What gets mismeasured gets mismanaged.
The licence given to businesses by mainstream economics to make decisions while effectively ignoring psychological or perceptual factors is doubly disastrous for business decision-making: it focuses companies on improving the wrong things, and, by assuming consumers to be rational maximisers, it limits the notion of what improvements and innovations might most motivate different customers, who may be highly different in their preferences. It is hence creatively limiting.
To redress this imbalance, marketers and other imaginative business innovators need to use the methodology and vocabulary of behavioural economics to start to win arguments in the boardroom. They need to develop proper new metrics to complement the objective metrics which have become overused. Instead of measuring the length of queues or the overcrowding on trains, they need to measure the irritation of waiting or the level of inconvenience endured. It will take time to redress the balance – but thanks to books like this it is starting to happen.
rory sutherland
London, 2020
Introduction
If you are in business, you are in the business of behaviour.
Unless a business influences behaviour, it will not succeed. A business needs people to buy and use its products and services to generate revenue. It needs people to make and deliver those products and services.
Or at the very least it needs people to create those products and services, or to build and program the machines that create them. And it needs to do those things better than its competitors to survive and grow.
This much should be self-evident. But there are lots of things businesses do that fly in the face of the latest evidence on how, and why, people behave as they do. Or worse, businesses frequently don’t even try to change behaviour, but merely perceptions or attitudes, and wrongly assume behaviour will follow.
If there is one thing to learn from behavioural science, it is this: what people do is often not the same as what they say they do, or intend to. If a business does not employ this understanding of how people make decisions – that they are frequently driven by subconscious or external factors they are not aware of – they are wasting the business’s money (and that of any shareholders).
The good news is that in the last 50 years we have learnt more about how, and why, people behave as they do than we learnt in the previous 5,000. Like advances in medicine, technology, and computing, the growth of knowledge in behavioural science has been extraordinary. It has been driven by academic disciplines like behavioural economics, social/evolutionary psychology and neuroscience, and the work of a number of dedicated practitioners.2
A number of leading thinkers referenced in this book are now key advisors to governments and businesses around the world. Similarly, two key luminaries – Professors Daniel Kahneman and Richard Thaler – have been awarded Nobel Prizes this century.
There is much for businesses to learn.
But this is not a guide to the science, nor a list of biases or irrationalities in human behaviour, because (whisper), confession time: I am not a behavioural scientist – despite often being introduced as such (or a behavioural economist or psychologist) when I am speaking at conferences.
I am a practitioner.
My career has been based on applying the insights from behavioural science to influence behaviour. My knowledge and passion for the subject is entirely derived from a career which has focused on harnessing insights from this discipline in the private and public sectors.
A deeper understanding of behaviour can help you achieve a far greater impact. When I was working at the UK Department of Health, our head of anti-smoking policy once told the team we could potentially save more lives in a year than many surgeons do in their entire careers. It was then I realised the potential to change behaviour at scale by better understanding the real drivers of behaviour.
It also became clear to me that the ways in which the public sector used behavioural insights to help people lead longer, happier lives could equally be applied to other challenges.
Some of the behavioural challenges I have addressed include getting people to: stop smoking; join the armed forces; drink spirits rather than wine; pay for university tuition; submit their taxes; work more collaboratively; build flatpack furniture; complete their timesheets; and take public transport – as well as buy numerous products and services.
Developing a behaviourally informed strategy enabled my colleagues and I to win a global campaign of the year award in 2014 for a social media campaign addressing domestic violence. It also led to the development of the world’s most successful stop-smoking mobile app: My QuitBuddy. I have conducted training for call centre personnel, CEOs, marketing directors, creatives, TV continuity announcers, customer experience directors, university administrators and pretty much everything in between. I have briefed ministers of state, advised financial technology start-ups, and spoken at conferences of health workers, business psychologists and nutritionists.
The only way I have been able to have such a varied career is because I have been fortunate enough to study, read and collaborate with many more qualified people. You will see many of them listed in the acknowledgements – this book represents their thoughts as much as mine. In compiling this book, I interviewed 25 of the most inspirational and thoughtful practitioners to benefit from their best practice.
In these conversations I found that there was something all the leading practitioners had in common. Despite disparate academic and career backgrounds, they all shared an innate curiosity to understand how the mind works. They are eager to know why people behave in ways that might not initially make sense, to challenge conventional wisdom, and build better businesses as a result – just as we make progress in science. As Einstein said: “The important thing is not to stop questioning. Curiosity has its own reason for existing.”
Should you want to hear more from them, please listen to the podcast series that accompanies this book – and seek out as many books, blogs, tweets and utterings from these luminaries as you can.
One final thought before you dive into the wonderful world of behavioural science in business: these tools for influencing are more powerful than many realise. Recent global events are making this increasingly plain. The ethical risks raised by the application of behavioural science are important and will be addressed throughout the book.
My inspiration to pursue a career in applied behavioural science was derived from seeing its potential to help people make the decisions they want to make, and to help businesses fashion workplaces, products and services that improve our lives and contribute to the economy.
To make our lives better, not worse.
Now, let’s get down to business.
2 An important note on terminology. I use the term behavioural science in this book, rather than behavioural economics or social psychology (for example), because the insights used in this book come from a variety of disciplines such as those mentioned, and I find it is the best term to encapsulate a holistic study of human decision-making. Also, as we will see, a scientific approach is critical to effectively applying these insights.
Part One: How to Create a Behavioural Business
Chapter 1: Undoing Economics – A New Way of Thinking
Undoing economics
When i was at university 20 years ago, behavioural science as a field of study was virtually non-existent.
But now, things are very different. In addition to flourishing academic courses on behavioural science, behavioural economics and experimental psychology, there are over 200 behavioural insights teams operating with local and national governments