machetemag

Table of Contents
Preface // 1. Culture // 2. Empathy // 3. Diversity
4. Momentum // 5. Judgment // Conclusion // Notes

A NOTE TO MY READERS
After offering the book for sale for almost one year, I decided to make it more widely available and free. If you’d still like to own the paperback or ebook, you can purchase a copy on Amazon. I welcome your comments as well, just send me a note here.

Want an audio summary? Check out this AI-generated podcast episode.

DATA IS AN INPUT.

There is so much happening around us that we often forget why we’re even paying attention. Desperate to make sense of all the information in our possession we strive to find meaning and ask, “what does the data say?” Then we evaluate the data and make decisions that seem statistically sound. But in our desperation to find answers, did we forget to collect all of the data we should have? Or were we too caught up to note that we only used data that was freely available and easy to find? Or maybe we stopped searching as soon as we found information that confirmed our existing beliefs?

In this book, I reflect on five factors that are prevalent in every business transaction, but often overlooked because they’re tough to quantify. These factors are easier to understand through critical thinking than digital calculations, and they must be baked into a company’s core strategy before they can be implemented as tactics. The first two chapters, Culture and Empathy, draw attention to the social and emotional relationships between humans and businesses. The chapters on Diversity and Momentum prompt us to think differently about human resources and innovation. And the closing chapter, Judgment, shines a light on the subjectivity of ethics and the factors that influence the way we make decisions.

DECISIONS ARE AN OUTPUT.

DEPENDING ON WHO YOU SPEAK WITH, the term “culture” can be defined and interpreted in a variety of ways. A corporate recruiter may use the term to refer to a company’s idealistic expectations for a certain type of shared work ethic; while a biologist uses the term to explain scientific phenomena related to biological development, growth, and diversity. In this book, we review human behavior and business strategy in a manner that relies on my informed, but admittedly subjective, worldview—while respecting the indisputable truths of scientific evidence. So, for the purposes of this book, the most relevant definition of “culture” is the one an anthropologist might use to describe the values, behaviors, beliefs, and customs shared by a society, or a group within a society.¹

We begin by examining culture because it represents a valuable category of information that is generally underutilized in the business world.

The fundamental and defining factors shared by any group of humans, whether we’re talking about groups of consumers or people within a business organization, can be recognized as characteristics that define a culture. The culture of a group represents a common way of doing things, of thinking, and of interacting with the rest of the world. Culture is also ever- changing, and this dynamic nature alone makes it almost impossible to define the boundaries of any specific culture, but it doesn’t stop us from trying. So we tend to begin the categorization process by grouping people based on the characteristics that are easiest to define in broad terms such as geographic location, gender, household income, profession, and job seniority.

These simple categories serve the purpose of breaking large populations down into smaller, more manageable data sets, but because the categorization is so broad, we miss out on meaningful subtleties and nuances. Over-generalizations can result in a worldview that lacks cultural depth, increasing the probability of getting blindsided by risks or missing opportunities that would’ve otherwise been detected through a finer assessment of cultural characteristics. We don’t always need deep investigation, but sometimes granular cultural analysis is critical to understanding the way people behave, what motivates them, and how they interact with their environment—often generating findings that are not quantifiable, yet particularly valuable.

Cultural awareness adds color and depth to data, revealing qualitative context that informs leadership and staff in ways that many organizations will find completely novel. This qualitative context helps companies to create stronger bonds with customers; policymakers to develop legislation that is more equitable; and, nonprofit organizations to deliver humanitarian aid that has more sustainable, long-term impact.

Let’s look at how cultural insights can be developed, and why they can add significant value to a company’s business strategy.

Thinking Like a Cultural Anthropologist.

The social sciences are significantly underutilized in the business world, but I think this is slowly changing as companies realize the competitive advantage brought by deeper knowledge of human behavior. When it comes to researching and analyzing culture, the anthropologist’s methods present a particularly well-suited set of tools and techniques. While we’ll always be able to inform cultural awareness with third-party data, surveys, focus groups, and off-the-shelf analysis models like Hofstede’s cultural dimensions², nothing beats the on-the-ground fieldwork of an anthropologist when it comes to generating deep and wide data and meaningful insights. This involves the collection of qualitative data through ethnographic methods such as participatory observation, semi-structured interviews, and artifact collection; followed by the analysis of the data and substantiation of the researcher’s perspective through specific processes such as pattern detection, theme identification, and argument framing.

This is valuable and structured work conducted by specialized practitioners, but companies can also benefit from providing a foundational understanding of ethnographic methods to employees who have limited exposure to the social sciences. Anthropologist and author Jay Hasbrouck describes how, through “ethnographic thinking,” businesspeople can go beyond simply asking what consumers want, and delve deeper to identify why the company is relevant to the consumer at all, and discover how the company’s unique make-up and culture impacts the capability to innovate and thrive in a competitive marketplace.

In his book Small Data Martin Lindstrom talks about how he relies on a similar approach to breathe new life into the companies he advises.³ While spending time with consumer audiences in their natural environment and conducting what he calls “subtext research,” he discovers business growth opportunities that are hidden in plain sight. For example, while conducting research for The Lego Group, he visited homes with children, and in one boy’s room he observed just how proud the skateboarding-enthused kid was about a pair of sneakers that were significantly distressed—they were a badge of honor that proved his dedication to the sport. In a separate case, Lindstrom discovered that older Russian matriarchs disliked the smell of perfumed laundry detergents, while younger homemakers associated the smell with cleanliness. This revealed important insight that could make or break detergent brands seeking to do business in Russia.

Cultural Insights in a Data-Crazed World.

Like any other information, cultural insights must be codified and observed a certain way before they can become useful. This is the same challenge that modern organization’s face with ever-increasing volumes of big data. For example, a company may have the answers to its most pressing strategic questions within the massive stores of data it has built up over time. But, though we know there is treasure in the sea of all this data, one cannot simply throw the data into an Excel PivotTable and hope to get lucky. It takes a dedicated team of skilled data scientists to ensure the quality of the data, organize it, then analyze it. In a similar way, the information gathered through cultural analysis must also be cleansed, managed, and analyzed by a skilled expert in order to generate valuable insights and impact the way we create and resolve strategic questions.

Our rapidly advancing computing capabilities make it possible to crunch data and develop robust, customized analytic models more efficiently than ever before. However, we must also acknowledge that the way we think about the world is grounded in subjective beliefs, and we rely on these beliefs when we program analytic models. That is to say, we may collect data without prejudice, but the act of analysis is inherently biased—whether or not the analysis is carried out by a human or machine. So, before we even begin to program our analytic models, we need to deliberately call out what we don’t know, what we know, and what we don’t know we don’t know.

In an increasingly technology-enabled world, insights on human behavior and cultural awareness are vital to sustain a competitive advantage.

Advanced analytics are a significant force multiplier every organization should be vying to exploit. We just need to remember that there is an inverse relationship between the adoption of technology and the reliance on human judgment.

Understanding and aligning with the customer’s cultural values.

When people do anything together they form a culture. People from Tokyo, people who speak Portuguese, people who shop at IKEA, people who play cricket—all of these groups represent distinct cultures. These cultures should be understood by business leaders to tailor offerings that resonate with customer audiences, and to build valuable companies where people love coming to work. The most successful businesses tout strong relationships with customers, and one way to build this bond is through authentic experiences rooted in heightened cultural awareness.

