Why I don't believe in myself (the day before my birthday)

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There are advantages to having a closed mind: you will never doubt.
There are advantages to being indecisive: you will never make an error.
There are advantages to not loving: your heart will never get broken.
There are disadvantages to strategic planning: you miss the opportunities you did not expect.
There are disadvantages to doing research: people can’t tell you what they don’t know.

There are pros and cons to many perspectives that are almost universally believed to be ‘good’ or true.

None more so than the universal command that we should ‘believe in ourselves’.

It is meant to be motivating, it is meant to fuel a belief that will keep you going when things are tough.

But in truth, it is completely erroneous and misleading.

Think about it for a moment: is the ‘belief’ in your head (or heart) actually connected in any real, meaningful way to the outcome that you are supposed to believe in?

Consider the example: you are stumbling through the desert. All alone, no tools, no water. It is just you in a hundreds of kilometers of sand. Things are dire. WIll you make it or not? 

The facts are: you will make it if you keep going long enough to get to water or help, or the help or water comes to you.

Conventional wisdom would hold that this would be the time when you should believe in yourself. Things are grim - have faith in yourself.

But no amount of belief in yourself will save you.

The walking will save if you do it long enough to get to the water. Not the belief.  You may ask whether the belief will keep you walking? I doubt it very much. 

What keeps you walking is fear of dying, not the self-affirmation in your abilities. You need to believe that you will be saved if you keep on  walking; not so much that your are a great and wonderful person that is capable of anything. Believe the benefits of (keeping on)  walking, not in your ability to walk.

If you are a poor manager with anger issues, belief won’t fix it. If you lack ‘coding skills’ to become a good programmer, it is more learning that will get you ‘there’, not the belief in yourself. 

You should actually believe (the reality) that you are not that good and keep learning.

You should actually believe (the reality) that you will die without water and keep walking.

Recognising the reality is real motivator, not belief in yourself.

If you want to believe - and I think we all need to - I would suggest you find something more inspirational, maybe even something transcendent to believe in.

Groucho Marx’s letter of resignation to the Friars’ Club read: “I don’t want to belong to any club that would accept me as one of its members.”

It is something like that: if you are going to base your belief in something, make it something worthwhile that could actually make a difference.

I hate to sound cruel, but the reality is that half the population is less than average on any metric that matters. No amount of belief will change that. There are two groups of people who peddle this to you:

  1. Self-help authors a profit from persuading the bottom half that they could be the top half - if only they believed (- and here is the recipe in my book).
  2. Deluded people who self-identify as high achievers and want to tell you how they did it. The problem is, they suffer from either (a) the Dunning-Kruger effect, a  cognitive bias whereby people who are incompetent at something are unable to recognize their own incompetence, or (b) self-serving bias, which  is the distortion of cognitive or perceptual process because of the need to maintain and enhance self-esteem, or the tendency to perceive oneself in an overly favorable manner. That is: if things go wrong, someone else is to blame, if things go well, it is because I am so good. They must find a reason for their success within themselves (my intelligence, my persistence, my actions, my attitude).

Reality is a lot more complicated. All people who succeed, believed in themselves, but all people who believe in themselves don’t succeed. Belief is present in success, but success is not contingent upon belief. Just like breathing is ‘present’ in all successful people, all breathers don’t succeed.

Believing in yourself sets the bar very low.

Better to have a firm grasp on reality, believe in the (science of) consequences that follow from actions, believe in (the spirit of) God, or believe in the purpose you have set. 

But belief in yourself? Maybe not the smartest thing you can bet on...
 

Should your business 'take the knee'?

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Well, should it? Or to put it differently, the purpose of profit may not be what you think.


Colin Kaepernick has dragged the NFL into the daily media narrative by refusing to stand for the national anthem. Tony Abbott et al have accused the NRL of dragging politics into sport by having Macklemore singing ‘Same Love’ at the Grand Final.

What role should business play in socio-political issues?

To answer that question, we have to ask what the purpose of business is. The simple response is that a business must create a profit for its shareholders. But, there is a catch:

The purpose of profit is not what you think.

Most businesses make 5%-10% profit, to distributed to its shareholders. And the other 95% of its money recycles effectively through the organisation to allow it to keep going.

That is, if the organisation spends 95% of its revenue on sustaining the organisation (with only 5%) leaving the organisation more or less permanently, in practice a business exists to feed its employees. (Even if half of that is spent as COGS, it is still an act of recycling funds in order to keep going.)

Now before you think I have gone all Marxist, just hear me out: 

Most people believe that we have come a long way since the robber barons of old filled medieval factories with indentured labourers; what with fixed salaries, executive perquisites, bonus incentives, and not to mention a panoply of ‘programs’ for the people like:

  • employee recognition
  • engagement
  • workplace improvement 
  • or whatever #hashtag there is to celebrate. 

On the negative side, you get people abusing their privileges:

  • stealing office stationery 
  • accepting kick-backs
  • taking ‘sickies’
  • or more insidiously, postponing (or timing) capex or investment decisions to boost short-term performance so that the results ‘on your watch’ look good

It seems to me that it is a commonly accepted fact that people know and act as if the company exists for them and they may feel they are not getting what they deserve. What we have on display in most organisations is the economic reality that the modern organisation exists primarily to sustain the business, and that the practical reality that people in the business act accordingly.

And that might well be the kiss of death.This may seem to be a counter-intuitive position, so please bear with me.

Whilst it is true that almost all funds are cycled into the business in order to sustain the business and its people, this should not be the objective of the organisation. 

When you start focussing on the system of business for the sake of sustaining the system, paradoxically you diminish the sustainability of the business. And since all businesses fail (eventually) it seems as if no one is immune to this distraction.

When celebration of the employee and the culture becomes the ‘purpose’, the organisation is doomed. 

I am not suggesting that employees are not important and that they should be treated poorly.
But when anything but shareholder returns becomes primary, it is a sure indication that an organisation has lost/ is losing focus. (I am not saying that employee needs are not important; quite the opposite. They ARE, but the question is how do you meet those needs sustainably.)

That 5% return that finds its way to the shareholder, whilst only a small portion of the total, is the ONLY portion of funds that are external. That 5% is the objective, ‘north star’ by which you can navigate BECAUSE it is outside the system.

When an organisation starts making decisions and taking actions that based on what is best for the system by referencing what is IN the system, it become self-referential. You cannot make good (objective) decisions by being self-referential. 

You don’t achieve your primary objective by focussing on your secondary objectives.

Your SatNav can’t navigate your Mercedes by referencing the star on the bonnet, because it is part of your Mercedes - it needs an external point of reference.

I would suggest it is useful to examine many corporate activities in the light of this perspective. I am not advocating a return to indentured labour, and I am not saying ALL non-core activities and initiatives are automatically inappropriate.

But I would say a healthy, focussed organisation must thoroughly examine itself and the activities that are not directly related to driving shareholder returns. (And I mean directly - because if you draw a long enough bow, even having an office cat can be said to link to shareholder returns.)

I am not advocating for corporations to accept no responsibility for their actions and their role in society, but rather question some, now commonly accepted, corporate practices:

  • Should it really be the responsibility of an organisation who is comprised of a diverse range of people (employees and shareholders) with a diverse range of beliefs, to dictate what its definition of (say) ‘wellness’ is? 
  • Should an organisation (via the Executive) really decide which political party to support - when half the employees (and shareholders) are likely to support the other party?
  • Should the organisation decide which charity should be supported, or is it best to return the funds to the shareholders (or pay the employees more) and let them decide who they would like to support?
  • At what stage does the organisation’s engineering of employee interactions and ‘change management’ become manipulation? And who decides where the line is? 

