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Example Companies Involved with Behavioral Economics

Here are some consulting firms and practice groups in the behavioral science and economics space:

These days I see an increasing number of internal behavioral economics groups or initiatives starting within traditional companies or organizations. Here are some examples:

I also see more independent consultants in this space as compared to what I used to see 10 years ago.

The lists above will be updated from time to time.

Steve Shu specializes in incubating new initiatives with a primary focus on strategy, technology, and behavioral science. He is author of Inside Nudging: Implementing Behavioral Science Initiatives and The Consulting Apprenticeship: 40 Jump-Start Ideas for You and Your Business.

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One of the Best Ways to Market Yourself as a New Consultant

One of the best ways to market yourself as a consultant is by having someone refer you to a client prospect. This type of marketing can be viewed through the lens of “networking by helping someone” (in contrast to networking and just meeting lots of people). These are investments you make to both build your reputation and professional networks.

As an example, for one of my first clients as an independent consultant, I got in the door through the referral of an IT systems consultant (met at a local lunch talk) who needed to help their client do an operational analysis. I first helped the consultant and then the client to understand how operational analyses were done and provided them with some tools they could use (e.g., gave them some management one-pagers I wrote on their topic). They then invited me to propose to them.

Marketing as “networking by helping someone” is a key tool to have in your kit. It is the idea of helping before selling. Once you have successful clients, you can then refer to the general experiences as case studies (often anonymized, but not always). These case studies accumulate, and they serve as resources that can help your marketing efforts as a consultant.

Steve Shu specializes in incubating new initiatives with a primary focus on strategy, technology, and behavioral science. He is author of Inside Nudging: Implementing Behavioral Science Initiatives and The Consulting Apprenticeship: 40 Jump-Start Ideas for You and Your Business.

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What Is It Like to Work in a Nudge Unit?

This post is based on a question that was posed to me on Quora, What does it look like to work at the Behavioural Insights Team, or any other Nudge Unit?

If you are interested in nudging within the government context, I would check out the book by David Halpern, Inside the Nudge Unit, which essentially addresses the genesis of the Behavioral Insights Team in the UK and its approach to execution, which includes addressing problems one nudge at a time.

For some additional flavor on the US side and how nudging has affected policy, with some of those ideas being implemented in the White House Behavioral Sciences Team, check out Cass Sunstein’s book, Simpler. I am not sure how that team is currently doing given the Trump administration and policies to dismantle organizations from both the outside and within, but it is a good book. Although it’s been some time since I read that book, I recall a distinct a vibe around calculating return on investment as a key process intertwined with implementing nudges within government.

If you are looking for information on implementing nudge units within companies, I published a book in 2015, Inside Nudging: Implementing Behavioral Science Initiatives. Like the books previously mentioned, I typically have found nudge units to be very project-focused, and they often include elements of randomized controlled trials (RCTs) or experimental work. I have also found that nudge units tend to work best when they deliberately address elements and processes around Goals, Research, Innovation, and Testing. I call this Behavioral GRIT (essentially organizational fortitude to implement behavioral science). I propose that how companies implement behavioral science initiatives should be based around a vision implemented through a predominant organizational model (like an innovation center or consulting office) and then adding implementation elements (like an advisory board or a chief behavioral scientist). I’ve made an appendix to my book available here, which details predominant organization models and implementation elements to jump-start one’s thinking: https://steveshuconsulting.com/wp-content/uploads/2015/08/Inside-Nudging-Appendix-A-August-27-2015-v7.pdf. Leafing through that appendix might also give you some indirect ideas about what it might be like to work in a commercial nudge unit (recognizing that these vary a lot).

Finally, I also put together a short video introducing behavioral science initiatives (again related to commercial settings), and the video might also provide some additional color:

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How Do Consultants Stay Organized Before Creating Client Deliverables?

This post is based on a question posed to me on Quora.

Individual consultants and engagement managers usually develop their own ways of organizing information. Here are a few concepts I have used (but situations vary widely based on the situation and team composition):

  1. Document the problem statement, the problem solving structure, the set of workstreams and activities to execute the project, governance process, and structure of each deliverable. In some cases the engagement team may create (up front) an entire blueprint to execute the project.
  2. Develop interview guides according to the problem solving structure and conduct interviews with the interview guides in mind. Take raw notes roughly in line with the interview guides. Create managerial meeting summaries along the way and file the raw notes.
  3. Organize notes, specimens, analyses, deliverables, potentially by workstream folders and subfolders. For example, there may be four major workstreams at the top level like assessment, financial modeling, technology options, and business strategy. Here is a chart from my book, The Consulting Apprenticeship, and it illustrates the conceptual concept of workstreams and activities (I could have also included deliverables on the chart, but the sizing for print would have been an issue).
  4. Have clear consultant assignments and owners for workstreams and major activity areas. Have individual consultants organize and present progress (for their realm) to engagement managers and principals at least 1–2 times per week. This helps to both keep project cadence up and put pressure on the individual consultants to be organized and deliver the pieces that they have responsibility for. Make course adjustments or staff adjustments as needed.

