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Category: Knowledge

Behavioral economics and the mistakes we do

In his gamification lecture on coursera.org Prof. Kevin Werbach talks about behavioral economics. At the intersection of ecomomics and behaviorism, behavioral economics differs from economics by looking specifically at people’s behaviors. What are people actually doing when facing a situation as opposed to they logically should be doing.

Kevin points out 3 interesting ‘mistakes’ people make consitently:
Loss aversion

people’s tendency to strongly prefer avoiding losses to acquiring gains. Some studies suggest that losses are twice as powerful, psychologically, as gains.

Power of default

people are more likely to go with the default option than to change it. This is observed regulary on the web while selecting an opt-in or opt-out process.

Confirmation bias

tendency of people to favor information that confirms their beliefs or hypotheses. People display this bias when they gather or remember information selectively, or when they interpret it in a biased way.

Loss aversion and power of default – seems to be able to be corrected by paying attention. The confirmation bias seems pretty strong and much harder to correct. The effect is stronger for emotionally charged issues and for deeply entrenched beliefs – says Wikipedia. The related effect are: polarization of opinion (think politics), persistence of discredited beliefs (beliefs remain when the initial evidence is removed), preference for early information, illusory association between events (see non-existent correlations).

How to not innovate

Taken from 10 ways to inhibit innovation, here are 4 trends that what prevents innovation in companies.

We exploite and dont explore

Our focus on short-term results drives out ideas that take longer to mature.

Our efficiency focus eliminates free time for fresh thinking.

Incentives are geared towards maximizing today’s business and reducing risk.

Most of our resources are devoted to day-to-day business so that few remain for innovative prospects.

Organisation and roles

We do not have a standard process to nurture the development of new ideas.

Innovation is someone else’s job and not part of everyone’s responsibilities.

Managers are not trained to be innovation leaders.

Mindset

Managers immediately look for flaws in new ideas rather than tease out their potential.

Innovation is someone else’s job and not part of everyone’s responsibilities.

We look at opportunities through internal lenses rather than starting with customers’ needs and problems.

Fear of cannibalizing current business – Kodak failure is a great example of this, where the film business was so lucrative that they didn’t want to launch other products that will compete with it.

The Lean Startup -by Eric Ries

Eric Ries talks are great and his book is a must. It’s easy to read, practical with lot’s of real life examples and situations. If you have a specific idea or project in mind, this book will be a great resource, and help you avoid mistakes that someone else already did.

Get it here: The Lean Startup – How today’s entrepreneurs use continuous innovation to create radically successful businesses

The key ideas of the book (or movement now) are well summarised here on the anwser from William Pietri to this question:
Does the “lean startup” philosophy lead to more successful startups?

William Pietri writes the key ideas as:

capital efficiency – This is really an outcome of Lean’s focus on waste reduction. For example, recall WebVan. Their investors paid something like $1bn to find out that the US wasn’t ready for online grocery shopping. Could they have learned that for less money by, say, testing their core hypotheses on a smaller scale? Absolutely, and that’s the Lean Startup’s goal: testing assumptions as quickly and cheaply as possible.

pull, don’t push – Lean Manufacturing aims to start building something only when it is ordered. Similarly, the Lean Startup approach seeks to start with proven customer needs and use that to pull solutions from the team. The difference is subtle in explanation, but profound in experience, and I think you get much better products, and at lower cost.

continuous improvement – Western business culture tends to focus on maximizing results, while Lean practitioners focus on improving the system that gets the results. (E.g., if your goal is to improve sales, a results-focused answer is the quarterly sales goal, but that can lead to problems like channel-stuffing.) This is especially helpful in startups: a company already in the habit of improving things is more likely to scale sustainably.

customer-centered definition of value – Like many Lean ideas, this sounds obvious; the difference is mainly in how seriously it’s pursued. For example, suppose somebody buys your product but never uses it. Some would focus on the sale and call it a win. But in the Lean analysis, it’s a loss: resources were expended but no value was delivered. This focus helps startups build a satisfied customer base and discover the big steps forward in value creation needed to take a big chunk of a market.

Digital marketing mind map

While preparing the lecture on digital marketing for Paris Ouest University master students, I put together this mindmap. It’s designed to give a quick 1 hour overview of different aspects of digital marketing. Feel free to use it.

I finished the lecture with this video, “from Ad Men to Math Men”. It’s a bit long and complex so pausing after each chapters to discuss is a good idea.

3 ways to market your service on social media

Beyond the +1, Like and Tweet button, here are 3 ideas to sell or market your online service on social media platform.

1- Broadcast – The most basic way is to uses social media to broadcast your message and market your services. In this approach you establish a presence on a social media platform (a Facebook page, a twitter account or a company page on LinkedIn) and communicate about your service and content. Add a follow-us and a like button and you are set. This is mostly about retention and reaching your users on other platforms.

2- Engage – Another way to use social media is pro-actively engage users and start the conversation. It’s about finding who talks about what you business does and share thinks that you think may be of interest to them. Respond to their expressed reactions. For instance, you are selling cookies; send a message to someone when they are hungry. This approach will allow to increase your user base, but depending on how you to id, it is very time consuming.

3- Force – The most aggressive way I have seen uses of social media is on the services that will only work on top of them. They leverage the virality to the maximum, pushing the users to share events and actively seek participation of other users. Good examples are the so-called social games a-la Farmville and services such as bravenewtalents.com. This aggressive approach is very effective to increase dramatically your users base. It also requires quite a bit of thinking getting it right.

Those are just 3 ways I have seen frequently used. Each have their own level of complexity behind them of course.

