“Simplicity is the Ultimate Sophistication”

The importance of not forgetting about your hedgehog…

Business leadership is important. We all know this, don’t we?

Therefore I’m always on the lookout for insights, tips and guidance that could help me improve my business leadership skills. As a matter of fact, the desire to learn got me listening to the Tim Ferris podcast. I listen to a lot of Tim’s interviews and his guests are absolutely fascinating. Of course, Tim makes the difference by asking some really great questions.

Lots of the interviews make an impression on me, but one interview left me giddy with a gem of wisdom. Unsurprisingly, it was from Kevin Systrom.

Kevin is, of course, the co-founder of Instagram, the photo-sharing social media network. As a platform, the user growth it experienced was unparalleled when it launched in 2010. One of Tim’s questions brought out a great answer from Kevin. The question was one that asked Kevin about the business advice he had received.

Keep it Simple

This is a wonderfully simple (pardon the pun) piece of advice. Furthermore, I was about to find out just how insightful and practical it could be…

“We’re doing what?”

One of my first jobs as a business consultant was working with a company on some business development projects. As I became more involved, I got to understand what the business was doing, and I quickly became exasperated.

What I found was a business swimming with ideas, lots of them. Each idea was almost a business in its own right. The business owner proudly declared to me that he always wanted to own multiple businesses and he had about six businesses on the go.

There was a hidden reality to it all though. None of them was working. Not one. Each business had its own identity, a name and a fancy logo. Beneath that façade, there wasn’t a lot of substance. Unsurprisingly, the one thing it did achieve was to add complexity to the business.

I had been looking at the business and the myriad of ideas and mini businesses that were in play. It was bewildering quite frankly. I could see we needed to focus on what was working, but all these mini-businesses just made it far too complicated.

Why Keep it Simple?

For me, it is entirely logical to keeping things simple. When I look at the great businesses in the past everyone can understand what the business was about. They are simple.

Don’t get me wrong, a business can, and often needs to be complicated.

But what sets great businesses apart from the crowd is that there is simplicity within. Simplicity in the product the customer buys.

How did we get to a position to keep it simple?

After a long day at work, I paused to take stock of the complexity I had found. This felt far more serious than I had first realised. It felt to me that the multitude of businesses indicated a lack of purpose. I could see I was going to have to dig a bit deeper first.

My challenge was that the business owner couldn’t get out of the detail, consequently, he wasn’t able to see the bigger picture.

My next step was to look at getting back to basics. I needed to remind the owner why he had started the business in the first place. I had just the exercise to get us there.

The Hedgehog Concept

Jim Collins calls this exercise the hedgehog concept and quite simply it comes from the intersection of three circles, each with a question about the business.

Simply, the questions are as follows:

1. What are you deeply passionate about?
2. What can you be the best in the world at?
3. What drives your economic engine?

You might be reading this and asking yourself, what has the hedgehog concept got to do with keeping things simple?

Allow me to explain.

In order to keep things simple, you must first understand what drives your business forward. Frequently, business leaders become lost in the detail of operations.

Think about it, in business as in life there must be interest, a goal and way to make money.

I find it deeply interesting when I pose these three questions, in part because it forces the owner to pause and think, but also because inevitably they must think back as to why they started the business in the first place.

The three-question quiz and the answers

The first challenge I had to overcome was getting the business owner to step back enough from the day to day to ask himself these questions. But we got there, eventually.

We dug into each question and after some introspection, the answers started to come forth. The industry was at the heart of the business. Therefore, the business wanted to work in it, share information and help others were the things that drove the business forward.

This was especially pleasing with each question giving me valuable insights. The exercise led quickly from the concept to the primary question I needed to answer. How did the current business activities align with the answers we got from the hedgehog concept?

The answer to this was obvious, but it was enlightening to see the penny drop with my colleague.

Business Leadership and Simplicity

For me, business leadership starts by defining a clear sense of purpose. The hedgehog concept allows the leadership team to validate what they are doing.

Any business, whether it be a start-up, or a blue-chip organisation needs to reflect the principles of the hedgehog. In other words, it sets out what the business is passionate about, what it aspires to be with its customers and how it will make money doing so.

As the business moves forward and looks to implement new strategies it becomes logical to assess the strategy against the hedgehog concept.

This, for me, is the true skill in business leadership.

The 3 steps to keeping things simple in your business

To clarify, some people might challenge the need to step back to the hedgehog concept, but the power that comes from that refresh of purpose shouldn’t be ignored.