It seems, if considered superficially, that there is always a justification to spend money (and it is easy to do if it is other people’s money) on some social/ employee initiatives (because of that 95%) but this would be an egregious error in judgement. 

Organisations must obviously comply with the law. Organisations have a duty of care to ensure no one gets harassed or is put in harm's way, and that might well be the full extent of it if you want to err on the side of caution.

When you take your eye off the ball (shareholder returns) no matter how ‘noble’ the alternative seems, the result is inevitably a dropped ball. When that happens, there is nothing to share, and worse, no job to go to and no one gets to appreciate the poster in the canteen that proudly proclaims that ‘we put people first’ when the organisation ceases to exist.

As employees and executives, we have one job: to leave the organisation in a position that allows it to provide purpose and employment for future generations. That is, we put current and future employees first. BUT - we achieve that by not treating the company like our plaything, and by not expecting it to cater to our every whim, but instead ensure it stays true to the external objective of meeting customer needs and rewarding stakeholders.

That’s all.
 

Image courtesy: http://www.theloop.ca/

The unvarnished truth about ecommerce failure

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What no one tells you about eCommerce Failure like Surfstitch: 10 lessons for bricks and mortar:

I am not an eCommerce denier. But I do have two eCommerce failures under the belt. So I can speak from experience. 

But rather than my failures, let’s consider the more spectacular story of Surfstitch. My son was a customer of theirs, so I also have some experience to confirm that Surfstitch had:

  • Great customer service
  • Good product range and pricing
  • A very nice UI/UX on the website
  • Good marketing

In short, they had EVERYTHING the gurus are telling bricks-and-mortar retailers they should get as a matter or life or death. Yet that did not work out so well for them.

SurfStitch had their IPO in 2014, and less than a year later, the share price had more than doubled, pushing market value beyond $500 million.

Surfstitch shares crashed in 2016 after a peak in 2015. CEO Justin Cameron bailed out in 2016, and the company issued three profit warnings and is facing the prospect of a $100m class action from irate investors.The reported loss totalled $155m for 2016.

While sales grew 7 per cent over the (2016) year, this was largely due to the spate of acquisitions. In 2017 Surfstitch went into administration, although the main online operating entity continues to trade.

Excuses that were offered included:
The period of rapid expansion (multiple acquisitions and two major capital raisings) involved significant management time.
The  focus on increasing market share, combined with difficult trading conditions – particularly in USA  – saw  margins slump from 46 per cent to 39 per cent.

Excuses that were NOT offered, but probably did not help:
Co-founder Lex Pedersen - who returned as interim chief executive saw his base salary for the year jump from $280,000 to $634,000, 
Mr Cameron's (previous CEO) had his base salary also increase from $220,000 to $561,000 in the eight months to his March departure.
Chairman Howard McDonald's total remuneration jumped 40 per cent from $71,950 to $100,903.

But what really happened?

To paraphrase Forrest Gump: Life is a box of chocolates. And Surfstitch got stuck with the leftover Cherry Ripes.

Of course it would be presumptuous of an outsider to prognosticate about the specifics, so let me generalise the lessons for any retailer in any channel:

  1. Money (capital) does not fix everything
  2. There is no substitute for spending less than you are earning: sales is not the same as profits, and without sufficient margin you don’t have a platform
  3. You can indeed grow yourself broke
  4. Hubris will kill any business: don’t drink your own Kool Aid
  5. Inexperience can only be cured one way
  6. It can’t cost you more to acquire customers than you make from them - at least not forever
  7. You can bulls&*t some people some of the time
  8. There is nothing more vicious than an aggrieved shareholder who had already visualised spending the returns
  9. All the metrics matter - except positive PR

And finally, and most importantly:
10. eCommerce businesses are not immune to all the issues that any other business faces. You have do all the same things ‘right’, and not do all the same ‘wrong’ things . And if you have an traditional retail business, simply adding eCommerce capability is in and of itself NOT a panacea. 

As JH Plumb wrote so eloquently in his treatise on The Renaissance:

Success comes most swiftly and completely not to the greatest or perhaps even to the ablest men, but to those whose gifts are most completely in harmony with the taste of their times.

That was true then (fifteenth century), and it is true today. And that is just the start. After that you have to execute. 

To fail at execution is to fail for sure.
 

(Image: surfstitch.com)

How to persuade people without changing their minds

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IT IS ALL IN THE FRAMING

You may not have heard of framing, but it shapes what you believe and how you act every day in every way.

Marketing gurus will tell you that the ‘new’ marketing is about storytelling. In fact, the old marketing is about storytelling.

Except, that it isn’t about ‘stories’ it is about ‘narrative frame’. This is how a paper from University of Southern California describes it:

A listener's psychological reaction to narrated events is influenced by how the narrator frames the events, appealing to different values, knowledge, and experiences of the listener.

If that sounds awfully academic, allow me to reframe it (simply):

People base their decisions today on their past experiences.

HOW FRAMES ARE CONSTRUCTED

People (over time) process their experiences in a way that forms the basis of what they believe to be true (knowledge) and what they believe to important (values). In this way experiences build on each other to create a mindset or worldview that has utilitarian value for the individual; he or she can use it to function properly in the real world.

New experiences are viewed through the lens of your existing worldview, and the ‘facts’ that fit best with the existing mindset are easily absorbed because they are deemed true. The trap we all fall into is that, new experiences that don’t fit with the existing mental models, are bent so that they are forced to fit.

We all do this bending of reality to fit our mental models, because we don’t have the mental capacity to objectively, systematically evaluate every experience, and to file it properly. The process is too slow for the real world, and it is psychologically uncomfortable and destabilizing.

This process is related to the idea of ‘bias’ but not necessarily the way it is often explained. A bias is not some ‘bad’ thing that you should strive to eliminate. (Here is a long list of cognitive biases.)

One such bias that people universally claim to be ‘bad’ and that should be avoided is (for example) stereotyping, which is expecting a member of a group to have certain characteristics without having actual information about that individual.

Whilst there is some benefit to gain from expecting the unexpected, and to give people the ‘benefit of the doubt’; most often people conform to stereotype. That is stereotypes have functional utility because they are usually true. By not having to wait for, or in the absence of any other facts, it is practical and expedient to assume people will conform to stereotype. It takes very limited mental processing capacity, which leaves you free to pay attention to other things. Stereotyping is a useful bias. Of course, there may be times with certain individuals where the stereotype does not apply, and it is useful to be able to recognise that. But the point is that, until proven otherwise, the bias has a purpose.

Biases are useful shortcuts (heuristics) that allow people to operate efficiently in the world.

It is very hard to change people’s biases.

This gives rise to another aphorism which has become cliched, but is essentially true. People will often claim ‘perception is reality’. Of course that is not true; reality is reality, irrespective of how it is perceived. But in practice, how people perceive reality leads to them acting in a way that is in accordance with how they perceive it, so it is a fair enough approximation to accept the statement is a useful proxy.

So, we have three considerations here:

One: People construct mental models to operate in the world

Two: Our biases influence how we stack more information on top of existing information, favouring the facts that have proven most useful and repeatable over time

Three: With our personal mental models thus constructed, we perceive the world in a certain way.

FRAMES IN ACTION

The way we perceive the world is through frames - and people have multiple frames which are contingent upon circumstances.

