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Zara, Microsoft And GORE-TEX - Tapping Real-Time Instincts

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In a challenge to the phrase “Past performance is not indicative of future results,” I offer this alternative: “Real-time performance is indicative of future results.”

Studies have shown that, when forced to choose between two options based on instinct alone, participants make the right call up to 90 percent of the time. In a study at Tel Aviv University’s School of Psychology, participants were shown groups of numbers in quick succession – two groups at a time - and were asked to choose which of the two groups had the highest average. To determine the highest average of either group, they had to rely on "intuitive arithmetic."

Remarkably, when the groups contained relatively few numbers, the participants chose accurately 65 percent of the time. But when the quantity of numbers per group increased to the point where mental calculations were no longer possible (e.g. up to 48 numbers), the accuracy rate grew to about 90 percent.

Human intuition and instinct can be a powerful tool if harnessed properly. So how can retailers and brands tap into the instincts of their desired customers in order to understand what they value and to achieve the desired outcome of consistent engagement, loyalty and wallet share? The answer is out there and in forms you may not have realized existed.

Associate Professor of Management at Purdue University Karthik Kannan has been proposing the idea of “Design for Instincts” (www.designforinstincts.com) and explains it using the following three examples.

Zara, the most substantial contributor to the world’s largest fashion apparel company Inditex, has tapped into the instincts of the female fashion buyer, but not in the way you might think. You might surmise that it is their trend-right approach that appeals to a woman’s instinct to wear and be seen in the latest fashion trend. Nobody delivers the goods in time to take advantage of a trend like Zara. But in reality, it’s primarily Zara’s supply chain model that taps the instincts of the fashion-forward shopper.

A fundamental axiom of retail is to avoid out-of-stocks. For most retailers, “out-of-stock” means the cash register is silent. But women who purchase an item that they know will be out of stock feel special about owning a limited edition product.  Zara has tapped into this emotional, instinctive behavior of women by intentionally building a supply chain model which makes new products obsolete – and unavailable - quickly.

Zara’s model for delivering exclusive, trend-right and limited availability product speaks directly to the instinctive desire to have what most others do not.

Another example of where instincts came into play revolves around Microsoft and their use of “gamification” to solve a business problem. Even for Microsoft, finding enough resources to ferret out bugs is a monumental task.  Also, finding these glitches and testing for them is a mind-numbingly boring task that can only be done manually.  Ross Smith, the director of testing at Microsoft, translated the problem into a game where participant-teams from different regions within Microsoft competed to find bugs in their local languages.  This gamified bug-finding hunt was wildly successful.

The reason for the success was the translation from a boring one-on-one task to a design appealing to human instincts of cooperation and competition.  People instinctively spend enormous amounts of time playing games such as Angry Birds or Tetris. Microsoft simply turned this into a productive endeavor to solve a business problem.

The last example is GORE-TEX.  This is an organization with very little hierarchy in its organizational structure.  Two specific HR policies of GORE-TEX are worth highlighting.  After a job candidate works for thirty days with the firm, the candidate’s teammates vote on whether or not the individual can be hired.  Similarly, if an employee wants to rise up the ranks, he/she can form his/her own team.

Why does this approach work?  These policies are designed around the instinctive human behavior of self-organization. At GORE-TEX, leaders do not impose a set hierarchy on its employees but rather let it evolve.  Employees who care about their work will naturally organize themselves for their own success and that of their organization.

As the power shifts away from centralized organizations and toward individuals, processes which are designed around human instincts are naturally going to be highly successful. This reversion to natural instincts should not be surprising.  Our business world was built with perception that extrinsic rewards (such as money) are the drivers, which shape human behavior.  However, basic human instincts have often been observed which run counter to monetary-maximizing behavior. Professor Kannan states,  “I believe we are at the next stage where these are no longer considered to be “irrational behaviors”; rather, businesses are designing systems that incorporate human instincts to shape behaviors to a desired outcome.”

Now the question is whether or not companies can design their customer engagement around instinctive behavior that drives the ultimate result:  increased sales and margins.

Greg Petro

CEO, First Insight, Inc.

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