We've all heard the cliché "hindsight is 20/20" a thousand times. And it's pretty much true. It's a lot easier to figure out the path to a particular event when you know the final outcome. But if "what happened" is something bad, determining the reason after the fact doesn't change the negative event.
How can we do a better job finding those problems in advance of our next new strategy implementation, site redesign, store remodel or other big effort?
It's worth digging a little deeper to better understand why our hindsight is so perceptive. One of the most famous cases of 20/20 hindsight comes from the investigation into the attacks on Pearl Harbor (although, we could also argue the investigation into 9/11 and the more recent Fort Hood shootings have many similarities). In her book Pearl Harbor: Warning and Decision, noted military intelligence historian Roberta Wohlstetter wrote "it is much easier after the event to sort the relevant from the irrelevant signals. After the event, of course, a signal is always crystal clear; we can now see what disaster it was signaling since the disaster has occurred. But before the event it is obscure and pregnant with conflicting meanings.”
Of course, Pearl Harbor was an unexpected disaster that seemingly came out of nowhere. While we have those occasionally in business, more often than not our "disasters" come from strategies, redesigns or promotions that did not perform as expected. And those expectations can also lead to our blindness.
Whenever we're implementing some new and exciting strategy, we tend to be very optimistic about the results. We're convinced these new strategies are going to provide positive returns or we wouldn't be implementing them. That optimism can lead to the same sort of crystal clear signal Wohlstetter referenced, but in the opposite direction; i.e. we tend to only see how everything we're doing will lead to greatness and can easily overlook variables that have potential to lead to negative outcomes.
So, what do we do about it?
It seems some of the most common solutions today involve pulling together a committee to review what went wrong and putting together processes to prevent those specific problems in the future. These new processes don't prevent all potential problems in the future, but with any luck they'll prevent us from repeating the same mistakes.
But all of that happens after the fact.
There's got to be a better way. My problem with the "committee and new process" approach is there's a tendency to introduce lots of new and --all too often -- needless bureaucracy. Inefficiencies ensue without greatly decreasing the probability of problem-free future efforts.
A technique I've found effective invokes much of the clarity of hindsight by drawing on the power of imagination.
During the ROI process for the strategy or project, we've already imagined the positive outcome. So before we wrap up planning, let's also imagine a couple horrific scenarios. For example, imagine that four or five months after a site redesign, sales are down 50% and customer satisfaction has tanked. What happened? Now let's assemble the same type of committee we would in that scenario and pour over the plan to find the causes of our imagined disaster.
Some might say this technique is really just standard contingency planning, but I find some pretty big differences. Contingency planning tends to look at the current plan to identify execution risks. It doesn't often uncover key strategic or design problems.
The Scenario Imagination technique provides us with a different sort of lens that taps into our hindsight abilities to separate the signal from the noise.
We certainly won't find every potential problem, but every problem we mitigate increases our probability of success and reduces our risk. And if we can reduce a lot of risk without strangling ourselves in bureaucracy, we'll likely lower costs, increase efficiencies, and increase profits. I like the sound of that.
What do you think? Have you run into these types of issues? Do you think this technique would work for you? Do you have any techniques you would like to share?
Photo credit: me'nthedogsThe poor economy has done nothing to lower customer expectations of online retailers, and recent mixed results data from ComScore and ForeSee Results indicate that retailers who continue to improve their customer experiences are pulling away from their competitors in both sales and customer satisfaction.
ComScore reports online retail up 4% for the holiday season. While an increase is always nice, this is a much lower growth rate than online retail has seen in the past. And last year's comparison base was far from stellar. ForeSee Results shows a significant drop in customer satisfaction year over year. Since satisfaction is predictive of future financial results, a drop is concerning.
But still, I wondered how sales could be up at all if satisfaction was so far down.
A deeper look at the ComScore data shows the Top 25 retailers growing 13% while "Small and Mid Tail" retailers are declining 10%. Satisfaction scores are also split, but the differences we're seeing seem to be more based on those retailers who are continually improving their sites versus those whose cost containment measures have slowed or stopped improvements. It appears that the retailers who closely measure the effectiveness of their sites from their customers' perspectives and continuously improve their customers' experiences are the retailers with increasing customer satisfaction scores. Those retailers who didn't improve customer experience this year are suffering declining satisfaction scores. Many of those in the Top 25 are the retailers who have continued to enhance their customer experiences. Those enhancements are not only helping them to increase their sales, but because of the high visibility and usage of those tops sites, they're also raising consumer expectations of all sites.
Customer satisfaction can be best defined as the degree to which a customer's actual experience meets his or her expectations. Therefore, rising expectations can depress satisfaction scores if customer experience improvements don't keep pace.
In the rapidly changing world of online retail, stopping or delaying improvements is like treading water in a swimming race. While you may temporarily save some energy, you will fall hopelessly behind and your only hope of catching up is spending a lot more energy than you likely saved treading water.