It is not easy to change people’s biases. It is almost impossible to change people’s mental models - their personal paradigm - but it is possible to persuade people by creating a specific narrative frame. Strangely, you are actually not changing people’s minds (that is almost impossible) but since people have multiple frames through which they look at reality, you can change the perceived reality by changing the frame.

Imagine someone is looking through a keyhole into a room. They see a man lying on the bed, and another person taking a knife to his chest and slicing him open. They might think they are witnessing a murder.

Imagine now you put a sign above the door that reads OR 3 with a red cross. They still witness the same (limited) set of behaviours, but now people are more likely to think they are witnessing a medical procedure.

People’s mental models and biases have remained UNCHANGED. There are certain behaviours that are good (life-saving operation) and there certain behaviours that are bad (murder).

It’s not a great analogy because you may tempted to think that the ‘persuasion’ worked because you simply provided more information (the sign above the door). Consider some real life examples:

For decades there was strong push to get abortion legalised. The arguments were framed as pro-abortion and anti-abortion. Looking at the issue through the lens of abortion made it very difficult for pro-abortionists to win an argument. People have certain biases and certain mental models; including that the ‘innocent shouldn’t be made to suffer’.

Over time, and I am not sure if it was by design or by chance, the debate was re-framed as being ‘pro-choice’ and ‘anti-choice’. As soon as this happened, the debate was over. Most people would subscribe to the idea that personal freedoms are important. Consequently the right to choose is important, and they accepted abortion viewed through that lense. People did not change their minds about ‘innocents not suffering’ - but they just looked at the debate as being about choice and not about suffering.

The same happens with the debate about same-sex marriage. Traditionally homosexuality was deemed a deviant behaviour and was ignored or covered up. (Those who refused to do so were said to ‘come out’.)  

As soon as the debate was reframed away from homosexuality (we are different) towards marriage equality (we deserve the same) the momentum towards allowing same sex marriage swung rapidly and decisively towards acceptance. Most people can identify with the importance and the inherent fairness of treating people ‘equally’.

Those opposed to same-sex marriage have attempted unsuccessfully to frame the debate as being about ‘political correctness’. That is because being PC is, whilst generally derided, not seen as a human right issue and therefore carries less weight - or what I like to call ‘persuasive valence’.

So much for the background. How does this apply to business?

THE IMPORTANCE OF A SINGLE WORD

One of the key ‘narratives’ that an organisation can create is through mass-media advertising.

Aldert Vrij’s (Detecting Lies and Deceit) describes the framing effect as follows:

Participants saw a film of a traffic accident and then answered questions about the event, including the question ‘About how fast were the cars going when they contacted each other?’ Other participants received the same information, except that the verb ‘contacted’ was replaced by either hit, bumped, collided, or smashed. Even though all of the participants saw the same film, the wording of the questions affected their answers. The speed estimates (in miles per hour) were 31, 34, 38, 39, and 41, respectively.

One week later, the participants were asked whether they had seen broken glass at the accident site. Although the correct answer was ‘no,’ 32% of the participants who were given the ‘smashed’ condition said that they had. Hence the wording of the question can influence their memory of the incident.

A bank may choose to frame their home-loan product as being ‘smart’ or as being ‘safe’. Or an institution may choose to frame their life-insurance products as being ‘smart’ or as being ‘responsible’. (Which would you choose as the most effective?)

THE RISK OF FRAMING FOR CHEAP

The interesting thing is how many retailers choose to frame their offer as being ‘the cheapest’ or value for money. These are valid frames, because consumers have a propensity to want to save money and they have a frame of not wanting to be ripped off.

There are multiple problems with this frame:

One: Several brands are offering the same frame, so it is crowded in front of that particular window. Competing on price is an option only if it is well-considered; but often it seems to be a lazy strategy applied inappropriately to the wrong product or market.

Two: The type of customer you acquire is the least valuable and most disloyal. It is a precarious business model that relies fully on price-conscious customer. I am not suggesting that it can’t be done (WalMart e.g.) but there are a number of other things that need to be balanced, one being that it is best suited to products or services that are commoditised, and the entire business model should cater to that type of business.

Three: The brand association is inherently negative, because.heuristic that applies to things that are cheap is that they are poor quality. You can say ‘value for money AND best quality’ as much as you like in your advertisements, it won’t change people’s minds because people have a bias to disbelieve what people say about themselves and believe the actions they take. I can tell you I am an honest guy as much as I like, but until you ascertain for yourself that I act honestly, you will tend to disbelieve it.

CONCLUSION

The best kind of persuasion is the kind that does not rely on people changing their minds. It is nearly impossible to change people’s minds, because they have constructed a mental model of the world that allows them to function properly in reality.

Instead of changing people’s minds, try and change the lense through which they look at the world.

You can do this by changing a word.


Image: https://www.flickr.com/photos/maumana/3714637604/

 

The Siren Song of Growth

Image:  oopperabaletti.fi

Image:  oopperabaletti.fi

The roots of mermaid mythology varied.  In modern myth we tend to see mermaids as kind and benevolent to humans but not all stories go this way though. In these myths, mermaids would sing to men on ships, hypnotizing them with their beauty and song.  Those affected would rush out to sea only to be either drowned, eaten, or otherwise sent to their doom.

The idea of Growth seems hold the same powers as the magical mermaids of your. We are seduced by its siren song....

Its existence seems accepted.

Its desirability is assumed.

Its benefits implicit.

But is it?

It is undeniably true that nothing grows forever.

In fact, the trajectory of growth is something that goes like this:

Birth, Growth, Maturity, Decline

You may recognise that that is the Livecycle Curve I just described.

The only question and the only variable is ‘how long’.

So, decline and death is inevitable and inexorable.

Growth is NOT an unending upward trajectory.

So, if the END of growth is death, why are we so obsessed with growing?

Surviving the Politics in Retail

Whether you are a Church, a charity, an NGO or a Retail Business, the rules of engagement and the features of our interactions are made by humans for human and they all share common features. Organisations are organisations - that is pretty obvious.

The similarities between our Political System and the typical Retail Organisation is striking.

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Just kidding of course. Politicians will never rort the system.

How to position your business (practically)

OR, YOU HAVE TO BE IN IT TO WIN IT

If you use words like positioning or point-of-difference, many retail operators switch off because all they hear is ‘theory’. It is worth remembering that the process works like this: you RESEARCH what happens in PRACTICE in order to formulate a THEORY. So, in fact ‘theory’ describes what happens in practice, and in practice retailers ‘position’ themselves differently.

The problem is that it happens by default and not by design.

Below is a simple approach to design your positioning; if done right, can be difference between success and failure. I will use a furniture store as an example.

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There are a range of competitors – from the dollar shops, to the big furniture retailers – in this category. How do you find a niche, communicate that to your customers in such a way that you have a sustainable business?

What is Positioning?

Positioning is how you want your customer to think of you. (Your ‘position’ is the space you occupy in the mind of the customer.)

Can you identify the brands based on how they have ‘positioned’ themselves?

·                The go to place for… birthday cards

·                The drink to get if you are thirsty and hungry

·                The car to buy if you like driving for sheer driving pleasure

In order to conduct a positioning exercise, we usually recommend it is done on a two-dimensional matrix, but in this example, we take a different (more user-friendly) approach.

Step 1: List all the criteria/attributes that are relevant to your sector. Be sure to concentrate on those variables that matter to consumers. (This stage is important, and should be done with real insight. If you are able to identify a variable that really matters that no one else has considered, you potentially have discovered some ‘blue ocean’.

