Amazon is one of the leading eCommerce businesses around the globe. In this episode, former Amazon executive and the author of Think Like Amazon, John Rossman, provides some strategies and ideas on how to think and win like Amazon. He also shares his thoughts on the impact of perception on how we run our business.
The best companies have experimentation as a core competency where they ask and answer decisions using experiments. Chris Goward, an author, digital disruption expert, and the Founder of WiderFunnel, provides insights on using experimentation as a way to achieve marketing success and business decisions. Chris also talks about conversion rate optimization, changing culture, improving curiosity, and more.
I have John Rossman and Chris Goward here. John is an advisor to innovators. He’s the author of Think Like Amazon: 50 1/2 Ideas to Become a Digital Leader and Chris is the Founder of WiderFunnel and GO Group Digital. He’s an author and keynote speaker. Both of these guys are so interesting.
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Think And Win Like Amazon With John Rossman
I am here with John Rossman. He’s a former Amazon executive, author and expert on digital disruption. He’s the Managing Director with Rossman Partners, specializing in technology, strategy, multiple multichannel operations, scaling and platform enablement. I’m looking at your bio and I know there’s a lot to get out here because there are so many things that you’ve done, John. I’m excited to have you.
Diane, thanks for having me. It’s great to be here.
I was excited to talk to you. I think that you’ve done a lot of interesting things and a lot of people love to hear the word Amazon just because it’s so different and something that nobody else has done in the past. What you write about ties in so much to your experience working at Amazon and what you’ve learned from that experience. I want to get a background on you because your book Think Like Amazon: 50 1/2 Ideas to Become a Digital Leader, which I love that. What led to your career with Amazon? Can we get to that point?
I was at Amazon from early 2002 through late 2005, so for about four years, I got to launch and scale the marketplace business. That’s where third parties sell at Amazon.com. Now that’s over 58% of all units shipped and sold. To me it’s like you think about the way back machine. When I joined Amazon in 2002, 90% of the business was books, music, video and we did the first billion-dollar quarter was that holiday season of 2002. When you compare it now, it’s so many different categories, so many different businesses and it’s about a $280 billion organization. A lot has changed since then from a business standpoint, but how they think about leadership, how they work as an organization, how they’re systematic about their innovation. How they pay attention to the details and the business through metrics and instrumentation, all of those things are the same.
While it’s been a long time since I’ve been there, I’m always testing these ideas with my friends and colleagues at Amazon. I’ve had the distinct opportunity since I left Amazon in late 2005 to be testing and utilizing these ideas with my clients to help make change happen. It was a client of mine at the Gates Foundation, a guy I still work with, Greg Shaw, who actually is the coauthor of Satya Nadella’s book Hit Refresh. Greg was a client of mine at the Gates Foundation and it was six or seven years after I left Amazon. Greg came to me and said, “John, you do a nice job of taking little anecdotes from Amazon and putting them into our work. We ought to do a book.” That’s what’s led me to Think Like Amazon. I always say the book is not about Amazon. It’s about what leaders can take from a company like Amazon to put into their own business to operate better, to create better leadership, better accountability, more customer focus and to be more innovative culture.Every once in a while, you're going to learn something new and you have to be willing to disconfirm the bias that you already have. Click To Tweet
That’s obviously what I love to talk about is how to be more innovative. That’s why I research curiosity. I use a lot of information on my courses. I teach a lot for different universities still and we often touch on Amazon’s culture and how it is or isn’t like Zappos or Whole Foods or some of the things that they’ve taken over and what’s good about it and what’s not good about it. What did you think was the best and the worst of the culture at Amazon?
It’s hard to circle in on one thing that’s the best at Amazon. I would say one of the things that stand out is it’s focused on trying to avoid bureaucracy. Even when it was a small company, when I was there, Jeff was very mindful of like, “I want to create a big company that acts like a bunch of small companies.” Many of the things that they do, from metrics to the two-pizza team model to how they architect their software and their services to how they think about accountability and being deliberate about making decisions. All of those things are to help avoid bureaucracy, which is the number one concern for Amazon. It’s no competitors. It’s not the government. His biggest concern for Amazon is slowing down and becoming bureaucratic.
I think that was the best part of Amazon was you could get things done in relative terms pretty fluidly and everything. The worst part of Amazon and you could consider this either a feature or defect and everything, which is why you have to deliver results. That’s actually the fourteenth leadership principle. There are fourteen leadership principles of Amazon. The first is customer obsession. It’s the most famous, the fourteenth is delivered results and leaders have to deliver hard results despite setbacks and despite dependencies. You didn’t get to point the other direction in Amazon. Simply learning the nature of that type of accountability is hard for people where they come from different businesses and cultures who operate differently internally where they strive more for getting along than necessarily getting results. At Amazon, you have to do both. You have to get results and you have to get along.
