Paradox of Choice

Does having more choice make a person freer and happier?  Does this satisfy them more?  According to professor and psychologist, Barry Schwartz it does not.  Instead with more choices, it makes people unhappier to the point that they are paralyzed by the sheer number of choices.  This video discusses how the western societies value freedom greatly, and with greater number of choices enables people to have greater freedom, which results in greater welfare for the people.  Western societies subscribe to this dogma of maximum choice = maximum freedom = maximum welfare. 

All this choice has multiple negative effects: 1) With so many choices available, people have difficulty in finding a choice and this leads to paralysis.  For example, if the investment (401k) program at work features 100 choices of mutual funds versus 10,  people’s participation wanes because they constantly delay the purchase decision to deal with the enormous number of choices. 

2) Once the selection from one of the numerous choices is completed, the overall satisfaction decreases, even if the choice is terrific.  This is due to regret and the anticipation of regret, resulting from.the cognitive dissonance experienced after purchasing a product/service, also known as buyer’s remorse.  If the consumer selects a particular good/service and is aware of the multitude of choices that are available, he/she may not be satisfied knowing there could be a better product/service that could have been chosen amongst the plentitude of choices.  With the increasing number of choices available, also comes with an increasing number of opportunity costs.  For example, upon purchasing a mutual fund, one may express buyer’s remorse in thinking that a different brand could have been better.  Or even, investing in an altogether different financial instrument (e.g. T-Bills, Bonds, Stocks, etc.).

3) Escalation of expectations.  Adding more choices only raises people’s expectations of the product/service.  The professor’s example was in the past, buying jeans was simple because there was only one style of jeans.  These jeans were not particularly stylish nor did they fit well.  But today, there are a multitude of styles of jeans (e.g. boot cut, slim fit, relaxed fit, tapered, button fly, zip fly,stone wash, faded, etc.).  When the professor went to a jean store to ask for a similar style that he bought several years ago, it was not easy finding them.  When he did find the right style, an hour later, the jeans were more stylish and fitted better than the previous jeans in the past.  However,  the process and the elevated expectations waned the experience.   With the multitude of choices that are available, people’s expectations have risen precipitously to the point that being pleasantly surprised was a phenomenon that mostly occurred in the past.  

4) Secret to happiness is low expectations.  When people have such high expectations, self-blame is what people experience when they choose the wrong product/service.  For example, in the past, if the jeans were a horrible fit or if the quality was poor, you could blame the jean company. Today, with the multitude of choices, you have yourself to blame.

This problem is rife in modern affluent societies.  There needs to be a balance between too little and too many choices.  A possible solution espoused by the professor is income redistribution it becomes a win/win scenario for both the poor and the affluent.  It addresses the problem of having too little or too many choices.

10 Traits for Creative People

A prominent author and professor, Mihaly Csikszentmihalyi, who published the award-winning book, “Flow: Psychology of Optimal Experience”, wrote about ten seemingly paradoxical traits of creative people in this article. 

He mentioned that: “When we’re creative, we feel we are living more fully than during the rest of life……But creativity also leaves an outcome that adds to the richness and complexity of the future. “

Other than being creative, what makes creative people so unique?  He author said: “Creative individuals are remarkable for their ability to adapt to almost any situation and to make do with whatever is at hand to reach their goals. If I had to express in one word what makes their personalities different from others, it’s complexity. They show tendencies of thought and action that in most people are segregated. They contain contradictory extremes; instead of being an “individual,” each of them is a “multitude.“”

The following ten traits of creative people are as follows:

1) They possess an abundance of energy, while simultaneously able to find periods to rest and recharge/regroup.  Being able to focus intently on anything at anytime is paramount.  Being able to shuffle this balance, is important for these people’s success.  Past trial and errors helped them with achieving their goals.

2) Ability to balance convergent and divergent thinking.  Convergent thinking is the ability to solve well-defined problems that have one correct answer, this can be measured by IQ tests.  Divergent thinking is the ability to generate a multitude of ideas while being flexible and being able to use different perspectives, but not necessarily arrive at an answer.  This is the type of thinking that is encouraged by creative workshops.  Finally, the creative person is able to use Convergent thinking to select the right answer/solution from Divergent thinking.

