I’ve finally released Inside Nudging: Implementing Behavioral Science Initiatives

InsideNudging-3D

Inside Nudging is written for management professionals and scientists to feed their thinking and discussions about implementing behavioral science initiatives (which includes behavioral economics and finance) in business settings. Situations include the incubation of innovation centers, behavioral science overlay capabilities, and advancement of existing organizations. Companies need to develop grit – the ability and fortitude to succeed. The book introduces the Behavioral GRIT™ framework and covers key takeaways in leading an organization that implements behavioral science. Behavioral GRIT™ stands for the business functions related to Goals, Research, Innovation, and Testing.

The chapters are complemented by an appendix which covers ideas to introduce behavioral science initiatives. I argue that first a company needs to identify its goals and identify what type of predominant organization model it wants to pursue. There are five predominant organizational models I’ve seen. I also offer that a company should consider a number of implementation elements that may play a role during execution. Example elements include an advisory board and a behavioral science officer.

Note that the purpose of this book is not to teach people about behavioral science; there are many other books out there for those purposes. That said, Inside Nudging introduces some behavioral science concepts to provide context and help develop a common language between management professionals and scientists.

I see the application of behavioral science as still being in the early adoption phase. Many companies will benefit if they take time to develop the right approach. I hope Inside Nudging helps you with your journey.

Steve Shu

Praise for Inside Nudging

buy4._V192207739_

scr2558-proj697-a-kindle-logo-w-mono-rgb-lg

 

 

 

Navigating Behavioral Science Applications


The concept of nudging and more specifically the behavioral science phrase of “no neutral design” has strong historical ties to social and public sector issues. The motivation for the phrase goes something like this. We have to provide people with information and choices, such as part of governing a country and during driver’s license application processes, social security claiming processes, and hundreds (possibly even thousands) of other processes. During those processes, we present information and choices as part of designs, and there is some nudging which may influence people’s perceptions and choices in predictable ways. For example, when presenting a set of choice options in list format, a cognitive bias known as the primacy effect may be observed where people tend to be influenced more by the first option in the list. But some option has to be first in the list. So in this case we cannot totally avoid the risk of primacy effect biases. And more generally, we cannot avoid many other types of biases and influences studied in behavioral science. All forms of structure and designs affect behavior. Hence, there is no neutral design, and we need to be deliberate about the behavioral architecture surrounding the way things are designed.

These considerations also play a role in the private sector. And I see a lot of cases where companies may not be conscious about how behavioral science influences come into play simply because they weren’t thinking about them. And that’s the problem. It is a corollary to no neutral design. Because we design things in the private sector, we influence behavior. We can either be diligent to consider behavioral science considerations or not. In other words, we need to avoid accidental behavioral architecture in our designs. We need to navigate toward deliberate behavioral architecture.

Now we can’t predict how everything will turn out for a design through understanding behavioral science. However, we can get a lot smarter about things and about how to manage companies that can better implement and navigate behavioral science. That’s why I’m writing the book, Inside Nudging: Navigating Behavioral Science Applications. The book is not intended to explore detailed behavioral science principals as covered in other great books like Thinking, Fast and Slow (Kahneman 2013) or The Last Mile (Soman 2015). My real focus is to shed light on how behavioral science concepts are implemented in companies and how to get an organization further along the maturity curve in terms of implementation. These management considerations sometimes require a more detailed appreciation of behavioral science. For example, it is hard to really explore management considerations of behavioral science and ethics without delving into areas like System 1 versus System 2 thinking, nudge controllability, moral psychology, and the like. To implement behavioral science more effectively, companies need grit – the ability and fortitude to succeed. Behavioral GRIT™ is a key framework that I refer to in Inside Nudging, and it represents orchestrating companies relative to Goals, Research, Innovation, and Testing.

Inside Nudging: The Excerpts is available in paperback form for talks, workshops, and academic inquiries. The excerpt version of the book includes:

  • Chapter 1: Behavioral Science Centered Design in the New Black – This chapter both sets the foundation for deliberate behavioral architecture and the lenses that we need to examine company efforts through.
  • Chapter 2: Organizations Can Package Behavioral Science for Good – This chapter describes a case of using behavioral finance in the retirement plan design space.
  • Chapter 8: Nudges Refined, Ethics Examined, Acceptability Explored – This chapter introduces Nudge Psyche, a checklist of things to think about so that you can be deliberate about how you approach nudge design and ethics.
  • Appendix A: Ideas to Introduce Behavioral Science Initiatives – This appendix explores predominant organization models (such as an innovation center) and a number of implementation elements that may play a role during execution (such as an advisory board and a behavioral science officer position).

Thanks for reading. I welcome your companionship on this journey and your feedback. Visit www.InsideNudging.com for more info.