There’s been some talk about like work-life balance issues there and how much you have to get done. Was it over the top?
It was busy, but the thing it forced you to do was to be deliberate in how you measured your business. This concept of instrumentation and monitoring to understand the details of your business, but no doubt, in a lot of their leadership principles are around insisting on the highest standards and knowing the details of your business and everything and you’re both operating and launching new products and new capabilities all the time. That’s both the best and the worst of it, which is there’s so much to do and they have a big vision and a big appetite and you’re free to do it, but you’ve got to get it all done.
I think that it’s changed to some degree since I was there. They’ve become much more aware of the work-life balance and creating different paths for different needs and helping people be more successful there. That wasn’t a big essence when I was there. They’ve progressed based on feedback and criticism they’d gotten from many different angles. One of the things I admire about the company is they’re willing to change their perspectives on things and they don’t think they’re perfect. Being curious is part of that introspective process that you go through, but it’s also being willing to listen to your critics and take from your critics the important things like, “What is the essence of the truth of the criticism and what do we do about it?” without diluting the things that you believe in.
I want to get into the curiosity thing, but you made me think of something before we jump to that because of Whole Foods. Mackey was very well-known for his conscious capitalism thinking. I’m curious how that tied into the Amazon thinking. Did they embrace it?
Tell me a little bit more about conscious capitalism.
I think that giving back, you can make money and still do good things. A lot of people look at organizations as just money and then it’s all about profit. You can be profitable and still do great things for the world. There’s a consciousness behind that capitalism. I don’t hear a lot of that about Amazon. I’m curious about how the culture match. Did you think that those were good culture matches with Amazon and Whole Foods or Amazon and Zappos who are known for loving their people and giving a certain amount back and all that thing?
I think where there’s a great alignment between a company like Whole Foods and Zappos and a lot of Amazon’s acquisitions like PillPack, tend to be two core elements. First is an obsession with the customer and the customer’s experiences. I think that is shared between all of those brands and everything. The second thing is they believe in innovation in the business model. Whether it’s a technology-centric approach to that or merchandising or other aspects of it, they believe in innovating the business model. I do think that the concept of conscious capitalism, while it’s not center to the Amazon brand proposition, there are streams of that everywhere in the business. Typically when you’re doing the right thing for society, you figure out a way to also make it a good thing for your business.
For example, Amazon is a leader in changing the way that products are packaged to reduce the amount of waste and all the clamshells and clutter that go along. They’ve had for years this whole program called frustration-free packaging where they’ve been the leader in working with brands to reduce the amount of packaging that shipped along with packages. Everybody wins in that type of program. Their AWS business, their cloud business is a leader in green energy for powering data centers, which is a big aspect of the consumption that they need to put in for that AWS business. They’re a leader in that. They’re also a leader in a lot of employment programs for veterans and an education for their associates and everything. I don’t think they get enough publicity for those things. It’s not like for Whole Foods, it is center to their brand. I think it gets displayed more prominently. For most companies, it’s not as center to the brand. You’ve got to look under the covers but it’s definitely there.Amazon gets a lot of publicity for all the innovative things they do but not for what a world-class operating company they are. Click To Tweet
It’s fun to watch what Amazon does because it’s a massive thing. I always wondered if Bezos or any of those guys that come up with these companies, the Elon Musks of the world know how big things can possibly be. If you ever did, it would freak me out, thinking about how you would ever keep up with it. You’re taking all that you’ve learned and you’ve created these great ideas and I wanted to touch on them. I want to know the half ideas. I’m sure everybody asks you that, how do you have 50 1/2 ideas to become a digital leader.
Especially over the past years, I’ve done probably 300 keynote discussions. I meet with leadership teams. I get asked basically the question of what would Jeff do questions and everything. Like how would Amazon think about this? How would Amazon compete on that? Will Amazon enter my market? Just every variety of that. That was my journey or my education process to talk about even in a more discreet way all these little things that we did at Amazon to get results that we wanted. Some of them are about culture, some of them are about business strategy, and some of them are about operations. Some of them are about leadership and everything.
That’s where I broke down into these discrete chunks, depending upon the situation. The only problem with 50 ideas is there are 50 ideas. In any one circumstance, probably two or three of those are the right ones to lead with. That’s where it takes wisdom and judgment to evaluate which tool, which technique do I put in at the right point. I think it’s always nice to have guiding principles or things that you believe in. The question you always have is, “How do I operationalize it? How do I make it real and everything?” For example, if you talk about a principle about customer obsession, how do I make customer obsession real?
