Strategy. Innovation. Brand.
Strategy: What If Health Care Costs Go Down?
The telegraph will generate millions of jobs.
In the early 1990s, call centers were popping up around the United States like mushrooms on a dewy morning. Companies invested millions of dollars to improve customer service via well-trained, professional operators in automated centers. Several prognosticators suggested that the segment was growing so quickly that every man, woman, and child in the United States would be working in a call center by, oh say, 2010.
Of course, it didn’t happen. The Internet arrived and millions of customers chose to serve themselves. Telecommunication costs plummeted and many companies moved their call centers offshore. Call centers are still important but not nearly as pervasive in the United States as they were projected to be.
Now we’re faced with similar projections for health care costs. If current trends continue, prognosticators say, health care will consume an ever increasing portion of the American budget until everything simply falls apart. Given our experience with other “obvious trends”, I think it behooves us to ask the opposite question, what if health care costs go down?
Why would health care costs go down? Simply put — we may just cure a few diseases.
Why am I optimistic about potential cures? Because we’re making progress on many different fronts. For instance, what if obesity isn’t a social/cultural issue but a bacteriological issue? That’s the upshot of a recent article published in The ISME Journal. To quote: “Gram-negative opportunistic pathogens in the gut may be pivotal in obesity…” (For the original article, click here. For a summary in layman’s terms, click here). In other words, having the wrong bacteria in your gut could make you fat. Neutralizing those bacteria could slim down the whole country and reduce our health care costs dramatically.
And what about cancer? Apparently, we’re learning how to “persuade” cancer cells to kill themselves. I’ve spotted several articles on this — click here, here, here, here, and here for samples. Researchers hope that training cancer cells to commit suicide could cure many cancers in one fell swoop rather than trying to knock them off one at a time.
Of course, I’m not a medical doctor and it’s exceedingly hard to predict whether or when these findings might be transformed into real solutions. But I am old enough to know that “obvious predictions” often turn out to be dead wrong. In the late 1980s, experts predicted that our crime rate would spike to new highs in the 1990s. Instead, it did exactly the opposite. Similarly, we expected Japan to dominate the world economy. That didn’t happen either. We expected call centers to dominate the labor market. Instead, demand shifted to the Internet.
In the case of health care, it’s hard to make specific predictions. But a good strategist will always ask the “opposite” question. If the whole world is predicting that X will grow in significance, the strategist will always ask, “what if the reverse is true?” You may not be able to predict the future but you can certainly prepare for it.
Do Generals Stray More Than Teachers?
Do generals commit adultery more often than, say, elementary school teachers?
The way we answer this question says a lot about the way we think. If you’ve been reading about American generals recently, you know that a lot of top ranking officers have been caught with their hands in the cookie jar. The facts are easily available to you. You can recall them quickly. Indeed, they’re very likely top of mind. (One of my students asked, in mock horror, since when have generals taken orders from their privates?)
On the other hand, when was the last time you read about cheating primary school teachers? It’s probably been a long time, if ever. Why? Because stories about cheating teachers don’t sell many newspapers. Stories about cheating generals seize our attention and hold it. It’s a great way to sell newspapers, magazines, and TV shows.
So, it’s easy for you to remember stories about cheating generals. It’s much harder to remember stories about cheating teachers. Based on your ability to remember relevant cases, you might conclude that generals do indeed stray more often than teachers. Would you be right? Maybe … but maybe not. All you’ve really done is search your own memory banks. As we all know, memory is fallible and can easily play tricks on us.
When we’re asked a comparative question like generals versus teachers, we often try to answer a different question: how many cases of each can I readily recall? It’s an easier question to answer and doesn’t require us to search external sources and think hard thoughts. Though it’s easy, it’s often erroneous.
I think I saw this phenomenon in action during the recent presidential election. My friends who supported Obama tended to talk to other people who supported Obama. If you asked how many people would support Obama, they could readily retrieve many cases and conclude that Obama would win. Of course, my friends who supported Romney were doing exactly the same thing — talking with or listening to other Romney supporters. I heard one person say, “Of course Romney will win. Everybody hates Obama”. I suspect that everybody he talked to hated Obama. But that’s not the same as everybody.
Relying on easily available information can help create the political chasms that we see around us. If you read a lot of articles about intransigent Republicans, you may conclude that Republicans are more intransigent than Democrats. That may be true … or it could just be a product of what you remember. Similarly, if you read lots of articles about Democrats undercutting the military, you might come to believe …. well, you get the picture.
What should we do? First, remember that the easy answer is often the wrong answer. It depends on what we remember rather than what’s actually happening. Second, start reading more sources that “disagree” with your point of view. All information sources have some degree of bias. Reading widely can help you establish a balance. Third, study up on statistics. It will help you understand what’s accurate and what’s not.
By the way, this post is adapted from Thinking Fast and Slow by Daniel Kahneman, easily the best book I’ve read this year. You can find it here.
(Note: I’ll teach a class on Applied Critical Thinking during the winter term at the University of Denver. Some of my teaching material will show up here in posts about how we think. They’ll all carry the tag, Applied Critical Thinking, so you can find them easily).
Brand Names: Offense
My clients often ask me to help them name things. They’re hoping that we can develop a name that plays equally well to logic and emotion and that states a compelling benefit in 15 letters or less. A lot of brains have been damaged this way.
Great brand names often trigger emotional responses. But we often get the cause and effect backward. The name doesn’t put the emotion in us. We put the emotion in the name.