3) Balancing playfulness and discipline is also key.  Creative people persevere during hardships and periods of difficulty.  It is not uncommon when most people are relaxing, these people are hard at work.

4) Alternate between the realms of fantasy and imagination.  Many creative ideas are borne from that extra leap in imagination.  Many people view artists, musicians, etc. as being part of the fantasy realm, while scientists, mathematicians, etc. as being realists.  When the creative person begins to work, this is no longer true.

5) Be simultaneously extraverted and introverted.  Most people are one or the other, but creative people are both.

6) Be self-deprecating and humble, while being proud.  They understand the quality of work that was accomplished before theirs and are able to put their work into perspective.  They focus on future ideas and current projects, as past projects no matter how interesting or significant, are no longer interesting.

7) Possess both female and male traits in thinking.  Being psychologically androgyny means a person has the ability to be both aggressive and nuturant, rigid and sensitive, competitive and collaborative, dominating and submissive regardless of gender.

Act rebellious/iconoclastic, and be concurrently traditional/conservative. Creative people understand and appreciate current dogma.  Being able to take risks to possibly enable paradigm shifts may be necessary.

9) Are passionate about their work, yet, objective about it.  The ability to detach oneself from a project and can identify and understand criticism from others.

10) Are sensitive, which opens to them to pain, yet it can become enjoyable.  Creative people are usually at the forefront of new ideas and designs, and are subject to criticism.  Due to their nature, many things bother them, and they need to correct these imperfections.  For example, a badly designed vehicle would bother a creative engineer.  Divergent thinking is viewed by many as deviant, resulting in many creative people feeling misunderstood.

The above ten antithetical traits of creative people underlie some of their motivations and ways of viewing the world.  Most importantly, is that in order for creativity to thrive in people, they must enjoy the process of creation.  Without this, it would stifle creativity.

Advertising and Social Media

 

How are businesses marketing their products/services?  Are they still broadcasting at their audience? David Cushman, wrote an interesting article about the change from traditional method of advertising to being able to engage and listen to the business’s audience in the social media world.  As mentioned in a previous post, the internet has evolved, where many companies are utilizing and implementing web 2.0 tools.  As mentioned in a previous post, the web is increasingly being fragmented, where users are able to select the what, where, when, who, why and how of experiencing the internet.  Since the user is in full control of his/her experience, how does a marketer reach his/her target audience?

Mr. Cushman, has stressed users control the conversation made to/from them, and 70% of their purchase decisions were made through recommendations.  Websites such as Amazon.com display online reviews from various users as well as from experts.  Other than setting up online forums, questions/comments page, how else can businesses listen to consumers?

This post has a wonderful example of how Twitter is used to listen to what users are saying about the business’s brand. Going to search website that enables anyone to listen on any conversation about any topic.  Some companies such as Comcast, Zappos.com, and Dell regularly monitor Twitter to handle any customer-related issues.  

Mr. Cushman explains that widgets, which are tools that allows marketers to advertise their product/service, yet, allows consumers to share, discuss and collaborate using these tools amongst themselves.  Effective widgets need to have the following traits: 1) Marketers need to relinquish control of the marketing message; 2) These toolkits need to be user-friendly; 3) Allow users to be creative.

Since this is user-generated content, users are more apt to share and market this content among their friends. As discussed earlier, content is now owned by the user, he/she is able to generate conversation as a result of this.

The traditional broadcast model is still valuable, but, this emergence of the social media cannot be ignored. Companies need to adapt to be effective in embracing this form of advertising.

50 uses for Twitter for business applications

 

How does a business listen to its customers? Is it through the customer service department?  Call center operations? This is an interesting article about how businesses can incorporate Twitter as a web 2.0 tool.  I had discussed in an earlier post about the benefits of Twitter to enhance friendships, but this post will be about using Twitter to enhance business to customer relationships.  