In 2015, Nike’s digital studio s23NYC launched the SNKRS app for iPhone and Android devices. Beyond providing a delightful mobile shopping experience, the app provides users with a wealth of information, such as the story behind a shoe’s design and the ability to know what shoes will be released in the future. The app sends users pushes notifications of new sneaker releases (“drops”) so they can purchase them as soon as they are available and enter Nike’s “randomized selection system to purchase key releases.”⁴

The beauty of this is that even without this app, “sneaker heads” would’ve discovered all of this information on their own. They’d seek out tips from their friends and online forums, try to get the scoop from retailers, sift through thousands of sneaker-dedicated websites, hang with other sneaker heads at Sneaker Con⁵, and wait in long lines for hours leading up to a new drop. This is Sneaker Culture, it’s a pretty big thing, and Nike is doing more than designing and selling shoes, they are supporting this established culture. There is more to this success than simply using culture- inspired language and imagery. The people of the business, Nike in this case, must understand, respect, and empathize with their customers’ culture, and the interactions should feel authentic. Ron Faris, general manager of s23NYC, reinforced this in an interview where he stated: “whenever you’re trying to build a new digital experience, especially with the sneaker community, it has to resonate authentically with that community and honor them for all the effort they put in and for all their fanaticism around sneakers.”⁶

Why is it helpful for employees to understand the cultural values of customers? To improve the likelihood of developing strong long-term relationships that are cemented by mutual respect, trust, and ideals. When the buyer and seller understand or share each other’s cultural values, there is less likelihood of friction throughout the relationship. With empathy on both sides of the transaction, faults are overlooked, success is shared, and promises are honored. A real-world example that brings this point home is Recreational Equipment Incorporated (more commonly known as REI). At a time when retail sporting goods stores are going out of business, REI manages to thrive. Each of its stores serves as a hub for the local community of people who enjoy outdoor activities. The store’s famously liberal return policy is a testament to their trust in the items that are stocked— because they seek out the best products, they offer members friction-free returns for up to one year after the purchase date. Staff are often rock climbers, backpackers, cyclists, and triathletes themselves who understand the customer because they are also passionate about outdoor activities. This is enterprise-level strategy that begins at the executive level.

The company’s corporate website sums up the brand purpose nicely: “At REI, we inspire, educate and outfit for a lifetime of outdoor adventure and stewardship.”⁷This isn’t just another company that sells outdoor equipment, it’s a company that supports outdoor adventure. I’ve participated in several corporate mission and value statement initiatives, so I know how hollow and futile these top-down initiatives can be, but REI reinforces its values from the bottom up by providing retail employees with product training and knowledge of outdoor activities under the expectation that they should be able to “offer excellent service and inspiration.”⁸ The corporation also leads by example, putting their money where their mouth is by shutting down its doors on the busiest day of the American retail calendar, the day after the Thanksgiving holiday known as Black Friday. On this day , REI encourages people to participate in outdoor activities instead of shopping, and it compensates employees for a full day of work to do the same.

Raison d’être. Why high-performing brands often define a shared purpose.

A lot of operational inefficiencies and performance flaws within a company result from misaligned expectations and ambiguous working relationships between colleagues. Even when staff are aligned on the obvious and essential factors, such as business processes, target financial numbers, and the distribution of duties, there can still be significant operational friction. There is such a thing as good friction, but here we’re talking about bad friction, the kind that slows down processes, erodes customer relationships, and slowly breaks down the fiber of an organization. Sometimes the company’s people simply need a guiding light that goes beyond performance targets found in basic management textbooks. When a company defines its reason for existence in practical terms, it brings employees together, no matter where they’re located and what team they’re on, around a singular uniting force. This is a very strong force of alignment because it gets people to think not just about logical factors (“why does the company exist in the marketplace?”), but also about emotional factors (“how can I relate to the company’s purpose?”).

This isn’t about force-fitting some idealistic social enterprise “purpose statement” on a company’s website; rather, it’s about developing an honest narrative that describes the company’s position in the marketplace and why it deserves to maintain or grow its position in the marketplace. It’s easy for the company’s founders or chief executives to go to work with a sense of purpose because they’re in the driver’s seat, but as you work down an organization’s ranks it becomes tougher for people to understand these existential factors. When people across the organization can tie their own job responsibilities to the business’s purpose, they are more likely to empathize with colleagues and customers.

But when a shared sense of purpose is missing, people define their own purpose and work towards different goals. In the worst case, each business function operates in “reactive mode,” where staff are perpetually putting out fires and defending themselves from a series of misaligned expectations. The sales team chases deals, the finance department looks to offset costs, the compliance team slows down processes to protect the company, the marketers are at the ready to help the sales executive that yells the loudest, and the human resources team struggles to recruit against high employee churn and uncertainty. In this misaligned state, teams look out for their own best interests, operational friction peaks, and business growth slows.

Shared purpose and company culture aren’t really easy to quantify. So in today’s data-hungry world, these human aspects of doing business tend to take a backseat to the calculations that can be crunched in a spreadsheet. The best venture capitalists and private equity firms understand these dynamics, but there are just as many investors and managers that simply don’t get it. I’ve seen big league private equity firms buy companies almost entirely on the merit of strong financial statements, failing to recognize the signs of destructive company cultures. In one acquisition I participated in, a private equity firm acquired a group of companies that looked valuable based on an analysis of financial statements. But, after the ink dried, newly hired executives arrived to find a sludge of tired staff, unsatisfied customers, industry-lagging product lines, and several unapproachable market sectors thanks to inconceivably-liberal perpetual license deals. This is what happens when softer, more social aspects of a business such as culture aren’t a priority. When a shared sense of purpose and desired cultural characteristics are not defined, weak cultures and unproductive behaviors develop. Game theory kicks in, social circles and alliances form, intracompany alignment drops, and overall morale nosedives.

You don’t have to look beyond today’s most successful companies to see that deliberate cultural definition should be a requirement for growth and scale. Netflix, Amazon, Zappos, Google, Patagonia, and IBM—all category-leading businesses—possess well-defined and broadly recognized cultural objectives.

It’s important to note, that the mere presence of formally defined cultural imperatives is not enough to unequivocally say that a company provides an idealistic and progressive place to work. In fact, it’s not hard to find firms that tout strong cultural values, but still screen new job candidates for something called “cultural fit,” which is often not anything more than a politically correct way to minimize diversity and maintain a stable status quo. So, when it comes to defining an organizational culture, we have to be careful about what we’re defining, and be clear about what we’re not defining.

Culture isn’t something we can create on paper, it is complex and built up over time, through experiences and interactions, and it is felt, observed, and thought. One can argue that a corporate office can never really define a company culture, but it can put words together that define the brand’s value in terms that are employee and customer-centric all at once. If there are unproductive and undesirable traits that lurk in the company’s bones, leaders must be deliberate about calling them out and establishing a plan for uprooting them. This isn’t done through statements on paper, it’s done by modeling good behavior and communicating effectively with empathy and honesty .

The Strategic Importance of Effective Internal Communication

Companies with great products can net high revenues, but they cannot achieve sustainable growth without a deliberate cultural strategy. They need to understand their customers’ cultures just as much as their own internal cultures. This is where we find a strong link between progressive company cultures and effective internal communication. In a regressive company culture, communication between colleagues is terse and transactional, and it’s unlikely to possess much value beyond the task at hand. In the worst case, I’ve seen organizations where communication is almost non-existent, and this can actually be deadly. Yes, I’m sensationalizing this concept a bit, just bear with me.

In a study called “The Silent Treatment,” researchers found that poor communication between staff in healthcare facilities can result in catastrophic harm and death to the facility’s patients. Nurses might feel nervous to ask a senior doctor whether or not she has washed her hands, or they may be hesitant to question a doctor’s choice of drug treatments in light of potential allergies and contraindications, particularly when previous interactions with the same doctor have been less than pleasant. Researchers learned of one case where a nurse, while treating a patient, attempted to follow the formal protocol for inserting an intravenous line utilizing a “maximal sterile barrier” to prevent catheter-related bloodstream infections. The presiding surgeon ridiculed the nurse for suggesting such a formal procedure and went on to break official protocol, refusing the maximal sterile barrier, and thus increasing the probability of health complications for the patient.⁹

The organization that led the study, VitalSmarts, is a training company that focuses on improving communication skills. Their “Crucial Conversations” and “Crucial Accountability” workshops have been some of the most rewarding learning experiences I have ever gone through, and I’d suggest them to every organization challenged with developing a culture of effective and honest internal communication. Their methodology prepares people with a framework for approaching complex, high-stakes communications with colleagues. The result is increased workplace respect, less mistakes, more collaborative achievements, and a huge step forward for building strong organizational values. Surely, the grandest vision for company culture cannot be realized without first ensuring that colleagues can hold respectful and productive communication.

We cannot communicate effectively and sustainably to buyer audiences before mastering internal communication.