The idea, the lofty principle with here are some mechanisms, techniques, tools, measures, or questions to help make that a real capability within your organization or within your team. The half idea gets back to this notion of this book isn’t about Amazon, it’s about you. The thing that I’ve noticed and I’m an engineer by background, I’m not a psychologist, I’m not a coach or a change expert on an individual basis. As I’ve worked with leaders about this notion of transformation, innovation and digital, the thing I’ve become convinced of is everybody thinks this was about an organizational change and it’s not. It’s about personal change and leaders being willing to personally make changes in what they believe in, how they act, how they spend their time and money. The half idea, it basically puts it back to the reader and says, “What are you willing to do differently?” I’ve given you 50 ideas, but none of this matters if you’re not willing to make some personal change here. That’s where I put it back to the reader in their journey of personal change.
That ties into some of my work with perception, which you talk about wisdom and judgment and what they believe in and how much is perception part of this process of cultural change. Did you learn much there since you’ve written this book or in any other part of your life about how much our perception impacts how we do business?
The way I interpret that question is that’s all about the biases that we bring. You’re the expert on this, not me, but there’s this concept of confirmation bias, which means, the way I understand it is as humans, because we have so much clutter, so much information, especially senior people, you have to filter things through the lens of what you already believe in. What that does is it sorts everything into reconfirming what you already believe. Part of the nature of this change has to be willing and a conscious effort of disconfirming the things that you believe in. 90% of that exercise is, “I’m going to prove out what I already believe,” but every once in a while you’re going to learn something new and you have to be willing to disconfirm the bias that you already have. That to me has been the perception is everybody perceives, “Amazon doesn’t run a profitable business. They’ve had this luxury of doing this. It’s not true.” “Amazon wouldn’t ever enter this space. They can’t deal with the complexity of my industry.” It’s probably not true. My customers would never accept an alternative approach or a more digital approach or do a new business model. It’s probably not true. The perception is that the things that have made you successful in the past might be the things that limit your growth and your innovation in the future.
Marshall Goldsmith is famous for saying, “What got you here won’t get you there.” Perception can keep you in status quo thinking. I like the thought of debating the counterpoint, taking the opposing viewpoint on things. I would think I would like to see companies do that more often. Pick your side here. You’ve got to argue the other. I’ve done that in some of my courses. I’ve had students put themselves in Ken Lay’s position and try to defend what he did, to try to figure out what he was thinking with Enron like, “Why would you do that?” You don’t want to be on his side, but I think it helps you see things from a different perspective. I don’t think we do enough of that in education or in the business world. You and I talked a little before about some things that Amazon did to develop curiosity, which is important. Can you talk about the pilots and the things that you used? I wanted you to talk about him.
Being curious is actually one of the leadership principles. It talks about leaders work actively to disconfirm their biases and they bring in different perspectives and they’re curious about the future. Again, Nice Principle, “What are some things that I can do to help develop that both as an individual and as a team?” Idea 48 in the book is titled, “You are What You Eat. Create Change via the Executive Team Reading Lists.” At Amazon, the executive team would take the time to pick a book, read the book and discuss it as a team. It was a way of evolving important topics over a period of time.
A lot of the books that were being read when I was there were around operational excellence and about how to construct architectures that scaled and sometimes technical topics, oftentimes like how we collaborate topics and a lot around operational excellence. It was through that process that they developed their perspectives on what do we do relative to that topic? They would debate it as a team, come to an agreement and then take forward an idea. It was actually through that process that Amazon’s perspective on writing narratives that we aren’t going to present important ideas, projects, proposals as PowerPoint. We are going to write narratives. That came through from exploring the concept of PowerPoint down Corporate America and how written communication is such a more rigorous process for exploring important ideas. That came from the executive reading list process at Amazon.
I like that idea. I think I see a lot of PowerPoints and I know a lot of PowerPoints right now are getting to be more artsy because you see TED Talks or they have a picture and then you bring it back and you look at it and go, “What was that about? I don’t even remember.”
