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June 2008

3 x 3 = 9x

The diagram comes from John Gourville’s paper, Eager Sellers and Stony Buyers (2006), and is one iteration of what he calls the 9x problem. I’d not come across Gourville’s work until yesterday, when I read Andrew McAfee’s 2006 post, The 9X Email Problem. Andrew’s post is so good, I hope I may be forgiven for reblogging a substantial part of it here:   

A while back I heard John Gourville, a colleague in HBS's Marketing department, talk about his research investigating why so many new consumer products fail to catch on with their intended audiences despite the clear advantages they offer over what's currently on the market.

His explanation was fascinating, and very insightful.  He said that we need to stop thinking about consumers as highly rational evaluators of the old vs. the new products, lining up pros and cons of each in mental tables and then selecting the winner.  Instead, we need to keep in mind three well-documented features of our cognitive 'equipment' for making evaluations.    

  • We make relative evaluations, not absolute ones.  When I'm at a poker table deciding whether to call a bet, I don't think of what my total net worth will be if I win the hand vs. if I lose it.  Instead, I think in relative terms --  whether I'll be 'up' or 'down.'

  • Our reference point is the status quo.  My poker table comparisons are made with respect to where I am at that point in time.  "If I win this hand I'll be up $40; if I lose it I'll be down $10 compared to my current bankroll."  It's only at the end of the night that my horizon broadens enough to see if I'm up or down for the whole game.

  • We are loss averse.  A $50 loss looms larger than a $50 gain.  Loss aversion is virtually universal across people and contexts, and is not much affected by how much wealth one already has.  Ample research has demonstrated that people find that a prospective loss of $x is about two to three times as painful as a prospective gain of $x is pleasurable.   

When combined, these three lead to what the behavioral economist Richard Thaler has called the "endowment effect:"  We value items in our possession more than prospective items that could be in our possession, especially if the prospective item is a proposed substitute.  We mentally compare having the prospective item to giving up what we already have (our 'endowment'), but because we're loss averse giving up what we already have (our reference point) looms large.   

And Gourville points out three factors that make the situation worse for product developers who want their offerings to succeed.  First is timing:  adopters have to give up their endowment immediately, and only get benefits sometime in the future.  Second, these benefits are not certain; the new product might not work as promised.  Third, benefits are usually qualitative, making them difficult to enumerate and compare.   

As if all this weren't enough, Gourville also highlights that the people developing new products are very dissimilar from the products' prospective consumers.  You don't go work for TiVo (to use his example) if you don't 'get' the potential of digital video recorders and think they're a really good idea.  And after working for the company for a while, having TiVo becomes part of your endowment; you think of things in comparison to TiVo, instead of in comparison to a VCR.  Both of these factors make it harder for developers to see things as their target customers do.   

Because of all of the above, Gourville talks about the '9X problem' --  "a mismatch of 9 to 1 between what innovators think consumers want and what consumers actually want."1  The 9X problem goes a long way to explaining the tech industry folk wisdom that to spread like wildfire a new product has to offer a tenfold improvement over what's currently out there.2  …   

Email is virtually everyone's current endowment of collaboration software.  Gourville's research suggests that the average person will underweight the prospective benefits of a replacement technology for it by about a factor of three, and overweight by the same factor everything they're being asked to give up by not using email.   This is the 9X problem developers of new collaboration technologies will have to overcome.   

1Gourville, J. T. (2004). Why consumers don't buy: The psychology of new product adoption, Harvard Business School Note #504-056   

2Andy Grove, Churning things up,  Fortune, July 21, 2003


Amongst poets

Adam Foulds came in to school on Thursday and read from The Broken Word (Sunday Times review here, Guardian here). Earlier this term, I read the poem in one sitting: it’s not difficult to do this, but it was, in any case, simply not a poem I wanted to break off from reading. It is very disturbing, not least because of the contrast between the quality of the telling and what it has to tell. Hearing so much of it read affected me greatly and, in winding up the reading, I slipped and called Adam ‘Robin’ — as his reading had melded in my mind with Robin Robertson’s also dark reading from earlier in the term.

Adam talked afterwards about the LRB review which lies behind the poem. You need a subscription, but the review, Bernard Porter: How did they get away with it?, discussed two books, David Anderson’s Histories of the Hanged: Britain’s Dirty War in Kenya and the End of Empire and Caroline Elkins’ Britain’s Gulag: The Brutal End of Empire in Kenya. Adam spoke about how Porter’s review, and then the two books themselves, shook the sense he had grown up with that, on the whole, and despite some shortcomings, British colonial rule had been a good thing. He had, he said, shared the ambient complacency about British rule. Porter’s review put it like this: “The accepted view of Britain’s decolonisation hitherto has been that it was done in a more dignified, enlightened and consensual way than by other countries – meaning, of course, France. It will be difficult now to argue this so glibly.”

Ambient complacency is a potent phrase, is it not?

Something else — unrelated — that Adam said after the reading also struck me: novels ‘take a group effort’. (His previous book is a novel, The Truth About These Strange Times.) They are so long — they can grow so ‘thin and wispy’ — a writer needs the collaboration of others to bring a novel into the world.

Of course, every author is different. Writing in The Observer’s Book of Books (a slim volume, given away free with the paper in May this year) about how he works as an editor (and drawing on his lengthy experience in publishing), Robin made just this point. His short piece should be read in full, but I can’t find it online. Here are some excerpts:

… an editor’s eye shouldn’t pass over a text too often for fear of losing the very objectivity the writer lacks. During a first read … I’m always watching myself for the first signs of inattention; any time that I’m stopped or distracted means there’s probably a problem in the text … If any changes do need to be made, I’d always ask the author to make them. After all, it is their book, and at this stage it’s still a thing in flux … You have to encourage the writer to see the problem, not just tell them there is one. Editing is about reading and listening attentively … I’ve always considered editing to involve quite a large degree of pastoral care.

What we hold in our heads

I’ve been remiss in writing up recent conferences, but I’m no longer sure that’s a bad thing. Instead of a summary that then, it seems, gets put away in my memory (here or elsewhere), I find I’m going back to things I’ve heard said, presentations made — and circling and circling. It seems to make for better thinking.

Here’s one thing I’ve been struck by, both when I saw it last month in Richard Sandford‘s geeKyoto presentation (Richard is a Learning Researcher at Futurelab; he’s blogged about geeKyoto here and his presentation is available here),

and when Matt wrote recently:

We see the world in fives: two generations back, our children, and our children's children, and ourselves. Time is a little planet with close horizons.

In his notes on Matt’s post, Rod excerpted and commented:

"And it's my job to carry the torch and god help me if I stumble, because I'm it now [...] and that's the burden of the middle" ... and even after kids arrive too: the burden of shepherding the generations either side on their journeys.

I don’t know for sure whether it’s true that no day goes by without my thinking of my father, who died four years ago this October, but his memory is always close and I often think of him. It certainly feels like not a day goes by without my thinking of him.

I know far too little about my grandparents’ and even, when I think about it, my parents’ lives.

And into my head comes the first part of Auden’s late poem (August, 1973), ‘The Question’. It’s short, so I’ll quote it all:

All of us believe
we were born of a virgin
(for who can imagine

his parents copulating?),
and cases are known
of pregnant Virgins.

But the Question remains:
from where did Christ get
that extra chromosome?

In his almost as brief discussion of the poem, John Fuller draws in Augustine writing about his parents, over 1600 years ago, in the Confessions (IX.xiii): ‘by whose bodies thou broughtest me into this life, though how I know not’.

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