We can hire brilliant copywriters and pavement-pounding rainmaking salespeople, but in the absence of strong internal communication, they will excel only on their own. They will make their mark, achieve success, burn out, hit a wall, or suffer through tough times all on their own. Highly evolved internal communication is above all things “low friction,” meaning that it’s easy to get opinions from colleagues, your boss is quick and constructive with feedback and criticism, and opinions are accepted and not taken personally.

Let’s bring it home: Be deliberate in understanding the cultures of your customers and employees, and use those insights to build a progressive environment characterized by effective and honest communication inside and outside the organization. Ultimately, customers and colleagues share the desire to do business with people we appreciate, respect, and trust.

TEXTBOOKS DEFINE EMPATHY as the ability to sense someone’s emotions and feelings from their own point of reference. Fundamentally, to be empathetic is to be aware. This awareness, or lack of awareness, impacts all of our relationships with people, brands, and society; and, though the idea seems abstract, our ability to be empathetic influences the way we perceive other people’s opinions, ideas, and cultural norms. This matters to business, public policy, team sports, and any other pursuit that relies on interactions between people.

Have you met an empathetic person lately? Chances are this is someone you feel comfortable with, they have good energy, they aren’t judgmental, and they typically possess desirable personality traits. We gravitate to empathetic people because they help us feel valued. Can businesses make us feel the same way? Of course they can, and especially those businesses that understand how important it is to create rich experiences. This works just the same for government agencies, churches, philanthropic organizations, and hospitals.

Empathy is an observed trait just as much as it is an ability.

The Empathetic Brand and Being Human with Technology

Empathetic brands are those which are perceived to be favorable, not just because of price or utility, but because of the good feelings we get when thinking of the brand. A company’s brand image is the culmination of a multitude of factors, but it is the personal, private, one-on-one moments between customer and business that matter the most when it comes to the perception of empathy.

At well-regarded companies, staff are empathetic to customer needs, requests, and concerns. They are proactive at delivering a stellar customer experience, and they are proactively prepared with “rules of engagement” that help them mitigate potentially negative customer interactions. The operative word here is “potentially,” because it represents staff preparedness to be proactive, rather than reactive, to any situation. These employees are empowered to delight the customer, not simply because “the customer is always right,” but because staff aim to listen, understand, act fairly, and mitigate issues tactfully. They treat humans like humans, relying on a honed capability to be human, without fearing disciplinary action from management.

The airline industry offers a good example of how technological advancements support the development and application of empathy in the context of customer support. Customer service representatives at an airline reservation desk, their administrative burden cut down through online check-ins, pre-vetted passengers, and mobile self-service, now exist to provide a welcoming smile and attentive ear—in essence, to be the passenger’s advocate. Of course, many airlines will go the opposite direction and take the efficiency gains along with significant cost reductions in the labor category. In this scenario, check-in desks will be operated by a skeleton crew of stressed out, over-worked staff; dehumanizing the customer and staff experience and effectively canceling out the force-multiplying effect of automation. This is why it’s critical for companies that adopt advanced technologies to pay special attention to staff and consumer sentiment in order to strike a favorable balance between people and technology.

In an increasingly automating world, where smart technology is accelerating the completion of menial tasks, the human touch is what tomorrow’s workforce will focus on more than ever.

Today’s digital technologies are developing at such an aggressive rate that many people will lose their jobs to something as simple as basic process automation. At the same time, these leaps in technology are making it possible for humans to get back to what we’re best at: thinking critically, building better technology, and experiencing and expressing emotion. The role of empathy will only become more important as we shoot into the future. And perhaps it’s a form of empathy in itself, for people to be given the opportunity to apply critical thinking skills and do less “busy work.”

The pharmaceutical scientist, whose tedious research work is now supported by automated programs that search thousands of journals and databases to conduct unstructured text analysis, will be able to dedicate a larger share of time to the development of high-order hypotheses and analyses which cannot be performed by machines. These scientists are able to program rule-based algorithms that predict and anticipate thousands of scenarios, resulting in better medicine, lower risks, lower costs, and better healthcare outcomes. When built with the right ethical considerations, advanced technology can almost seem to be empathetic as it enables the provision of customized and precise service at a massive scale.

Empathetic communication smooths decision making.

When Dove launched its “Real Women” campaign it stood out as a brand that validates each woman for the unique being she is. When combing through a dizzying array of beauty and hygiene products at the supermarket, we see the Dove logo and think great thoughts, observing the calm-colored and smooth- shaped packaging, and placing it into our basket before even considering the product’s actual value in relation to other similar products. Because it just feels right.

This example illustrates that perceived value is complex, and there is more to a purchase decision than price and utility. Our decision-making processes are driven by many factors. Our brains process Dove’s empathy by relying on an extensive list of decision-making heuristics and cognitive biases we have honed throughout our lives.

The study of our decision-making processes crosses several scientific disciplines such as human behavior, economics, sociology, anthropology, and neurochemistry. We can learn a lot from the contemporary work of Nobel Laureate Daniel Kahneman, a psychologist who has done a great deal of important work in the field of decision-making. In his book, Thinking Fast and Slow, Kahneman describes how we rely on two distinct thought processes, fueled by subjective heuristics and biases, that drive decision-making: System 1 is a fast, automatic, emotional, and subconscious thought process that relies on knowledge and information that is easiest to access. System 2 is used for slow , logical, calculating, and conscious thinking. When it comes to low-risk, low-stakes decisions like buying hand soap or choosing a park for kite flying, we keep it simple and easy, defaulting to System 1. When it comes to buying a house or asking for a raise, we turn to System 2, serious business.¹

Marketers are constantly striving to get their products considered in consumer decision-making processes. We do this by building credibility and favor for the brand, so our target audience keeps us in consideration for their next purchase. In influencing brand perception, companies try very hard to leverage empathy, and sometimes it doesn’t work out as planned.

Empathetic branding requires grit.

In 2017, Dove released a set of six oddly-designed “real beauty bottles” for its body wash products. Each package is shaped differently, claiming to “celebrate” the diverse body shapes of its target audience, the “real woman.” The internet quickly went up in a stir, criticizing and ridiculing the company for trying too hard.² Right or wrong, you and I know that these are the types of risks we take to make a splash. Sometimes they flop, sometimes they rock. But when all is said and done, conviction and intention will typically outlive initial blowback. In this next example, a growing, mission-driven business shows us how this is done in practice.

In early 2018, the female-centric investment platform, Ellevest, launched its “Invest Like a Woman” campaign. Even this carefully planned campaign was met with criticism, but that’s when CEO Sallie Krawcheck doubled down on her mission. She was adamant that this was more than a marketing ploy, and acknowledged that she wasn’t always an advocate for gender- specific investment platforms, recognizing that woman-targeted campaigns often “talked down” to women.³ Though Sallie’s greatly successful Wall Street reputation precedes her, she frequently reinforces the importance of woman-specific investment strategies through public messages that stand by the need to “invest like a woman.” Ellevest will continue to grow because of Sallie’s relatable, visionary, and empathetic message. This type of dedication to the vision will endure far longer than a week-long Twitter backlash.

Digital Communication with Empathy, Role-Modeled by the Youth.

Most of us have at some point fallen into a vitriolic hole of YouTube comments or read through a completely absurd Twitter conversation that spun out of control into an exchange of insults. On occasion, you’ll see someone that is acting on empathy, chiming in to say “people, chill out, you’re being rude and insensitive.” The disturbing thing is that these people treating each other terribly, protected by distance and the pseudo-anonymity afforded by the internet, are mostly fully- grown adults. These are the same people who know how to keep their abrasive comments to themselves in the real world, but just can’t seem to help themselves on the web.

Empathetic people watch cues carefully, they’re observant. They are not only less prone to internal distress, but they are also more likely to diffuse negative situations that would otherwise blow out of proportion. The empathetic person is the one that intervenes tactfully to cool down heated arguments by imploring people to take a step back and think deeper. This person is devoted to progress, acting to move beyond frail human emotions, thinking objectively and searching for reason in an otherwise unreasonable environment. If you’re leading a business, wouldn’t you want your brand to be perceived this way? Since communication travels more frequently, faster, and heavier through digital platforms, we have a prime opportunity on our hands to gain the favor of the movers and shakers of the future, today’s youth.