In the right moment, they’re powerful and they’re important. Let’s talk about the limitations on that. First is in creating that PowerPoint, it doesn’t bring a group of people together to rigorously explore and clarify a set of ideas and to capture that so that we have to agree on it. That’s one limitation. The second limitation is it takes a great speaker, a great person to go along with that presentation. It’s difficult to scale it. You can’t easily pass it forward to others. The third is it’s hard to pass on detailed specifications or concepts or debate the fine items. When we’re talking about strategy or we’re talking about do I do this project or that project? You don’t want lightweight conversations. You want deep, rigorous conversations. A PowerPoint presentation is a difficult medium to do that with. The last limitation is it doesn’t stand the test over time. You can’t go back to it and refer to it easily and go, “This was our thinking at that point in time. Now we’ve progressed, we’ve learned a lot. What have we learned? What do we adjust relative to that?”Most innovation comes from the seeds and the hard work that you do in operational excellence. Click To Tweet
That’s why PowerPoint is important in one in a specific set of circumstances. For deep conversation about the decision, just business decisions, it’s a horrible and a lazy way to go about doing things. That’s the problem with all of these techniques, whether it’s an executive reading list or writing narratives to clarify ideas. It takes time. It takes effort. When you hear about Amazon being a difficult or demanding place to work at the corporate level, not in the fulfillment centers, not in customer care centers, but at that corporate center, it’s because leaders are both operational leaders and they’re doing all of this work in the future. That tends to create very full days but it’s also a lot of fun.
You talked about projects and I’m going to be talking to some project managers soon. If you’re giving advice on how to be more curious and effective based on what you’ve learned at Amazon, what advice would you give to project managers?
Dig deep on the customer experience, the true customer experience and think about it bigger than just your product, your service or your current circumstance. Go upstream and downstream in the customer experience. The second aspect of that explores the bad days when things go wrong. It’s when things go wrong that you start working the edge cases and where customer trust is built is, how you avoid or manage the negative components. When you explore everything through the eyes of the customer, it cuts across organizational boundaries, it cuts across roles, titles and all of that. It helps you build better insights into that. Amazon’s innovation approach is called start with the customer and think backwards. I’ve got four or five of the ideas that are all tied to that technique of Amazon’s, of starting with the customer and working backwards. I think all too often projects get centered around either a business function or the business case. It should always be led with how does this tie to our customer and how does this tie to our brand? Then tie it to your business process and your business case.
I think that’s so important and you’ve obviously got some great tips in this book because I liked that. Do you have a favorite that you want to share?
This isn’t going to be sexy, but it’s the hard work that goes on every day. Amazon gets a lot of publicity for all the innovative things they do. They don’t get that much publicity for what a world-class operating company they are. If you think about in the areas of supply chain and logistics, what it means to be able to deliver what they deliver and make changes. They launched a feature that lets you pick the day of the week that you have a package delivered. To be able to have that type of capability throughout an extended supply chain is a tremendously impressive thing. All of that is built on the back of day-in, day-out obsession around operational excellence. One of the stories I tell in here is about Relentless.com. If you go to Relentless.com, it actually resolves to Amazon. It was an early name that basis considered for Amazon. He keeps that domain alive as a message to the organization, which is we are relentless about getting to perfection for those things that impact our customers.
Operational excellence is the heart and soul of what goes on at Amazon and hitting your metrics every day. You need to be able to answer the question every day, “Did my customers have a good day? Yes or no and why? What am I doing about it?” That takes real-time data, great metrics and detailed understanding of what’s going on in your business. When you do that on a routine basis, when you go to the gym every single day and workout, what you’re rewarded with is insights for big ideas to innovate. This concept that operational excellence is separate from innovation, I think it’s a fallacy. Most innovation comes from the seeds and the hard work that you do in operational excellence.
Everybody’s worried about innovation. I think that what you want to sound like you’re talking about and what I focus on is getting away from status quo thinking. I think that so many people just do what they used to do and they’ll still get the same results and you can’t do that. The times are changing. You’ve touched on so many important things in this book. Are there any last thoughts that you want people to know about the book?
You can get it at Amazon. It’s in hardback, Kindle and Audible. What I hope is that I hear stories about how people took one or two ideas and then it made a difference in the way they work. That’s what inspires me on this is the cool feedback where these books land. One of my earlier books, I got a note from a lady who runs orphanages in Africa and how the book impacted how she was thinking about some management challenges she had. That’s amazing to me. I never expected to have an impact like that. That’s what I hope I hear about over time.
Was that The Amazon Way?
That was The Amazon Way, exactly.The best businesses are customer-obsessed businesses that focus entirely on the customer's experience, their needs, and their motivations. Click To Tweet
I hope everybody takes some time to check out your work and this was interesting. I enjoyed our chat. Thank you so much, John, for being on the show.
Thanks. You lead a great conversation. I appreciate it.
Experimentation Programs With Chris Goward
I am here with Chris Goward who is the Founder of WiderFunnel and GO Group Digital. When companies like Google, IBM, GM, HP and Motley Fool want to improve their business results, they call Chris Goward. I am very excited to have him here. I watched some of your talks and you have some fairly interesting, unusual things that I don’t get to talk about so much. I’m so excited to have you here, welcome.