1. Identify your business hedgehog
2. Challenge the current status of what you do. Does it align with the concept you found in step 1?
3. Change it as required but keep it simple.

Keeping it simple should transcend through the business. Therefore, understanding the answers to the hedgehog concept becomes key. Every aspect of the business should reflect what you’ve identified as your hedgehog. If it doesn’t, change it.

Credit: medium.com

Marketers see today’s consumers as web-savvy, mobile-enabled data sifters who pounce on whichever brand or store offers the best deal. Brand loyalty, the thinking goes, is vanishing. In response, companies have ramped up their messaging, expecting that the more interaction and information they provide, the better the chances of holding on to these increasingly distracted and disloyal customers. But for many consumers, the rising volume of marketing messages isn’t empowering—it’s overwhelming. Rather than pulling customers into the fold, marketers are pushing them away with relentless and ill-conceived efforts to engage.

That’s a key finding of Corporate Executive Board’s multiple surveys of more than 7,000 consumers and interviews with hundreds of marketing executives and other experts around the world (for more detail, see the sidebar “About the Research”). Our study bored in on what makes consumers “sticky”—that is, likely to follow through on an intended purchase, buy the product repeatedly, and recommend it to others. We looked at the impact on stickiness of more than 40 variables, including price, customers’ perceptions of a brand, and how often consumers interacted with the brand. The single biggest driver of stickiness, by far, was “decision simplicity”—the ease with which consumers can gather trustworthy information about a product and confidently and efficiently weigh their purchase options. What consumers want from marketers is, simply, simplicity.

Consider the marketing activities of two digital camera brands. Brand A’s search engine strategy is to pick up any consumers who are searching common digital camera terms and direct them to the company website. There they find extensive technical and feature information and 360-degree rotatable product photos, all organized and sortable by model. In stores, shelf labels list key technical attributes, such as megapixel rating and memory, and provide a QR code that takes consumers to a mobile version of the brand’s website, where they can dig more deeply into product specifications.

Brand B’s search engine strategy is to first understand the consumer’s intent and where in the search process she is likely to be. Why does she want a camera? Is she just starting to look, or is she ready to buy? The company guides those in the early stages of investigation to third-party review sites (where its cameras get good marks) and directs consumers who are actively shopping to its own website. User reviews and ratings are front and center there, and a navigation tool lets consumers quickly find reviews that are relevant to their intended use of the camera (family and vacation photography, nature photography, sports photography, and so on). In stores, Brand B frames technical features in nontechnical terms. Instead of emphasizing megapixels and memory, for example, it says how many high-resolution photos fit on its memory card. The QR code on shelf displays leads to a simple app that simulates one of the camera’s key differentiators, a photo-editing feature.

The highly detailed information Brand A provides at every step on the purchase path may instruct the consumer about a given camera’s capabilities, but it does little to facilitate an easy decision. Brand B simplifies decision making by offering trustworthy information tailored to the consumer’s individual needs, thus helping her traverse the purchase path quickly and confidently. Our research shows that customers considering both brands are likely to be dramatically more “sticky” toward Brand B.

Making Decisions Simple

For a marketing organization, what does it take to acquire sticky consumers?

Our study found that the best tool for measuring consumer-engagement efforts is the “decision simplicity index,” a gauge of how easy it is for consumers to gather and understand (or navigate) information about a brand, how much they can trust the information they find, and how readily they can weigh their options. The easier a brand makes the purchase-decision journey, the higher its decision-simplicity score. Brands that scored in the top quarter in our study were 86% more likely than those in the bottom quarter to be purchased by the consumers considering them. They were 9% more likely to be repurchased and 115% more likely to be recommended to others.

Shifting the orientation toward decision simplicity and helping consumers confidently complete the purchase journey is a profound change, one that typically requires marketers to flex new muscles and rethink how they craft their communications. Some practical lessons can be drawn from brands that are leading the way. The processes of aiding navigation, building trust, and making it easier to weigh options often happen simultaneously, or at least aren’t strictly linear, but for clarity we’ll discuss them separately below.

Aiding navigation.

In demanding ever more attention from overloaded consumers, brands ultimately lead them down unnecessarily confusing purchase paths. Creating a more efficient path means minimizing the number of information sources consumers must touch while moving confidently toward a purchase. The savviest brands achieve this by personalizing the route.

This approach is especially foreign to marketers because in many cases the simplest, most confidence-inspiring learning path involves touchpoints that are outside a brand’s direct control. Often what a consumer needs is not a flashy interactive experience on a branded microsite but a detailed exchange with users about the pros and cons of the product and how it would fit into the consumer’s life.