Growing online retail businesses realize and fully embrace the need for continuous improvements, and they also realize that online retail in general is far from producing the level of customer experience truly necessary to provide excellent self-service shopping experiences. I recently heard Robin Terrell, Managing Director of John Lewis Direct in the UK (and Amazon alum), say "If it ain't broke, you ain't looking hard enough" in a talk about the need to improve customer experience. It's a brilliant statement, and I totally agree with what he was saying.
So, "improving customer experience" is a huge and vague statement. Where do we start?
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We've got a lot of data that shows that retailers who best satisfy their customers generate the best financial results. I suppose that statement doesn't sound like rocket science. But understanding that satisfaction has a direct relation to expectations and that our customers' expectations can change independent of what we do on our own site is important. The leaders are continuously improving their sites, and they're improvements are raising our customers' expectations. We've all got to swim harder to keep pace.
What do you think? What's your view on the marketplace? How have you see customer satisfaction affect your business?
Imagine a scenario where you and your business competitors all join in a pact to share your largest revenue sources, pool most of your marketing efforts and limit your respective payrolls to the exact same amount. You all sell the same product. Would you expect each of your companies to perform about equally well?
According to this article, the NFL expected such an arrangement to produce parity -- but it doesn't seem to be panning out. A few teams stand out as being consistently great over time and a few others (including my beloved Cleveland Browns) have been consistently terrible.
Are these success and failure stories the result of random luck, or are there some business lessons to be learned?
I'm not sure there's enough data to completely rule out streaks of good and bad luck, but some of the analysts quoted in the article offered some reasoning that at least got me thinking about business lessons.
Former Colts coach Tony Dungy went to the playoffs in each of his seven seasons in Indianapolis and won the Super Bowl after the 2006 season. The key to winning, he says, is "having everyone on the same page and going in the same direction. The more stability you can get, that's how you're going to win."
"I think one of the biggest reasons why teams aren't getting better is instability," says former Bills coach and general manager Marv Levy, who coached the team to four consecutive AFC titles from 1990 to 1993. "It's always, 'Let's change, let's change. This constant 'We have to shake it up' is causing some of this (disparity)."
Both quotes struck me as pretty meaningful in the business world. In my experience, big changes are disruptive and expensive -- both in real terms and in opportunity costs.
For the record, I am definitely not anti-change. In fact, I love change and the eternal optimist in me is prone to almost always seeing the greener grass on the other side. But it's helpful for me to remember that change does have its hidden costs to be considered.
Real costs
Large scale changes, be they new strategic plans, remodels, site redesigns or something similar, have real costs in their preparation and capital expenses. Since those are more obvious, I'll move on to...
Opportunity costs
Implementing new change is hard work that takes a lot of time and effort. Diverting attention from current efforts creates opportunity costs and can cause a business to fall behind and lose market share during the buildup. Also, in my experience, big changes like store remodels and site redesigns tend to cause temporary step-backs in business and customer satisfaction (which can have longer term effects) due to the "where's my stuff" syndrome.
Talent costs
Big changes like strategic shifts due to leadership changes tend to have human costs. For example, I've found over the years that any "A" player can become a "C" player if put into the wrong situation. Replacing team members is expensive and can lead to some of the opportunity costs listed above.
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Again, I'm an certainly not arguing against change. But in my experience too frequent wholesale changes can generate costs that outweigh the benefits, which is what the NFL coaches quoted above seem to be saying.
At a recent speaking engagement, someone asked me if it's better to implement occasional site redesigns or take a more continuous improvement approach. I've found the continuous improvement approach to be more effective because it's less disruptive to employees and customers alike. But that doesn't mean revolutionary change isn't necessary at times. After all, defending the status quo kills companies. We just have to be careful how often we revolt and make sure revolution is truly the smartest long term move.
But, hey, I'm still thinking through this issue. I would certainly benefit from your thoughts and perspectives. What do you think?
With the holiday season upon us, I thought I would write about my favorite business books of the year to provide some gift giving ideas for you and your teams. Here, in no particular order, are my favorites among the books I read this year. (Note: These books were not all published this year, but since I read them this year I'm including them in my list.)
Six Pixels of Separation: Everyone is Connected. Connect Your Business to Everyone.
by Mitch Joel
Six Pixels of Separation begins as a primer for any business leader with limited knowledge of the Internet's capabilities and quickly turns into an indispensable set of guidelines and advice for any business person who plans to make use of the web (which should be any business person). Mitch Joel offers excellent insight and plenty of simple, direct, digestible advice. This is a must read. The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty
by Sam L. Savage
Every business person should read this book. We are so often looking for precise numbers when precise numbers are unrealistic. The reality is, we would actually be much more accurate to use probabilities and ranges when referencing uncertain number such as sales forecasts or project timelines. Savage takes us through the dangers of using averages to describe distributions and offers solid solutions that can be used to better manage our business.