Thanks for the invitation, Diane. I’m looking forward to this.
I was watching one of your talks and you casually mentioned, “I took analytical chemistry. It’s so easy.” I know a lot of people fall off in Organic Chemistry and some of the analytical stuff is super challenging. I remember having to take Statistics for my undergrad and grad doctorate. Your mind is definitely mathematical and very logical, which I think is important to be able to figure out some of this evidence-based decision making. That’s what I want to talk a little bit about. I want to get a little more of a background. I gave a little bit of a sneak peek at what smarty-pants you are, but what can you tell us about your background?
It’s been a winding road for a lot of us, how we get to where we are is not a straight path. I don’t know if I’d label myself necessarily as a smarty-pants or anything like that, but I started off in a different direction completely. I actually was intending on going into dentistry, of all things. I started in biochemistry to try to head that direction based on guidance from school counselors or something. I’m not sure. I ended up building websites on the side. I taught myself web design and got into the web. That was back in the mid-‘90s when the web was much less sophisticated than it is now. I was fascinated by the idea that anyone could publish something for the world to see. That’s when my interest in web and technology and then eventually marketing took off, which is of course a completely different frame of mind. WiderFunnel was I think the combination of that originally scientific mindset of curiosity and experimentation along with the marketing, persuasion and web. It was like this Venn diagram that popped out to experimentation and what was originally called conversion optimization with this company.
It’s a fascinating field and you are the brain behind LIFT Model, PIE Framework and infinity optimization process. You also are the author of the book You Should Test That. All of this ties into what I talked to my daughter about. She actually works at Tealium. My daughter’s Toni Rothpletz and the CEO there is Jeff Lunsford. As far as I can tell what they do is a tag management thing. I don’t know that in any way you would understand it. What I do know is that there is a lot of need for keeping track of what’s going on your website. How to optimize everything and how to know what customers are looking at what they’re buying, what they’re clicking, what they’re going away from and just converting sales. I was in sales forever, so I get the idea of you to want to convert. What is conversion rate optimization? Let’s start with that, for people who don’t know. Let’s talk soon assuming they don’t know.
It’s interesting you mentioned Tealium. We’re actually a services partner at Tealium and we love their tool. A lot of our clients are using Tealium as part of our services. That’s certainly right up our alley. I’m interested to speak with your daughter and hear about her experiences too. Conversion rate optimization was the starting point of the field that we’re in of what’s become more business experimentation. There’s a variety of definitions of it. Conversion rate optimization is the practice of experimenting on your website, running experiments to understand what works better for visitors to help them to make buying decisions or to fill in forms or to essentially improve the conversion rate on a business’s website of the visitors into customers or into long-term relationships with the brand. It started by experimenting to find out how to improve conversion rates. Since then it’s evolved to be much broader. I don’t like the term conversion rate optimization anymore because it focuses on a single metric. The goal of what we’re doing with experimentation is to help companies make better business decisions. That’s where the industry has gone. The best companies have experimentation as a core competency where they actually ask and answer decisions using experiments.
Like an A/B test, that type of thing?At the core of being an insight-driven business is having a continuous experimentation culture. Click To Tweet
Like an A/B testing. A/B testing across all different touchpoints with your customers.
I was watching one of your talks about some of the things that work and don’t work and you were talking about how you’d just be watching a screen and give you an offer and as you’re starting to think about, it flips to the next thing. Do you see a lot of that? I’m curious about that.
Thankfully, they’re starting to go away. Marketers are starting to realize that these don’t work. That’s one good example of this glaring terrible user experience where on a lot of homepages. At least a couple of years ago you would see the homepage would have this beautiful image and offer a headline and you’d start to read the content. You might start getting interested in it by understanding if it applies to you. Just as you’re about to click the button, it rotates into another offer and a completely unrelated topic comes up. Now you have to decide, “How do I figure out this experience? Do I now read this new offer or do I find out how to get back to that previous one that I was about to be interested in?” These things are our evidence of how many businesses make decisions. From the user’s perspective, this is a terrible experience, but from the businesses’ perspective, they’re solving their problem of running out of screen real estate. They have to rotate to another message. It’s self-interest from the business, but it actually hurts their results by making a poor user experience.
It’s hard because you want to keep up with what the latest technology is to look like you’re cutting edge on your site and then sometimes you don’t even know what you’ve picked, if it works. I think that there’s a lot of experimentation involved. What are leading companies using experimentation as a strategy in terms of how they market? There’s no right way to do this. There’s no book because it’s never been done before. How do you know where to go?
