Nathan/ I wanted to ask you about research in the context of strategy, because it’s absolutely critical, but the type of research is, in fact, probably more critical than whether you do research or not. Obviously, there’s no point in doing bad research but so much research is exactly that. What is a successful way to frame that to leaders so that they get the importance and they’re down with it?
Steve/ In order to address that, I think it’s important to note that there’s at least three different major types of information that typically informs strategic thinking inside companies: customer insight, competitor and market insight and insight on internal functions and processes. If we’re talking about strategy to drive innovation, that usually focuses on a market analysis of the competitive and industry landscape. Obviously, that’s important because you need to understand the context. That’s what I usually discuss with business execs but it’s only one half of the equation. The other half is the customers and to ignore the customer makes no sense considering how quickly consumers evolve. The competitive analysis is basically the seller side—producers and competitors. The other half is the buyer side. And, that doesn’t just mean trying to figure-out consumer life stages and trends in purchasing. You need to understand people’s experiential preferences and how they’re evolving—where they’re headed. You can’t do that only with quant. You can only get there with certain kinds of qualitative research.
Nathan/ Business leaders are perfectly comfortable with the competitor industry side and the quant side. But, most are uncomfortable with the customer side, specifically the qualitative side. Does that bear out in your experience?
Steve/ That’s definitely true. It’s actually a good idea. It’s just that you don’t know what the right questions are unless you do qualitative first and most marketers and leaders think they already know what the right questions are. It’s not difficult for me to identify really bad questions that have destroyed entire industries. I’ve seen it happen.
Nathan/ Please do.
Steve/ I started doing work for newspapers around the turn of the millennium. It was 1999. And we were approached by the head of research at one of the big Midwestern newspapers. Since then, I’ve worked with a lot of other papers in the United States—sometimes up to a dozen projects for key papers. What was really fascinating about this was the discussions, because newspapers did traditional market research so they could tell advertisers what consumer products people were likely to be in the market for in the next few years. In other words, they were doing consumer research to sell their readers to their advertisers. So, if you’re a furniture retailer in town, if you knew that 40% of the people who read the one metropolitan daily were planning to buy new furniture in the next year, you had a really good reason to buy ad space.
But, being public-spirited people, the newspaper researchers also thought: “Let’s ask people, how important certain attributes of newspapers are to them.” They would ask questions like: “On a one to seven scale, how important is objectivity to you? How important is depth? How important is balance? How important is news you can use?” Unsurprisingly, they were pleased to see that the vast majority of their readers valued those things really highly. What they didn’t take into account were two key things. One is that the average American has been trained for decades to know what journalists think is important in news stories. The vast majority of news readers never thought about it for themselves independent of what they’ve been told. So, they knew objectivity should be important, they knew balance should be important. But, is that what mattered most to readers? Well, they didn’t know because they never actually asked people what mattered to them. They assumed they knew because the journalistic profession is driven by people who are elitist in their mentality—they know what’s best for people. They’ll decide how to serve it up, and then people will like it, they’re expected to. So, I suggested asking the question in a slightly different way: “What is it about newspapers that makes you savor the prospect of picking the paper off the stoop in the morning? Is it objectivity? Is it balance?” With some of the most important publishers and editors in America, not a single one of them could answer the question. They were more than a little flummoxed and would question: Why does that matter? But they quickly understood that they were making assumptions about what mattered that drove their questions, assumptions that didn’t really make sense.
Now, I should also mention that, at this time, the reason they turned to us was because the average age of readers was 40 years old—and getting older (this was 1999, remember). And, they thought that they should have had people in their thirties because they believed that people started subscribing about the time they bought their first home. So, what was happening? Gen Xers weren’t subscribing and they couldn’t figure out why. Meanwhile, there was this Internet thing going on and they didn’t know what to make of that. And, even by that point, the classifieds were beginning to migrate from the metropolitan dailies to the Craigslists of the world and other emerging things online. And, they didn’t think that would ever really take-off because all of the online options didn’t have the depth of interesting stuff that the metropolitan dailies had. They assumed that people cared about the news how they cared about it.
We conducted a bunch of 90 minute interviews with people and quickly understood what people wanted. Objectivity was not the point. Balance wasn’t either. It’s not like they were against objectivity, it just wasn’t what was driving them.