Our observations of online interactions give us some very special insight because they help us realize that today’s youth, digital natives, are born and raised understanding the ground rules of digital communication. These people are grounded in the cultural norms of a digital age, and the web is just as real as streets, libraries, playgrounds, and stores. Digital natives experience a connected life without even thinking about it—it gives them immediate access to friends, information, money, entertainment, and relaxation.

And while old folks will rush to say, “these kids don’t have to work hard for anything,” nothing could be further from the truth. Who said instant gratification was a bad thing? Wouldn’t our 19th century ancestors have appreciated a crop that reaped fruit 50% faster, or a faster journey across the country with just a little less starvation, no dysentery, and fewer stagecoach robberies?

Today’s youth aren’t looking for instant gratification, it is a benefit of the time we live in, which has also given us more freedom by opening up more time and accessibility.

Menial tasks are for robots, caring is for humans.

No matter how digitized our lives become, humans will spend time with each other, whether in person or online, it doesn’t matter. Until cyborgs and artificial superintelligence take over our world, we will need each other more than ever in a digital ecosystem that is connecting, dividing, facilitating, and enlightening us all at the same time.

The biggest takeaway here is that fewer humans will waste time on tasks that can be performed more effectively by machines; and this is why soft skills, such as the ability to be empathetic, will distinguish the best of tomorrow’s leaders. The ability to relate to other people, to lead with vision, resolve issues with tact, and understand human purpose and action, is what humans bring to the digital table.

CONSISTENT AND SUSTAINABLE BUSINESS GROWTH requires constant adaptation to changing conditions over time. There are many ways to keep up with changing times, but there is no more efficient manner to meet evolving market demands, and even get ahead of changing conditions, than the cultivation of diverse resources.

Diversification of business resources, whether they are people, technology, or processes, doesn’t happen on its own; and many businesses operate in a manner that actually inhibits diversity. So organizations must be deliberate about diversity initiatives, and commit to persistently, and continuously seek out methods that vary the way business is conducted. Only when this deliberate diversity is expected of every employee, can diversity become part of the organization’s culture, embedded into its fiber.

Interestingly, the pursuit of diversity as a broad concept is already deeply embedded in the fabric of business management principles. We are diversifying when we seek alternative suppliers to mitigate supply chain risk, or establish several revenue channels that are independent of each other. However, today’s enterprises don’t struggle with these business school fundamentals, they struggle to achieve two very specific categories of diversity: diversity of voice and diversity of fact. In short, they limit the people that have an influential voice, and rely on a limited set of facts to inform decision making.

Diversity of Voice

We’re seeing more about this topic than ever before because of the contemporary social movements that call for greater human equality and inclusion in the workplace, and society at large. This is an important and noble cause, but let’s look at this from another angle and try to understand why the concept of staff diversity is key to sustainable business growth. I believe it boils down to the presence of “diversity of voice.”

Diversity may seem like it’s mostly about hiring different- looking people, but at its root, it’s really about fostering an environment where the company’s direction is influenced by people that don’t think and act the same. We’ve all seen CEOs surrounded by insipid executives that lack drive, vying for friction-free meetings, and avoiding confrontation at all costs. These types of leaders operate in an echo chamber where the same old people say the same old things and think in the same old ways. This is no way to keep up with changing market conditions and constricts opportunity while magnifying the effects of errors. By actively insisting that different types of people are listened to, we broaden our perspective and bring more objectivity to decisions. Diversity of voice is needed at all levels of an organization, but it must start with the most influential roles at the topmost rungs of the organization.

It’s very easy for business leaders to hire more minorities and create inclusive social media hashtags, but we are still hard- pressed to find companies that specify practical performance indicators to monitor the effectiveness of such programs. Even though the idea of inclusion and equality in the workplace has become more commonplace, you will find that very few organizations actually attempt to correlate this type of “identity” diversity to business performance. Instead, it’s used as a badge of honor displayed to outsiders, while the company’s topmost positions continue to lack diversity.

So, how does diversity of voice improve a company’s performance? The short answer is more information, less uncertainty, less risk, and more opportunities.

Diversity of voice is characterized by an organization’s tolerance for, and expectation of, a wide range of influential voices.

Diversity of voice raises the number of viewpoints on any given topic, which in turn develops greater trust among colleagues who benefit from understanding alternative views. This isn’t just about adding more ethnicities to the payroll, it’s about developing a staff roster that is not homogeneous. It is accomplished by hiring people from communities that are under-represented and is based on a range of criteria that includes academic background, personality traits, socio- economic condition, ethnicity, geographic location, etc. With diverse staff, the company gains a world view that is broader and more specific all at once, resulting in a more accurate assessment of the market factors surrounding the business’s existence and future plans.

The more we know, the better prepared we are to mitigate risks and exploit opportunities. At the same time, this heightened awareness helps us to more confidently point out the information we don’t have. And in today’s fast-moving markets, it’s just as important to know what we don’t know.

Still, many business leaders really don’t want to know more.

Diversity of Fact

Every organization has their own version of truth, and the biggest limiting factor on the depth and breadth of that truth is the availability and analysis of diverse sources of information. This really isn’t an evident problem in most enterprises because the organization’s leadership may not want more information, or business seems to be doing fine as-is. Even today’s largest and most successful businesses suffer from a lack of diverse information and that carries a high opportunity cost. A scarcity of information resulted in JC Penney’s downfall from being considered America’s top retailer to becoming a retail desert; conversely, an abundance of information continues to fuel Amazon’s rise from simple online bookseller to global retail and technology titan. We’re not going to solve everyone’s problems in this brief work, so I have identified three big issues that restrict an organization’s ability to diversify its sources of fact:

The resource issue: it takes time and the right type of qualified personnel to manage and analyze incremental information. Organization-specific analytics models can solve this issue by developing automated analytics solutions to crunch critical data and spit out insight. But with more data being produced every day, we’ll always be behind, so we must be deliberate about assigning resources to the areas that are most critical for success.

The executive vision issue: the chief executive has a right to run the business with a subjective vision that may or may not conflict with facts. The amount and variety of information the c-suite is exposed to will determine the balance between subjectivity and objectivity in the chief executive’s vision, and ultimately impact the company’s performance.

The board issue: the board is often looking at the bottom line and relies on financial levers to make macro-level business decisions. If one line of business is doing great, they recommend investing more to multiply those results. If a legacy product is losing market share, they recommend cutting resources or pulling the plug. A board that holds company leadership accountable for analyzing a broad set of facts will have less fires to put out and better financial results to show for the increased scope of awareness. A McKinsey & Company survey of more than 770 directors discovered that high-impact boards ranked “reducing decision biases” as their biggest strategic aspiration.¹ This shows us that the most high-performing boards understand the importance of improved objectivity as a key precursor to long-term business viability and shareholder value.

To be best-prepared for success in the future, organizations must admit what they don’t know, and what they don’t know they don’t know.

Do nothing about diversity, and fall to the Red Queen.

Every day, thousands of businesses are founded and countless products are launched. This is happening faster than ever, and today’s customers have more options than ever. Sustainable and sustained business growth requires continuous adaptation to market factors that are generally out of a business’s direct control. To meet the changing demands of modern customers, and deliver delightful, friction-free experiences, we need to understand “all sides of the story.” If there were ever a time to insist on deliberate diversity, it is now.

If we’re watching trends, we observe that tomorrow’s market share will go to businesses that are innovative and flexible in the ways they provide products and solutions to the empowered modern customer. Two types of winning businesses will be prepared for this new environment: New market entrants will pick on a pain point not addressed by stodgy, old-fashioned, out-of-touch businesses, and provide a novel solution to meet market demand; and current market leaders will hang on as long as they consistently reinvent the way they do business to outlive their contemporaries and compete with new market entrants.

Ultimately, both types of businesses share two key traits:

1. The possession of reliable intelligence about future-state market dynamics; and,
2. The deliberate allocation of resources to proactively exploit this intelligence.

Of course, this is easier said than done because resources are never unlimited, and trade-offs must be accepted.