Chris Brogan has listed fifty uses of using Twitter for businesses.  It is quite the insightful read.  Mostly, it is used for connecting business to its customers through its interests, its insights, customer service and customer opinions.

Emerging technological trends for businesses

 

 

 

  

 

What are some emerging technology trends that will change and reform businesses and the economy?

 

 

This article from McKinsey Quarterly discusses eight trends can be categorized into three subcategories: Managing Business Relationships; Managing Capital and Assets; and Leveraging information in new ways. 

 

 

The next four trends are categorized under the “Managing Business Relationships” heading.

  

 

The first is Distributing Cocreation – This is when suppliers, customers and contractors can aid in product/service development.  By shifting more power and ultimately more autonomy to outsiders that work together, costs and lead times can be reduced by getting different insights during the development process and forgoing some of the bottlenecks associated with having total control of the innovation process.  The notion of a open-source innovation was discussed in this earlier post. 

 

 

Companies will need to compete with each other in order to attract the best and most innovative contributors.

 

 

The second trend is “Using Consumers as Innovators,” and is facilitated by the growth of the web 2.0.  Customers are looking to be engaged with one another or with an organization.  Customers are increasingly being engaged by the their involvement in the development, testing and marketing (viral marketing) of products or services.  An example of is Wikipedia.  The accuracy of this online encyclopedia is almost as accurate as Britannica’s. 

 

 

With this trend, development cycles and costs can be reduced, while understanding the customer’s behavior and wants can be easier.  The cost to attract customers is lower, and retaining customer loyalty becomes easier. Companies also need to be aware that the customers that would be involved in the development of their product or service is a small segment of the overall market, therefore, the developers’ needs and wants maybe different than the overall market.  Often customers’ needs and wants are immediate and not long term. 

    

 

The third trend is “Tapping into a world of talent”, as the internet is becoming more interactive with new communication and collaborative tools, outsourcing some functions of a business to specialists, talent networks, and freelancers is increasingly more viable from a cost and functional aspect.  As I had alluded to in yesterday’s post, some advertising agencies have outsourced their creative, account management and media buying departments.  Many companies would focus on their core competencies and not have the burden of being tied down to those other functions. 

 

 

The main task is being able to harness the global talent pool, managing the existing workforce and being able to integrate the work in a cohesive manner. 

 

 

The fourth trend is “Extracting more value from interactions”, that is interactions between different types of work and enabling the workforce to function more effectively and efficiently. 

 

 

The first type of work is Transformational, usually work that is involved in the production of goods or in the extraction of raw materials; the second type of work is Transactional, usually work that is clerical or simple-rule based such as a call center operations or someone involved with data entry; finally, the last type of work is Tacit, which primarily deals with knowledge, judgment and collaboration with multiple interactions with multiple stakeholders.  For example, a sales person would engage in tacit work, by interacting with the marketing, product development, H/R, logistics and after sales departments to maximize sales, while engaging and interacting with multiple parties through collaboration. 

 

 

There are systems that can maximize the efficiency of both transformational and transactional work such as assembly line work.  However, with tacit work, there is no such a rule or process.  Maximizing the effectiveness of this work is accomplished by focusing them on interactions that create value.  Companies must enable these workers with greater decision making ability, bring down barriers, increase the availability of resources/information and facilitate collaboration.  New and current technology is facilitating this trend and enabling tacit workers to become more effective by having wikis, blogs, emails, text messages, and feeds to make communication and collaboration easier.

 

 

The next two trends are categorized under the “Managing Capital and Assets” heading.

 

 

The fifth trend is “Expanding the Frontiers of Automation,” companies will continue and expand their automation ability for tasks and processes that are repetitive.  For example, Fed-Ex and UPS have enabled users to track their packages online.  A major benefit would be to lower costs and help users get the information they need effortlessly in a timely manner.

 

 

The sixth trend is “Unbundling Production from Delivery,” uses existing business structures of large businesses (e.g. supply chain management, computing power, etc.) and rents this to other businesses.  From a supply side, this technology would attract asset-intensive businesses (e.g. factories, office buildings, etc.) to raise their utilization rates and therefore, their return on invested capital.  From a demand side, this technology would attract businesses that do not possess the economies of scale and scope to achieve competitive marginal costs. 

