we will ask our-and-yourselves what the 2022 version could look like.

The following was a brilliant and impactful campaign run by Amnesty International in Spain.

 

Note that the act of cutting out the coupon (yes, imagine that some of us old timers can remember the days when people actually cut out coupons and mailed or used them!) concretely demonstrates the result that your donation is meant to promote. You break the handcuffs, save the prisoner about to be hanged, etc.

 Two elements stand out when you compare this add to a basic version in which the coupon would simply appear beside the text and visual:

  1. The reader is invited to perform a physical action;
  2. The reader receives a small immediate payoff for their action.

The results of these two features of this type of ad are:

  1. Engaging in physical action can increase engagement and long-term retention of a message. In addition to the everyday experience suggesting that this is the case, there is apparently a growing body of research on “Embodiment Theory” which proposes that knowledge is grounded in sensorimotor experiences. [If you are aware of relevant research, we would love to hear about it]
  2. When the viewer is hesitating as to their engagement with a message or willingness to act on it, we are assuming that a “nudge” can make the difference – the extra payoff in the action can be this nudge.

Let’s observe how this plays out in several additional examples.

The following “SocialSwipe” campaign, from 2014, uses a very similar idea to that used by Amnesty, but with a newer and more sophisticated medium: a billboard invites you to swipe your credit card on the billboard itself, with the double result of both transferring a donation to Misereor, and cutting a visual loaf of bread to feed a hungry child.  [Watch 90 seconds here, of how it plays out]:

https://youtu.be/zVuWtWZh4oQ

The following campaign was created by Publicis Brussels for Reporters without Borders, a non-profit organization which defends the freedom to be informed and to inform others no matter in which regime. Note the interesting combination of traditional print media with a cellular app, in which a phone, placed on top of the ad, hijacks three autocrats’ faces to pronounce an anti-dictatorial message “Because there are mouths that will never speak the truth.”

Two of these three autocrats we have been liberated from thankfully, but creepy to think that, 11 years after the campaign, [one of them is still with us, damaging the world with renewed toxic vigor]:

https://youtu.be/JywgnvmtKac

[Have you seen other examples of this type of Nudge-Activation lately? Can you share with us so that we can both enjoy and analyze them?]

How does one go about deliberately creating this kind of message-nudging?

When you wish to convey a message, through a medium, that will lead the viewer to perform a required action, we recommend using the Nudge-Activation tool. Use the medium to create an extra payoff that will nudge the viewer to perform an action which is either the required action itself or will serve as a bridging action and second nudge for the required action.

 

 

The direct version: In the SocialSwipe example the required action was swiping your card to donate. The extra payoff of this very action was seeing the bread being cut.

The double-nudge version: In the autocrat campaign the required action was donation to Reporters Without Borders, the extra payoff was seeing the dictators’ faces pronouncing anti-repression words, and this payoff, together with the physical action of triggering it, would hopefully nudge the viewer into performing the required action of donation.

 [Try applying this tool, by following the simple procedure]:

Applying Nudge-Activation

  1. Define the required action – the action you would like the viewer to eventually perform.
  2. Possibly define a bridging action – a small action that can serve as a nudge towards performing the required action.
  3. Invent an extra payoff that the viewer will receive once they perform either the bridging action or the required action.
  4. Search your medium, your message or the environment of consumption of the message for resources that can help implement the extra payoff or perform the actions. Examples of components used in our examples are: the viewer’s phone, their credit card, the magazines paper, the billboard itself, a coupon, YouTube, social media. [Note that in this part you are using the Task Unification tool, described in the first part of this post]
  5. Combine your message with an invitation to act, presenting the extra payoff or hinting at it, using an existing resource.

Getting you into this article may have required some nudging – we tried our best in the accompanying post, but once you were in it, we did our best to engage you in thinking about our content in a practical way, maybe even asking yourself how you could go about using our tools. [Can you identify the myriad ways we attempted to nudge you towards our objective?] We tried to pepper the article with hints [[[]]] and will be happy to read what you thought about these efforts. Thanks.