Apple ignored ‘capacity’ and ‘size’ when it came to portable music players, and instead focused on ‘aesthetics’ with the iPod. They hit the jackpot, which was amplified when they launched iTunes to also provide ‘access to music’ instead of ‘owning music’.

Step 2: Plot your business on these variables.

Step 3: Plot competitors. (The more data-driven insights you have the better, but sometimes common sense gives an answer that is close enough to be good enough.)

Step 4: Identify the point(s) of difference.

Step 5: Claim one POD and communicate that with laser-focus.

EXAMPLE:

The following is an incomplete list of strategic positioning variables for two furniture retailers.

Whilst these are hypothetical examples, for the sake of testing yourself, which positioning path (for example) represents Harvey Norman and which would better represent Oz Design?

If you were, say, Beds-R-Us, where would you position yourself on these variables – and which one would be your POD?

 Point-of-Difference describes how you differ from your competition. The diagram above will reveal your point-of difference that you focus on. Communicate this difference with consistency over a long period of time and the message will eventually embed in the mind of the consumer.

If you succeed with that, all that it means is that you are in the ‘consideration set’ of options when a consumer makes a decision about buying your product. Your POD may not be relevant to them or may not be the most important variable when it comes to making the decision.

But if you are positioned appropriately in the mind of the customer, at least you are in the game.

And as our friends at Tatts remind us; you have to be in it to win it.

It is not what you know, it is what you assume that will kill you

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THE POWER OF ASSUMPTIONS IS AWESOME

Have you seen the meme make the rounds, and maybe you have even ‘liked’ or shared it?

It promotes an egalitarian ideal: you achieve the desired state because of a core the assumption is that you take from the have and give to the have not. Everybody gets the same thing, so it is promoted as a 'fair'.

But consider that for it to be good, we must ASSUME that:

> guy no 1 doesn’t mind to lose everything and gain nothing

> guy no 2 doesn’t mind being ignored

> neither will fight to retain the status quo

> the little guy doesn’t want to go ride his bike instead

> everyone wants to watch the baseball game equally badly

> someone who has to decide the basis on which the ‘resources’ and privileges must be dished out is willing and able and will do it fairly

> the ‘benefit’ is clear (box)

> the actual privilege is the ability to watch the game

Now, lets assume these assumptions, unrealistic as they are, actually can hold. In the real world, resources are limited – and there are actually more people lining up to watch the match than there are tall guys to sacrifice their boxes.

And, most importantly, no one mentioned that the tall guy is going bald. The injustice!

When a business model eats itself

Or, Committing Ouroboros

The emergence of platform brands has been interesting, and perhaps the defining feature of the post-millennial business models. By platform I am referring to businesses like Facebook, Uber, Spotify, Amazon etc which operate essentially as a marketplace/ platform that connects supply and demand.

The new business is a peculiar beast

One peculiar feature of these business models is that they are, quite literally, business models that eat themselves.


Mythologically, the meaning of the snake eating its own tail (Ouroboros) is strangely enough the Infinity Symbol too. These businesses may seem to last forever, but there is also a limited amount of tail to eat.

Let me explain.

Spotify

Spotify had to attract the big brand (artists) to the platform in order to gain traction. Every time the sign a big name, the number listeners climbed. Eventually they even got Taylor Swift. Now there is no reason for anyone not to listen to spotify.

But as Spotify ‘learns’ your taste in music, and the algorithm produces playlists and stations for you, the constant stream of music obliterates the artist who created it. Unlike radio, where the chatter of the DJs and other human interaction revealed something about albums, artists and other context that constitute the art of music, Spotify  turns all music into muzak. I have hundreds of songs in a playlist (that I like) that I don’t know who the artist is.

When all artists stream on Spotify, you don’t need an artists anymore, just an infinite number of variations of a genre that suits my ear.

Kickstarter

Kickstarter is a way of raising venture capital. In order to get where it is, it needed (traditional venture capital) even while crowdfunding is replacing traditional sources of capital. Eventually, VC can conceivably be replaced altogether by peer-to-peer lending. I can even imagine a time where the applications on these platforms are selected and promoted on the platform based on an algorithmic prediction of likelihood of success. And that the ‘users’ or investors, set an investment budget and allow the algorithm to decide.

Netflix

There are an infinite number of options, but instead of us immersing ourselves in the characters, reading stories about the actors in gossip magazines for the better part of the year, we binge on a series for a weekend - are briefly engaged - and then move on to the next.

I have watched 5 seasons of Suits, and I don’t know who plays the main characters. But I can remember that Corbin Bernsen and Harry Hamlin played major characters in LA Law back in the 80s. Our interest in the actor is fleeting and superficial and they are all eminently interchangeable. Except for the odd break-out series such GoT, everything is forgettable.

Netflix needed the big names to attract us, but can’t produce big names that will keep us.

Amazon/ Commerce/ Shopping Cart

Shopping sites need to stock the brand we want in order to attract us. Once we are there, like it and return, we set up our favourites to re-order. After that, we are less likely to switch brands, because we ‘set and forget’ and have little exposure to alternatives if everything is done on automatic reorder.

Amazon found its fame by signing up all the big name authors to be distributed online. The Kindl seduced them further.

As soon as every author is on Amazon, then all the readers are on Amazon, and then no individual author matters. You are fed an endless stream of authots/titles that are 'like;' the one you already like and they all blur into a genre-soup that satisfies you. Ultimately it kills your curiousity AND your taste, because by never reading something you don't like, you will forget what you like. And no consumer brand eventually will matter when Alexa orders everything.

[ASIDE: That is why social media is so dangerous in fostering groupthink - creating these echo chambers of followers/fans who all happily drink the kool-aid.]

The Brand Paradox

This means in practical terms that brands are developing a new value architecture: These platform business models are at once very hard to replace because they own the demand. This strength increases over time, because of the self-reinforcing nature of the business model. The more people use Uber, the more drivers will want to drive for Uber.

But at the same time, there is paradoxically very low barriers to entry and the business (platform) can easily be subsumed and surpassed. If a better search engine comes along, the value of Google will fall off a cliff in a matter of mere weeks. The switching cost for the consumer is as low as spending a minute to download an app.

The only barrier to entry is the critical mass of consumer demand. This is hard to win, but easy to lose.

The brand becomes a placeholder: Uber now means taxi, and nothing more.

These modern brands are different from traditional brands in many ways. Most obviously is the way in which there is separation between the product/service experience and that of the brand values. If you have a poor AirBnB experience, you won’t necessarily (not initially and not completely) condemn AirBnB, but instead would understand that it is the host that should be punished with negative brand assessment (ratings). If this happens consistently, you will start questioning the AirBnB vetting process, but there is initially some separation between brand value and the actual product or service. The same applies to say Uber or Amazon et al.

But the flipside of the platform-brands enjoying this immunity is that they are also less valuable as a brand. By that I mean that the huge valuations they enjoy is because of the (crazy) multiples of their anticipated cash flows, and not because of some inherent brand equity.  If Uber rebranded tomorrow to Zuber, it would be easily done compared to rebranding Coke.

In Summary

Let’s take Netflix as an example, but exactly the same can be said of any of the other platform brands like Uber, Amazon etc.

  • The value of Netflix is in the number of subscribers they have.

  • Because of that critical mass, there is a major barrier to entry.

  • But if you created a product that was demonstrably better, shifting the mass of customers is easy; the barriers to exit are low.

  • Netflix engenders no loyalty from the suppliers (producers, distributors, actors) because in fact Netflix destroys the brand value of the very thing it needed in the first place by virtue of becoming dominant through infinite supply.