Marketers face two practical challenges here. First, how can they detect where a given consumer is on the purchase path and what information she most needs? Second, how can they ensure that consumers they direct to third-party information sources will come back?

To answer the first question, frontier marketers are using big data and sophisticated analytics to map consumers’ purchase paths. One electronics company has gathered data from four major sources—social media monitoring, ad-effectiveness and campaign-tracking information, clickstream analysis, and individual consumer surveys—to identify common purchase paths. It studies the resulting maps to determine the volume of traffic on various paths, which paths inspire the most confidence, which touchpoints are best suited to conveying which types of messages, and at what points consumers lose confidence or defect.

Brands pursuing decision-simplicity strategies make full use of such information to assess where consumers are on the path and to direct them to the best touchpoints. Certain auto manufacturers, retailers, and travel brands have been sifting through consumer search data to learn how search terms and the type of search platform (say, mobile versus desktop) indicate consumer intent and position on the path. They’ve found, for example, that 70% of those using a mobile device to search are within a few hours of making a purchase, whereas 70% of those using a desktop are roughly a week away.

Moreover, by analyzing search terms, companies can discern what information the consumer most needs next. Someone who searches a general term like “luxury sedans” is at an early stage compared with someone who searches a specific phrase like “BMW vs Audi.” Decision-simplicity marketers would guide the former to the latest auto reviews for their sedans and the latter to an enthusiastic owner community. If the late-phase consumer was using a mobile device (indicating that he was probably out and about), the search engine would serve up a paid link to a dealer locator with a click-to-call feature that enabled him to easily set up a test drive.

Building trust.

In the context of decision simplicity, “trust” isn’t about trusting the brand; it’s about trusting the information gathered. Marketers often miss this point and put their efforts into activating brand recommenders who simply focus on product features and benefits. Consumers also need information about an adviser’s decision criteria and brand usage.

What does trusted advice look like? Consider the current “haul video” phenomenon among teenage girls. After shopping at a mall, many girls upload YouTube videos of themselves talking about their haul (purchases). In the videos, they discuss not just what they bought but also why, and how they plan to mix their new items with the rest of their wardrobe. This takes the complicated world of teen clothing and accessories—a world fraught with danger from shifting trends and overwhelming choice—and simplifies it, by showcasing fashionable peers who offer trustworthy guidance. In essence, the “hauler” cuts through the seemingly infinite options and provides decision-making criteria. J.C. Penney and American Eagle have capitalized on the phenomenon by hosting unbiased haulers on their sites and in their digital communications. Neither retailer requires that the haulers show only brands purchased at its store, and the haulers are transparent about their links to the companies (Penney, for instance, gives its star haulers gift cards).

Information about the adviser also helps build trust. Disney has done an outstanding job in this regard with its Walt Disney World Moms Panel. A selected group of Disney World veteran moms answer questions from consumers who are planning Disney vacations. In one recent case, a consumer asked about good viewing places for the parade; she had two children who wouldn’t be able to stand the whole time. She got perfectly tailored advice from Jackie S. With 25 Disney World trips under her belt, Jackie has the experience to make her information credible. Consumers can get a further sense of her reliability by reviewing her profile on the Disney World website and reading about her family, her hometown, and even how she met her husband. Such details matter: They help consumers assess the trustworthiness of the advice they’re getting and allow them to judge how well that advice applies to their own situations.

The lesson for marketers: Build cadres of trustworthy advisers rather than simply developing recommenders who will push the brand. Then aggregate their advice and make it easy for consumers to discover and use it, as J.C. Penney—whose haul videos get hundreds of thousands of views—so successfully does.

Making it easier to weigh options.

To help consumers evaluate choices, most brands describe their differentiating features and benefits. Some go a step further, offering buying guides containing side-by-side brand or product comparisons. For example, a bank might compile a catalog of its checking account options that lists the features of each one. Both approaches provide lots of information, but neither offers much guidance, leaving the consumer as confused as ever about the “best” choice.

Brands need to take a different tack. Except in cases of low-value products, consumers increasingly expend most of their effort learning about and weighing their choices. For items costing more than $50, a quarter of customers report that most of their effort is spent on product research. About 20% say that most of their effort is spent on comparison shopping.

The marketer’s goal is to help customers feel confident about their choice. Just providing more information often doesn’t help. Instead, marketers need to provide tools that allow customers to identify and weigh the features that are most relevant to them. A classic example is De Beers’s use of the “4 Cs” (cut, color, clarity, and carat) to frame the complex and often vexing comparison of diamonds. The 4 Cs simplify the buying decision by giving consumers confidence that they are weighing the essential features of the diamonds they’re considering and making an informed choice.