You alluded to something that is one of the dangers especially in marketing, in your website, or management is trying to look like you’re cutting edge. Trying to use the latest technology just because it’s available. Developers and designers will get excited about new functionality that’s possible, but often it hurts the end result or hurts the user experience. What leading companies are doing and there’s actually a Forrester Report that has been talking about the insight-driven business that is customer-obsessed.
The best businesses are customer-obsessed businesses that focus entirely on the customer’s experience, their needs and their motivations. At the core of being insight-driven, Forrester said is having a continuous experimentation culture. That’s part of the methodology and it’s broader than just experimentation as well. The customer-obsessed businesses are the ones who are making the fastest growth and improvement by being agile and iterating on what customers’ needs. You know having a clear path to the customer, the voice of the customer and understanding what makes the best experience for them.
If a project manager was reading this and they’re trying to redesign their whole website and system of how they interact with customers. This is interesting to me because I wrote about curiosity and to me, you have to ask questions and explore to find out more about things. A lot of people just will go by tried and true status quo ways of thinking. How can we improve curiosity maybe a project manager who’s thinking of doing the next big thing? Is there a big mistake that they’re making when designing these sites to begin with?
Often unfortunately what the project manager gets squeezed in the middle where they’re given a directive, a deadline and a budget, and they’re usually understaffed, under-resourced, and under time pressure to deliver the results. If they deliver a functional website, they’ve done their job. They get recognition for a job well done. If they get too curious and start to explore the edges and start to ask too many questions, then they can risk delaying the project or maybe going off track. Maybe challenging the assumptions of their senior executives, which doesn’t tend to go well and a lot of companies.
It has to start with a culture of humility and curiosity from the top level to allow people the room to make mistakes, to ask questions and to challenge. It reminds me of a book I’ve been spending a lot of time with our management team lately, which is The Five Dysfunctions of a Team. What it gets down to is all five dysfunctions are a product of a lack of trust. If there’s no trust in the organization or low trust and there’s an inability to actually challenge directives or challenge people’s opinions. Without that challenge, there’s no buy-in and personal accountability for the end result. It becomes a dysfunctional culture of just checking boxes and completing the minimum requirements rather than pushing new ideas and adding intelligence to the process.
We talked about this a lot about culture needs to start at the top. Let’s say somebody reading this and they’re not at the top and the culture is not there, what do you do?All levels of science require humility. If you can predict the outcome, then you're not experimenting. Click To Tweet
It’s possible to influence and I love finding those we call them the entrepreneurs inside these larger organizations or we call them the innovation champions. We’ve been doing our own strategic planning here and trying to identify the attributes of our best core customers. What we found is that they’re exactly those people who are challenging the status quo within this larger enterprise to push the idea and persuade others within the organization of the value of taking a customer-obsessed approach and taking an experimentation program into their decision making. It is possible by creating this, sometimes it’s skunkworks program or an under the radar program or something on the edges that don’t have maybe executive eyes on it to build some momentum. To get some quick wins from experiments and to then create some proof points and some momentum that then becomes this beacon of insights. Once executives get a flavor and a taste of what the value can come from real customer insights in their behavior and motivations, they can start to spark a little bit of curiosity up there in terms of, “How can we do more of this across the rest of the company?”
It’s so interesting that sometimes you have to have the proof but to get the proof you have to go around to get the proof. What you’re talking about ties into going to the customers, seeing what they want going in ways that people don’t think sometimes where they should be. I know Steve Jobs was always saying find out the customer what they want and then work backward from there. I think that when you’re setting up some of this stuff, if business leaders thought more that way it would be easier for them to come up with their experimentation programs. Do you think sometimes they rigged the end result because they think they know? It’s almost like when I would be a doctoral chair to students. They would tell me how their experiment was going to end. I’m like, “You don’t know and if you know, then you’re forcing it to do that.” Are they doing that sometimes in their experimentations?
You’re absolutely right. In all levels of science, it requires humility and if you can predict the outcome, then you’re not experimenting. That’s often the case. We’ll have companies come into to us and they’ll say, “We know about this experimentation stuff, but you guys must’ve learned enough. Give us the low hanging fruit. Tell us what to do. Give us the recommendation and then we’ll go and implement it.” We have to say, “I don’t think you get it yet and come back when you understand what experimentation means.” We can’t just go and dictate.