  • The customers are not loyal to the brand of Netflix, because there is no real brand of Netflix - it has no brand and no personality, no more than a bookshelf has a personality.

  • If you see a bad movie or have bad reception, you don’t attribute it to Netflix. But neither do you think Netflix is great because you enjoyed Ozark so much.

  • When the brand is a platform, it only has utiltarian value.

For Netflix to grow, it needs to eat the thing that made Netflix great:  that is ouroboros - the snake eating its tail.

All these businesses, now so seemingly invincible, are vulnerable at the core, because neither the customer, the supplier or the partners are loyal, since they are all destroyed in the process of making the company great.

Infinity is an illusion.

Transformative Innovation in Malls - Pt 2

3. Create an ‘agile lease’

We don’t envisage that leases will disappear altogether. But what would introduce the necessary flexibility to empower retailer-driven innovation is the notion of an agile lease.

Innovation: Change the Standard Specialty Lease to an Agile Lease

This is a lease where the key commercial terms (duration, cost, usage clause etc) are contained on ONE sheet, which then can be changed by sitting down in a single meeting or phone call and counter-signed and legally take effect. If new concepts can grow and establish themselves without the constraints and costs of for instance trading hours and with the guaranteed ability to vary the usage to fine-tune the offer to see what works, their chances of success are greatly enhanced.

There are strong socio-cultural trends that suggest that the value of these legal agreements are being eroded significantly anyway. In fact, the recent Sumo Salad/ Scentre debacle points to the absolute necessity.

5 Every centre a mixed-use centre

Creating a TRUE mixed-use centre would mean incorporating many of the following uses - possibly even all of the areas below.

Innovation: Multiplicity of Use

  • Retail

  • Public Domain/ Community

  • Entertainment

  • Office

  • Residential

  • Alternative

  • Tourism

This is in essence a risk diversification strategy.

Start by adding maximum residential living to the centre. That is, to use an Aussie social convention a matter of BYO Customers. This is obviously not necessarily easy or applicable in every instance, but on the whole, most retail centres are in prime real estate locations with excellent infrastructure as well as often with community facilities.

It may require serious, long-term lobbying to overcome zoning issues, height limits and what not, but political opinion aside, I find it difficult to visualise any shopping centre that could not accommodate hundreds, maybe thousands of living units above it.

Great use of space, roads/parking etc can be expanded (possibly going underground) more easily than entirely new land to be found somewhere else. The accommodation could be for residents, holiday or even student accommodation.

Alternative use could include spaces often found in event/convention spaces. I can imagine ‘Launchpads’ = space in the shopping centre for experiences. Shop selling yoga clothes can use this space to run a yoga class once a week and promote their clothes. These are spaces to learn, explore and meet.

Ensure some spaces are large, flexible and multi-purpose. For a shopping centre to be a true marketplace it will  need to cater for a events (we lost our centre courts to kiosks).

These spaces should be  accessible AFTER hours. The idea is to work towards a mix of activities and an offer that extends the trading period of a shopping centre. In a world of shift work, remote work, permanent casual work, the gig economy, the idea of a 9-5 centre will become a quaint relic. The town square is not only applicable to large regional centres with external space to use; it can be replicated in every centre, and it starts by reclaiming the old centre court.

Placemaking is gaining traction in shopping centres. The argument for this is easy; the payoff is a bit harder. But if shopping centres are to be function as public spaces, it has consider topics such as Biophilia . An environment devoid of Nature may have a negative effect, with a potentially undesirable impact on health or quality of life. Malls have the social obligation to manage these spaces differently.

Placemaking relies on high quality common areas, a blurred line between public and private spaces, and the integration of traditional and non-traditional retail uses like local government offices, community centres, medical, childcare and education services.

It is critical that malls be about much more than stores. We see the mix of tenant/public space shifting from the current 70/30 to a significantly different split. When this happens, these expanded public spaces will need to be planned and programed over the year much like an exhibition. They will be managed more like content and media, instead of real estate.

Mckinsey suggests that malls must become like retailers, isolate and quantify the consumer touch points that are most responsible for driving satisfaction.

This means applying recent retail innovations like customer journey mapping in the mall, tracking it and using the information to improve the experience.

6. Crack the Code

Any landlord of any material significance could create a crack team of retail professionals that can scour the world and create a new concept. Landlords have capital, data that will aide insight and decision-making and  It will likely be a franchise concept, and as soon as it attains critical mass, it can be sold.

It is really Landlords adopting a BYO attitude to retail mix. Landlords should:

  • get better at judging a retail talent

  • have retail teams working on partnership with retailer

  • be willing to perhaps operate retail shops themselves

(When you are funding the retail concept through fitout contributions anyway, you might as well have more control.) Mckinsey says that malls (should) see themselves as customer-facing providers of shoppable entertainment. (For example, the Menaissance: men are taking the lead in spending.)

7. Toe-prints

I borrowed this term from Liz Holland, even though our use is a bit different. It is about exploring the multi-channel crossover opportunities.

For example, provide space for customers/patrons to:

  • see and try the products for eCommerce retailers (shared space).

  • pick online orders up

  • provide showroom spaces

These types of opportunities are designed to make the shopping mall a place where non-traditional retailers (like eCommerce merchants) can get a micro-footprint (or a toeprint as Liz calls it) in an environment before they are ready to commit to bigger, longer-term arrangements.

These examples are not an exhaustive list - you will see that it involves all four elements of the shopping centre mix to some extent, so I believe it has the potential to be TRANSFORMATIVE.

Transformative Innovation in Malls - Part 1

Why do shopping centers struggle with innovation so much?

Over the years I have made many proposals and floated many ideas with clients and with employers. I have had many bad ideas, but I have also had many ideas that were simply ahead of time.

Ideas have an extraordinary difficult path to adoption; what with politics, resources and risk to consider.

The diagram below illustrates the two types of innovation. Both are desirable, but only one is critically necessary. Implementing truly transformative innovations is harder by an order of magnitude. Simple, transitional innovations are necessary, but they don’t transform a business to make it sustainable in the long run. For instance, it is important to implement recycling programs, install charging stations for EVs, but these won’t help ensure your future. Transitional innovations are necessary, but not sufficient.

(c) 2017 ganador

(c) 2017 ganador


The problem, as it is with so many strategic insights, is how to actually, practically make it happen. I think I have solved that riddle for shopping centres. The framework below articulates the four key elements of the shopping centre’s success. The investors (representing the providers of capital), the actual bricks and mortar place, the shopping community (patrons) and the merchants that are the primary attractors.

Transformative innovation happens when you succeed in introducing a change that involves and benefits all four these elements of the shopping centre mix. When you integrate changes that to some extent combines and involves these four elements, then you get innovation that transform.

(c) 2017 ganador

(c) 2017 ganador

As an aside, for the sake of completeness and transparency, it should be pointed out that simply having an idea is a very small part of the process. The biggest challenge is the cultural shift that creates a climate that is receptive to innovative ideas and a structure that enables the execution of innovations are prerequisites. But this is not a book about change management per se, so I will stick to the knitting.

The list below are all ideas (some more than a decade old) that seems to me still have merit, and all of them integrates to a greater or lesser extent these elements of the mix.

1. A Fund for Fitout Contributions:

Retailers in the current climate (2017 and foreseeable future) rely heavily on landlord funded store development.

Innovation: Create a FITOUT FUND.

That is a separate fund (with a dedicated Fund Manager)  that takes equity but with a payback structure for the retailers, instead of providing lease incentives with no return. Instead of funding failing business models, invest in new concepts. Make it compulsory for a portion of the funds to be spent on professional advice (design, marketing, legal, financial, operational etc) that improves the risk profile of the fund.