I worked in college and scraped together enough money to buy a beat-up Pontiac Tempest. The original Pontiac was a great Indian leader in the midwestern United States. The town of Pontiac, Michigan was named after him. General Motors opened a factory there and named the car after the town. Originally, the name Pontiac didn’t mean anything more to me than, say, the name Cotopaxi. It’s just a name. Then I bought the car and enjoyed driving it. Now Pontiac has a special meaning to me, some sentimental value. The name didn’t do anything to me. I did something to the name. That’s why naming is so difficult. The name doesn’t trigger anything until customers add emotion to it.
As Kevin Lane Keller and many other branding experts have pointed out, you can play offense or defense with a name — but it’s hard to do both. Consider three variables for offense:
- Memorability — anything you can do to make your name memorable will help build your brand. This may mean playing off a well-known word — as in Lincoln cars or Winston cigarettes. Be sure to link to something that has positive connotations. Repetition also builds memorability which is why marketers repeat themselves so often.
- Meaningfulness — a good name may identify a product category, or some key product features, or a major product benefit. Be aware that changes in perception may require you to change your name. When fried food came to be viewed as unhealthful, Kentucky Fried Chicken decided to change its name to KFC.
- Likability — it’s hard to know what makes a name likable. You may pick a popular person’s name. Animals often provide better names than people do. It’s hard to hate an animal whereas it’s not so hard to dislike some people. The more abstract a product or service is, the more important it is to focus on a likable name.
It’s exceedingly hard to pick a name that has all three criteria. The trick is to not worry too much about it. Remember that a great name doesn’t create a great product. A great product creates a great name. Tomorrow we’ll talk about how to defend a great name.
(This article is based largely on Kevin Lane Keller’s book, Strategic Brand Management).
Innovation and the Installed Base
How could God create the entire universe in only six days? He didn’t have to worry about an installed base.
Need to upgrade to Universe 2.0?
It’s fairly easy to innovate technically when you don’t have customers. You can adapt new technologies or new ideas without fear of alienating current users. Once you have customers, you have to pay attention to their needs. That includes the ability to upgrade seamlessly from one generation to another. Your customers feel that they’ve paid you money for a long time so their needs should dominate your planning. That may mean that you have to slow down new releases of your product to help your installed base tag along.
Think about it this way: which company is more innovative: Apple or Microsoft? Most people would say that Apple is far more innovative. But which company takes better care of its installed base? By and large, Microsoft has. When Microsoft releases a new operating system, they actually test to determine if old applications will run on the new platform. Apple is much quicker to dump the old stuff to keep the new stuff coming. The latest example is the new plug for the iPhone 5. If and when I upgrade to the iPhone 5, I’ll obsolete half a dozen perfectly good cables that no longer fit. That’s irritating but it may well get me into new technologies that work better than the old.
So do innovation and good customer care always conflict with each other? Not necessarily. Your fundamental commitment to customers is not that you’ll help them to move from release to release. Your promise is actually simpler — that you’ll stay in business to continue to serve your customers. I’m a veteran of a number of companies that no longer exist. Our customers were totally out of luck — they got nothing. Much better to give your customers something new — even if it entails ripping out the old — than it is to give them nothing at all.
When is it acceptable to ship an innovation that disrupts your installed base? I think there are two answers: 1) When a new technology emerges that allows you to provide much better solutions at a lower cost. You need to hop to a new platform to take advantage of the change. I saw this happen in the transition from host-centric to client/server software. It’s happening again today with cloud computing and mobile platforms. 2) When a competitor is shipping a solution that will disrupt your relationship with your installed base. Better to disrupt your own base than to let someone else do it for you.
And, how do build innovative new solutions while also maintaining and developing your traditional, bread-and-butter products? It’s not easy. The best answer I’ve seen is the ambidextrous organization which you can read about here.
Branding: Why Do They Buy?
Are these fashionable?
When I lived in Stockholm, I was responsible for customers throughout Scandinavia. One of my favorite customers was Dale of Norway, the creators of richly patterned, thick wool sweaters. The sweaters are very popular with winter sport enthusiasts in my home state of Colorado. They’re stylish and they’re practical … and therein lies a tale.
I visited Dale of Norway’s headquarters and met their CEO. The company is located in a picturesque little town called Dale. (We call it Dale as in Chip and Dale but the Norwegians pronounce it Darla). When I met the CEO I mentioned that I was from Colorado and that my wife and I were both customers. The conversation went something like this:
CEO: “Let me guess. You have one sweater and your wife has three.”
Me (surprised): “Yes. How did you know?”
CEO: “Women see our sweaters as fashion statements and they’re willing to buy more than one. Men see them as a high quality product that will last a life time. If it will last a life time, why would you ever buy more than one?”
Me: “I wish I understood my customers as well as you understand yours.”
There are a couple of lessons here. First, sometimes a satisfied customer is just that: satisfied. I was a very satisfied Dale of Norway customer. If you did a customer satisfaction survey, I would be right at the top. But I was generating exactly zero revenue for the company.
One of Dale of Norway’s challenges was to overcome the satisfied customer curse. They needed to give me (and even my wife) more reasons to buy. To complement their heavy weight sweaters, they introduced two new product lines — mid-weight sweaters and lighter weight accessories. I’m now the proud owner of a mid-weight sweater and some long underwear. I’m still satisfied but, more importantly, I’ve generated new revenues for Dale of Norway.
The second lesson: different people buy for different reasons. Don’t ever assume that what’s sauce for the goose is sauce for the gander. To the maximum extent possible, live with your customers. When you see the world through their eyes, you’ll find that different groups see your product differently. There’s nothing surprising in that — it’s just segment marketing. Unless you understand how each segment thinks, you’ll never communicate effectively with them. One message does not fit all.
The third lesson? Dale of Norway makes great sweaters, gloves, mittens, and scarves. So get out there and buy one … or two … or three. You can find them here.
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