Preview Flaw of Averages Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
by Nassim Nicholas Taleb
This book made me think more than any book in recent memory. That may be partly because it's pretty dense and I had to read it more slowly than I normally read. However, I'll give a lot more credit to the fact that Taleb's makes some very interesting points about the amount of randomness in our lives and how that randomness is all too often mistaken for something more substantive.
Preview Fooled by Randomness How We Decide
by Jonah Lehrer
I loved this book. Jonah Lehrer takes us through some fairly common behavior economics principles and experiments, but the very interesting twist he takes is to explain the brain mechanics that drive our thinking and decisions. He really uncovers why we're "predictably irrational" and provides great insight into how we make decisions and how we can use that knowledge to improve our decision making.
The Drunkard's Walk: How Randomness Rules Our Lives
by Leonard Mlodinow
I'm on a randomness kick lately, and this is the book that got me started on it. Mlodinow does a nice job of illustrating some of the finer statistical points in a pretty accessible manner. While this book isn't as deep at the book I'm currently reading, "Fooled by Randomness," it's definitely an easier read and does a nice job of covering the basics.
Preview The Drunkard's Walk Sway: The Irresistible Pull of Irrational Behavior
by Ori Brafman, Rom Brafman
Another one of the behavior economics books I so love. This one has some pretty interesting stories and anecdotes, and its insights benefit from one of the writers being a psychologist and the other a businessman.
Preview Sway
More Than a Motorcycle: The Leadership Journey at Harley-Davidson
By Rich Teerlink and Lee Ozley
This is a very interesting book about culture change at Harley-Davidson during the '90s written by the CEO and lead consultant who initiated the change. It can be a bit dry at times, but the details behind the thinking and the execution are excellent. I learned a lot by reading it.
Preview More than a Motorcycle
And here are some great books that I re-read this year:
The OPEN Brand: When Push Comes to Pull in a Web-Made World
by Kelly Mooney, Nita Rollins
The world is changing rapidly, and those who fail to realize it will be left in the dust. However, those who open their brand and see the value of allowing their best customers to participate in the brand will not only reap the benefits of those customers ideas, but they will also benefit from those customers becoming the largest and more credible Marketing department a company could have. Kelly Mooney and Nita Rollins explore these themes in an extremely insightful book that comes with lots of examples that help the reader visualize how these ideas could apply to his or her own business. The writing style and formatting is fun and extremely easy to read. This is a great handbook for any marketer in the 21st century.
Moneyball: The Art of Winning an Unfair Game
by Michael Lewis
While this is ostensibly a baseball book about the success of Oakland A's GM Billy Beane, I actually found this to be an excellent business book. Michael Lewis tells the story of Beane defying the conventional wisdom of longtime baseball scouts about what good baseball players look like. Rather than trust scouts who literally would determine a baseball player's prospects by how he physically looked, Beane went to the data as a disciple of Bill James' Sabermetrics theories. Lewis describes how James took a new look at traditional baseball statistics and created new statistics that were actually more causally related to winning games. By following the James' approach, Beane was able to put together consistently winning teams while working with one of the lowest payrolls in the Major Leagues. How can the same principles of trusting data over tradition and "gut" play in the business world? That is a thought I constantly ponder thanks to reading this book.
Preview Moneyball The Culture Code: An Ingenious Way to Understand Why People Around the World Live and Buy as They Do
by Clotaire Rapaille
I picked this book up on a whim one day because the title was interesting. I was quickly engrossed by reading the story in the introduction of Clotaire Rapaille's work with Chrysler on Jeep Wrangler. He describes the "code" word for Jeep in America is HORSE and advises executives to design round headlights instead of square headlights because horses have round eyes. They think he's nuts, of course, but when it turns out round headlights are cheaper they go with them -- and they're a hit. They also then position the Wrangler as a "horse" in their ads and have great success. Rapaille goes on to describe what he means by "culture code" and details some of the hidden cultural patterns that affect most all of us. Some samples of other codes within the book are:
- The American Culture Code for love is FALSE EXPECTATION
- The female code for sex is VIOLENCE (Whoa! You've got to read the book to understand)
- The code for hospital in America is PROCESSING PLANT
There are tons more of these interesting observations embedded in short, easy-to-read chapters. Whether or not you buy into everything he says, it's very interesting to see how he developed each code and certainly will expand your understanding of how and why people behave as they do under the powerful forces of culture
Preview The Culture Code Predictably Irrational: The Hidden Forces That Shape Our Decisions
by Dan Ariely
This is the book that first turned me on to the fascinating world of behavioral economics. Ariely does an excellent job of explaining many of the core principles of behavioral economics with stories and experiments. Every retailer should read this book to better understand how people (customers) think and behave. It will absolutely open your eyes.
Those are some of my favorites. I'm always looking for a new read. What books fired you up this year?
VP of Retail Strategy at ForeSee Results; longtime e-commerce executive
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