For instance, many people in regional markets equated “objectivity” with liberalism. They would read an article and then point it out to me. In one case, there was an article on “pollution in the city” and this one woman looked at this and responded, “This is typical. They have this story about pollution, but they don’t say whether it’s good or bad or whether it’s a serious problem or not a big deal. They just tell me that there’s pollution and they tell me where it’s coming from and they tell me what the mayor thinks.” I asked, “So, what do you make of that?” And she responded, “Well, this is typical liberal writing. It is morality-free even when there should be a point of view about whether this is good or bad or how bad is.” Another article reported on demonstrations at abortion clinics in the city and this guy declared “The article never says anything about the problem of people having abortions.” I asked him to elaborate and he said, “Liberals wrote this. They treat it as if it’s self-evident that it’s a good thing that we have these clinics and they’re reporting on the bad people that are demonstrating outside of them, and their tone is neutral as if they’re objective. But, what they’re bringing to it has an unspoken bias. And this is how things are all the time. They act like they’re objective, but they’re not.”
Well, this was a real eye opener for the editors. These respondents aren’t, necessarily, your typical Fox News watchers that are upset that this is getting reported or disagree with abortion or pollution. It’s just that the journalist’s idea of objectivity was bloodless and, more importantly, it didn’t take into account that when you speak to people about something, you take your point of view into account when you speak to them, you don’t treat them like they’re a computer. You talk to them like they’re a human being and you show respect for them by starting out with some kind of recognition of where you think they may be. None of that was part of “objectivity” in journalism when I was doing this research. One paper really ran with what we gave them. Partly as a result, their circulation increased and they won several Pulitzers. They changed the way they wrote stories in order to engage where their readers are and what they value instead of only what journalists value. And they maintained their integrity in the process. I’m glad somebody got something out of all of that work. An important question to ask is, “What is driving the fact that these other newspapers ignored this research or couldn’t bring themselves to follow it?” I think it’s because their management teams were in their mid-fifties and they’re looking forward to retirement, and didn’t feel an urgency to make changes that would serve their readers better but would be difficult to implement. We could see which way things were going. It’s not that they didn’t or couldn’t but that they didn’t want to.
There was another paper we advised to consider becoming an the ISP (Internet Service Provider) for his city because that didn’t yet exist. And, he said, “Well Steve, we can’t do that.” Why? They had just invested millions into a new printing plant that could produce color pictures because they thought color was more engaging for people. I just responded, “Well, given what’s going on with the Internet, you’re not going to be printing very many newspapers in another 10 years.” He replied, “Isn’t that a little over-dramatic?” I told him, “No, I’m being conservative. It’s going to be over. Unless you migrate to the Web, you can see what’s happening and you can see where young people are going. They’re not buying your paper and they’re not going to start because you have color pictures. We know this from what they told us they want.”
Nathan/ I told News Limited the same thing in Australia about their classified ads and what you said is absolutely true. They cared more about their retirements and their golf games than they cared about the company.
Steve/ Making customer-centered change in many news companies was not, and is not, a priority. It was too difficult and it would’ve reduced profits in the short term. And the thing is that in the short erm, they were right. That industry was consistently producing 20% ROI because they wore oligopolies or monopolies in every decent-sized city. So, they rode the entire thing down until they all retired. Then the news people were at the mercy of vulture capitalists and hedge funds squeezing a lot more value out of them. This isn’t just true of the newspaper industry. It’s true for all business that has disincentives to innovate to attract new customers based on what the customers want.
Here’s another example: we worked for one of the biggest insurance companies in the USA. They wanted to grow market share in health insurance so they wanted to understand what experiences people wanted from health insurance. And, we figured it out. We brought it to them, present it to their research department and they loved it. And I asked, “OK, what’s next? What are you considering doing to implement?” They replied, “Oh, well this will never see the light of day here.” I was surprised, of course, so I asked them, “What’s wrong? Did we miss something?” And, they said, “No, no, no, this makes total sense. The problem is that management believes that the only way that you can profitably innovate new insurance products is on the basis of actuarial table trends. If the death rate is going up for certain kinds of things, you tweak something in your pricing. But the idea of us being an experience company just won’t go anywhere. I was even more surprised: “I don’t understand. May I ask, why did you have us explore it then?” Their reply, “Well, we had extra money and we were interested. We saw you speak at a conference, and it sounded really interesting. We wanted to see what you could find out for us. And it’s really great. But we’re not going to use any of it. We can’t.”
Once you get past the earlier stages of development in the life cycle of businesses, they reach a point where people are rewarded for incremental improvements in the bottom line and not for disruptive changes. They become efficiency machines that need to get a little bit better all the time. And, I completely understand that. Our clients were usually companies on the wrong side of this and were beginning to sputter and were willing to try something new. But, most wouldn’t actually do it or only to a point because, again, the management teams didn’t have an incentive unless there was a new CEO who promised to turn everything around. Even then, a lot of times their turnaround ideas were only financial—optimization and tinkering. And if the average CEO sticks around for just a few years anyway, whatever new approach may be unlikely to survive the change to the next group of leaders. It’s a real challenge for businesses that are mature.