However, many brands have made the weighing process harder by introducing a dizzying array of SKUs. Crest’s website, for example, details 35 types of toothpaste. Although a consumer can sort them according to a few characteristics—“flavor experience,” “dentist inspired,” “fresh breath,” “classic”—there’s little to help her figure out which features are most important to her and which paste is her best choice. Are “dentist-inspired” pastes better in her case than “classic” pastes? Buying guides of this sort make the mistake of appearing to offer guidance while actually complicating the decision process.

Marketers, especially those with an abundance of SKUs, need to help customers control the weighing process. Herbal Essences does a good job with an online decision guide to its shampoos. The guide provides substantial detail but also makes narrowing and tailoring one’s choice an easy, transparent, step-by-step process. One-click questions about hair type, length, and texture (straight, short, fine, thick) and other needs (color treatment, volume) allow the visitor to rapidly sort through more than three dozen offerings to find the ideal one.

Technology can also address consumers’ weighing woes by allowing them to sidestep the process altogether. Consumers are likely to feel confident about recommendations that are based on their own purchasing data or other past behavior, because those things are typically accurate gauges of preference. ShoeDazzle.com and JustFab.com—clubs for shoe lovers—collect “personality” information on each member, such as favorite fashion icons and general shoe preferences (heel size, color, and so on) and tailor suggestions accordingly. The Spanish bank BBVA makes personalized recommendations for financial products after assessing individual consumers’ spending behavior—as reflected in credit card histories and questionnaires—and comparing that behavior with the spending of peers. In each case, the company eliminates much if not all of the hassle of weighing choices by providing a likely best choice at the outset.

Putting It Together

No company that we know of has fully integrated the three components of a decision-simplicity strategy—but Intuit is among those out in front. Consider its software product TurboTax. Tax prep is complex, and consumers have a range of options, from accountants to software programs to pencil and paper. Within software itself, there’s a potentially bewildering array of choices. Intuit has made a concerted effort to simplify those choices by helping consumers navigate, trust, and weigh information along the path to purchase, as we’ll describe below. Christine Morrison, the head of social media at TurboTax, says, “We’ve seen dozens of areas where simplifying decisions for consumers pays big dividends.”

Navigation.

TurboTax created a customer forum, called TurboTax Live Community, where visitors can ask product, tax, and support questions and share information. It contains a database of answers provided by customers and experts. To ensure relevance, an algorithm serves up the five most common answers to a given question. For example, a user on the mortgage-deductions screen will find answers to questions about deduction limits and how to calculate deductions for the purchase of a house. TurboTax users don’t pay for the software until they file their taxes; Live Community helps drive conversion by shepherding consumers through the tax-prep process to completion, providing the right information at the moment it’s needed. To date more than 12 million users have engaged with the community.

Trust.

Intuit provides more than 160,000 unfiltered user reviews and ratings on the TurboTax website and helps consumers find the most relevant ones. The ratings range from one star to five; the inclusion of low ratings boosts consumers’ confidence, showing them that Intuit isn’t cherry-picking its reviews. Consumers can use the “folks like you” tool to sort evaluations according to reviewers’ marital status, life situations, and major tax events. They can find reviews written by friends or family by connecting to Facebook or Twitter—TurboTax encourages customers to post on either site when they’ve completed their taxes, and the postings constitute what are in effect consumer-generated, highly trusted banner ads. The conversion rate of those ads is 30% higher than that of TurboTax’s regular banner advertising.

Weighing options.

The TurboTax home page shows basic product choices arrayed side by side for easy comparison. It includes a “help me choose” function that allows consumers to go through a 30-second “check the boxes that apply” exercise. This not only guides them to the product most suited to them but also shows why that product is their best choice.

In addition, Intuit lets consumers filter user reviews by prior tax-prep method so that they can read what reviewers with similar tax-prep histories have said about switching to TurboTax. This helps them answer the question “What would it be like to change to TurboTax from what I use now?”

Given the rapid expansion of social and mobile technologies, marketers will have ever-increasing opportunities to bombard consumers. And if history is any guide, that’s exactly what they’ll do. But in their aggressive efforts to engage with their customers, they’ll only make the decision journey more complex and confusing. Marketers who focus on simplifying consumers’ decision making will rise above the din, and their customers will stick by them as a result.

Credit: hbr.org