Inspiration

Albert Einstein

I was inspired to write the book Advantage by this little-considered fact:

Albert Einstein gave up his position in the patent office in 1909. What is noteworthy about this fact is another fact: in 1905 Einstein published four scientific papers that revolutionized physics. So, what did Einstein do in 1906 and 1907 and 1908? He worked in the patent office.

The physics community did not know how to react to this revolution at first. Perhaps this is what caused Einstein to later say: “If at first the idea is not absurd, there is no hope for it.”

Why Fight the Brain’s City Hall?

In the June 2011 issue of The Harvard Business Review psychologist Daniel Kahneman and colleagues present an article on attempting to overcome bias in business decision-making. Bottom line: decision makers can’t really overcome their own bias. Decision makers are swimming against a very strong current. My company, Tailwind Discovery Group is all about leveraging the existing energy, we figure out how to swim with the current. In talks I give on Behavioral Sales, I take exactly the opposite approach from Kahneman, I show you how to use bias to your advantage which turns out to be both, much easier and much more successful.

Kahneman, et al, rightly point out how insidious bias is in the workplace. When it comes time to make a decision, every one of us is overwhelmed by biases we don’t even see in ourselves. In some respects the power of the bias is given a boost by the hierarchical nature of internal relationships in the company. The decider is always the superior in rank.

In the article the authors point out that: the evidence we select in making a decision; how we weigh that evidence; and our bias toward ambiguity influence our ability to make good decisions:

“Confirmation bias, for instance leads people to ignore evidence that contradicts their preconceived notions. Anchoring (bias) causes them to weigh one piece of information too heavily in making decisions; loss aversion makes them too cautious. In our experience, however, awareness of the effects of biases has done little to improve the quality of business decisions.”...

“...this process is fraught at every stage with the potential for distortions in judgment that result from cognitive biases. Executives can’t do much about their own biases, as we shall see.”

Daniel Kahneman and colleagues bow to this fact. You can’t fight your own biases. But you can attempt to see bias at work in others, and use that intelligence to help fine tune your own decision a little bit. But you can only hope for a little bit of improvement because your own bias influences your ability to detect the same bias in others. Trying to overcome your own biases is like rowing a dingy up a waterfall.

In my Behavioral Sales talk, I show you, not how to overcome biases, but rather how to leverage them in your favor. With the Counterfactual-Hypothetical questions you will influence Anchoring bias in the buyer’s brain. Then with the Peak/End questions (as Kahneman himself showed in his work leading up to the Nobel Prize) you will influence the buyer’s brain cognitive bias. Done well, these two approaches will greatly boost your chances to win the sale.

Self Control as a Crucial Component of Success

Dan Ariely has an interesting blog entry today on self control:

http://danariely.com/2011/05/15/wait-for-another-cookie/

So this is Customer Service???

Yesterday I attempted to make a payment an received the following error (notice that they are talking about formatting my phone number and there is no phone number input box on the screen): (click on the image to enlarge)

Thinking I would be helpful to the site, I sent them a note pointing out this confusing error message. Part of the reason this error message makes no sense is that the phone number is not needed to process a credit card payment. So this is the response I received:

Thank you for contacting support.

It seems that the error message appears because the system cannot pull up your phone number in your profile or account information based on how you wrote it. Please correct the format of your phone number in the following link as instructed in the error message:

http://www……….(I've deleted the link for the blog)

Please do not hesitate to contact us again if you have other concerns.

---

Sincerely,

As you can see, it turns out that I am the problem. But I did not follow their instructions in the end. In the image above there is a blue hyperlink at the bottom of the input page and it turned out that (apparently they did not realize this in their computer) but I already had an account with Moneybookers and I simply went there and completed the transaction. Oh, and they did not require a phone number!!!

Taxes - I feel rich!!

Today, as is my custom, I did my taxes. 2010 was a less than stellar year for me. Alright, it was a pretty poor year. I am feeling good though. I paid only a little more taxes than a rich person!!

Forego Know-How, Forego Competitive Advantage

Nearly three years ago I blogged on Boeing’s strategic mistake of outsourcing the design and build of the 787. I wrote: “While Boeing still retains vast amounts of intellectual capital through its central role in the 787 developments, it is foregoing a tremendous amount of intellectual property in the form of know-how.”

Know-how is about experience. It is something that blueprints and instructions cannot impart. In the case of aircraft manufacturing is the the know-how of engineers and the technicians who put the pieces together. But know-how plays the same important role in any industry.

In his book The Wealth and Poverty of Nations, David S. Landes tells of the French needing an additional supply of their 75-mm field guns during WWI. They ask for US help and sent the blueprints over to the US. However, even though they followed the blueprints precisely the US team could not build satisfactory canons. It wasn't until a team of French workmen came over and showed the Americans how to make and assemble the pieces, that the American could build guns of comparable power and stability. - Know-how!

The 787 uses new materials and new designs. But these raise problems that were not anticipated by the engineers. Discovering how to solve those problems and how to get around these many little obstacles is what makes up know-how. Since it is 3rd parties who are doing this work, Boeing isn't even aware of most of these problems and solutions. Boeing has given away that know-how. And, more importantly, the know-how is now available to any competitor who wants to contract with the 3rd party.

Actually Boeing should have known this. Before all this outsourcing began John Hart-Smith, a senior technical fellow at Boeing gave a talk internally in which he pointed out the pitfalls of the outsourcing strategy

"Subcontracting of higher-level design work means partners may end up with the specialized knowledge they need to supersede the prime manufacturer. One must be able to contribute in some way to products one sells to avoid becoming merely a retailer of other people's products."

His main recommendation was:

"Retain sufficient in-house production manufacturing that it is possible for future engineers to acquire the skills needed to develop new products, without which all businesses will fail."

Of course, as an engineer he was thinking engineering, but the problem is more widespread. It is also the knowledge of the technicians in airframe, avionics, flight control, and powerplant who figure out ways to put things together that miss out on know-how.

Outsourcing is something that must be thought through thoroughly. When you outsource a portion of what creates your competitive advantage, then you risk losing control of the valuable intellectual property known as “know-how.”

Sams Club Update

Three or four posts down this page I wrote about the issue we had with Sams Club. I ended up writing a second letter to Brian Cornell's boss at Walmart. That got action. Finally, I got a call from a lovely woman at Sams Club who managed to sort it out, and got me the replacement filters.

We did join Costco and are quite happy with it. I am maintaining my membership with Sams Club too because they have some things that Costco doesn't. Well, actually, they have one thing I need and have the best price on it anywhere.