In Lewis Carroll’s book, Through the Looking Glass, the Red Queen says to Alice: “Now, here, you see, it takes all the running you can do, to keep in the same place.”² This concept is known in the field of evolutionary biology as the Red Queen effect, and serves to illustrate “that organisms must constantly adapt, evolve, and proliferate not merely to gain reproductive advantage, but also simply to survive while pitted against ever- evolving opposing organisms in a constantly changing environment.”³

In today’s highly competitive markets, anyone running a business can relate to the Red Queen effect in that it takes a great deal of resources to simply meet the current market standard, which itself is constantly changing, and forever morphing into something unfamiliar. So in order to sustain meaningful growth, we have to be fastidious, or perhaps more conscientious, in the way we allocate resources and select incremental resources dedicated to any target gains above and beyond the current equilibrium.

This is where resource diversity is critical to the bottom line. Each individual resource, through its contribution to overall diversity, results in a net return-on-investment against the sum of all resources. I’m taking some liberties here, but this is not too far off from the way ecologists speak about ecosystem multifunctionality, which is the ability of an ecosystem to maintain and deliver multiple functions and services. Ecosystem multifunctionality is positively related to the presence of species richness⁴ (the number of different species represented in an ecological community), and biodiversity is vital to maximizing the ecosystem’s ability to deliver multiple functions, e.g. wildlife- carrying capacity, soil fertility, invasion resistance, etc.⁵,⁶ Conversely, losses in biodiversity can lead to less productive ecosystems.

All of the factors in this book can easily be thrown around as buzzwords that serve an ideological purpose. The term diversity itself is often used to represent diligence, progress, sustainability, equality, and so on. These are actually desirable and progressive values, but only when we go beyond “lip service,” and into deliberate execution, will we reap the benefits of diversity of voice and diversity of fact.

ARE WE BEING PRODUCTIVE, OR JUST KEEPING BUSY? There’s a big difference, and humans have always been concerned about it. Between pondering over our life’s purpose and reflecting about our endless stores of underutilized potential, it’s tough to pin down what perfect looks like at an individual level. But in a business context, this conversation should be simpler. So, what is productivity anyway? Is it simply the state of doing something or hitting a specific metric? Words like “productivity” have different meanings for different people, but most of us can agree that productivity is directly related to “progress.” And this is where we once again find an under- tapped opportunity to be more mindful about how we do something—how we make progress—in order to maximize our value as individuals and groups, buyers and sellers, consumers and producers.

High-Tech is Table Stakes, Move On

Coming back to the Red Queen effect we covered in the preceding chapter, businesses need to invest almost all of their resources just to keep up with the competition. But if we’re only keeping up with the competition, who’s looking out for the future? Keeping up with the competition isn’t progress, it’s a steady state, and at best contributes to a dreadfully minimal amount of forward momentum. So, how can we be deliberate about getting far ahead of change?

I’ll tell you right now that the answer isn’t to simply throw more high-tech into the mix. The immense volumes of data, killer digital technology, and proven processes of our modern era are being exploited by every single competitive market player. So we can consider that these resources are the cost of entry—table stakes—that build a company’s basic capacity to compete in today’s market. Without these basic resources, you’re simply not going to get anywhere. So before we can even talk about how to run a profitable business amid rapidly changing market conditions, we need to get over the technology hype.

At the end of the day, investors and customers don’t put up money to support the development of company resources, they are paying for the value derived from those resources. We must shift our attention away from processes and shiny new technology, and measure the value of investments based on their contribution to the company’s continued relevance into the future.

The Changing Face of Value

Investors are looking for outcomes that are almost entirely quantitative, but customers look for outcomes that are both quantitative and qualitative. The key issue here is that customers have an ever-expanding range of really good options for addressing their wants and needs. Think about any consumer product or business service, how many companies offer the same thing at similar prices? Now compound the issue by recognizing that consumers are increasingly gaining access to more advanced technology they can own and control, allowing them to get more things done, without needing to buy additional products and services from a separate company. In this re-shaping environment, customers are transforming the way they perceive value to put more weight on qualitative factors. If the way you offer value isn’t changing to adapt to the way consumers want value, other businesses will fill the gap and you’ll find it incredibly difficult to catch up to the market once you lose momentum.

Momentum is precious, and a strong grasp of factors presented in this book (such as cultural awareness and diversity of voice) will not only insulate your business from drastic change, but also position your business to be a market leader at the frontier of change.

Let’s look at how innovation, deliberate iteration, and trend forecasting influence a company’s ability to make progress and establish unrelenting momentum.

Humans: Inherently Innovative, Consistently Iterative

Researchers recently discovered evidence of early human innovation dating back to around 320,000 years, about 100,000 years earlier than previous estimates. As part of the Smithsonian Institution’s Human Origins Program, excavations in the Olorgesailie Basin of Southern Kenya resulted in the discovery of advanced tools made of stone and the use of coloring pigments, indicating the presence of complex technological and sociological behaviors.¹ If we look beyond our own species, Homo sapiens, technological innovation dates all the way back to about 1.2 million years ago, when other hominin species crafted large, less intricate handaxes out of stone.

Our prehistoric ancestors wrangled natural resources into materials for hunting, clothing, and nutrition; which in turn created entirely new categories of derivative resources. Raw stones were carved into pointed shapes, which were then elaborately shaved to form sharp cutting devices. These devices became utility knives used to cut portions of food and create clothing from animal skin. Food could then be distributed and consumed in new ways, and the concept of clothing would usher in some sort of prehistoric wearable fashion, like Neanderthal necklaces made out of eagle talons.²

Every technological innovation is, in essence, an iteration on previous technology that itself was made possible by iteration. We do this today in the same way we’ve been doing since the beginning of our species’ existence, by creating new knowledge from yesterday’s knowledge through the process of iteration.

To be human is to be inherently innovative; or, more fundamentally, to be human is to be inherently capable of thinking critically.

Today, we place a lot of weight on the word “innovation,” and say that innovation is the key to business success. This word gives us a catch-all term for lumping a wide variety of advancements into one massive category that includes everything from Keurig’s K-Cup design and Nils Bohlin’s three-point seat belt design³, to cryptocurrencies and a child’s cardboard box fort. When a child progresses from making tiny structures with Lego blocks to creating their own life-sized fort, that’s an innovation…right?

Clearly, innovation is subjective, so why do we use this term so much in the business world? Some people think it sounds good in marketing copy, management uses it to inspire and motivate their subordinates, and analysts still give it a pass on investor calls.

Fine.

But when it comes to improving the way we do business, we should be careful about using overly general terms such as “innovation,” and instead identify specific desired outcomes so people can apply critical thinking skills in effective ways.

If you want surefire progress, institutionalize deliberate iteration.

If iterative work is a reliable path to achieve progress, how can we be deliberate about the iterations we undertake so they contribute to sustained business growth?

Every day, hundreds of unrelated people post a new photo on Instagram of the same scene in the Dumbo neighborhood of Brooklyn, New York. You have to stand on Washington Street to take in the iconic scene, which features one of the Manhattan Bridge’s two towers so satisfyingly framed by red brick warehouses on the left and right sides. Some people take a selfie, others wait for the street to clear out and prefer to capture the architecture on its own. Fundamentally, each of these images look the same because they share the same key subjects, but when we investigate further, every single image is unique. The lighting, shadows, clouds, colors, and perspective are distinct from photo to photo. The majority of people taking this iconic photo don’t really care about previous versions of the scene, they simply want to do it themselves and preserve their own version of the memory. These aren’t iterations that will contribute significantly to any type of shared sense of progress. The photos are taken independent of one another and there is no concept of leveraging previous work in order to make forward progress. These are simply different versions of the same scene.

Businesses that don’t plan well for the future tend to allocate resources ineffectively, recreating new versions of the same scene. They incentivize work that might seem like an improvement, but in reality, is nothing more than a new version of previous work. It feels like running in place.

Every modern leader—whether in a corporation, philanthropic organization, or public institution—should understand the concept of deliberate iteration and set deliberate goals for iteration in their organization. This degree of calculation doesn’t inhibit the development of an environment that incentivizes free-thinking; on the contrary, it enables creativity to thrive by establishing a stable foundation that ensures forward momentum and minimizes the presence of decision- making biases such as overconfidence bias (which prioritizes subjective confidence over objective accuracy) and action bias (being busy for the sake of being busy).

You can’t measure all forms of progress.