Note that some consulting firms also set up “war rooms” where there may be many wallboards, whiteboards, and the like for maintaining an Agile-like environment. Elements of that can eventually get converted into more formal deliverables. You may also run into some tech-savvy clients that also encourage the use of things like Slack or InVision for collaboration and communication with the client.

In summary, careful planning, note taking, analysis, project organization, storyboarding, and regular project leader reviews are needed to keep information organized and a consulting engagement on the rails.

Edit 2/13/2019: Special mention to Kevin Johannes Wörner who has a nice video covering advice for new strategy consultants (9 lifehacks) based on his experiences, including at Roland Berger. I really resonate with Kevin’s comments about how to deal with massive amounts of data and information coming at you in the client environment and focusing on the few items that really drive results. 

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Is Behavioral Economics Used in Business?

This post is reproduced from an answer that I wrote on Quora to the question posed to me, “Is Behavioral Economics Actually Used in Business?”

Broad, conscious, and concerted efforts to apply behavioral economics probably did not begin until sometime after 2008 with the release of Thaler and Sunstein’s book, Nudge. And then when new applications of behavioral economics started, they seemed to be mostly applied in the government space. While many principles of behavioral economics have preceded that and have been applied, I think the introduction of a popular science book and clever packaging helped the principles rise to a new level of consciousness.

Since then, the implementation of behavioral economics/science initiatives in business has started to grow, but it’s still somewhat early. Back in 2010, I was part of a team that started one of the early behavioral finance centers with one of the investment manufacturing firms in the United States. We introduced thought leadership materials like some of the other firms, but we also took it further by equipping financial advisors with specific tools to help assess the behavioral architecture of retirement plans offered by companies.

One key observation I’ve had is that certain companies can have different strategies for implementing behavioral economics. This can include wanting to do holistic innovation that touches on service, products, and applications. Or they can pursue narrower approaches, like research and thought leadership. I wrote a book, Inside Nudging: Implementing Behavioral Science Initiatives in 2016, mostly to help bridge the gap between science and the application in business. That work is based on my background in closely collaborating with academics in behavioral economics and companies looking to be on the cutting edge.

Here are a few examples of how the field of behavioral economics has touched business in my corner of the world relative to behavioral finance:

As an additional reference, you might also be interested in checking out the book by one of my colleagues, The Smarter Screen. That book specifically addresses behavioral economics in a digital world.

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Behavioral Economics Versus Behavioral Science

There will be different perspectives on the definitions of these two terms depending on context. Put simply, behavioral economics lies at the intersection of economics and psychology. Behavioral science is a somewhat broader term than behavioral economics as it is more inclusive of things that do not lie at the intersection (e.g., pure social psychology or neuroscience).

While the boundaries are evolving due to the nature of knowledge discovery, some things that lie at the intersection (i.e., behavioral economics as I’ve depicted) include choice under risk and uncertainty, prospect theory and loss aversion, myopic loss aversion, behavioral time discounting, heuristics, biases, mental accounting, behavioral game theory, and neuroeconomics. You will find that some people have a perspective that behavioral economists have foundational training in economics (i.e., come from economics departments) whereas other use the term more loosely and include those in the behavioral science area.

Note that when when you visit the intersection of these two circles you will inevitably see the distinction between how people behave versus how people should behave. You may also see the concept of nudges and behavioral solutions that try to address issues that people face.

Behavioral science is inclusive of the intersection and may also include things beyond that like memory processes, empathy, emotions, learning, moral foundations theory, group decision making, neuroscience, psychology of aging, etc.

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Thoughts About Finder’s Fees to Other Professional Services Providers as a Consultant

This answer is based on a question posed to me on Quora.

I’ve only used finder’s fees sparingly over the course of my professional services career. Here are some reasons why:

  1. Some of the best referrals for me have come from other people that currently work either for the client or as a consultant to the client. Providing a referral fee can sometimes create a conflict for those parties providing a referral. The same applies to me providing referrals.
  2. Other referrals come through people that know me or know of me. In these cases, I may provide a referral fee (or something else) more as a unwritten gesture than as a contractual, business regularity, mainly since business through these channels is very much appreciated but more irregular.
  3. Unless designed properly, the referral fee can be stranded between a space where not enough incentive is provided (or even insulting to the referrer), too much incentive is provided and margins are decreased too much, and/or an unwritten obligation is created where the referrer feels overly responsible as to whether the referred is successful or not (as opposed to being arms length from both the referred and the client).