 

 

Unbundling also offers businesses quick and easy access to assets; that minimizes impact on their balance sheets; and makes their income statements more favorable.  For the businesses that offer unbundling, it decreases their marginal operational costs because of greater utilization of resources, and greater economies of scale and scope.  Companies need to manage possible supply and demand conflicts.  Examples have included the mobile phone networks and Amazon.com. 

 

 

Here is another example in this article that discusses the growth of APIs across many existing web platforms using existing computing power of large companies. (e.g. eBay, Amazon, etc.)

 

 

The last two trends are categorized under the “Leveraging information in new ways” heading. 

 

 

The seventh trend is “Putting more science into management,” companies are using statistics and other data to use internally and externally.  For an internal example, automotive companies will typically spend more on sales incentives and on advertising campaigns based on seasonality of sales and possible product lifecycle changes. For an external example, Listen.fm and Amazon.com both use customer segmentation systems that utilize recommendation engines that suggest certain items based on the user’s past history, and on other users’ preferences.

 

 

As mentioned in an earlier post, the costs for computing power and storage capacity will continue to fall; and the quality and quantity of information that will become available will rise. The increase in information will empower organizations, as it becomes becomes transparent to employees and suppliers, and the access to it becomes broadened. 

   

 

The eighth and final trend is “Making Business from information,” as now increasingly more data is captured by businesses and from varieties of sources; this could be beneficial for an information-based business opportunity.  Intermediary businesses that have access to greater quality and quantity of information can charge a premium for the aggregation and analysis of this data.  An example of this could be a security firm selling its video footage of a retail store to a market research firm studying retail consumer buying behavior. 

 

 

These aggregators need to be cautious, because they could be aggregated themselves. Their business model can continue to flourish in business to consumer shopping sites and business to business directories.

 

 

Companies need to be cognizant of these eight emerging trends.  Rather than reacting to it, companies can now use these trends to catalyze change and create opportunities as a result of this.

 

What is the future for ad agencies?

 

 

The above link was an insightful presentation on the future of the ad agency and its relationships with the client and the world, it was presented by Scott Goodson, who was the chair of the Global Marketing Summit in 2007 and is the founder and CEO of Strawberry Frog.

 

 

Some of the main points included:

 

 

Ad agencies should focus on their main strength, which is idea generation.  Often the agency is very preoccupied with the execution of an idea, and due to time constraints, it potentially stymies creativity.

 

 

As discussed in an earlier posting, there is a trend to outsource different departments in ad agencies.  Many traditional functions such as the creative department, media buying, and executing ideas now have outlets to which these services can be outsourced.

 

 

By bidding some processes to suppliers, Strawberry Frog’s lead time for innovations has diminished, and the quality of the new ideas has increased as a result of focusing on its core strength – idea generation.  Consequently, the agency is reinvigorated and rids itself of clutter.

 

 

The traditional model for monetary compensation is based on billable hours.  This structure encourages billing based on execution versus idea generation.  A revised model would include compensation that includes profit sharing (for the agency) as well as billable hours.  This encourages the agency to be cognizant of innovative money generating ideas

 

 

From a client perspective, also discussed in an earlier posting; booking, planning, and buying media is now available to bidding in an open auction on services such as Google.   This type of service is analogous to cherry-picking the preferred talent to work on an ad campaign.  Creative and Executing teams can also be found through a bidding process in an open auction.  This gives the client the power to select from a variety of sources. 

 

 

So, with this open style auction of media agencies, do they have a role in the future?  I do think that media agencies have a role, but it has diminished greatly due to Google’s business model, which can reap the benefits of the long tail.  Smaller customers and individuals now have unfettered access to purchase media through an auction-style portal to bid on multiple types of media, and most importantly, have pertinent metrics to measure their ROI.  Media agencies will continue to occupy the important advisory role, as their access to research and trends will enable them to do so.  Due to economies of scale, larger customers and institutions may still find it advantageous to buy their media through these agencies.  I think the Media agencies need to adapt their business model to cope with this.   