2. Casual Incubator.

Casual Mall Leasing and later Pop-Up Retail has long been part of the shopping centre scene. Landlords saw this as revenue opportunities - occupying common area space and generating incremental income. It was largely a response to the luxury of high occupancy rates. Many in the industry saw this as an opportunity to ‘incubate’ future tenants. But for a variety of reasons that hardly ever materialised.

A few entrepreneurial types tried things like 100 Squared. Scentre recently launched an incubator at Chermside which I have not seen personally, but is possibly the type of innovation that could be transformative.

Innovation: Design & Create dedicated a Co-op Space

Much like Offices have become Co-working spaces where a bunch of rotating and fluctuating temporal concepts can trial themselves. The key to making it a sustainable option is to (a) support it with professional advice to incoming trial concepts (b) make it permanently available (c) prioritise the concepts that can scale for shopping centres and (d) allocate space based on potential (not first movers only) and (e) constant rotation to keep customers coming back anew.

The key feature of something like this would require the Landlord to NOT be cynical.

The shaded/blue areas are those services we specialise in over at www.yearone.solutions

The shaded/blue areas are those services we specialise in over at www.yearone.solutions

A real incubator must be applied the full lifecycle of new retail concepts - as per above diagram: Identify, source, screen, onboard, support, adapt, grow and iterate.

One can brainstorm various innovations once you have a specific stage of the cycle to focus on. Examples of innovations that could be applied to the various stages are:

Online Academy: Create a dedicated website for any business interested in opening in a centre to (a) learn how to do it (b) step them through actually doing it. It may even be a joint-initiative of multiple landlords, but the idea is that making a success in a shopping centre has its own unique requirements. It is not about teaching people how to retail (only) but how to do business and to ‘stress-test’ their ideas and give them an opportunity to bounce ideas off the facilitators (independently).

Retail Development Support Office: For the duration of every retail development, create a Retailer Academy/Forum for any business (comprising fewer than 3 stores) who is signed up to a deal. Offer the newbies guided, independent advice to help plan their business, design and configure it, finance it and launch it. A simple thing like navigating the recruitment process on intuition is fraught with danger and getting the wrong people on the wrong agreements at the start of the new retail business could easily be fatal (at worst) or just result in such a poor customer experience post launch that they are on struggle street to retail customer interest. (How often have you gone into a store for the first time, had a bad experience, and wrote that store/brand off never to return?

Screen for Success: We have created a subsidiary company - www.yearone.solutions to act as an external validation agency  in this space. Y1S can help de-risk new retailers and assignees though better, professional assessment and validation. This mitigates risk and secures any potential landlord investment. This intervention can also be geared to guide the retailer - through the business planning process - to help get them off to a better start, particularly those who are not familiar with the constraints of trading in a centre.

We conclude the two-part series in the next post.

PS: Drop your name in the subscription box to be notified when we publish the FULL version of THE BEAT OF THE MALL.

How AirBnB's business model is the blueprint for shopping malls

This was intially published to the #thinkdifferent newsletter. If you would like to get advance insights, well you need to be smart enough to know what to do...


Business Model Disruption in Real Estate

In many ways, this section goes to the heart of explaining HOW the business model of shopping centres will be disrupted. Rather than speculate or theorise about it, I looked at disruption in other industries and identified to key elements of disruption. There are many to choose from (Taxis, Media, Movies and even Retail). I considered all of them and I found a patterns of disruption that (a) conforms to the way we think as revealed in our dialectical cycles of system change and (b) it reveals a set of consistent principles.

It is worth noting that entrepreneurs who disrupt industries, rarely can articulate with foresight a list of dimensions that they aim to ‘disrupt’. It is a result of opportunistic thinking - simply doing the opposite of the incumbent’s strategy.

It is only with hindsight, once the disruption has occurred that we can sit back and see what actually happened, and more importantly what worked. We have had sufficient examples of effective , technology-led disruption in multiple industries to start seeing the patterns.

Like Uber, not like Tesla

I don’t consider, for instance, that Tesla is a ‘disruptor’. Their business model is at its core quite similar to the rest of the auto industry. Electric-powered cars are more disruptive than say the inflection that occurred when the industry went from normally-aspirated vehicles (with carburetors) to fuel-injected vehicles, but the nature of the disruption is relatively similar.  EV will fundamentally disrupt the oil exploration and fuel distribution business, but not so much the automobile manufacturing industry.

As will be explained below, one of the characteristics is that it is a case of winner-takes-all post disruption. With Tesla other manufactures can (have) follow suite and do it relatively quickly.

The Principles

The principles below are simply the key strategic elements of any business - brand, value, price etc. By comparing the industry sector before and after the disruption provides a powerful insight into what the future is for industries yet to be disrupted.

The criteria considered are:

  • Brand
  • Determinants of Supply
  • Nature of Supply Chain
  • Marketing Characteristics
  • Roles of the physical location (Real Estate
  • Nature of Service
  • Nature of Value
  • Range/Offer
  • Determining the Experience
  • Choice
  • Capacity
  • Scale
  • Pricing

The question is simply this: how did these criteria change in the NEW business models? Given the opportunistic nature of business evolution (go where the opportunity is); the hypothesis is that the disruption will occur in the direction of the opposite (from thesis to antithesis).The disruption that AirBnB brought to the holiday/short-term accommodation sector seems to be an appropriate case study as hotels function very much like shopping centres on many levels. What happened?

Brand

The idea of a ‘brand’ was traditionally used to identify the nature of the product; that is communicate essential features of the actual product. In the new model, the actual product can be anything anywhere - from a six star experience, to a tent on a farm. The brand is a platform that attracts people to it and is not determined or influenced by the actual product. No one associates AirBnB with a certain type of product, a certain type of experience. 

Supply and Demand

In the old model the winner was the brand that owned the supply. In the new model, the winner owns the demand (the market) and suppliers follow. There are challenges in creating these ‘marketplace’ business models initially, but once the tipping point is reached, it becomes self-fulfilling.

Marketing Characteristics

As much as traditional businesses claim and aim to be ‘market-led’, the reality is that they are very much in charge of their own destiny, deciding what the strategy, execution and so forth are.  Traditional marketing is top down, from the inside out. In the new format, the marketing becomes outside in and bottom up. Other than 'founder ego', there is no reason for AIrBnB to advertise - the participants advertise their participation as they wish.

Roles of the physical location (Real Estate)

At the dawn of commerce, the production of goods and the consumption of goods were co-located. In time, as distribution expanded, the importance of owning locations mattered a lot. Trade routes determined marketplaces. The one with the best real estate won. Hotels that opened prime locations on the ‘trade route’ of holiday destinations owned the real estate to differentiate themselves. This created high barriers to entry.

AirBnB owns no real estate and the barriers to entry come from owning the market, not owning the supply of rooms.

Nature of Service

Businesses choose to differentiate on the level of service they offer, usually adding services = adding value and adding margin. In the new model, there is typically only the essential services.

AirBnB does not facilitate insurance, does not help its suppliers to procure cheap soap. Not additional services.

Nature of Value

The value procured can range on a scale of tangible to intangible. (Pure product to pure service). In all major instances, the disruption has been in one direction - towards intangibility. (There is currently the emergence of the Internet-of-Things, which has a distinct tangibility to it; again the ‘antithesis of the thesis offered by the internet.)

I have spoken and written at length about ‘ephemeralization’ - the idea the the things we buy seem to be increasingly ephemeral - even for digital products. The storage disk becomes the Cloud and the CD becomes a ‘stream’.

