Supported by Greenhaven Road Capital, finding value off the beaten path.
Martin Lindstrom was doing research for LEGO. He was a good choice because he loved LEGOs. As a kid, Lindstrom built a LEGO Land in his backyard. It was so popular that one day two – kind – IP lawyers showed up and asked him to call it something else.
LEGO saw 2003 as a time of change. Call of Duty was released and The Matrix trilogy finished. It seemed like kids wanted easier toys (everyone knows kids have short attention spans, right?) with more technology. LEGO adapted, making sets with bigger blocks, fewer steps, and less intricacy. Things only got worse.
Year-over-year Christmas sales fell 30%. LEGO headed out into homes around Europe to find out what kids really want. At one home the LEGO team asked a kid about his favorite possession and he pointed to a pair of ratty shoes. Those? Yep. Why?! Well, the kid said, those are my first skateboard shoes. That moment showed LEGO that kids only had short attention spans for boring things. The company shifted directions and found success.
It wasn’t that kids wanted easier LEGO toys, they wanted less boring ones.
Lindstrom calls these moments “Small Data” and said “these seemingly insignificant observations, is all about causation. The reason why.”
Lindstrom is a consultant, spending most of his time in planes, hotels, and client’s offices. He’s the author of Small Data, Brandwashed, and Buyology. We’ll look at his suggestions for creativity, how to focus on the customer and how we think fast and slow.
Phone and serendipity. There’s a joke that veterinarians are just like doctors only their patients can’t tell them what’s wrong. Lindstrom is like a consumer vet. How does he do this kind of work? Recently he got rid of his smartphone, “I don’t have a smartphone because it makes me detach from the world and stops my creativity.”
The problem isn’t the phone so much as what it replaces, boredom. “I’ve learned that creativity happens when you’re completely bored and that inspiration for creativity is when you start to see the world. Yet we hide behind the screen, a comfortable distance from the real world.”
This summer our family is reading The Lion, the Witch, and the Wardrobe. The story begins when four children are whisked to a countryside house to avoid the bombs of World War II. The children are nervous but excited, especially to explore the nearby woods. “There might be eagles. There might be stags. There’ll be hawks,” Peter exclaims to the others.
But the first day it rains. “Of course it would be raining,” groans Edmund. “Do stop grumbling, Ed.” said Susan. “There’s a wireless and lots of books.” “Not for me,” said Peter, “I’m going to explore the house.” On a rainy day, in the English countryside, within a large home, four children discover that a wardrobe is not just a wardrobe.
Fast forward to today’s English countryside and any home and with a smartphone, and the entertainment is quite different. The radio for Peter, Susan, Edmond, and Lucy had an effective library of one, whatever was being broadcast. Now the effective library is more like 11,000+. In his technology strategy analysis, Ben Thompson often brings up the moment when Netflix signed up to stream Starz to create an effective library of 11,000. A few months early the iPhone was released. Then, Facebook published its mobile site.
From the world of Narnia in 1950 to the world of the smartphone in 2008, effective libraries crawled along until they suddenly jumped. When I was a kid it was easy to be bored. I watched ESPN SportsCenter every summer day but only for an hour. Then it repeated itself and I was bored. Try doing that on YouTube when YouTube’s incentive is the opposite.
Yet we need to be bored.
Ed Sheeran told Howard Stern, “The worst thing in the world is being in the studio and you’re, like, mid-flow, bang bang bang, and you get a text and you go into your phone and that’s an hour of your time gone.”
To stop the flow no-nos Sheeran’s apps had to go. He deleted a bunch. “If you don’t have any distractions – I was literally writing four or five songs a day ‘cause there was nothing else to do.”
Lindstrom’s research revealed that too, “Even if you have a smartphone on a desk that’s not yours, it will affect your performance negatively.” Kenneth Jeffrey Marshall said, “I don’t own a smartphone. I don’t own a television. I don’t have a Bloomberg terminal. All of that seems to have led to better decisions. There’s less noise, and little loss of signal.”
With Starz on Netflix, phones in pockets, and infinite feeds we consume and assume rather than observe and wonder.
Brian Grazer, curiouser raconteur wrote about curiosity as a prerequisite to serendipity. You don’t need a smartphone, an internet connection, or an encyclopedia. You just have to notice things and ask questions about them. It’s like when Neo sees a glitch in the Matrix or when you pause and say that’s interesting.
This is hard for us to do because serendipity and curiosity aren’t linear. There’s no cause and effect and as people, we love to see cause and effect. Lindstrom notes that “Clue gathering is never linear.”
David Epstein told Patrick O’Shaughnessy this when they talked. During his research, Epstein reads ten journal articles a day, sometimes veering in odd directions. That’s okay.
Rabbit holes and wardrobes both lead to interesting places, often more than smartphones.
Outsider POV on the customer. Businesses succeed when they serve customers and earn sustainable profits. But, “Business are struggling right now because they don’t understand the customer.”
Why is that? “There’s a huge difference between selling to you and listening to you.” Lindstrom put his phone away and started to listen more. In his books, he writes about being in different homes around the world and watching what people do, what people hang on their walls, what people store in their refrigerators and where.
I have a neighbor who doesn’t recycle. At all. This amazes me. At our previous house, we sorted and transported our recycling. At our current house, we have a single stream bin and a combination of lasers, pressurized air, and algorithms sort it. For us, it’s easier. For my neighbor, it’s not.
