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Topic:

What's the Right Question?

January 25, 2012

What's the Right Question?

Executives who grew up in the world of mass media, and -- despite the freshest thinking they can muster -- still ask, when confronted with the new technologies: "How can we use social media to increase sales, increase reach and frequency at low cost, and "create buzz?" It's the wrong question to ask.

The right question?

How can we use any of the tools available -- old or new -- to help us understand each customer better, remember what each one wants, predict best what each one will want next, and solidify the relationship our company has with that customer -- and in that way, grow our business?

In other words, our goal is to act in the interest of each customer, at a profit. More and more companies are doing it, on purpose, and they benefit in social media by what in a previous age we might call "good press." Consider Best Buy's Twelpforce, or USAA's online services.
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Acting in the best interest of a customer is considerably complex. Obviously, since I can't be any more certain of your motives and interests than you are of mine, it's possible my company might not respect your needs simply because I don't fully understand what your needs are. How can any company genuinely know what's in the best interest of a particular customer when customers clearly have different tastes and preferences?

The fact that numbers and data are more available and should be employed more effectively in helping executives to make decisions doesn't mean that judgment and intuition aren't also important. Statistical and analytical studies should never be considered flawless, no matter how sophisticated they are. One reason for the 2008 financial meltdown, for instance, was an overreliance on flawed statistical models, coupled with a failure to exercise straightforward, reasonable judgment. According to Michael Mauboussin, empirical evidence from as far back as the 1920s shows that changes in asset prices don't have a normal, bell-shaped distribution, but the financial community still plans as if it did, using normal-curve metrics such as alpha, beta, and standard deviation. And Felix Rohatyn suggested that the kinds of financial derivatives that led to the 2008 meltdown were like "financial hydrogen bombs, built on personal computers by twenty-six-year-olds with MBAs."

Straightforward human judgment or intuition can sometimes be the last line of defense against innumerate statistical reasoning. There are many examples of the incredible power that the human mind actually possesses when it comes to cutting through immense amounts of information to make intuition-based judgments. Intuition is powerful, but the conditions under which it will triumph usually have to do with accumulated expertise--expertise that often lies dormant in our subconscious minds, but has the power to shape our conscious decisions if we just allow it to. The more "expert" you are at any given subject--the more time you've spent analyzing and discussing it, benefiting from it, categorizing it, using it--the more likely you are to have absorbed a large array of facts and patterns you may not even recognize consciously. If you've come to understand a subject intimately over several years, then your snap judgment on this subject can often be uncannily accurate. Malcolm Gladwell cites research showing that this level of expertise requires about ten thousand hours of practice or study, for instance.

Accumulated expertise is why an art critic's quick instinct about whether a particular piece of art is authentic or fake, or a brilliant general's intuitive decision to defy his opponent's expectations in order to win a battle partly by confusing the enemy, are examples of the proper use of judgment and "wisdom," as opposed to simply analyzing a large array of data and facts. In such cases, the expert's subconscious mind is relying on data and facts, by drawing on a large assortment of accumulated memories, lessons, and comparisons built up over years of study and attention to the issues. But the key words here are "expert" and "facts." Because of the expert's accumulation of facts and information over years of study, it's likely that his own subconscious mind will be able to reassemble all these miscellaneous facts and observations into a logical, insightful conclusion. (Think about it: If a 26-year-old financial MBA had had 10,000 hours of practice in the discipline, he or she is likely to have experienced at least one significant and unanticipated market collapse.)

On the other hand, experts can still be fooled by the illusion of control, coming to believe that their judgment is right even when confronted with contrary facts. "Isabel" is a computer program designed specifically to narrow the consideration set of medical diagnoses based on symptoms observed. According to Ayres, of the eleven thousand diseases afflicting humans, 96 percent of the time Isabel can successfully place the correct diagnosis within a relatively narrow range of between ten and thirty diseases, which is far better than the success rate of physicians relying on their own judgment and research, especially when analyzing rare or unusual diseases. Unfortunately, doctors still resist Isabel energetically. (One of Isabel's creators started learning to fly in 1999, and was struck by how much easier it was for pilots to accept flight support software than for doctors to accept diagnosis support software. "I asked my flight instructor what he thought accounted for the difference, and he told me, 'It's very simple. Unlike pilots, doctors don't go down with their planes.'")

Unfortunately, most of us also tend to make snap judgments about issues in which we haven't actually accumulated much expertise, and these are the kinds of decisions that get us into trouble most often. For many over-fortyish decision-makers, the judgments made about how to use and measure social media may fall into this category.

The business world is full of seemingly commonsense patterns and obvious assumptions that are just not supported by the data available. We've seen how companies trying to boost business by offering discounts or special deals in the social domain can sometimes (as Disney found out) generate worse results than offering nothing at all. Most companies are afraid to host ratings on their websites since they are loathe to have to host any negative ratings, and yet it turns out that a negative product review can actually improve the chances that a product will sell. As counterintuitive as these facts are, the data don't lie. Moreover, in each case, if you had already been an expert--in social production or in network theory, say--then it is more likely that your initial "hunch" would have been correct, even prior to examining the data. Paying attention to the data doesn't mean ignoring your subconscious or overriding your intuition, but simply using discipline in applying it.

In other words, start getting really good at social media, and spend a lot of time with it. And ask the right question about how to use social media or any other tool to get great insights into what customers need and how to act in their best interests.

Adapted from the upcoming book Extreme Trust: Honesty As a Competitive Advantage, Don Peppers and Martha Rogers, Ph.D., available in April, and for preorder now.

End Notes:
Michael Mauboussin, Think Twice: Harnessing the Power of Counterintuition (Harvard Business School Press, 2009) p. 109.

The quote about the "financial hydrogen bombs" that led to the 2008 collapse was cited in Gillian Tett, Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe, Kindle edition, Loc. 573-75.

Malcolm Gladwell's "10,000 hours" principle was popularized in his book Outliers: The Story of Success (Little, Brown, 2008), and the power of intuition is something he highlighted in Blink: The Power of Thinking Without Thinking (Back Bay Books, 2007).

See stories of the Getty Museum's evaluation of an ancient Greek statue and of Lee's strategy against Hooker at the Battle of Chancellorsville (from Blink's cutting room floor at Malcolm Gladwell's website, http://www.gladwell.com/blink/biblio/chapter4.html, accessed October 6, 2011).

The quote about how doctors don't go down with their planes is from Ian Ayres, Super Crunchers: Why Thinking-by-Numbers Is the New Way to Be Smart (Bantam Books, 2007), pp. 98-99.



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