Nathan/ Well, what advice do you have for a team like that, where they are interested—they see that there’s something new possible that could improve things? How do they get those insights into the senior leadership discussion?
Steve/ In my experience, my most challenged clients have been C-level people or directors reporting to C-level people: publishers, CEOs, chief marketing officers, etc. and most would bring it to “the table.” They were at “the table.” The easiest clients are the ones where everybody can see that there’s a change coming. Now, with the newspapers, it was a little too early. They knew big change was coming, but they couldn’t see the ramifications of it, for them, yet, because it wasn’t news on the Internet yet. The classifieds were moving over and that was where their revenue was but the news hadn’t really moved over to the Internet in a big way and they didn’t get what that really meant.
When I worked with Chrysler, in contrast to some of the big news organizations, they understood very well that the future of their vehicles was the computerization of all those cars’ key functions—autonomous and electric vehicles, for example. And they knew that customer experiences would need to be re-imagined as a result, and that it offered huge opportunities. They got all that but they didn’t know how long it would take. And that told them that they had to start making the investments in those directions. So, we didn’t have to persuade anybody of anything. They even understood that quant couldn’t get them there because, again, quant is great for incremental improvements to what you’re already doing. If you wanted to uncover something new, the “why” of the changes that were necessary, quant can never answer without qual first.
Nathan/ We’ve discussed the customer research, so far, and how that impacts strategy. What about the other two?
Steve/ One of the others is more operations-oriented: rethinking and restructuring internal processes to be more efficient. It’s what you bring in the McKinseys for usually. Sometimes, you need to reform operations to fit new circumstances. All of that are important. But, most leaders still, for sure, miss the customer one. They think they do the customer piece, but they only do it in quant or they only do traditional market research, which is again, quant.
Nathan/ “We ran a lot of surveys and this is what we found.” They’re not doing the qual or they’re not doing qual in the right way. Do you agree that, like I always tell my students, quant gives you the what and qual gives you the why?
Steve/ Partly. It definitely gives you the why, but what it doesn’t give you is the how much. If you do qual correctly you’ll uncover all the experiential preferences and factors within a population. But you won’t know the relative importance of those factors. It doesn’t yet help you make a business investment decision that’s hundreds of millions or billions of dollars unless you know which of these experiences are the decisive ones. For that, you definitely need quant. So, you need both.
The qualitative has to come first because it drives the quant. Otherwise, it’s never going to emerge from the quant. You don’t even yet know what to ask in the quant without the qual. But without quant informed by qual insights, you can’t be sure you’ve uncovered what’s most important to act on.
Nathan/ What are the best qual techniques? Is there a long list? A short list?
Steve/ There’s two kinds of qual research that provide the insights we need to inform effective quant- ethnographies and one-on-ones. Focus groups do not work. Ethno is a different kind of one-on-one. A one on one could be done anywhere: on the street in someone’s home, etc. Ethno involves your observation, though, so you really need to meet your subjects somewhere relevant because there’s more context around that conversation.
Nathan/ I’m going to challenge you in. In Christopher’s chapter, the first chapter of Brenda’s book entitled Design Research, she talks about all these variations like two-on-ones—like interviewing someone next to their best friend gives you different answers than if you interview them one-on-one. Is that true?
Steve/ Yes, it’s true, particularly when you’re talking with children or teenagers. It’s incredibly difficult for an adult to interview a teen and have a really good conversation. Kids are often uncomfortable or insecure and having their friend there helps make them more comfortable. But if we’re talking about adults, generally speaking, I think it’s risky. I’m always trying to find out what are the meaningful experiences that people want products or services to evoke for them. And one thing I know for sure is that if someone is sitting there listening to their friend talk when they are being interviewed, they’ll be influenced by what their friend says. The mood will be influenced by their friend’s state of mind. So, people are less likely to tell a researcher how they really want to feel when they use a product in a particular category. They’ll be overly influenced by another person’s preferences, someone who won’t be with them when they’re trying to choose a product or service.
That said, it’s better than nothing, sometimes by a lot. There’s no magic bullet in research. You’re always getting something better than nothing, but you don’t know how much better. Overall, though, I don’t like doing any kinds of group work unless there’s no choice, because, with a dyad or a triad, people are influencing each other. You’re not getting as in-depth of a read on them. In my experience, ethnography is the best, but it’s the most expensive and it takes the longest.
