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So Much More than Experimentation

Posted on  16 August 10  by 

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In the last couple of weeks I’ve seen two articles in the business press extolling the virtues and limitations of applying experimentation to business issues.  The first article, in the summer 2010 edition of City Journal, outlines the history of randomized experimentation and its use in criminology and sociology.  But it also goes into business uses for this technique, including specifics from Capital One, Harrah’s, and GoogleThe Washington Post then picked up the topic, adding its own historic examples and business examples from Applied Predictive Technologies, including Kraft, Red Lobster, and Family Dollar Stores. While applauding the knowledge gained in these studies, the authors place more emphasis on the challenges and pitfalls of constructing valid, replicable studies of social phenomena. 

MREB view: Although we are somewhat bemused by the assertion in these articles that the application of experimental scientific principles to business is “recent” outside of “pockets” (see our history of the market research profession: Overview of Customer Information Sources Since 1910) we also celebrate research-based insight and recognize how difficult these insights are to generate. 

In addition to the methodological challenges raised in these articles, we have seen leading companies get very good at generating – and acting on – insight:

  1. Use multiple data sources in your insight generation process: to generate growth-driving insights, not just inform incremental improvements, you need to establish as complete a view of the customer and market as you can.  Gathering information from the broadest possible perspective will allow you to challenge conventional wisdom.  Tesco shared with us its Customer-Insight team organization, which brings together traditional research, data analysis, future trends, and location analysis to create a 360-degree view of its customers.  Unilever builds an objective foundation for consumer insight by immersing themselves in observations outside of their own areas of expertise and discussing all observations before allowing themselves to draw any conclusions.
  2. Seek differentiated sources of information: it’s not just the number of data sources you have, but the quality of those sources that determines the value of the insight.  Two resources for acquiring differentiated information at reasonable cost are those you work most closely with: business partners and research suppliers.  Creating networks of experts within your organization is a great way to tap into the tacit knowledge of corporate experts.  General Motors identifies, recruits, and motivates employees most able to contribute valuable information, and then assesses members’ contributions to ensure they are on target, and Sabre uses its internal social networking site to drive information and knowledge exchange throughout the company.  As for convincing supplier to deliver differentiated information, you need to prove what’s in it for them.  One bank we work with became a customer-of-choice to a supplier (which gave them access to scarce supplier resources) by identifying assets that existed within the company that the suppliers would value.   Things like business process optimization, research product innovation, or best business practices: providing nonfinancial, strategic value to your most trusted partners can greatly increase the power of your collaboration.
  3. Connect insights to business action: it’s one thing to raise the profile of “insight” within your organization, but another altogether to build your company’s ability to create truly differentiated insights.  Vodafone created an insight workshop that breaks down false assumptions about current insight-generation efforts, providing a significantly more demanding view of insight, and Lilly uses its own insight training to teach its business partners to assimilate and synthesize insights from multiple sources.  Another company found its own way to help its line partners own insight synthesis by creating a content portal for partners that compels them to review information from multiple sources before making decisions.

Have you seen increased interest within your business of a more scientific understanding of customer behavior and psychology?  How are you ensuring that the experiments and studies you conduct actually push your company’s strategy forward?

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