Range/Offer

Consumers always wanted unlimited choice (but it must be easy to choose and be frictionless to transact) and so the ephemeralization has enabled that to the extent that consumers now have practically unlimited choice. In the old model, there are obvious constraints and limitations in the offer.

Curation: Determining the Experience

The brand owner determined the experience. In fact, the brand ‘promised’ the experience. The hotel operator determined the level of ‘stars’ of the experience. AirBnB has very little control over the quality of the offer, relying on consumer rating mechanisms to communicate the nature of the experience. (As aside: AirBnB is attempting to enforce social justice agenda by setting rules as to who the operator may or may not decline to host. This runs counter to the core premise, and it will be interesting see how it plays out.)

Capacity & Scale

In traditional business there is often a capacity constraint that limits the operational capacity. Only so many locations, only so many customers. In the new marketplace model, there are virtually no capacity constraints to limit growth. AirBnB is not even limited by the number of houses on Earth - they can keep adding ‘experiences’ or they could even colonise the moon.

Pricing

The old model of pricing was quite structured, with each member of a the supply chain carving out a margin that kept the whole system alive. Each stage of the chain was carefully and formally negotiated. In the AirBnB world pricing is variable. There is a ‘clip-the-ticket’ mentality that operators adopt - often taking a relatively small portion of the price, relying on scale to provide the returns by keeping resistance for newcomers low.

The Dialectical Meta-Pattern

The dialectical pattern always seems to emerge doesn’t it? When you carefully analyse all the changes articulated above (or summarised below) you will notice that there is a dialectical pattern. The full process is explained in THE BEAT OF THE MALL - so you will just have to stay tuned for more on that. 

The table below summarises how the traditional model of hotels compares to the business model of AIRBnB. Both industry sectors aggregate and sell rooms to visitors and derives a profit from the amount spent by the guest.

The key takeaway is quite simple, and quite self-evident: whatever the features are of a currently successful business model (the THESIS), the future lies in doing the opposite (the ANTITHESIS). Ovder ttime, these differences get SYNTHESISED. 

And then a NEW ANTHITESIS emerges.

THESE ARE THE QUESTIONS TO ASK:

What are you doing now?
What is the opposite?
Is that possibly the future?

How Marketing Makes a Mockery of Maslow

The ‘hierarchy of needs’  developed by Maslow must be one of the most misunderstood ideas around. It is, despite the fact that it is approaching 75 years since it was conceived, still a mainstay of modern MBAs. As a ‘business concept’ it has proven extraordinarily antifragile. But chances are you have never read any of Maslow’s original writings, instead on relying on blogs (oh, the irony) to learn what it is all about.

Why did it last? Why is it so useful? Why are Marketing MBAs taught about Maslow, and not SEO instead?

And if you are going to understand needs, you must understand wants - and again misconceptions are rife. So, strap in, this is going to be a long ride. But it is extraordinarily useful to know what it is and how it operates.


 

Firstly, the idea of a layered pyramid as the graphic representation is actually not the best way of visualising the way Maslow conceived the theory. There is one aspect of the various ‘drives’ that are hierarchical, yet that has come to dominate our understanding. It may even be useful to ignore the idea of the pyramid until you have a strong grasp of this subject matter.

Secondly, the hierarchy is not fixed, and in Maslow’s own words: “We have spoken so far as if this hierarchy were a fixed order but actually it is not nearly as rigid as we may have implied. It is true that most of the people with whom we have worked have seemed to have these basic needs in about the order that has been indicated. However, there have been a number of exceptions.”

The notes below are extracted verbatim from a paper by Maslow, and I add my commentary below most points to clarify some common misconceptions or highlight key insights.

The integrated wholeness of the organism must be one of the foundation stones of motivation theory.

There is more to humans and human motivation that the factors identified here. And the factors that motivate behaviour are integrated - that is they play out simultaneously or separately, but they influence each other. It is dangerous to simply assume a rigid, linear sequence.

Maslow explains it as follows: “There is a degree of relative satisfaction. -- There is a false impression that a need must be satisfied 100 per cent before the next need emerges. In actual fact, most members of our society who are normal, are partially satisfied in all their basic needs and partially unsatisfied in all their basic needs at the same time. A more realistic description of the hierarchy would be in terms of decreasing percentages of satisfaction as we go up the hierarchy of prepotency.”

Human needs arrange themselves in hierarchies of prepotency. That is to say, the appearance of one need usually rests on the prior satisfaction of another, more pre-potent need. Man is a perpetually wanting animal. Also no need or drive can be treated as if it were isolated or discrete; every drive is related to the state of satisfaction or dissatisfaction of other drives.

The hierarchy is about POTENCY, not a sequence of drives that happen in succession. Whilst there is a general tendency for lower level needs to be satisfied first, it is more important to understand that these needs are STRONGER motivators. (Marketers often think because they sell a sophisticated product, they must appeal to higher-order needs. This is simply put, just stupid.)

The hunger drive (or any other physiological drive) was rejected as a centering point or model for a definitive theory of motivation. Any drive that is somatically based and localizable was shown to be atypical rather than typical in human motivation.

Contrary to what many people believe the lowest level in the hierarchy is not what motivates us first and foremost. Human being are NOT typically motivated by pure physiological needs. (If we were, we’d be animals.)

In Maslow’s words: “Motivation theory is not synonymous with behavior theory. The motivations are only one class of determinants of behavior. While behavior is almost always motivated, it is also almost always biologically, culturally and situationally determined as well.

Such a theory should stress and center itself upon ultimate or basic goals rather than partial or superficial ones, upon ends rather than means to these ends. Such a stress would imply a more central place for unconscious than for conscious motivations.

At the most basic level, motives are NOT conscious. The root cause of our behaviour is psychological and unconscious. What we seem to be motivated by is often the ‘means’ and not the ‘end’ (or root cause).

There are usually available various cultural paths to the same goal. Therefore conscious, specific, local-cultural desires are not as fundamental in motivation theory as the more basic, unconscious goals.

Motivation is about ‘what drives you towards a goal’ and these drives can take various forms and is contingent on cultural and environmental factors. I.e. the ‘needs’ are moderated by environmental factors. To paraphrase Maslow: No claim is made that it is ultimate or universal for all cultures. The claim is made only that it is relatively more ultimate, more universal, more basic, than the superficial conscious desires from culture to culture, and makes a somewhat closer approach to common-human characteristics, Basic needs are more common-human than superficial desires or behaviors.

Any motivated behavior, either preparatory or consummatory, must be understood to be a channel through which many basic needs may be simultaneously expressed or satisfied. Typically an act has more than one motivation.

Not all behaviour can be said to be ‘motivated’; but this theory applies only to those behaviours that are. Multiple needs (motivational factors) manifest often in one behaviour. That is, it is not a simple matter of one need, one behaviour.

To paraphrase Maslow again: There are multiple motivations of behavior. These needs must be understood not to be exclusive or single determiners of certain kinds of behavior. E.g.  Eating may be partially for the sake of filling the stomach, and partially for the sake of comfort and amelioration of other needs.

Not all behavior is determined by the basic needs. We might even say that not all behavior is motivated. There are many determinants of behavior other than motives. Too often people think the ‘hierarchy’ explains motivation completely. Not only are there contingent factors (culture) there are also other internal factors (personality, attitude etc) that motivate certain behaviours.

Some behavior is highly motivated, other behavior is only weakly motivated. Some is not motivated at all (but all behavior is determined).

