Strategy. Innovation. Brand.
Local, Personal, Social, and Always On
The Boston Consulting Group (BCG) just published a new study that compares 16 industries in their ability to deliver digital satisfaction to American consumers. What’s the worst industry? The telco/cable industry is at the bottom of the heap. What’s the best industry? Surprise … it’s personal banking.
BCG surveyed 3,135 consumers in March 2013 and measured satisfaction with 17 different digital “interactions”. These were grouped into four broad categories:
- Research – interactions include the ability to find information quickly and easily, the ability to find better prices, etc.
- Transactions – the ease of making the transaction, the ability to buy what I need, etc.
- Post-transaction activities – including social features, customized communication, and mobile access.
- Other – including quick access to help and the degree to which I trust this transaction.
The researchers asked consumers to rate each interaction in two ways: 1) how important is it?; 2) how satisfied are you with it? With these data, we can compare expectations and how well those expectations are met.
The researchers crunched all the data and compiled the 16 industries into four categories:
Leaders – consumers had high expectations of leaders and, by and large, their expectations were met. In general, the leaders scored well across all four interaction categories, from beginning to end. (Actually, the process never really ends). The four leading industries are (in order) personal banking, online merchants, media retail, and electronics retail. Personal banking leads by a wide margin, with a total satisfaction score of 15.2, compared to 11.8 for online merchants, the second ranking industry.
Aspirants – these industries do well on the research interactions but lag on the transaction and post-transaction categories. In other words, they get off to a good start but don’t follow through well. Consumers are not displeased with aspirant performance but think it could be improved. Industries in this category are: apparel retail, airlines, investments, and hotels.
Sleepers – consumers have low (digital) expectations of sleeper industries … and those expectations were fulfilled. Sleeper industries are: supermarkets, automobiles, and real estate.
Laggards – consumers have higher expectations of laggards (than of sleepers) but low satisfaction. Laggards fall behind in all interaction categories, from research to post-transaction. Laggards include: utilities, government services, health care providers, insurance, and (worst of the worst) telco and cable
Consumers want the digital experience to offer more than the physical experience. Digital might offer more options, more information, better prices, or more convenience. It might even be fun. Generally, consumers “expect the digital experience to be local (recognizing where they are), personal (tailored to their individual needs and preferences), social (shared with their friends) – and always on.”
The study also points to the growing importance of mobile access. Roughly half of Millennials (born 1980 – 2000) use mobile devices while shopping. For older consumers, the rate is approximately one-fifth. Mobile access enables two key trends:
Showrooming – check out the merchandise in a brick-and-mortar retail outlet, then compare prices and buy online.
Omnichannel – use the entire array of online, mobile, virtual, social, and real world channels to make a buying decision.
As the authors point out, the purchasing process is no longer linear; it’s now fluid and dynamic. To succeed, companies will need to enhance satisfaction through the entire range of interactions and do it through all channels. It’s a daunting challenge. The reward, however, is a slice of the $450 billion e-commerce market that BCG projects by 2016.
Creativity and Caffeine
Gosh, I’m feeling so creative.
Last December I wrote a brief article asking, Are You More Creative When You’re Sleepy? The general idea is that you’re less likely to stick to nonproductive routines when you’re tired. Let’s assume that you know the “right” way to do something. When you’re fresh and energetic, you may repeat the process multiple times, even if it doesn’t work well. You’re more likely to assume that the process is correct but you’re making a mistake. Thus, you repeat the process, expecting to correct the mistake and achieve success. When you’re tired, you’re more likely to give up, and try something different — perhaps something more creative.
This week The New Yorker has an article looking at the same phenomenon from a different perspective. The question: does caffeine inhibit creativity? Caffeine tends to stimulate and focus the mind. If you’re more creative when you’re tired — because your mind wanders — then caffeine should reduce your creativity.
Maria Konnikova — who wrote Mastermind: How To Think Like Sherlock Holmes — wrote The New Yorker article and it’s well worth a read. Even if you’re not interested in creativity, you’ll be fascinated with the way Honoré de Balzac inhaled ground coffee dust because the brewed stuff just wasn’t strong enough.
Nothing Buttists and Physics Envy
It’s so precise!
Physics is beautiful. It’s precise, it’s elegant, it’s mathematical, and it explains and predicts. If you know the inputs, you also know the outputs.
Perhaps that’s why so many other sciences (and pseudo-sciences) seem to have physics envy. Envious sciences can’t simply explain; they also have to predict. That’s where they get into trouble.
Take economics. It used to be about markets and policies and people and behavior. Then it succumbed to physics envy and grew (in my opinion) far too fond of calculus. Economists seemed to think that calculus would provide the same predictability as physics. Just remove the human element, forget the politics, and focus on the math. As Roger Lowenstein writes, “The modern economist employs mathematics as a badge of neutrality.” We should all be thankful that Daniel Kahneman et. al. have restored human behavior to economics.
Physics envy seems to have invaded neurology as well. As David Brooks points out, we now have “nothing buttists” – humans are “nothing but a bunch of neurons.” Taking this view supposedly leads to predictability. Indeed, Adrian Raines believes that we can predict violent crime. (My low heart rate may consign me to jail).