Let’s Rethink Our Relations: How to Break Relational Fixedness in the Digital World

Published date: March 24, 2022 в 4:35 pm

Written by:

Category: Innovation,Innovation Facilitation,Strategy

Reruns of “Seinfeld” on Netflix are a glimpse into a 30-year-old time capsule that allows one to dig up innovative ideas that, for some reason, have never been implemented. One of the hidden potential startups is Elaine’s brilliant suggestion, when Jerry, George and she impatiently wait in line at a Chinese restaurant:

“You know, it’s not fair that people are seated first come – first serve. It should be based on who’s hungriest”

Credit: Seinfeld on Twitter

Silly idea? Or wonderful? It probably depends on whether you are hungry when you first hear it. One thing is sure, though – it is too seldom that one rethinks the nature of the connection between the various components of a system, product, or service, and thus, many an opportunity for real innovation is forever lost.

Imagine an external training program offered by your company to a limited number of employees. Since it is too expensive to send everyone who wishes to go, the company selects based on professional knowledge or experience.

At first thought this sounds like a logical and proper consideration, which ensures that the level of trainees is uniform, and participants can process new material based on their knowledge and experience.

But one can look at this situation from another angle. Those selected for training will probably be employees who already master the field, while employees with no background (but with high potential) will have a slim chance of joining. Paradoxically, this means that the cumulative value that the company’s employees have gained from this external training is lower than that of a similar training with participants with no previous knowledge.

The decision to use prior knowledge as a selection criterion for the training is an example of Relational Fixedness, one of the barriers that can interfere with innovation processes.

Relational Fixedness is the tendency to perceive connections and dependencies between variables of a system in one certain way, without being able to imagine different relations.

All types of fixedness are cognitive mechanisms that enable quick understanding of objects and situations, allowing us to take immediate action. Such mechanisms are beneficial and even crucial at both the personal and organizational levels. At the same time, they can be a significant barrier to innovation, as they make it difficult for us to identify new opportunities.

There are other ways to connect the dots

What does it mean to consider different relations between the variables of a system’s components? Let’s look at one of the important variables in any business: the price of the product.

Seemingly, there should be no connection between the price of a consumer product, such as a pair of glasses, and the characteristics of other parameters of the business, such as the location of the store or the day of the year. In practice, many business models display different pricing for the same product depending on these exact characteristics, as evidenced in holiday discounts or outlet stores. These models are examples of breaking Relational Fixedness.

 

 

And what do you think about this campaign by a major optical retailer in Israel? The number of percentage points discounted from a customer’s price is exactly the age of that customer. If the customer is 62 years old, he or she will receive a 62% discount.

 

 

 

 

But how do you produce such unconventional ideas, and how do you make sure they are more than a gimmick? We believe that the way to do this is through systematic thinking and the use of thinking tools that force the would-be innovator to perceive the components that are already available, but through a different lens.

The thinking tool that can lead to the generation of, for example, an age-dependent discount is called in SIT “Attribute Dependency”. The process of using this tool consists of listing the components of the product or system, specifying their characteristics, and then modifying the existing relations (or dependencies) between those characteristics (or creating new ones if none exist).

In the next section we will explain and demonstrate how this can be applied in the context of digital and data-based products.

Relational Fixedness in a data-driven world

What about the digital data-laden world we live in today – is Relational Fixedness prevalent there, as in the world of tangible products? Definitely!

Fixedness is not a feature of computers or databases, but a characteristic of human thinking, including those humans who make the design, marketing, and operational decisions in cutting-edge technology companies.

The information available thanks to digital tools can point to surprising new opportunities, which can easily be missed because they seem “illogical” or because fixedness prevents one from noticing them in the first place.

Despite the fixedness, the abundance of data that can be monitored, processed, and presented to customers has in recent years led to a wealth of new and fascinating models, and to the creation of connections that did not exist in the past between variables of product components.

Here are three reasons why companies choose to break Relational Fixedness in their digital products and offerings, and a few examples for each reason:

I. Make the most of the value embodied in the technology.

  1. In most smartphones, “low battery” mode automatically turns on when the battery runs low. In such cases, display will be dimmed, since screen brightness is a big battery drain. In Attribute Dependency lingo, a new connection has been created between the energy level of the battery and the level of illumination of the screen.
  2. Many digital services and apps are affected by the speed of the internet connection. App providers often operate multiple data centers around the world, and use smart traffic routing to the nearest one, according to user’s IP addresses. The location of the server from which the users receive service depends on the location of the users themselves, a dependency that was not possible in the past.

