The Behaviour Business. Richard Chataway

businesses, doing this has been proven to generate marginal gains (in terms of both efficiency and effectiveness) and achieve competitive advantage.

      Consequently, there are a number of things you can do to make effective use of the science to become a behavioural business:

       ensure you understand that people are most often in Homer mode, i.e. will not think unless they have to, and so create processes, systems, products and services that make it easy to achieve a desired behaviour;

       focus on collecting data on actual, not claimed, behaviour based on the desired outcomes;

       make hypotheses based on data and create infrastructure to conduct experiments to verify them, i.e. science the shit out of problems;

       encourage test-tube behaviours – promote continuous testing and learning, building of new hypotheses, and testing creative, counter-intuitive solutions;

       be prepared that some of these experiments may fail, and that learning from these failures is an important part of a growth mindset that delivers marginal gains in both efficiency, and effectiveness.

      Part Two: Delivering in Digital with Behavioural Science

      Chapter 5: How Digital Got its FANGs – the Behavioural Science of Digital Business

      ‘Making it easy’ in digital

      The largest global digital companies – the so-called FANG group (Facebook, Amazon, Netflix, Google) – are worth a combined total of over $2,350 billion at the time of writing. But none were the first to launch in their respective markets, nor was the technology they employed unique. They did not deliver that growth solely through technical innovation.

      In differing ways, every FANG company demonstrates how creating processes, systems, products and services that make it easy – by paying close attention to the psychology of customers – leads to business success.

      And yet, providers of digital goods and services often seem to forget (or ignore) that consumers frequently want their decisions – and therefore their lives – made easy for them. That the digital customer experience should be short, not long, and require as little effort on their part as possible. And not just minimal physical effort, like next-day home delivery, but mental effort as well.

      The most successful digital companies of the 21st century have minimised consumer cognitive effort. The FANGs have achieved market dominance in social, e-commerce, content and search by providing products that are not just driven by technological innovation, but go with the grain of behaviour, reduce friction, and make choice as easy as possible. They leverage instinctive system-1 biases and heuristics to provide experiences that are effortless, turning them into habits and making their products inherently addictive – with all the associated ethical and moral problems that causes, as we shall see later.

      Let’s take a quick example. Do you remember the heady days of 1998? When the biggest Presidential scandal involved an act of infidelity with an intern, European countries agreed to work more closely and introduce a single currency, and Britney Spears informed us that, oops, she had done it again?

      On 28 September of that year, a shiny new search engine called Google launched.

      Google was not the first search engine. It wasn’t even among the first 50. In 1998, there were dozens of similar products available, including Yahoo!, Altavista, AOL, and Ask Jeeves.42 Yet, two Stanford dropouts, Sergey Brin and Larry Page, were still able to create a disruptive product, and one that quickly achieved a near monopoly.

      Twenty years on, 85% of all internet searches in the UK are conducted using Google. It has been an astonishing rise, with virtually none of that growth fuelled by marketing. Most of Google’s marketing efforts have been focused on its other products, such as phones and voice assistants.

      Google’s innovation in the search market was not technological – their background tech was essentially the same as the other search companies – but psychological. The information Google provided was the same as other providers, but the way it was presented to users was different. What they were saying was the same, but how they said it was better. According to Nir Eyal, in his excellent book Hooked:

      “Google’s PageRank43 algorithm proved to be a much more effective way to index the web. By ranking pages based on how frequently other sites linked to them, Google improved search relevancy. Compared with directory-based search tools such as Yahoo!, Google was a massive time-saver. Google also beat out other search engines that had become polluted with irrelevant content and cluttered with advertising. From its inception, Google’s clean, simple homepage and search results pages were solely focused on streamlining the act of searching and getting relevant results.

      “Simply put, Google reduced the amount of time and the cognitive effort required to find what the user was looking for.”44

      Leaving aside the pitfall of survivorship bias (see below), this is a great example of how the digital behemoths have been driven by an evidence-based understanding of the psychology of consumers. Through that understanding, they have delivered products and experiences that are more useful, memorable, cognitively effortless and – therefore – more addictive than those of their competitors.

      Survivorship bias

      Source: xkcd

      The joke in the great cartoon above, of course, is that winning the lottery is down to blind luck. The time put in bears no relation to the chances of winning, but successful people will often post-rationalise success as due to positive character traits.45

      Hence the expression: “History is written by the victors.”

      How this biases our behaviour is that we tend to regard stories of success as more influential than unsuccessful ones, and often ignore the effect of chance on positive outcomes.

      One famous example of survivorship bias is explained by David McRaney in his book, You Are Now Less Dumb. It is the story of Abraham Wald, a statistician working for the Applied Mathematics Panel for the US Air Force during WWII.

      The Air Force top brass were concerned about the low survival rates of bomber crews – at one stage they had a 50% chance of surviving a tour of duty. They wanted to increase the chances of crews returning unharmed by reinforcing the armour on the planes. But they couldn’t reinforce the plane throughout, because it would make it too heavy to fly and steel was in very short supply.

      The military had recorded data on where the returning planes accumulated most bullet holes – along the wings, around the tail gunner, and down the centre of the body – and naturally their first thought was to reinforce those areas.

      McRaney explains: “The mistake, which Wald saw instantly, was that the holes showed where the planes were strongest. The holes showed where a bomber could be shot and still survive the flight home, Wald explained. After all, here they were, holes and all. It was the planes that weren’t there that needed extra protection, and they had needed it in places that these planes had not.”

      Wald experimented to determine which of the other areas needed the most protection, saving countless lives. His theories are still in use today.46

      By only looking at the planes that survived, the US Air Force gained a false picture of what success looked like. This bias blinded them to the fact that there is as much to be learnt from failure (if not more), and negated scepticism about positive outcomes. Accordingly, we should overcome our natural tendency to hide failures, because if we do not, they are much more likely to be repeated. And we should accept that often our successes happen due to pure good fortune.

      This is not only fundamental to a growth mindset, but is also the basis of experimentation. If you test five things in an experiment, and only two work, that isn’t a bad outcome, nor a failed experiment.47 You will have gained five valuable insights that will deliver a business advantage – by