Update on Inside Nudging and Other Behavioral Science Efforts


I’ve published an update to Inside Nudging: The Excerpts (in paperback form for talks, workshops, and academic inquiries). The update includes:

  • Chapter 2: Organizations Can Package Behavioral Science for Good – This chapter describes a case of using behavioral finance in the retirement plan design space. I use this case to demonstrate one example of what a successful innovation center might look like. I also provide a summary using the Behavioral GRIT™ framework, where GRIT stands for the business functions related Goals, Research, Innovation, and Testing.
  • Chapter 8: Nudges Refined, Ethics Examined, Acceptability Explored – This chapter introduces Nudge Psyche, a checklist of things to think about so that you can be deliberate about how you approach nudge design and ethics. It attempts to help design by thinking about things from two broad perspectives: nudge design and nudgee attitudes. This chapter has been one of the most difficult ones for me to write as it draws from  a diverse set of research and literature areas including decision science, medical ethics, government, organizational behavior, behavioral science, and moral psychology. I have found the Nudge Psyche checklist to be very helpful though as implementation in the real world can get grey at times. The Nudge Psyche checklist can help one to tease apart the underlying issues.

The chapter excerpts are also complemented by Appendix A: Ideas to Introduce Behavioral Science Initiatives, which I quietly published earlier based on increasing interest by companies in learning about how to get started with behavioral science. I argue that first a company needs to identify its goals and identify what type of predominant organization model it wants to pursue. This may be an innovation center like I describe in Chapter 2. I also define four other predominant organizational models I’ve seen. I also offer that a company should consider a number of implementation elements that may play a role during execution. Example elements include an advisory board and a behavioral science officer.

As a final update, I plan to give a limited number of talks on Inside Nudging and co-host Behavioral Economics Workshops in conjunction with one of my colleagues and partners, Namika Sagara at Sagara Consulting. More information on the workshops can be found here.

Emergence of Formal Behavioral Insights Teams and Initiatives

I recently ran into a short video by the New South Wales government which does a great job of introducing the notion of behavioral insights and application in the governmental space. Although still early, behavioral insights and the application of behavioral economics principles have been going global in the public policy space. At some point in the future we will see a wave build in the private sector – the value proposition for getting smart about  behavioral science is compelling. On the one hand, impacts can be large and returns can easily exceed 10X (see 22X cost savings for UK Nudge Unit). One the other hand, possibilities for competitive differentiation and new products seem limitless. For example, Opower tapped into a great market using software-as-a-service and a behavioral efficiency model for saving energy. Companies like Idomoo present companies with an opportunity to tap into behavior change using massively-automated and personalized videos.

But how do organizations get from here to there in the behavioral economics space? How will the wave build? The New South Wales government video really made me think about the gap in organizational knowledge about capitalizing on behavioral economics. It’s an opportunity. While some companies may be very sophisticated in their approach with behavioral economics, the broader industry is barely conscious of the power of behavioral economics (perhaps Behavioral Economics World 0.2 or 0.3) let alone able to reap large returns from it. How do we get to a Behavioral Economics World 1.0 or 2.0?

The UK Nudge Unit has a noteworthy approach. It is a consulting-like and scientific approach that essentially includes customized analysis and design, plus scientific testing and iteration.

As another example, when I was working with Allscripts we had more of a strategic, business unit approach. We took data we gathered in one market, build insights on top, and then tried to line up incentives and behavior change in complementary markets via offerings in a standalone business unit.

Yet as another example, at Allianz Global Investors we took another approach by setting up a Center for Behavioral Finance with a Chief Behavioral Economist and then establishing a number of initiatives within the Center to provide thought leadership and support the larger business.

Each of these routes is suited for different situations. For other organizations in general, I think it’s important to try and assess what the opportunity is, determine a strategy for moving forward, audit where you are and identify the gaps, and then design and execute on an operating model. Execution of the operating model could include building a behavioral team, outsourcing, augmenting, or partnering.

So to jumpstart your organization’s thinking on how to become a leader in applying behavioral economics, consider the following types of questions:

  1. Opportunity Assessment
  • Where do we get ideas from now?
  • How should we get new ideas related to behavioral economics?
  • How might we change the game?
  • What’s the potential opportunity?
  • How can we test new ideas related to behavioral economics?
  1. Strategy Development
  • What’s going on in the market?
  • What blue sky opportunities should we focus on?
  • What will our approach be with customers?
  • How will we competitively position ourselves?
  • What will the output of our efforts look like and how will we distribute?
  • How will we know when we are successful?
  1. Audit and Gap Analysis
  • Where are we at and how can we get smarter about developing ideas based on behavioral economics?
  • To what extent do we know how to design and test behavioral solutions?
  • How can we develop the organizational fortitude to succeed?
  1. Operating Model Development
  • What should a multi-year plan for the behavioral initiative look like?
  • What should our behavioral insights team look like?
  • To what extent should we build, outsource, augment, or partner for our team?
  • How should we incubate the initiative?