II. Improve conversion rates and sales

  1. Determining users’ location is beneficial not only to improve the service they get, but also to maximize the probability that they purchase additional products. Location-based services (based on cellular data, WiFi, etc.) demonstrate sophisticated relations between users’ whereabouts and advertising content presented to them.
  2. The scope and resolution of data held by digital stores allow for dynamic pricing strategies, based on a huge number of variables. Some companies even choose to implement differential pricing of the same product, based on the type of cellphone used while shopping online.

III. Design considerations and improving the user experience

  1. The abundance of accessible data and variables for each product and customer makes it possible to fine-tune the users’ experience. Why should all Waze users be represented by the same avatar, when new users can appear, say, as baby-Wazers, and “senior” users as grown-ups? Why should the Google logo always look the same, when it can vary on different days of the year or appear differently in each country?
  2. To ensure a fast and smooth onboarding process, many applications offer an increasing number of features as the user’s level rises. New users will be offered a limited set of capabilities, and as they continue to gain experience, additional features will be revealed to them. A gradual onboarding prevents unnecessary confusion and allows for effective learning of each feature.

It can be clearly seen that data-driven companies know how to make good use of valuable information to create new connections between variables of the application or product components. In fact, we have become accustomed to smarter and more personalized applications, making the most of every characteristic of users’ behavior, their surroundings and even the application mode itself.

 How to leverage what we have learned from these examples

How can such new proposals be systematically generated? And how can one change or unlink existing dependencies, in a way that is not intended to meet a particular need, but to open new horizons for surprising opportunities?

Applying the “Attribute Dependency” thinking tool can be just the answer. In addition to conventional thinking, which emerges from analyzing needs, this tool makes it possible to systematically explore additional possibilities. Here are the operating instructions for a simple version of the tool:

     1. Prepare a list of variables:

  • 5-8 internal variables of the product you are working on (internal variables, i.e., those that the manufacturer has control over: volume, screen size, price of the product or service, color…).
  • 5-8 variables in the product’s immediate proximity (external variables, i.e., those that are relevant to the product, but the manufacturer has no control over: weather, age of user, location in the world).

2. Randomly select a pair of variables: one internal and one external.

3. Identify whether there is a relationship between the selected variables. If it exists – consider the possibility of changing or canceling it; If it does not exist – consider options for creating a relationship or dependency between the two.

4. Identify new opportunities that can emerge from the newly created relationship.

Here are some ideas created by using the tool, as a demonstration:

  1. In most applications, the number of features available to the user increases the more expensive the user’s subscription. Can you find an advantage in an app where a more expensive subscription includes fewer options?
  2. The default order of messages in an e-mail box depends on the time they were received. You can also change their order according to other characteristics, such as the subject of the message or its size. Why should the order of the messages not be related, say, to the number of recipients of each message so that bulk messages do not bother one at the top of the mailbox?
  3. Podcasts have become a favorite format for content consumption. You can control the speed of the audio, but would it not be more useful if the speed depended on the complexity of the podcast topic, or even the complexity of each section in it, or the speaker’s velocity?
  4. The position of Google search results depends on their ranking in Google’s algorithm. The advantage of this for Google (and for us) is obvious, but what if we add an option to display the results of the first five pages backwards? Exposure to new and unfamiliar content can expand one’s mind.

Applying Attribute Dependency is not trivial the first few times, because the process is counter-intuitive. In fact, when it comes to data driven digital products, the process may be even less intuitive than when seeking to innovate with a physical product, because of the wealth of “logical” options that can be realized before considering “weird” offers.

Gaining experience in activating this tool improves results dramatically. Since we have already chosen the less intuitive way – we have a good chance of reaching a surprising result that competitors will miss.

Now, back to Elaine’s idea of how to change the queue at the Chinese restaurant – maybe it’s worth adding a “how hungry are you?” question to the digital form used for booking seats in restaurants?

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