Wednesday, April 25

Making Decisions: Are Consumers In Control?

I was sitting in a business meeting yesterday when someone posed an interesting point. Eighty percent of startups develop products they never intended, driven by the markets they never intended to enter as dictated by the consumer. Never mind that the figure — 80 percent — was anectodal and unattributed.

This thinking is all around us. Some people say that social media sparked a consumer revolution, one where executive edicts were traded up for crowd-sourced darlings. You know the story. Companies better listen to consumers or else. They know what they need and make everything better.

How does the public know what 'should be' when it doesn't know what 'could be?'

Sometimes the public is right. During the Bronze Age in Great Britain, which spanned 2100-750 BC, consumers had it right. The early metal work started by the Beaker culture continually improved over hundreds of years until the final phases when Britain and the rest of Europe produced classic leaf-shaped swords.

For all we know, consumers would have refined bronze work for several thousand years more (like some cultures around the world did) if it hadn't been for the inconvenient introduction of another metal that would eventually sweep across Europe between 800 BC and 400 AD (or so). Iron and steel changed everything, including the entire socio-economic system that made people comfortable.

But can you imagine the change if we were experiencing it today? Some corporations would have argued evolving from bronze to iron was idiotic. Not only is iron more difficult to smelt and more costly to shape, but consumers would also be complaining about higher prices for a stronger but more brittle metal.

That's all fine and good, I suppose, until those guys with the iron cut through your defenses.

So what if this so-called 80-20 rule is right? What do you want to do? 

Sometimes I think businesses hire too many people who guess at so-called guarantees. The reality in business, much like life, is that all models only work sometimes and all guarantees are guesses at best. And that makes the riddle of bronze vs. iron nothing more than a parlor trick.

What I mean by that is: most decisions are never as clear cut as "do we fulfill the public need for better bronze or go with the gut of the guy in the back room and build out our iron division." Instead, they are littered with intangibles. You know, the guy in the back room could just as feasibly be working on a ham sandwich, in which case refining bronze might be better than hurling lunch meat.

So, it really does depend on the team and our best guess, just as history teaches us. Right. Some people backed beta and others picked up VHS. Flash forward a few dozen years only to find out that both decisions were wrong because DVDs, er, Blu-Rays and digital files win for now.

All this leads to a different approach. It seems to me that business choices have nothing to do with sizing everything up into 'either' and 'or' columns. Companies are better off innovating products and services that consumers have never seen and then refining those innovations once they are released in the marketplace based on consumer input, while keeping a watchful eye any inspirations that occur within every marketplace with every launch. That, of course, and everything needs to be weighed against what's next — information and ideas and innovations that consumers know nothing about it.

Ergo, Facebook bought Instagram for $1 billion because the guy in the buyer's back room had just as much time but came up with a ham sandwich. They called it Timeline. Meanwhile, Instragram went niche.
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