If we knew the outcome, we wouldn’t have to experiment. Besides, every context is different. Every customer situation is different, every interaction is different. The value of experimentation is uncovering new insights and it’s always surprising what actually works. It’s often counterintuitive and it’s often contradictory to the so-called best practices that are out there in all fields. Whether it’s UX design, marketing economics and business or even thinking about macroeconomics or microeconomics. One of the biggest, fastest-growing fields is behavioral economics, which is showing that the old economic models that we’ve been using for the last 100 years simply don’t work when you apply people to them because people are predictably irrational.
Do you have any great books to recommend on that?
Actually just that one by Dan Ariely. It’s called Predictably Irrational, which is fantastic. Of course, anything by Daniel Kahneman, Thinking, Fast and Slow is an important one to understand how the two thinking processes work and how people use heuristics and rules of thumb to make decisions that aren’t necessarily based on logic. They’re based on shortcuts that are there for a good reason. If you understand all of these ways that people operate, all of these targeted biases, then it makes more sense why people do what they do, but they’re not necessarily logical decisions.
How do you go over those biases if everybody’s perception is different? Do we just recognize that? How do we all work together with different biases?
Some of them are predictable. We know that some biases exist. For example, Dan Ariely did an experiment where he had a group of university students. It was at the lecture hall and he had them bid on an item that he put in front of them. It was some random item or record player, a vase or something. Before they bid on the item, he had them first write down the last three digits of their Social Security number. Completely random numbers they wrote on a piece of paper and then he had all of them bid on the item. What he found was that those who randomly had higher digits in their Social Security number made higher bids for the item. That’s a cognitive bias called anchoring. They had now anchored a randomly, completely unrelated number in their mind that caused them to now value this item higher. That’s a predictable outcome. There are 188 cognitive biases now that we know of that caused people to act differently.
That’s interesting because I researched some of that in my work and perception of how numbers had such an impact. I didn’t find it in sales. It seems like if you were going to go and try to get high bids for something, that you just flash a huge number of people. If you’re at an auction or something, I would have huge numbers going behind me on this screen. Has anybody done that? That’s what I’d like to know. I think it’s interesting, the impact of the higher number, the colors. I’ve had the author of Drunk Tank Pink and talking about how pink influences things. There are so many things that influence what makes people buy or do or how they perform. That’s why I like to quantify things. That’s why I thought it was interesting your book is called, You Should Test That. Testing to me, I always want to have an answer, a number and something associated with it. You are super quantitative, I imagine. Do you think that a lot of these companies aren’t doing enough testing?
What we’re seeing is that the fastest-growing companies have testing built into their core. Often it’s the incumbents, the larger organizations that are having difficulty. It comes down to changing culture, being afraid of being proven wrong. Whereas you’ve heard famously, Facebook has this culture of move fast and break things. There’s a downside to that too. I don’t think you should be trying to break things. Having the ability to experiment. Amazon is famous for having experimentation built throughout the organization from top to bottom. They actually have a metric that if you’re not failing, then you’re not trying hard enough. You’re not experimenting enough. We’re often seeing there’s a difference between the new entrance into our market versus the incumbents that have become comfortable with the top-down, waterfall decision-making process. These new entrants are completely reinventing how markets are operating by having that customer-obsessed experimentation of their core.
If somebody is reading this, who are you hoping would read your book? I agree that we need to have more failures to learn by or you’re just not trying in some respects. I meet a lot of people clinging to status quo thinking or not testing things enough because they liked the way they did things in the past. It worked but now it can’t get them any further. If somebody was trying to get more conversion and change things, what’s your main message for them?
Depending on the level of the organization, there are different things that are going to work for them. We’ve done a lot of research actually on how to assess the maturity of your organization from an experimentation perspective and where the barriers are in each organization. What I’ve been trying to develop since 2007 is more than just experimentation expertise or extermination practices. It’s easy to give people advice. What I want to do is much deeper than that and create reliable, robust frameworks that work in any situation. What we’ve tried to do is identify the common questions that people need to answer with in an experimentation program and develop them into frameworks that can become useful tools for anyone throughout the organization to use.If you're not failing, then you're not trying hard enough. Click To Tweet
For example, the LIFT Model was I think the first one that I developed, which helps especially UX practitioners, project managers, or marketers understand the perspective of their customer when they’re looking at their marketing touchpoints. It looks at the six factors that influence their motivation and ability to convert. The value proposition is the core of it, which determines the potential for your marketing success or your conversion rate lift, and then the relevance of the message to their needs and what they’re expecting when they arrive on that experience.