Progress at the tactical level is very easy to identify and undertake. For instance, writing more lines of code, sending out an email campaign, and delivering a sales presentation are all examples of tactical progress. But an enterprise-wide culture of progress is difficult to create when we make business decisions that are only informed by numbers. Let’s get the obvious out of the way, every team member needs to have the same understanding of target numbers, e.g. pipeline, revenue, profit margin, net promoter score, resolution time, etc. But if we’re investing all of our time working only on things that can be measured and converted into data (whether quantitative or qualitative), we won’t have time left to work on the culture of the business, what it feels like to work in the organization, and how consumers feel about the organization. These emotional concerns determine the human drive to engage in commercial transactions, they play a major role in our decision-making processes, and they’ll matter more than ever as we move into a future where qualities are more important than quantities.

The undertapped relationship between social sciences, qualitative data, and commercial progress.

Breakthrough innovations can appear to be the result of some inexplicable phenomenon that is realized when the right people get together to “think big.” But the reality is that these events are less about luck and more about logic. Not to completely dismiss the value of human emotions and grit, but we can actually explain any success story by objectively reviewing the conditions leading up to success, by assessing indisputable facts. From this grounded perspective, we can see how important it is for executives to be thirsty for facts and skeptical about opinions. But this is where terminology often trips us up, because facts aren’t synonymous with data, and data isn’t synonymous with truth. For example, people often view “qualities” as “opinions,” and this is a precarious correlation that has pushed many businesses away from balancing quantitative data with qualitative data to inform decisions.

We leverage quantitative data and analytics models to establish forward-looking business cases that are predictive and realizable. Ranging in complexity, these models help us assess a range of factors such as supply chain risk and the potential value of human capital or technology investments. But in our attempts to conduct due diligence and minimize the company’s surface area of risk, we tend to rely mostly on the data points that are recognized as industry “best practices,” and this often means that we’re merely relying on the data points that are readily available. What about the data we don’t have? Just because a certain set of data is out of sight, does this mean it should actually be out of mind? Of course not. We need to know what we don’t know so we can position a business to thrive at frontier of change, instead of lagging behind it.

Market conditions are changing so fast, accelerated by the explosive and unrelenting pace of technological development, that we cannot go on being appeased by traditional categories of information. And perhaps, more specifically, it is the human condition, which is transforming and recasting at such a high frequency, that we need to understand with more precision. Instead of relying on conventional generalizations that summarize this human condition, we should bring social scientists into the fold to support the development of strategy that is better-suited to stand the test of today’s circumstances. Scientists like anthropologists, sociologists, economists, and historians bring profound knowledge of their discipline’s discoveries and the methods required to map scientific findings to company objectives. If we’re looking to get ahead of change, to truly be prepared for the future, we need these experts to assess how contemporary conditions stand to alter the trendline.

Combined with traditional sources of proprietary and third- party data, this custom-tailored “social” information provides business leaders with a complete view of the commercial environment. This results in business strategies that age well over time because they rely on traditional financial and quantitative data that is also supplemented with information that explains the way people are expected to interact with commerce, and the business itself.

How will the seemingly infinite supply of information that is available online impact a buyer’s assessment of any incremental information they are exposed to? How does this impact the way they compare similar products from different vendors? How would the presence of an increasingly health-conscious middle class impact the availability of nutrient-dense foods for lower- income people? Is up-trending software-as-a-service consumption an antecedent to pay-per-use consumption, and should businesses in certain industries plan on shifting their models to pay-per-use consumption sooner rather than later? These are all questions that social scientists are well-equipped to answer, and although some of the world’s largest corporations are actively looking to add these skillsets to their ranks, not all business leaders get it.

I think social science will be a critical factor for success in tomorrow’s markets. Its absence will be observed at companies that waste time and miss opportunities; while its presence will be observed at companies that buzz with good energy and exploit opportunities that are gone before you see them in the headlines.

JUDGMENT IS DEFINED AS “the evaluation of evidence to make a decision.”¹ Computers are able to do this, but only when information is digitized, and even then, the computer’s decision-making framework is programmed by humans. It’s a fascinating paradox. In this most digitally-oriented point in mankind’s existence, human judgment may be more valuable than ever.

Machines process data more efficiently than humans, but there is a lot of data that is so complex it cannot be digitized because only humans can process it. Emotions, feelings, philosophies, and biases are only a small sample of the many types of data we hold in our brains, and this exclusively human information significantly influences the way we make decisions.

Growth-oriented organizations need to stay ahead of these rapid changes by inculcating into their strategies a firm understanding of the exclusively human information which cannot be digitized. This means that we need to look inward to understand what drives employees to do better and more meaningful work—without focusing solely on quantitative performance metrics. And we need to look outward to understand what societies and customer groups are looking for, and how their needs can be met—without focusing solely on quantitative demand metrics.

We close out this book by reflecting on some concepts that play a significant role in the way we exercise judgment: the definition of ethics, the perception of value, and the presence of bias.

Ethics: Individually Subjective, Universally Objective.

In any given society, things like norms, values, and philosophies are trusted to public and cultural institutions that manage what is right and wrong, good and evil, and so on. This shared understanding of morality is dynamic and ever-changing, unlike scientific facts, which are static. For example, the waves of our great oceans, the call of a hunting eagle, and the human ability to walk on two feet, are all observations that can be explained by science, they never change. But our civil codes, laws, philosophies, and religious rituals are manufactured by humans and defined through a shared understanding across groups of people, they always change. We build governing organizations to carry out these shared beliefs and institutionalize them. And though we’re not often cognizant about it, we have a very similar relationship with corporations, who play a role in defining, and to a lesser extent, governing, these beliefs we share across our societies.

Corporations produce things we need and want, they foster innovation, we interact with them multiple times a day, and they influence the way we think about life in general. But unlike publicly funded and publicly accountable institutions, corporations are not necessarily required to act in the best interest of the public. Though corporations are publicly funded by proxy, through the purchase of company goods, distribution of company shares, and allocation of tax benefits, they are not publicly accountable in the same way we hold government agencies responsible for their duties to society. This isn’t to say that corporations are evil, but that we should be observant about the ways we enable businesses to influence society— especially since it’s possible for a particular company’s interests to be at odds with a particular society’s interests.

We’re at a point in the evolutionary path of commerce where it’s becoming difficult for consumers to separate business and philosophy. This is why corporations that are looking to thrive in the future should take a clear stance on social issues and resolve ethical quandaries with speed, as if they could make or break the business. Companies can do this in different ways, but it often starts by establishing a sense of purpose that is bigger than a mundane conversation about products and services and instead aims to hold significant implications on society at large. Ford Motor Company is doing this today by positioning the corporation as one that is dedicated to improving the way people live and how they interact with transportation technology. CEO Jim Hackett says that it’s time to “reclaim the streets for living,” emanating a sense of empathy for humans whose cities have been taken over by vehicles.² The specific words Hackett uses in conveying his vision for the future carry idealistic connotations and play a role in defining ethical and moral standards not just for the company’s employees, but for society at large.

If we consider that Ford has over 200,000 employees, $145 billion in revenue, thousands of dealerships worldwide, and millions of cars on the road, we can be sure that this corporation’s impact on society goes far beyond simple commercial transactions and stock price shifts. The Ford example illustrates how corporations can have such a large footprint that they are able to significantly influence society’s collective set of norms, beliefs, and ethics. The word corporation itself is derived from the Latin word corporatio, which means “assumption of a body.” If “everybody” contributes to our shared legal codes and moral standards, then corporations, as personified entities, have greater implications on society than the numbers reported on a balance sheet.

What’s really interesting is that each of us, as individuals, carry a unique set of ethical standards and beliefs—they are totally subjective. But when we come together as groups of people to form societies, we have to agree on a shared set of ethical standards—effectively converting what was once subjective to appear objective, and almost indistinguishable from fact. As we collectively agree on these shared ethical standards, our codes and laws strive to represent the interests of society at large; but, they also tend to represent the interests of parties with the strongest capability to exert influence, and sometimes this is detrimental to specific segments of society.