Scalability Best Practices: Lessons from Randy Shoup @eBay

How to handle the load ?

You will find this list interesting if you are involved in designing and building large scale web applications. It’s the scalability best practices, written by Randy Shoup from eBay. Each practices is well explained with examples. Here are my favorites:

Best Practice #2: Split Horizontally
Best Practice #3: Avoid Distributed Transactions – this is the biggest lesson I have learned at Inktomi – the article also references Eric Brewer’s CAP theorem, which states that of three highly desirable properties of distributed systems – consistency (C), availability (A), and partition-tolerance (P) – you can only choose two at any one time.
Best Practice #5: Move Processing To Asynchronous Flows
Best Practice #7: Cache Appropriately – interesting here to see how eBay uses caching, and how Randy boils it down to a constant trade-off.

I was happy and comforted see that those are in-line with the approach of scalability I have. I hope you enjoy the reading as well: Scalability Best Practices: Lessons from eBay

Thanks to Arnaud Mauvais for the link.

Hunch: What does your Facebook account have to do with ice cream flavors ?

Or what does having a Facebook account have to do with the ice cream flavor I might like ? Well, I am not sure, but if it does, Hunch will definitely know about it! Hunch launched over a year ago – and looked promising as a “decision-making site” but the breath of questions covered wasn’t very big. They now have significantly grown since and pushed their product to be able to recommend things, like the flavor of ice cream you might like.

From what I can see, Hunch system seems to work very much like Akinator, an application where you think of someone and the genie tries to guess who it is, using a series of questions – The power of it, is that the right answers to the questions are crowd sourced. It’s a system constantly learning from the user inputs. Hunch seems to work that way too, but the questions here are also crowd sourced.

Cleverly, the product also leverage some game dynamics. They use status/badges – and progression dynamic to get user to fill their profile info.

On top of that, they allow users to connect their twitter/Facebook accounts (regardless of their favorite ice cream), meaning Hunch can make recommendations based on your profile and thing your friends share (like Flipboard and paper.li)

Definitely a service to watch closely now.

It is about the users

I recommend reading ‘The design of everyday things’ by Donald Norman.
The book convey a very rich idea.

The idea is about putting the user at the center of the design. It’s user-centric design: designing based on the needs of the user, leaving aside other considerations. It involves simplifying the structure of tasks, making things visible, getting the mapping right, exploiting the powers of constraint, and designing for error. It’s about designing for usability. Putting by the user at the center of the design process.

On the web
Since the book was published in 1988, the user-centred approach has gone a long way and is today extensively adopted in web design. On the web it possible to create different version of a site (with different text, colors, photos, layouts and functionalities). Splitting the visitors into the different version of the site and analysing how the visitor behave on each version allows to conclude which version is most effective. This is multi-variatant testing.
Classical user testing – observing the user interacting with the site – is also providing valuable insights on how to improve a web site. But the aim of those techniques is make sure the visitors can use the site easily, to help them do what they what to do.

On video games
That’s how I see user centred design being applied to the web. We are seeing such evolution in the video games today: the classic game pad is removed and replaced by a microphone, a guitar, a camera, or a wii detecting you movement. It’s simplifying the way the way the player interact with the game. Its removing the need to understand or learn the complexity and controller. Before you had to press left-left-right-cross-square-square-circle to trigger the power move. Now you just have give a punch with your Wii.

On the rest
Now, how about stretching the idea other fields, where complexity is still high. Simplifying the way things are done, making them easy, understandable and accessible. How about applying that to tax forms, contracts, opening banking accounts. That’s the point Alan Siegel is making in this short TED talk.

Any other area where this idea will bring significant changes ?

You, your privacy and your digital footprint

: Image by alancleaver_2000 via Flickr

Yesterday, I was invited to the You+technology event organised by Olswang, a tech/media law firm. The event regrouped an interesting mix of investors, entrepreneurs, visionaries and bankers to exchange on the topics of location and digital footprint. Two guest speakers, Alan Moore (SMLXL) and Tony Fish (author of My Digital Footprint) sparked the conversation with ideas and examples touching privacy and location services in the digital space. Coming with an open brain, I expected to connect my neurons to some good thinking. Here are some thoughts the exchanges triggered.

Alan dived straight into the subject quoting the co-founder of Sun Microsystems, Scott McNealy – “You have zero privacy, get over it.” … Which is true and not just in the digital world, think CCTV, phone book…

Combining location with other services to provide hyper-local services, Alan mentioned Otetsudai Networks, in Japan, which allows local employers in need of immediate help for a task to bring-up a map of the neighbourhood that pin points registered helpers available for the job now. But revealing your location (or not revealing it) can be dangerous. A good example is Please Rob Me.com.

We can agree that in general, knowing about a person should help a company provide a better service to that person. People are willing to *give* some information away when they get something back for it. Alan’s word of advice was “Trust”. Trust, in the sense that services utilizing personal information, will need to have the Trust of the audience.

Tony talked about his book (My Digital Footprint) – which I am currently reading. He argued that your mobile phone knows a lot about you and your habits, such as which exact TV channels and programs you watch and what type of shampoo you use (by making a lot of assumptions too).

Obviously, your digital footprint is a gold mine for marketers. They aim at understanding people’s profile to serve them more relevant advertisement. No harm when done correctly, both people and the marketers win. But the mix needs to be right.

Tony gave his insights to successfully deal with such a large amount of user footprints. The key is in extracting behaviour DNA of users. Not trying to understand everything the user is doing, most of it useless – but instead focusing on understanding the behaviours. The true value for a business lies in getting actual meaningful and usable data, gathered over time and not easily to replicable.