Please feel free to share your thoughts on other behavioral insights initiatives and teams, organizations implementing them, organizations not implementing but interested, who’s doing things right or not, unique approaches, new startups, etc.

Secret Techniques to Overcoming Obstacles as a Manager or Consultant

Over the years, I have had to opportunity to manage different groups and perhaps more importantly observe how different managers and consultants face obstacles. Often these techniques for addressing obstacles are passed down through mentorship or peer exchanges, and as such, these techniques are less documented. Here are some of the techniques that come to mind and are especially more common in entrepreneurial or intrapreneurial situations:

  1. The Experiment – In this case the obstacle that the manager wants to overcome is to make forward progress into an unknown area. For example, suppose a manager wants to adapt a software product for an adjacent customer market. The manager may allocate a budget to a small business development and delivery team to explore and develop a lead customer in the new market.
  2. The Audition – In some cases, the problem to be tackled is either new or the prime resource to deliver is an unknown. For example, suppose the manager needs someone to serve as the principal consultant to lead a new group of services professionals. The unspoken audition may be that the manager may want the principal to lead one engagement with key folks on the delivery team as part of the engagement. The other aspect of the audition may be to have the candidate assist with proposal development and lead an aspect of a customer sales pitch meeting.
  3. The Process Versus Milestones Approach – Some situations arise where it is not possible for one group to dictate the larger process that a company (or another group) should follow. In these cases, the basis of the conversation can be shifted so that groups agree to measure key milestones and outputs. For example, suppose one internal group wants a sales organization to follow a certain process to control focus and quality of customer messaging. While the internal group may find it difficult to instill explicit processes within the other group, the two groups can agree to have review meeting milestones and measurements to assess focus and quality indirectly. So the technique is based on the concept that processes and milestones go hand-in-hand. If one has trouble on the process, try working from milestones angle instead.
  4. The Associations Versus Strategic Approach – Strategy ideally comes before tactics. However, strategy often requires a lot of top-down thinking and heavy analytical brain power. For example, in top-down marketing one may need to define targeting and positioning methods after one has done a complete analysis of the customer segments, value propositions, competitors, company strengths, etc. Yet the battles in the field are happening today & right now. What are the soldiers supposed to do at this moment? Here’s where intuitive thinking, improv, and emergent strategies come to mind. In these cases, immediate tactics are based on doing something consistent with what has been done in the past, creating connections, or taking actions that create consistent associations (such as brand associations).

There are obviously many more techniques that managers use for overcoming obstacles in dynamic situations. What are some techniques that you’ve learned in the field?

Special Discussion on Starting Consulting Services Organizations Within Product Companies

When people think about consultants, they often think about those that work for companies like McKinsey, Accenture, Deloitte, etc. These are companies that are essentially independent from product vendors. However, there are a number of companies that provide consulting or professional services as part of product companies (e.g., companies like Cisco, Avaya, Nortel, Ericsson, IBM) that may sell things like hardware or software. I’ve had the opportunity to incubate and/or reboot the management, sales, marketing, and delivery for a number of these types of consulting practices, and they definitely face a number of issues that are unique from independent consulting firms.

As an example of a jumpstart “Consulting Services for Product Company” engagement, I have often found four common failure points to look out for when examining the organization from an end-to-end view from strategy through sales and delivery (see figure below which hints at the sales learning curve an organization must work through). The failure points are:

  • Unclear, strategy for providing consulting services – An example of unclear strategy includes not being able to articulate to what extent consulting services should be designed to protect product lines versus providing a new revenue stream. Also, what are the types of consulting services to be provided (the services portfolio)?
  • Unclear method for getting leads into the pipeline – Depending on strategy, consulting services organizations within product companies are often implemented as overlay organizations, and as such, the process of getting in front of customers and managing prospects can lack proper definition, discipline, and support tools. Often the buyer in the organization is different too.
  • Improper tone for sales meetings – Product companies are often used to marketing-push type sales strategies (e.g., “here’s the benefit and features of our product – its the best”). On the other hand, consulting services sales are often more diagnosis, empathy, and solution-driven. Getting the right mix between product and services messaging takes some work.
  • Irregular quality of consulting services project delivery – In some cases, consulting services may be may be provided as an afterthought or on a “free” basis to customers (e.g., subsidized by product sales). Unfortunately, a customer’s time is money, so even if the service cost is covered elsewhere, the consulting organization still needs to provide quality work to the customer.

Implementing consulting organizations within product companies can be a great opportunity. That said, I’ve provided a peek at some of the hazards involved. What has your experience been with consulting and professional services organizations within product companies?

Business Development Chronicles – The Story of Us (Doesn’t Have to End in Tragedy)

It’s a tale of Big Company and Small Company.