A Case-Study in Complicity: The Tobacco Industry

Does society think it’s reasonable to profit from someone else’s loss? It certainly seems that way if we look at the tobacco industry. Revenue for U.S. tobacco companies increased 50% from $78 billion in 2001 to $117 billion in 2016.³ At the same time, the World Health Organization reports that tobacco use is responsible for the death of over seven million people per year.⁴ Horrifying death toll aside, it’s obvious that cigarette smoking causes a wide range of painful and debilitating diseases, so why do people still smoke? The powerful force of influence has a lot to do with how people start smoking, and addiction (which is technically a brain disorder) is the reason people can’t shake the habit. The more we see any product used, the more likely we are to ask, “should I be using this product?” So every new smoker results in more cigarettes being sold to a larger number of people. This network effect is critical to mass adoption of any product, but cigarettes have an edge on other products in that they are extremely addictive.

The fundamental objectives of marketing campaigns in the tobacco industry are to a) influence non-smokers to buy their first pack of cigarettes; or, b) convince current smokers they should continue the habit. One of the key ploys involves the exploitation of a concept from sociology called “normalization.”⁵ When a particular behavior or idea becomes accepted by society as something that is normal and common in everyday life, people drop their guard and reduce scrutiny of that particular behavior or idea. The tobacco industry has historically teamed up with the world’s most effective advertising firms to develop marketing campaigns that made cigarette smoking seem normal. From the Lucky Strike ad proclaiming that “everybody’s doing it,” to the Camel ads that featured medical doctors insisting that, in a 30-day study of Camel smokers, “not one single case of throat irritation” was identified.

Today, tobacco companies face the biggest threat to their business they have ever faced in a consumer base with access to a near endless supply of digital information. But tobacco companies have adapted their tactics to the digital age, and they’re once again poised to hit record numbers by selling products that are harmful to their consumers through investments in electronic cigarette products and the newly- legalized Canadian cannabis industry. These companies have managed to maintain record-breaking profits in the most regulated consumer markets, so the highly-regulated cannabis and e-cigarette markets are relatively comfortable investments where the story of normalization is once again entering the frame. A quick review of e-cigarette websites shows us how they use clever messaging to convince consumers that vaporized tobacco is a pleasing alternative to cigarettes, misdirecting attention to the “heated” nature of the new product as opposed to the “burned” nature of traditional cigarettes, and highlighting that nicotine addiction is common by pointing out that there are one billion smokers in the world.

Change is inevitable, and as we mentioned in the previous chapter, companies that thrive in the long term are the ones that live on the frontier of change, continuously plotting new courses and quickly adapting to new conditions. Regardless of your stance on the ethics of the tobacco industry, large tobacco companies have kept up strong revenues amid growing market pressures by maintaining forward momentum—much of which counts on their ability to exert strong levels of influence on the regulation and perception of their products.

The power of influence and trust: Do we really have to do the right thing?

The tobacco industry example shows us just how powerful corporations can be in driving a society’s collective code of ethics, and it isn’t a coincidence. The contemporary marketing discipline is focused heavily on developing and executing methods to manipulate markets. Marketers don’t have supernatural capabilities, but we leverage the power of words, relationships, and trust to influence the decisions people make. These capabilities are amplified by large corporate budgets and an extreme level of access to consumers that has never been seen before. By downloading our apps, we can track where you go for lunch on weekdays, and we can see that you go to a children’s dance studio every Sunday at 10 a.m. By installing cookies on your computers, we can capture that you’re between the ages of 35 and 44, you like fashion, and live near the city center of Wichita, Kansas. When you walk into our retail store, we know you’re there and might send you a coupon to use within the next hour. Does all of this “power of influence” come with responsibility? I think it does.

In a competitive market, marketing does not simply need to be well-targeted and good-looking, it must also be convincing enough to have an influencing effect, it should motivate a favorable action for the brand. And this is exactly where an importance nuance lies, at the nearly indistinguishable line between persuasion and manipulation. In general, people are difficult to manipulate unless one understands how to exploit trust. Trust is a strong emotion we feel when we believe we can rely on someone or something, such as a corporation, philosophy, or technology. When we trust in someone, we drop our guard, and this greatly influences the way we make decisions. Among many methods, companies can exploit trust by:

1. Getting coverage on trusted media: think about a brand gaining coverage for a philanthropic initiative on a television news segment or social network.
2. Manipulating traditionally trusted concepts, like research studies: think about a research study funded by the beef industry that educates consumers about a marginal benefit of eating lean beef, counterbalancing scientific research that identifies health risks of eating beef.
3. Using language that plays on emotions: think about life insurance ads that remind senior citizens about the financial burden their death could place on the loved ones they’ll leave behind.

Any organization with the right resources can manipulate the way people think and behave, from corporations to political organizations. But do we really want to win people over through manipulation? The undesirable truth is that many organizations don’t care how they succeed, as long as they succeed. They can be really good at hiding unscrupulous practices, and when they’re caught, they can attribute undesirable behavior to a temporary lapse of judgment by a specific set of people, and often continue to operate. Indeed, contemporary laws that govern corporations serve to limit the liability of the people investing in the business and operating the business. But, while corporations are built to survive these types of negative incidences, other market actors (buyers, suppliers, regulators, investors, etc.) ultimately decide whether to constrict or expand a business’s viability.

From this perspective, it is becoming more difficult for companies to manipulate markets because of the rapid rate of change in our globally connected commercial environment. New businesses pop up every day to fill old needs and create new desires, some flaunt dirt cheap prices, while others tout social responsibility. The key here is that consumers are getting more choices for any given product than ever before, and they’re beginning to understand this.

It’s a buyer’s market, but they don’t know it yet.

People have way too much going on in their lives to anguish over simple purchase decisions like buying toilet paper or a bag of onions, so when we go shopping for these mundane products we tend to buy what we’re used to or whatever is on sale. This makes sense because they are low-stakes purchases. But, counterintuitively, we behave in the same simple way when making most of our purchase decisions, whether or not they should be more complex. It’s actually in our human nature to conserve cognitive effort, opting to expend only the amount of effort necessary to make satisfactory decisions, rather than optimal decisions.⁶ A study covered in the Journal of Consumer Research found that, when comparing two equivalent products at different price points, consumers were willing to pay a premium for the product that required the least effort to evaluate.⁷ In any given decision, we tend to accept the limited set of options that are available to us at a specific point in time. The thing is, there’s very little coincidence here, because the products and services that are readily available and easy to find are there by design.

Leading brands, whether they sell to businesses or individuals, understand that humans are potentially subject to two main categories of decision-making flaws: informational issues and cognitive biases.⁸ Businesses exploit these realities and use a broad range of techniques to advance market objectives, such as promotional offers, celebrity endorsements, distinctive packaging, competitor buy-outs, and government lobbying. So, unless they make a conscious decision to delve deeper, buyers are typically making purchase decisions under the illusion of choice. This has always been a great advantage for business, but the scope of that advantage is shrinking.

Modern consumers are getting so many options for any given product that they are no longer limited to shopping based on decision factors companies have traditionally manipulated such as Price (many vendors compete at the same price point); Brand Awareness (buyers are learning to ignore pervasive just-in-time ads); Quality (many vendors now offer 100% money back guarantees); and, Availability (many vendors offer near-instant delivery).

If simple decision factors are neutralized, how will buyers make purchase decisions? Logical parameters will always play a role, but leading companies understand the power of building emotional connections. Patagonia, the clothing company, stands out as a particularly well-positioned player that sells products which carry a high value for both logic-based and emotion-based decisions. Patagonia stands behind every product it sells by offering free repairs or product replacements through its “ironclad guarantee,” and it leads the apparel industry in supply chain ethics by enforcing fair wages and sustainable material sourcing. Patagonia will see long term success because it’s already catering to the consumer that knows they have a lot of options. From an economics perspective, when consumers have the upper hand (supply exceeds demand), they are able to demand more value from suppliers; and with the same utilitarian conditions met by multiple suppliers, consumers will shape the definition of “value” so it aligns closer to their subjective emotions and ideals.

Tomorrow’s buyer will have so many good options for any given purchase, the way they make decisions will naturally place more weight on emotional factors.