That’s the kind of point-of-view a business needs to understand. Priors are important because humans compare in relative, not absolute terms.
David Halpern’s work in the United Kingdom is probably the best application of the behavioral economics work done by Kahneman, Tversky, and Thaler. Halpern reflected, “We’re not very good at estimating the absolute value or price of something but we’re pretty good at estimating relative to something else.”
Like me, Halpern is willing to pursue easy environmentalism. While was in charge of Britains ‘Nudge Unit’ Halpern noticed that if more people insulated their attics they’d use less energy and save more money in the future. Using a direct mailing, Halpern and his team notified people of the potential savings.
Rather than absolute terms (all live on the planet will die unless…) they used relative terms (you could save money…). But almost no one took them up on the offer.
Here we should hear and heed Lindstrom. Go sit with your customer. That’s what they did. Halpern’s Nudge team went out and talked to people. Everyone wanted to save money but that only happened in the future. There was a price to pay to get there. It was costly, not in money per se but in something else. It’s a cost every adult has borne at one point. Cleaning out an attic is a pain in the ass.
There are decisions to make about what to keep and what to pitch. How many photo albums are enough? Will I ever go skiing again? Why did I buy this in the first place? Could I sell this and if so for how much?
With this understanding, the Nudge team started sharing coupons and connections to movers who would at least bring everything down. That made it easier. Rather than a physical and psychological effort, people had half that. Halpern found out when he talked to his customers, in this case, fellow citizens.
Lindstrom has also worked with IKEA and showed up one day to meet with the CEO only to find he wasn’t in his office. That’s odd. Lindstrom checked with his secretary who explained that he was in the store.
When Lindstrom finally tracked down founder, Ingvar Kamprad, he was working at the cash register! Lindstrom said, “If you want to study animals, don’t go to the zoo, go to the Amazon.” If you want to understand customers, don’t use spreadsheets, go to the cash register.
We looked at the Pixar fairy tale and how unlikely it was…
…but part of the reason the company made great movies was the field trips. Ed Catmull wrote, “Many on the crew of Finding Nemo also became scuba certified.” For Monster’s University, the crew visited MIT, Harvard, Princeton, UC Berkeley, and Stanford.
When John Lasseter and Catmull got to Disney they insisted the animators go to New Orleans for The Princess and the Frog. “Attending the Krewe of Bacchus parade on the Sunday before Mardi Gras gave them a vivid frame of reference when they animated a sequence based on that festival.” Catmull explained, “The authenticity it fosters in the film always comes through, even if moviegoers know nothing about the reality the film is depicting.”
The Pixar teams had to go there because they couldn’t listen to scuba divers, professors, and parade queens. That introduces Kulturbrille, culture glasses, that tint whatever you see.
Lindstrom said, “Familiarity, in fact, is at best counterproductive, and at worst, paralyzing.” Mark Ritson said that the early days for a consultant are the most important because, “The minute you start getting paid to work for a company, product, or service, it is impossible to see that product the way the customer sees it.”
Lowes Foods in North Carolina asked Lindstrom for help and in turn, Lindstrom asked everyone there for something. Rather than do his own research, Lindstrom took the store employees with him. “Why not issue a report? There’s no emotion to a report. But if you see a person cry, or emotionally affected, you will realize it has more impact than 10,000 people in a report. We infused empathy into the minds of the employees.”
Then, when they were working, the employees understood the why.
Customers hire businesses for all kinds of jobs to be done. Sometimes they know, sometimes they don’t. It can be clear, or opaque. Whatever the conditions, listening to your customers is crucial.
Buyology. Lindstrom’s book, Buyology, is an academic-like approach to how people unconsciously react. “Emotion is a sort of autopilot we’ve inherited through millions of years of evolution,” Lindstrom writes.
The book has many sections on smoking, in part, because Lindstrom’s mom was a smoker. “I noticed that when there were no ashtrays around my mom smoked less. Not because it was inconvenient but because it didn’t remind her to smoke.”
Using this insight he put people in an fMRI machine and wondered if Mark Ritson’s brand codes.
This is the DNA of a brand. There’s a story, maybe true but definitely helpful that the classic Coca-Cola bottle had to be designed such that even if it was smashed it someone could recognize it.
Cigarettes companies cannot advertise on television and this constraint turned one of their weaknesses into a strength. Without one medium, the cigarette companies got really good using the others. Smokers in an fMRI had similar brain activity when they saw cigarettes or a camel, mountains, or rugged cowboys.
However, when asked, people said it wasn’t subconscious associations. Lindstrom said, “Feeling the emotion is a process distinct from having the emotion in the first place.” And we post-rationalize. Jonathan Haidt said, “The conscious mind thinks it’s the Oval Office when in reality it’s the press office.”
Lindstrom saw this strongest in Coke and Pepsi test. If fed with a straw, participant’s brains and surveys reported liking Pepsi more. If asked, participants said they liked Coke. Like Dominos pizza, Pepsi had negative brand equity when compared to Coke.
Lindstrom wants people to ask questions and listen to the answers. That means putting down your phone and heading out to your customers.
This takes work. Lindstrom is on the road almost all of the year, but it’s an important job. Ron Shaich asked customers why they wanted their bread sliced. Eric Maddox asked why one person hung around another. Brian Koppelman asked why poker players (and then billionaires) talked a certain way. These are glitches in the matrix or ‘that’s interesting’ moments.
Sometimes we know why we do things, sometimes we don’t but that’s just a reason to ask more questions.
Thanks for reading.