Ultimately, I think it’s all just silliness. Professors are trying to put the gloss of scientific certainty over their incomplete theories. They’re trying to predict what humans will do with precision and certainty because that’s what physicists do. Fortunately, humans don’t behave like subatomic particles. Life is unpredictable – that’s what makes it fun. Just remember to eat dessert first.
Relegate the State – A Modest Proposal – 2
Back on track.
Yesterday, I introduced the idea of relegating failed states out of the United States. So, how would the system work?
First, we’d have to develop a definition of what “success” really means. Such a definition might include a number of metrics such as educational attainment, employment, crime rates, justice system, health care, life expectancy and, perhaps, a citizen satisfaction index. It might also include some fairness metrics, aiming to understand how minorities fare within the state. It should also include a freedom index that measures how much citizens can do as they please.
There are probably many other metrics to include in the mix. Ultimately, we roll them all into a complex formula and calculate a number. Frankly, it’s not all that different from calculating a quarterback efficiency rating: a lot of stuff goes in, one number comes out.
We then rank the states and allow them to work on improvements. At the end of a decade, we relegate the bottom five – the least successful states. They are granted their independence and are no longer states within the United States.
The relegated states are, in a sense, liberated as well. They no longer need to worry about regulations emanating from Washington. They’re free to behave as they choose. Of course, they no longer receive subsidies from Washington, either.
The system allows for promotion as well as relegation. At the end of each decade, states that had been relegated could choose to apply for re-admission. We would need to develop rules and procedures to determine if they would be re-admitted and how they would be re-integrated. Fortunately, we have at least 20 years to work on the problem.
Ideally, the system would allow non-traditional states to apply for “promotion” as well. With Alaska and Hawaii, we’ve shown that states do not need to be contiguous. Let’s imagine that Wales wants to become a state within the United States. The city of Aberystwyth, Wales is actually much closer to Washington, D.C. than Honolulu is – so distance shouldn’t be a problem. If they can pass the success metrics, I’d be happy to have Wales join our union.
Like any other system, the devil is in the details. Working out the definition of success will take time. (On the other hand, identifying moocher states is quite easy). Plus, we would have to work out all the mechanisms of entry and exit. We could learn a lot from the experience of the European Union.
Despite the obstacles, I think this is a system that would appeal to many Americans precisely because it promotes American virtues, including:
Competition – states will actually have to compete with each other rather than lolling around on government welfare.
Responsibility and accountability – if you don’t do the work, you don’t get the benefits.
Incentives – states, for the first time, have the incentive to improve themselves.
Lower taxes — if giver states no longer have to support moocher states, we can significantly lower taxes.
Freedom – states are free to choose whether they stay or go. To leave the union, all they have to do is continue to fail.
It’s an all-American scheme that will reduce taxes while promoting the well being of our citizens. Let’s get started.
Relegate the State – A Modest Proposal – 1
You’ve been relegated.
I’ve always admired the European system of relegating athletic teams to lower divisions when they don’t perform well. The system creates much better competition while rewarding teams that do well and penalizing teams that fail.
Let’s say you own a soccer team in the “A” league, the highest level of competition. In addition to the “A” league, your country also has a “B” league, a “C” league, etc. Being in the “A” league provides a lot of privileges – greater attendance, television revenue, prestige, and so on. You have a lot of incentive to keep your club in the “A” league.
At the end of each season, however, the bottom three teams in the “A” league are relegated to the “B” league. At the same time, the top three teams in the “B” league are promoted to the “A” league. (The number of teams moving up or down varies from league to league). You have a very strong incentive not to let your team fall to the bottom of the standings.
In the American system, on the other hand, an “A” league team will always stay in the “A” league, no matter how poorly it performs. There’s no chance that my Colorado Rockies will be relegated to the minor leagues even though they stunk up the major leagues last year.
The American system creates a number of perverse incentives. There’s a clear incentive to lose games one year to improve your draft position the next year. Even if you have a crummy team, you still get to share in league-related income, like TV revenues. You don’t get the glory of winning a championship, but the financial penalties of failing are not very stiff. If you’re just in it for the money, there’s no real incentive to win.
The European system seems clearly superior. It creates greater competition, removes perverse incentives, and creates a system of accountability. You win, you’re in. You lose, you’re out. That seems much more American than European.
I’ve been wondering lately if we couldn’t apply a relegation system to the states of the United States. We have 50 states and some are clearly more successful than others. Even the failing states, however, reap huge rewards from remaining in the union.
In our current system, there’s no real incentive for a state to succeed. Even if a state fails, it still gets huge subsidies from other states. In fact, the greater the failure, the greater the subsidy. It’s a perverse incentive: the worse you do, the more you get.
In fact, some states – let’s call them moocher states – get a net benefit of billions of dollars from the federal government. These states pay a relatively small amount in federal taxes but get huge federal subsidies in return. There’s no incentive for such a state to invest locally. It would only reduce the federal subsidy.
The giver states, on the other hand, are penalized for their success. They see their moneys drained away to subsidize the moocher states. This reduces their incentive to continue to succeed.
So, what to do with the moocher states? Let’s set up a league table and rank states on their success. Every ten years, let’s drop the bottom five from the union. That will improve competitiveness, enhance local autonomy, emphasize responsibility and accountability, and erase perverse incentives. What could be more American than that?
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