Others may have different experiences, so make sure to get some other perspectives.

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How Do Consultants Handle Situations With Clients Who May “Laugh” at Them Relative to Projections and Opportunity Outcomes?

Here are some thoughts on how consultants prepare for and handle these types of situations:

  1. Projections may be initially tested in safer settings. If projections end up being perceived as too wild or aggressive, it is better for this to happen in a working meeting or separate session before a “final” presentation is made. Following an iterative process and managing client expectations reduces risk for the consulting team.
  2. Projections are usually based on models with assumptions being made transparent. By making assumptions and modeling transparent, some focus can be taken off of the actual projections. The focus is more on the process and the assumptions, which of course lead to the projections. If the client disagrees with the assumptions or the process and modeling, problems can be resolved to minimize the possibility of clients “laughing” at the consulting team for the projections.
  3. Models and projections are often built by keeping the client team involved during the build process. This further minimizes risk of the client being surprised at the end. It also helps to increase ownership of the projections by the client. All projections have limitations of some sort. So let’s all own both the insights and limitations of the analysis.
  4. If the consulting team was not able to follow any of the processes above or if the consulting team could only feasibly do some of the elements above, then senior people on the team may need to handle a client that disbelieves the numbers and “laughs”. As example of how this could work, the partner could simply assert confidently that they believe the numbers and that a separate session could be set up to go through them. Another alternative might be for the partner to say that the consulting team will take a second look and perhaps one or more of the client members could be involved. Yet another option might be for the partner to suggest that some other scenarios and sensitivity analyses be performed. I will say though that consultants use their analytical training try to avoid being orders of magnitude off when putting forth projections. Or if they are going to provide projections that may be wildly off, they caveat that up-front.

All said, consultants try hard not to let situation #4 come up by actively working on items #1-#3 to reduce risk. It is important to remember that in consulting, the process is an essential part of the deliverable.

The post above was reproduced from a question that I originally answered on Quora.

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The Real Key to Performing a Competitive Assessment

Assuming that one has capable resources to get the job done, the most important thing needed for a competitive analysis is an articulation of the true problem statement. The need to perform a competitive analysis is not a problem statement in of itself. Is the problem statement a broad one to simply formulate strategy? Unlikely. Not focused enough. Perhaps it is about assessing the atrractiveness of services A, B, and C in a particular market? Or perhaps it is about a financial assessment of competitiveness from a risk management perspective? Or maybe the purpose is to determine the robustness of an organizational model relative to competitors? All of these? Some of these? Other?

The point is that competitive analysis is just a tool, and there are many tools. Which tool and approach one picks actually depends on refining the problem statement properly. Why do we want a competitive analysis? What problems are we actually trying to solve? Who in the organization is the analysis for? Get to the core needs. Then determine what competitive analysis approaches are the right ones given the problem, audience, time, effort, precision, and resources required.

Steve Shu specializes in incubating new initiatives with a primary focus on strategy, technology, and behavioral science. He is author of Inside Nudging: Implementing Behavioral Science Initiatives and The Consulting Apprenticeship: 40 Jump-Start Ideas for You and Your Business.

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One Tip to Prepare Yourself Before Starting a Job with McKinsey, Bain, or BCG

Prepare yourself for the situation that every Powerpoint slide that you create will get tossed out of the window. The slides you initially create will unlikely look like the ones from the firm. It may be discouraging at first, especially since many are used to being high achievers. However, it is a process that most people go through when they join a consulting firm because consulting is based apprenticeship and learning from others in the firm.

One of the early lessons will be opening your eyes to synthesizing data into killer pictures. Another lesson will be about making sure that slide titles drive to the “So What” message and bottom line versus being topically titled. And another lesson will include storyboarding the presentation deck, perhaps even creating the deck with just the titles of each slide as sentences and containing no content other than that. That construction allows one to read only the titles in the deck and glean the executive-level messages and deductions / inductions.

Of course there will be many more lessons both tacit and explicit. Look out for them carefully because not all lessons will be marked explicitly as such. But the slides you create…your mini Mona Lisas…will inevitably be trashed. Remember that the process is not about hazing. It really is about getting to the right end product with more senior people managing the quality of the product and training you according to cultural norms of the firm.

Edit 2/13/2019: Special mention to Kevin Johannes Wörner who has a nice video covering advice for new strategy consultants (9 lifehacks) based on his experiences, including at Roland Berger. I really resonate with Kevin’s comments about how to deal with massive amounts of data and information coming at you in the client environment and focusing on the few items that really drive results.

Steve Shu specializes in incubating new initiatives with a primary focus on strategy, technology, and behavioral science. He is author of Inside Nudging: Implementing Behavioral Science Initiatives and The Consulting Apprenticeship: 40 Jump-Start Ideas for You and Your Business.