A Soapy Example of Perceived Value

If you visit Target.com to buy liquid hand soap, you’ll find that around $3.00 USD can buy you 10 ounces of soap sold by several brands, including Method and Dial. The price for 10 ounces of Method branded soap is about $0.35 USD more than the same amount of Dial branded soap. Method is a B Corporation dedicated to producing non-toxic household cleaning products with minimal impact on our environment, and the front of its hand soap bottle reads, “naturally derived foaming hand wash.” Dial is a brand that is owned by Henkel, a large multinational corporation, and the front of its hand soap bottle reads, “2 IN 1 MOISTURIZING & antibacterial Foaming Hand Wash.” Beyond promotions and brand plays outside the point of commerce, the packaging decisions each company has made for these soap products very deliberately serve to describe the core value proposition they want to convey to their consumers. One prioritizes the sourcing of its ingredients, and the other prioritizes the soap’s efficacy in fighting germs and moisturizing skin.

Let’s put the brands aside and focus on the messaging found on each bottle, which type of product do you think is most favorable to today’s consumers? The answer is that they’re both favorable because there are too many different types of consumers, and they expect different things from liquid hand soap. But, if I’m looking at the brand and packaging decisions both of these companies have made, I observe that Dial reflects a societal status quo while Method has charted a new path, along with a growing number of brands, by doubling down promoting environmentally sustainable business operations.

Dial has chosen to brand itself as a supplier of competitive commodities, while Method wants people to recognize the brand for its benefits to society. Both of these soaps address the same pursuit of clean hands, but they each emphasize messaging that hits different areas of judgment. Dial caters to the consumer’s desire for the superior utility that comes from the soap’s moisturizing and antibacterial properties. While Method caters to the consumer’s desire for pure products that are free of toxic chemicals.

Everyone perceives value differently, and these two brands are counting on it.

The Rational Company and the Irrational Consumer

There exists a great deal of fascinating literature that goes into deep and wide scientific detail exploring how humans make decisions in commercial settings. In recent behavioral economics literature, we find the prevailing assumption that businesses are rational and consumers are irrational, so businesses seek to exploit that irrationality.⁹ Indeed, as consumers we are prone to making decisions that seem to defy logic, but there are very logical explanations for most of these decisions. For example, why would someone buy a delicate pair of designer brand shoes for $800 when they could acquire a pair of shoes from a well-known and reliable brand for just $100? Among the various potential reasons, researchers have found that we may choose to wear luxury goods in an attempt to gain social status, a concept that is explained by costly signaling theory.¹⁰ While designer shoes may seem to be an unreasonable expense, society provides a social incentive to people who pay for premium shoes. This example prompts us to look at the relationship between business and consumer from a different angle.

The idea that businesses are more rational than consumers isn’t based on the notion that businesspeople aren’t susceptible to the same social pressures and psychological conditions that face consumers; rather, it is based on the recognized informational advantage businesses possess over consumers. And, this informational advantage absolutely serves to capitalize on the aforementioned social pressures and psychological conditions that all humans are subject to.

As individual consumers, we are parties of one, whereas businesses are parties of over 70,000, like Nike, and 450,000, like Accenture. Businesses pool together a relatively large volume of resources, including people and technology, to maintain the upper hand in the business-consumer relationship, affording them the ability to be relatively more rational. And today, the rapid rise of data and analytics capabilities significantly boosts a business’s ability to be logical, to quickly and effectively run a wide range of scenarios and test hypotheses at a massive scale. Now that businesses can use technology to more effectively predict future market behaviors, they can stay ahead of the game, beating competitors to the next best thing, and hitting consumers at the right time with just the right message.

But it really isn’t all that simple. Businesses may have tons of data and immense computing power, but they are actually struggling to balance data-derived insights with the valuable, but subjective, expertise of their staff. At the same time, consumers have access to more information than ever before, which has a sort of equalizing effect that counterbalances the informational advantage companies have traditionally counted on. Consumers are also starting to acquire advanced technology that gives them analytical capabilities of their own, so they can make purchase decisions that serve their own interests, based on their unique perceptions of value.

Businesses cannot continue operating under the expectation that buyers have limited options, are less-informed, and value product usefulness over other less direct factors. Companies can try to keep their edge by throwing more resources at data science, but this is likely to result in an arms race of sorts between a handful of mega-corporations that vie to conquer specific categories. However, I would advise businesses, including the mega-corporations who may continue expanding their data science capabilities, to turn their attention to building honest relationships of trust with their audiences. When consumers experience a negative experience with a company, whether it’s due to a faulty product or data breach, they will seek out alternative suppliers that they can trust and relate to.

We’re all biased, and that’s ok.

No matter how much technology or process we work into our decision-making processes, business outcomes will be influenced by some degree of bias. In this respect, we’re talking about decisions-making processes programmed as algorithms that determine how technology responds to a range of inputs, as well as the way employees think about solving business challenges and executing on their objectives. If bias cannot be removed in totality, then the question that arises is “how can we keep bias to a bare minimum?” Bias itself can be reduced greatly by implementing rigid processes and rules that limit subjective thinking, and simply being more cognizant about the presence of biases across the enterprise.

Because of the resource advantage, organizations are less prone to bias-influenced decisions than consumers. But there are many times in the life of a business where just one decision can make or break the company. Company leaders must actively and deliberately seek out the biases and tendencies prevalent in the organization and neutralize any negative effects. For example, the tendency for groups of employees to agree with their leader’s views, known as sunflower management, nurtures a slow business environment devoid of the positive friction and debate that stimulates new ideas and growth. The loss aversion bias accounts for a person’s tendency to weigh potential losses great than they weigh potential gains, resulting in decisions that are overly risk-averse. These types of behaviors can become some embedded into a company’s culture that they’re often difficult to identify as a problem’s root cause.

The thing is, this stuff isn’t hit-you-in-the-face obvious, it takes considerable effort to find biases, hold company-wide conversations about them, and replace them with standardized processes to restrict subjective opinions in areas where objective facts should be the priority. Biases add uncertainty to business operations and adulterate the company’s base of information. In published scientific research, something we assume to be well-controlled and reliable, bias is often the reason most research findings can be proven to be false.¹¹ Even when businesses set up formalized research studies, they have to be mindful about the risks involved and avoid celebrating too soon under the expectation that “the numbers don’t lie.” The research that generated those numbers may very well have been biased enough to deem them unreliable. In the thought- provoking 2017 paper titled “Biasing Research: Can Science be Trusted?” the paper’s authors showcase, with examples, how bias accounts for fundamental study design mistakes such as “sampling on the dependent variable” and “relying on correlations rather than randomized controlled experiments,” which result in findings that are distortions and misrepresentations of the truth.¹² It’s even more troubling to think that research findings may go unchallenged because they support our opinions or preconceived notions, which is explained by confirmation bias.

Since most organizations don’t have mechanisms in place to identify bias, we must build additional capacity in our organizations to address this challenge in a formal manner. Companies with the most limited resources may need to give staff a crash course on biases and implore them to be more cognizant about how biases may be introduced into business decisions. Others may take a first step by forming a small, multi- disciplinary team to dig into business processes, conduct interviews with staff across the company, and define key priorities. In any case, it’s important to engage social scientists, with specialized expertise in these very matters, to ensure that research conducted at the highest standards and findings assessed as objectively as possible.

IT’S SO NOISY AND EVERYTHING IS HARD.

Sometimes it seems like all we’re doing is running around reacting to things we cannot control. We’re constantly being interrupted, and things just don’t seem to go the way we planned them. One person might say this is the result of over-reliance on flawed human judgment, instead of algorithms that reduce noise.¹ And Another person might say that amid this craziness is where we find our best opportunities and create unprecedented insights.² Perhaps both perspectives are correct, and what we really need is to dig in to the noise to challenge our knowledge, to discover context.

In his 1964 best-selling book Understanding Media: The Extensions of Man, Marshall McLuhan posits that any content is less significant than the medium which carries it, because the medium, not the content, shapes human senses and perception, and thus the way we perceive.³ From this perspective, we can begin to understand how important it is to investigate the underlying, less-than-obvious contextual features that shape the way we think about business.

I hope this book activated some sort of curiosity in you. The five factors themselves represent categories of context that can be explored to reveal a bigger truth—and add character to the information we consume. If there’s anything I hope to accomplish through this book, it is to motivate businesspeople to think differently, dynamically, and contextually.

IT’S SO CALM AND EVERYTHING IS NATURAL.

THE END