Thirty years ago, I was a product manager for a startup company that created high-performance, multiprocessing minicomputers. Powerful, scalable, and based on open standards, they offered exceptional price/performance. In 1988, Electronics magazine gave its Computer of The Year award to the flagship model
As we introduced the system, we described the “ideal” customer: a medium to large organization that used Unix-based systems, and ran large database applications, especially Oracle applications. We trained the sales force, produced some modest direct mail campaigns, and launched.
Then reality set in. In the first three months, we sold about 45 machines to some 30 different organizations. We gathered data about our new customers and looked for correlations that would help us target prospective customers more precisely. We found nothing — no patterns in terms of size, SIC code, geography, application, and so on. The data were almost random.
We were stumped. So, we decided to interview the key decision maker in each account. We created an interview guide and fanned out to visit customers
After our visits, we dug into our findings. Again, we found no useful patterns in the demographic data. Then we started describing the key decision makers. Who were they? Why did they decide on us?
Most of the decision makers were men in their early thirties who had recently been promoted to a position typically described as VP, Data Processing. They replaced an older person who had held the same position for more than ten years. One of our marketers had a flash of insight: “It’s almost like the decision maker is saying, ‘I’m the new sheriff in town. We’re going to do things my way. This is one of my first big decisions … and we’re going to buy a hot new machine from a startup company. I’m going to make my mark.’”
It turned out to be a very accurate description. Nominally, our customers were buying our machines to run large applications. But psychology was perhaps more important. We estimated that roughly 60% of our customers fit the “new sheriff” profile.
We decided to market specifically to new sheriffs. We trawled through organization profiles and identified those that had a new VP of Data Processing. We sent each new sheriff a fairly intense mail campaign coupled with calls by our local sales rep. The campaign succeeded rather well. From the time of the launch, we grew to $300 million in revenue in about two years.
I didn’t know it at the time, but we were practicing an art that today is called, the “jobs to be done theory of innovation.” (Click here for a good introduction). Developed by Clayton Christensen and his colleagues, the basic idea is that demographic information doesn’t reveal why a person chooses to purchase a new product or service. If we misunderstand the job to be done, our innovations will miss the mark.
Our startup company, for instance, positioned around big machines for big databases. We wanted to offer ever bigger, pricier machines. The new sheriff profile, however, changed our thinking. To get in the door, we needed to make it easy for the new sheriff to buy something on his own authority. So, we introduced an entry-level machine priced just below a typical VP signature limit.
Similarly, think about why men buy pajamas. We might think they simply want to stay warm. But men in America typically don’t buy pajamas until they have a daughter who is three years old. Their motivation is not to stay warm but to preserve their modesty. If we misunderstand that, we’ll produce far too many cozy, warm, flannel pajamas that men will never buy.
In my experience, good marketers and salespeople use the jobs-to-be-done method naturally and intuitively. They’re good observers and naturally ask a basic question: why do people buy these products? They dig into the data but, more importantly, they observe how people behave and ask insightful questions. The management guru, Ted Levitt,was a natural at this. He noted that people don’t buy gasoline for their cars. Rather, they buy the right to continue driving.
The jobs-to-be-done theory suggests that the key to innovation is sociology, not technology. Do you want your company to be more innovative? It’s time to add more marketers and salespeople – and maybe a sociologist and anthropologist – to your development team.
My buddy, Yancey, is a Bitcoin broker. He’s been arranging deals part-time for several years now. About a year ago, he went full time. He seems to be doing fine.
It’s ironic that the Bitcoin needs a broker. In my opinion, the best thing about Bitcoin, and the underlying blockchain, is the potential to disintermediate transactions. By eliminating middlemen, blockchain systems may deliver two major benefits:
Conceivably, the blockchain can produce a world of frictionless commerce where we no longer need trusted intermediaries. It’s ironic that Yancey serves as an intermediary for a technology that aims to eliminate intermediaries.
This suggests the blockchain has not yet reached its full potential. My question for Yancey: will it ever? I chatted with Yancey for about an hour last week. Here are some of the highlights.
Additionally, the structure of the blockchain itself can help prevent fraud. What’s stored in the blockchain can’t be changed. A bad actor could conceivably add to the blockchain but such additions are easy to identify and trace.
Assume, for a moment, that I’m your manager. I call you into my office one day and say, “You’re doing pretty good work … but you’re going to have to get better at shooting free throws on the basketball court. If you want a promotion this year, you’ll need to make at least 75% of your free throws.”
What would you do? Assuming that you don’t resign on the spot, you would probably get a basketball, go to the free throw line, and start practicing free throws (also known as foul shots). Like most skills, you would probably find that your accuracy improves with practice. You might also hire a coach or watch some training videos, but the bottom line is practice, practice, practice.
Now, let’s change the scenario. I call you into my office and say, “You’re doing pretty good work … but you’re going to have to get better at creating ideas. If you want a promotion this year, you’ll need to increased the number of good ideas you generate by at least 75%.”
Now what? Well … I’d suggest that you start practicing the art of creating good ideas. In fact, I’d suggest that it’s not very different from practicing the art of shooting free throws.
But shooting free throws and creating ideas seem to be very different processes. Here’s how they feel:
The two activities seem very different but, actually, they’re not. In both cases, you’re doing the work. With free throws, you readily recognize what you’re doing. With ideas, you don’t. Free throws happen in your conscious mind, also known as System 2. New ideas, on the other hand, happen below the level of consciousness, in System 1. When System 1 works up an idea, it pops it into System 2 and you become aware of it.