Big Company likes Small Company’s:

  • focus and style
  • entrepreneurial attitude and skills.

Small Company likes Big Company’s:

  • scale of resources
  • scope and number of customers.

Big Company hates thing like:

  • getting embarrassed by Small Company in front of customers
  • getting burned and stuck with Small Company’s software source code
  • worrying about loose cannons in Small Company’s organization
  • working with Small Company’s legal paper.

Small Company hates things like:

  • working with Big Company’s cumbersome processes
  • getting whipped round navigating Big Company’s large organization and jumping through hoops
  • waiting for the whale to speed up
  • failing to get real deals cut
  • getting RFIs from Big Company and worrying whether Big Company is playing around with others
  • answering the RFI question about financial stability of Small Company
  • getting paid six months late by Big Company.

The Story of Us doesn’t have to end in tragedy. “Us” requires hard work, like courtship. It requires an honest assessment of values and one another’s strengths and weaknesses. It requires regular communication. It requires bridge building skills on fluctuating ground, and should be viewed as an opportunity for those up to the challenge.

Endnotes:                                                                                                     

  • Business Development is about new initiatives and incubation
  • The percentage of alliance failures cited often exceeds 60 percent (example Entrepreneur article).
  • The title for this post was inspired by Taylor Swift’s song, The Story of Us from the Speak Now album
  • I wrote this post reflecting upon doing consulting & contract business development activities and representing mega, mid-market, and small companies over the past year.

What I’ve Learned From Buyers of Management Consulting Services

Many blog posts and articles address when to use management consultants versus not. Some argue that using consultants for strategy development intimate incompetence by management (example here). Others argue that consultants should be used in cases when expertise is higher than that of existing employees.

Companies should definitely examine the needs and tradeoffs for using management consultants. Tradeoffs include expertise, background in similar projects, knowledge retention, cash outlay, incentives, organizational dependency issues, etc.

But I’ve learned something entrepreneurial from a number of buyers that deeply understand how to use consultants and how to lead:

Many smart buyers of management consulting services focus on making forward progress. They focus on solving problems. Whether using consultants is the cheapest option or the best discount of future profits that a client has ever seen or anywhere in-between – the choice of whether to use consultants is less relevant than getting things done with a positive return.

As a long-time consultant, I am clearly somewhat biased. But I’ve been on the buyer side for consulting services too. My main point is to encourage folks to spend a balanced amount of time focusing on how to solve a problem as opposed to pointing fingers.

A Peek At The Difficulties of Incubating New Initiatives Within Large Companies

Entrepreneurial situations in large companies differ from that of startups, yet one thing that they seem to share is that they often represent “hope” in one way or another. In the case of large corporations, these new initiatives can not only turn out to be profitable “ventures” but also boost morale and reward key employees through growth opportunities. Yet many of these new initiatives have difficulty getting off the ground. Frustration is common. This post provides a peek at some of the situations, complexities, and steps to resolution that I have seen.

First, here’s a picture of a common situation in a large company faced with the prospect of starting a new initiative or business line:

  • Perceivably significant yet amorphous business opportunity
  • No money committed / no budget
  • No or limited organizational resources
  • Established products and sales & marketing channels
  • Mature and complex business and product approval processes.

What adds a level of complexity to the situation (and sometimes leads to insanity for those working directly within the environment) is that:

  • Venture requires substantial investment to ultimately succeed
  • Finance cycle of start-up opportunities (opportunity timing) does not align well with the long, finance planning cycles of large companies (sometimes can be 14+ month delays!)
  • Star players in the current organization have limited availability for the new organization
  • Articulating and aligning on a business opportunity requires collaboration by many functions, and these functions are separate and overloaded in the current organization
  • Sales and product development processes often need to be understood at more than the surface-level.

Here are some ideas for addressing many of the above issues:

  • Recognize that it’s not usually possible or desirable to speed up the process by cutting corners
  • Break the process into smaller pieces to get rolling
  • Search for the right sponsor and core team
  • Secure a portion of time for each of the star players
  • Give the employees a real chance to make things work 
  • Consider getting a commitment for small amount of money to get rolling
  • Start to articulate what the business opportunity looks like and document it
  • Consider using a facilitator that can pull the pieces together, help layout program plan, and frame strategic issues and options
  • Paint the vision for the org structure and build emotional attachment to the cause
  • Involve those from sales and product development that will be eager to provide input and testing grounds
  • Aim for pioneer sales and business development deals with lighthouse accounts (concrete wins)
  • Rinse, refine, increase committment, and repeat.

It may take a leap of faith to get things started. But the leap of faith can be smaller than the temptation of the opportunity as a whole. Sometimes the keys are to look for forward motion and to take some initial steps as opposed to wanting to knock it out of the park too soon.

Let me know your thoughts and experiences!