 

 

Also, the market is becoming culture-centric.  This can be broken down to three areas: User-generated content, ideas and products that are all subject to peer reviews.  As discussed in earlier post, the prevalence of social media enables the collaboration from various users.  Clients and agencies must adapt to center their approaches to incorporate these business behaviors.

 

 

Finally, the presentation also looked at how both the client and the agency is now becoming more socially conscious.  As noted in an earlier post about Transformational Design, the movement towards green marketing is an excellent example.

Social Websites (e.g. Facebook, etc.) enhance relationships…but at what costs?

In the world of social networks, the marginal utility of an application increases when the user’s friends usage rates increases.  Much of the reason of the emergence of the popularity of social websites such as Facebook, Twitter and MySpace is due to an increasingly number of users utilizing this service. 

In my earlier post, I had discussed the societal, economical and psychological benefits/drawbacks of social websites.  In this post, I will continue to discuss the role of online privacy.  In my earlier post today, I had discussed the balance between online privacy and targeted advertising.  Trying to seek a balance between the two is rather difficult.  There is a paradox that exists as the users become increasingly engaged online, their privacy increasingly erodes.      

One of the noted features of Facebook is a news feed, that automatically updates the activities of the user’s family, friends and acquaintances.  It is similar to an RSS feed, instead of seeking daily updates on a multitude of web pages, these feeds are instead fed to a single web page.   On Twitter, the user can update his/her status (what they are doing, where are they going, who are they seeing, etc.) with a maximum of 140 characters (similar to a text message) unlimited number of times per day.  Both Twitter and Facebook feed applications are similar, one feed is not meaningful by itself, and can be rather mundane.  Put together a collection of feeds that happen in one day, it becomes a story, and it paints a complete picture of the family member, friend, acquaintance or even a stranger that the person is following .  With Twitter one can update one’s feed and follow others’ feeds and know what the other user is feeling/thinking/doing, etc. on a constant basis especially when using a Blackberry device.  According to this article, social scientists refer to these incessant updates as “ambient awareness.”  Can people constantly read and absorb a multitude of messages on a daily basis?  Well, these feeds are meant to be scanned, akin to reading newspaper headlines, and is analagous to acting as ambient messaging. 

These feeds can become a conversation piece with friends the following day.  It ressembles reading someones mind.  For example, if one was meeting a group of friends at a coffee shop, and saw something interesting while in transit, he/she can “twitter” this neat occurrence to his/her friends real-time.  Once at the coffee shop, his/her friends would know what happened to the user on the way to the coffee shop.   

Being connected and engaged with these online social tools is not all rosy, the article discusses how this constant self-disclosure created difficulty with one user withdrawing from this online world because she wanted to know if people were discussing events behind her back.  Some employers and college admission boards are now utilizing these online social tools to screen potential job candidates.   

In the end, users need to balance the enhancing social capital vs online privacy paradox.  The constant self-disclosure could be used as a method for catharsis, which inadvertently, makes the user know themselves better.

Online Privacy vs Targeted Advertising

Today’s focus will be touch on online behavior.  This first article is about finding the delicate balance between maintaining online privacy versus targeted advertising.  Online users on one hand want to connect with their family, friends and colleagues, but on the other hand, want some privacy.  Advertisers try to track the user’s online behavior by tracking their website visits, purchases, freeware, and email.  If all these inputs are being monitored it almost becomes Big Brother-like behavior.  By targeting the user more effectively,  ads become increasingly relevant to the consumer and also increases the ROI for the advertiser.  Much of Google’s revenue is from selling contextually relevant ads, as they strive to find increasingly more effective methods to target consumers. 

Recently, Facebook launched an advertising program called Beacon, which tracks user purchases with Facebook-affiliated vendor sites and shares this with the user friends.   Could the purchase of a certain product be a conversation piece for the user with his/her friends?  Or is it an intrusion of privacy to the user?  It has caused much controversy.  Again, in the pursuit of contextually relevant advertising, many people feel that it has crossed the line with respecting online privacy. 