The distraction or anything that redirects attention from the primary message, the relevance anxiety that might be caused by any experiences on that page. The urgency that’s being created by the offer or the messages. All of these factors are an equation in the person’s mind when they’re in that experience. If it’s a positive equation, they’ll have the motivation to act. If it’s a negative equation, they’ll bounce off the page and you’ll lose them forever. That’s one framework we’ve got. All of these are publicly available. You can Google LIFT Model or the PIE Framework is one for prioritizing where to focus your time, energy and limited resources. That prioritizes your projects based on the potential for improvement, the importance to the business and the ease of implementation, which is PIE.
There’s the Infinity Optimization Process, which shows how to alternate between the expansive explorer mindset of looking for new discoveries versus the other side, which is to validate restrictive mindset, which is eliminating opportunities that don’t work. Having those two different mindsets is important for what I call the Zen marketing mindset of having that balance between creativity and analytics for behavioral science. We’ve been working with a model called the Limbic model, which understands that different types of people have different emotional drivers. They might be driven by a dominance, which is like winning and performance or stimulation, which is more of a curiosity and a pleasure versus balance, which is more of stability and quality. These different types of people are motivated by completely different experiences. By understanding your customer segmentation based on their emotional drivers, you can have much greater success and resonance by positioning your brands in the right emotional context.
That’s where a lot of that research is important. Understanding the voice of the customer by getting into their mindset and you can see patterns. It’s related to the customer type. Often different businesses will have different types of customers. A scientific buyer versus a mother searching for school supplies. These are completely different emotional drivers and you can create the appropriate resonance by understanding their emotional context and what they’re looking for. Those are examples of a few. In the book, I explain how some of those frameworks work, especially some of the earlier ones. A lot of people pick that up and use that. Also assessing where the organization is from a maturity perspective, we look at five components that one of which is probably holding the company back, which could either be process, accountability, structures, culture, expertise or technology. Usually one of those is the primary area that’s holding them back from being able to run a higher velocity experimentation program. Once you identify that, then you know where to focus energy and what to bring in to try to remove that barrier.
That’s so interesting because it’s what I do is curiosity. Once my assessment tells them what’s holding them back from being curious, once you can identify that, then you can move forward. That’s exactly what a lot of companies don’t focus on the problem, what’s holding them back. They keep trying to fix it without knowing that. I think you have to go back to the beginning. I could see that’s hugely important. A lot of people can get a lot of benefit from reading your book. This is a huge topic for so many organizations. I know when I went to the Forbes CMO Summit and some of these is such a huge issue of conversion and keeping customers happy and all of that. A lot of people would probably want to know how they could find your book and find out more from you.
The book is called, You Should Test That. It’s published by Wiley. It’s in Amazon and all the other places that books are sold. Some of our latest thinking is always being published on our blog at WiderFunnel.com/blog. We’ve got our strategist and thought leaders producing insights from the experiments and the new frameworks that we’ve been developing. We’re often at conferences as well and speaking at those kinds of things. We’re speaking at the Opticon Summit, which is Optimizely’s Summit and various webinars and podcasts.
I saw you spoke more than 300 events globally. I appreciate that you found time to do this and it was so much fun getting to know you, Chris. Thank you so much.
Thank you so much for your insightful questions, Diane. This is great.
I’d like to thank both John and Chris for being my guests. We get so many great guests. If you’ve missed any past episodes, please go to DrDianeHamilton.com. You can go to the radio to listen. You can find out more about curiosity if you go to the top. All the information is there. I hope you join us for the next episode of Take The Lead Radio.
- Think Like Amazon: 50 1/2 Ideas to Become a Digital Leader
- GO Group Digital
- Rossman Partners
- Hit Refresh
- The Amazon Way
- You Should Test That
- The Five Dysfunctions of a Team
- Predictably Irrational
- Thinking, Fast and Slow
- Drunk Tank Pink
- LIFT Model
- PIE Framework
- Infinity Optimization Process
- Opticon Summit
About John Rossman
John Rossman is an expert at digital business models, operations and organizing programs. He has led engagements on developing innovation processes, Internet of Things strategies, marketplace and API driven platform business models.
He is a sought after speaker on creating a culture of operational excellence and innovation. Mr. Rossman has worked with clients across various industries, including retail, insurance, education, healthcare, consumer products, industrial products and transportation.
About Chris Goward
Chris Goward is the Founder of WiderFunnel & GO Group Digital. When companies like Google, IBM, GM, HP, and The Motley Fool want to improve their business results, they call Chris Goward. Chris founded WiderFunnel with the belief that evidence-based decisions get better results.
He is the brain behind the LIFT Model®, PIE Framework®, and Infinity Optimization Process™, growth frameworks that consistently lift results for leading enterprises. He wrote the book, “You Should Test That!,” which redefined business experimentation and has spoken at 300+ events globally, showing how to create dramatic business improvements.
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