I.e. there is more to human behaviour than mere need expression.

There is a basic difference between expressive behavior and coping behavior (functional striving, purposive goal seeking). An expressive behavior does not try to do anything; it is simply a reflection of the personality. A stupid man behaves stupidly, not because he wants to, or tries to, or is motivated to, but simply because he is what he is.

I don’t think that need any further explanation.


So, in summary:

  • The hierarchy is not the complete explanation for human behaviour

  • The needs are interdependent

  • The needs are contingent

  • The needs are not exclusive

  • Some needs are more important than others in terms of ability to influence goal-directed behaviour

  • Not all behaviour is determined by needs.

So, what are needs exactly? Let’s rely on Kotler et al (p11, 2012) to describe the terms

  • Human needs are the basic human requirements. (Some people add ‘innate’ instead of basic. I prefer that.)

  • Needs become wants when they are directed at specific objects that might satisfy that need.

  • Demands are wants for specific products backed by an ability to pay.

It is worth noting that ORGANISATIONS don’t have needs in the same way as humans. Belatedly B2B marketers are realising that the ‘buyer’ is human after all, with all the concomitant biases and personal ‘needs.’ But the typical decision-making models that explain B2B purchasing may reference ‘general need description’ but it does not mean ‘need’ in the same way.

Organisations have requirements, not needs - despite the fact that we often colloquially refer to organisational needs. But it is lazy, wrong and confusing to do so.

See the progression in that set of definitions? Consider the table below as illustration:

What does this mean for the Marketer?

Your starting point is (usually) your product. You want to sell coffee. Ultimately you need to know what the latent demand is and what the potential demand is. Because it is only when you SUPPLY the product at a price to the market that DEMANDS that product that you generate revenue.

What are the basic human NEEDS that your coffee can appeal to?

(Note the plural.) You realise that coffee can play to a range of needs.

How are these needs typically fulfilled?

Some people want instant coffee, some want takeaway espresso, some want to make their own (for example.)

How are these wants met?

You can consider the ALTERNATIVES in the market - because this is effectively going to be your direct and indirect competition.

Does that want translate into a demand for that (type of) product?

I.e. are people spending or willing to spend MONEY on fulfilling the want?

Once you have calculated (or decided to take the risk) that there is a demand for YOUR product because it will be something people WANT as an expression of an innate (combination of) NEEDS, then you have a business.

The next step is to formulate your marketing plan by recognising who your competitors are and how to best communicate to the customer how your product is what they need - or more specifically, which one of the needs you may rely on more than others.

So, if you are an (MBA) educated marketer (or just extraordinarily intuitive) you would naturally work through this progression because it determines whether there is a (real) demand for your product based on a (real) need that the consumer has.

Marketing is defined (simply) as ‘finding out what the customer wants, and giving it to them. Now you understand why the idea of needs & wants are so fundamental to the idea of marketing.

PS: Whenever and wherever you see versions of the pyramid that has added layers or different names added, then you can rest assured it is just made-up stuff.

Like this one.


Image: https://www.professionalacademy.com

Paradigms of Truth

The biggest challenge we face when trying to discern a way forward is to distinguish between signal and noise: what is true and what is distraction. Simply scroll through your newsfeed on any social media and even through the list of articles posted on your favourite news site.

  • Retail is doomed.
  • Why retail will survive.
  • Malls are dead.
  • Long live the Mall.
  • Amazon will kill your business.
  • How to survive the coming of Amazon.
  • The economy will tank.
  • Prepare for the coming boom.

If that tells us nothing else, it should tell us this:

Things are not true because many people believe it.

It is not true because you agree with it.

Things are not true because they are written down or ‘researched’.

They are not true because we want it, because it is on the news or because a smart person says so.

Things are not true because they are complicated, nor because they are simple.

Your truth is not true because it is your truth.

Things are true because they are true.

You may think that makes truth impossible to know, but on the contrary, it is easy to know.

Truth is done, not said.

We act according to that we believe to be true. Forget what people say, write, ‘like or ‘share’.

If we want to know what true is for you (i.e. what you believe) - just look at how you act.  

If we act like Amazon is going to kill our business, then that is what we believe to be true.

If we actively seek an opportunity in every diversity, then we believe the future is bright.

If we pay our staff well, we believe in the importance of people.

If we greet our customers with a smile, we believe customer service is important.

If we complain to the landlord, we believe our problem is someone else’s fault.

If we watch our staff like hawks, we believe it is true that they are nothing but human resources.

If we open the store late, we don’t believe in discipline and consistency.

If we discount our offer as a default first step in a sale, we don’t believe your product has value.

If we say we value inclusiveness, but…

If we say we are not racist, but…

If we say we are compassionate, but…

It really doesn’t matter what we say, only what we do.

Psychologists suggest that 70% to 80% of what we do every day is habitual. Check your habits if you want to find the beliefs that are so ingrained you don’t even notice. That way lies an understanding of the truth. And once you know what you really believe to be true (and not what you have been telling yourself) then you are able to reset yourself and your business on the path that will lead to success.

The fact is, strategies and solutions (for the most part) are pretty self-evident. And if not, one can buy the expertise to solve it. The challenge we face is that we actually believe is incongruent with what we say – that is why we fail in the ‘execution’.

You can call yourself a Hawks fan, but unless you are prepared to sit and watch in the rain, you are a mere spectator.

Image: www.heraldsun.com.au

The virtue of having a closed mind

I have come to realise that I rarely change my mind. At first, I was horrified at the thought.

By that I don’t mean I never reconsider things, or never decide to do something different. I am talking about changing our mind about the things we actually believe (consciously and subconsciously) deeply.

We may change our preferences: You may decide to order pizza and then change your mind to get the Burrito instead. That is not a belief, it is preference.

We may change by learning: You may think that coffee is good for you and then you learn it is not, and you will think differently because you have learned something.

Neither of those are examples of 'changing your mind' about what you believe.

Beliefs don’t have to (only) be about transcendental ideas like God or karma. If you believe Tom Cruise is a great actor, despite the occasional shocker of a movie, then you too are highly unlikely to be persuaded otherwise.

I wonder why we so rarely change our minds, and it seems to me that our mind creates these heuristics (and biases even) for very good reason:

  • We get to navigate the world effectively despite the onslaught of information
  • We minimise decisions about things already considered and filed away, so as to allow us to consider new information and new dangers instead of the familiar (and safe) stuff
  • We know the people who want to change our minds do so for their gain, not ours, so our resistance is a natural, evolutionary response to protect our turf

We may instinctively distrust ideas and concepts that (and the people who) constantly change their minds because it signifies an inherent unreliability that is best avoided.

If you search the net about ‘changing minds’, you will find a good many quotes that suggest that changing your mind is a good thing and is a sign of a healthy perspective. Being open-minded is promoted a good thing.

The consensus seems to be with George:

Progress is impossible without change, and those who cannot change their minds cannot change anything. [George Bernard Shaw].

On the other hand there are a few contrarians:

Things don't change because people change their minds. They change because they retire or die. [Douglas Crockford].

I am with Doug.

It seems to me that we want to think of ourselves as open-minded and believe that we are capable of changing our minds. You may have spotted the irony there: we believe we are open-minded, and we are unlikely to change our minds about that. I just tried and probably failed.

But we delude ourselves, because changing our mind invites into it the chaos of the world, and most of us are not very good at coping with chaos. So we don’t change our minds about the things we believe, and the people selling us all those persuasion tricks are peddling snake oil.

That’s what I believe, and I am not going to change my mind about that.