The effect on privacy will be felt by current generation of users (high school, college and young professional users).  In the past, most activities and experiences with family, friends and colleagues were not broadcast around the world.  How will the greater transparency of social behaviors have on the current generation?  Only time will tell.  Are people opening themselves up too much?

Capitalism in China

What is the future of capitalism in China? Unexpectedly, there is quite bit of decentralization in decision making in China, grassroots democracy is quite apparent, where municipal and provincial decision making powers are quite strong.  This is quite evident with increasing power for individuals to defend their rights (e.g. labor laws, property laws).  In fact, among all OECD countries, China is the most decentralized country.  For most matters that affect infrastructure and investment, the local and  governments have the decision making power.  They even compete with each other to attract Foreign Direct Investment.  At the same time, the central government has metrics to measure the successes of each municipality and province.  The article discusses how if China were to become a capitalist society, its system would mirror closest to South Korea’s system of the chaebol, which are conglomerates that are family controlled.  This is because of its Confucian influence and importance of family in business.  However, It won’t be the same system as South Korea for the following three reasons: 1) China’s size; 2) South Korea is a full democracy; 3) China’s lack of scientific innovation. 

One of the challenges China faces is being able to transform from a society that places great emphasis to personalized trust (a trust between people that know each other) to institutionalized trust (a trust in existing systems that ensures transactions among businesses, NGOs, governments and other parties will function).  In China, much business is done between people that know each other, rather than between strangers.  It does not have an existing system where information and laws are readily available and implemented, and therefore institutional trust is difficult to earn.  Companies that handle complex issues may experience difficulties resulting from a lack of institutional trust because without this, delegation is often difficult.

Another barrier would be China’s lack of scientific innovation resulting from its lack of commercialization of science, and lack of sharing this knowledge across business stakeholders (e.g. venture capitalists, capitalists, scientists, etc.).  In other economies such as Germany’s and Japan’s, there is a high level of societal coordination among various parties (business associations, labor unions, etc.) 

Despite all those barriers, will China’s economy hit a wall?  China’s economy is interdependent on a multitude of nations around the world and vice-versa.  As a low cost manufacturing and assembly center, China has a high dependence on external innovation.  To grow, China needs to be involved with a larger chunk of the value chain by utilizing its comparative advantage in low cost manufacturing and labor in medium to high tech sector. (e.g. building tools for high tech sector)  China could be in danger of being trapped in a low-cost commoditized manufacturer.

However, moving higher up the value chain would require more capital investments and more cooperation amongst firms.  China is addressing these deficiencies is by fostering FDI, as well as involving the ethnic Chinese people in the innovation process.   There is also a movement towards Chinese firms acquiring foreign firms to gain knowledge and innovation.  An example, was Lenovo acquiring IBM.  These trends need to continue in the near future, as well as addressing the deficiencies of innovation, cooperation and trust in order for the Chinese economy to thrive.

Women vs Men – Purchasing Behavior

I believe most people know that there is a difference in behavior between men versus women when shopping.  Ever wonder why?  Why is it that women enjoy the shopping experience, and take their time perusing around the different areas of the store, while men try to avoid the shopping experience?  Is there a retail strategy that exists that can address the gender differences?  According to this article, women react more strongly to personal interaction, whereas for men, the utlitarian aspects of the shopping experience such as proximity of parking spots, length of checkout line, etc. are most important.

One of the people interviewed for this article mentioned that women are gatherers and men are hunters.  Consequently, women have better peripheral vision than men, and would benefit them as gatherers.  Men are interested in finding the right product, and want quick answers, and being able to leave the store quickly.  Women on the other hand, prefer to have a more personal interaction with the sales associate with more eye contact, support and collaboration during the buying process. 

Retailers need to have their sales associates adapt to not only gender differences amongst the customers, but also differences in demographic and  psychographic makeup.  Sales associates need to be an engager, expediter and educator.