We understand how to practice something in System 2 – we’re aware of our activity. But how do we practice in System 1? How can we practice something that we’re not aware of?
We think of our mind as controlling our body. But, as Amy Cuddy has pointed out, our bodily activities also influence our mental states. If we make ourselves big, we grow more confident. If we smile, our mood brightens.
So how do we use our bodies to teach our brains to have good ideas? First, we need to observe ourselves. What were you doing the last time you had a good idea? I’ve noticed that most of my good ideas pop into my head when I’m out for a walk. When I’m stuck on a difficult problem, I recognize that I need a good idea. I quit what I’m doing and go for a walk. Oftentimes, it works – my System 1 generates an idea and pops it into System 2.
In my critical thinking classes, I ask my students to raise their hands if they have ever in their lives had a good idea. All hands go up. Everybody has the ability to create good ideas. The question is practice.
Then I ask my students what they were doing the last time they had a good idea. The list includes: out for a walk, driving, riding in a car, bus, or train (but not an airplane), taking a shower, drifting off to sleep, and bicycling.
I also ask them what activities don’t generate good ideas. The list includes: when they’re stressed, highly focused, multitasking, overly tired, overly busy, or sitting in meetings.
So how do we practice the art of having good ideas? By doing more of those activities that generate good ideas (and fewer of those that don’t). The most productive activities – like walking – seem to occupy part of our attention while leaving much of our brainpower free to wander somewhat aimlessly. Our bodily activity influences and stimulates our System 1. The result is often a good idea.
Is that perfectly clear? Good. I’m going for a walk.
This fall, in addition to my regular academic courses, I’ll teach three one-day seminars designed for managers and executives.
These seminars draw on my academic courses and are repackaged for professionals who want to think more clearly and persuade more effectively. They also provide continuing education credits under the auspices of the University of Denver’s Center for Professional Development.
If you’re guiding your organization into an uncertain future, you’ll find them helpful. Here are the dates and titles along with links to the registration pages.
I hope to see you in one or more of these seminars. If you’re not in the Denver area, I can also take these on the road. Just let me know of your interest.
I first wrote about Bitcoin on this website five years ago today. (Click here). I decided not to buy any at the time because the price had surged to well over one hundred dollars! Clearly it was a bubble. If only I had known that the price would peak at $18,000 a few years later. (Today, the price is about $6,800).
So what’s happened over the past five years? Let’s look at Bitcoin’s benefits and then investigate some of the ways that it has changed our world.
Bitcoin is based on a blockchain stored in multiple locations. This gives it two major advantages: it can’t be erased and can’t be tampered with. Simply put, it’s like writing checks in ink rather than in pencil, using paper that can’t be destroyed. A blockchain can record transactions and ensure that they will always be available as a matter of public record. Bitcoin uses this feature to buy and sell things. Each transaction is recorded forever, meaning that you can’t spend the same Bitcoin more than once.
Bitcoins can also reduce inflation because they can’t be printed at a government’s whim. Instead, they’re “mined” through complex mathematical calculations. The process gradually grows the supply of coins. The money supply grows in predictable ways. This appeals to anyone who worries that governments will artificially inflate their national currencies.
Bitcoin is also anonymous – just like cash. Unlike cash, however, it’s not physical. It can easily be moved around the world as electronic blips. That makes transactions convenient and inexpensive and could conceivably cut out banks as middlemen. This makes Bitcoin attractive to many groups, especially criminals.
So, what’s happened? First, the idea of the blockchain has spread. There’s no reason to limit the blockchain to currency transactions. We can store anything in blockchain and ensure that it never disappears. In other words, we believe that it is more trustworthy than government or financial entities.
As Tim Wu writes, we are undergoing, “… a monumental transfer of social trust: away from human institutions backed by governments and to systems reliant on well-tested computer code.” Wu notes that we already trust computers to fly airplanes, assist in surgery, and guide us to our destination. Why not financial systems as well? A well-organized cryptocurrency could become the de facto standard global currency and eliminate the need for many banking services.
But we don’t need to limit the blockchain to financial transactions. Any record that must be inviolate can potentially benefit from blockchain technology. Some examples:
Of course, we can also use blockchains for less noble pursuits. The blockchain can store any information, including pornography. That’s a problem but it’s the same problem that was faced by myriad new technologies, including VCRs and the Internet itself. Criminals can also use cryptocurrencies for ransomware attacks, and to traffic in contraband or avoid taxes. We can ameliorate these problems but we probably can’t eliminate them. Still, the advantages of the technology seem much greater than the disadvantages.
So … what happens over the next five years? The New York Times reports that venture capitalists poured more than half a billion dollars into blockchain projects in the first three months of this year. So, I expect we’ll see a shakeout at the platform level over the next five years. Today, there are many ways to implement blockchain. It reminds me of the personal computing market in, say, 1985 – too many vendors selling too many technologies through too many channels. I expect the market will consolidate around two or perhaps three major platforms. Who will win? Perhaps IBM. Perhaps R3. Perhaps Ethereum. Perhaps Multichain. Rather than buying Bitcoin, I’d suggest that you study the platforms and place your bets accordingly.
In the meantime, we need to ask ourselves a simple question: Are we really willing to forego our trust in traditional institutions and put it all into computer code?