I did a project that had me going around the world to go to parties! The client was an appliance manufacturer and they wanted to understand how appliances could do a better job of making people’s lives easier for those who had guests over at least once a month. So, I was on the road for three weeks, all over the world, and I’m in Moscow on New Year’s Eve at a party. We sent people money to throw parties and then we went to them. It was great. I loved it. We would spend an hour before the party started and two hours into the party for the ethno, or we got to the party a few hours in and then stayed for an hour after it was over to watch people clean. I’m at this palatial apartment—seventeen foot ceilings and had to be at least 4,000 square feet. I mean the apartment is unbelievable. They had real Russian icons that had just been in the family for 400 years. They had China and silverware that had been in the family for a few hundred years. Changes in regime were just an annoyance you worked around.
I don’t know if you’ve been to a Russian party before but they’ll bring out some Tatar chicken and each person takes a piece, you eat it, and then you take a shot of vodka. Then, pizza comes out, everyone takes a piece and you down another shot. Salad, another shot, etc. They were two surgeons and the husband is busy preparing food before the guests come by. He’s chopping these vegetables. Just watching the unique prep techniques necessary for Russian cuisine led to some insights that could make a real difference for the 160 million consumers in that country. It’s like that all the time—the number of missed opportunities for people to have a better experience is infinite and so few companies ever triy to explore how they’re lives work, by going there, to find those opportunities. Qual lets you ask—you see it. But, you don’t know if it’s really an opportunity until you know how big it is, after the quant measures it.
Nathan/ I conducted a meaning workshop in South America, and there were a bunch of Whirlpool people there. We talked about the 15 core meetings and one of the teams came up with this amazing idea of the kitchen transforming into a kind of stage because they realized that when their customers throw a party, the party’s always in the kitchen. People who love cooking are really proud of it. They sketched this stove appliance that expands out to be a stage and then shrinks back to be a regular stove. Other than laddering, what are the other ways at getting to some of this deep insight into people? You have your students create meaning cards with evocative images on them, and teach them how to use such cards as part of these conversations, because you can’t directly ask people what you really want to know.
Steve/ We use those cards whenever we want to understand what experiences people are seeking. But- if you ask people why they chose the card they did, they start applying their rational side to their choices and it defeats the purpose. The meaning cards work because it’s a feeling-oriented process to pick a card that captures the essence of the way that you want to feel when you use a product. That’s really effective. I try to teach people to listen with an open heart and to use their empathetic skill to make a leap based on what you’re hearing and feeling yourself. I think that’s the most important way to uncover what really matters to others. Unfortunately, some clients are really uncomfortable with it until they hear the interview or better yet they go with you. When they see it for themselves, they realize, “Oh, I’m a fellow human. I actually can understand what somebody else might be feeling even when they don’t say the exact words, because nobody says, “I go to the Vietnamese restaurant because I want a combination of wonder, enlightenment, and freedom.” But, being there and engaging with respondents directly, it becomes almost obvious.
It wasn’t hard for Walt Disney to understand that people wanted “wonder.” He got it intuitively. That insights couldn’t have been easily gained quantitively, and can’t be easily measured using numbers, but if you’re an empathetic human being it can just be there in plain sight, waiting there for you to see. You just need to figure out how to deliver it when you recognize the desire.. If you can tell a designer what the specific experience is that people want, then you’re providing design direction. If you just say people want a higher level of satisfaction, you’re giving them nothing. After a while, I realized that companies were paying me for my empathetic skills and my ability to articulate what I found. If you boil all this down, what does it really mean to you as a researcher, to you as a company, and to you as someone who serves others, to serve customers? If it matters, open your heart and mind to customers and really hear them. Don’t treat them like they work for you. Work for them as if they actually matter. Not so controversial an idea in principle, but it runs totally counter to the common view of customers as people to manipulate in order to get their loyalty and their dollars. The “loyalty” should be coming from the companies, rather than the other way.
Nathan/ I’m also impressed how you use video from the interviews so that engineers and money people, who are often the most skeptical, have an emotional reaction to what they’re seeing and hearing. Then they understand.
Steve/ And, when you use that tool, you don’t have to persuade them of what you’ve inferred because it’s obvious. That’s what’s so interesting about it. If you just say it and it’s in writing, they demand, “How do you know?” But, when I play something for them and they listen to three excerpts from different interviews. They get it.
I try to bring my clients with me when I do one-on-ones or ethnos and they’re so affected by what they hear and what they feel that they often change what they’re doing at their company based on that one interview—because they know the truth, now. But, it’s just one interview. The flip side of the challenge is that they need to hear more of the interviews but they’re ready to go with just what they got from that one. It’s such a powerful effect. The vast majority of businesspeople don’t regularly interact with customers. They don’t know what they’re missing. How could they?
This interview is from A Whole New Strategy: Everything You Need To Think And Act More Strategically
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