Summer Edition #1

The economics of apologies

If economics is actually the study of trust and reciprocity, then economist John List chose a brilliant question to study: “When people are let down by your service, how much is an apology worth?”

List was both Chief Economist for Uber, and is a behavioural economics researcher at the University of Chicago, and?his findings about the economic power of an apology?were worth tens of millions of dollars to the rideshare service.

How?

Well, he answered Uber CEO Travis Kalnick’s concern: “What's the best way to keep Uber customers loyal, even when they've had a miserable experience?" (A miserable experience is having to wait too long for a ride - yes, I’ve had them too).

List examined how loyal customers would remain when one of three options were presented:

1. A status apology: “Sorry, we stuffed up”
2. A commitment apology: “Sorry, we’ll do better next time”
3. A compensatory apology: “Sorry, here’s $5 towards your next ride”

In Uber’s case, can you guess which worked best, to keep customers coming back?

They all worked to a point, but the most potent was #3.

Now, this doesn’t mean that compensation is always the best option, but experimenting to find the best combination of apologies for your business is likely to pay substantial dividends. Also, recall that List embarked upon the study when he discovered that, after stuff-ups, Uber wasn’t apologising at all!

Question: How can you use apologies to keep your customers loyal, even when they’ve had a miserable experience?

Across, not up

I’m nearly always working simultaneously on strategy with several executive teams and a common feature is getting them to work as?executives?(not managers), and as a?team?(not as individuals, and not as a committee).

I’ve noticed that when one of them goes on leave, the normal practice is to get one of their managers to ‘act up’. This is done on rotation, or sometimes, on merit. I suggested to a couple of my clients that they stop doing this.?

Instead, what they should do, if they want to become true executives, and work as a team, is ‘act across’.

In other words, when the Executive Director, Corporate goes on leave, the ED Operations should take her place. Then, someone ‘acts up’ to fill the ED Ops role. This achieves two things: (i) Executives get to know each other’s roles and pain points and achieve true organisational breadth, not continued specialisation; and (ii) The ‘acting across’ ED gets to see one of their direct reports as a peer. This never happens in the ‘acting up’ model, as they’re always away when their direct reports are in their seat.?

Question: What would you create if you ‘acted across’, not just ‘acted up’ in your organisation??

Disappearing jobs

A local government director asked me, “Andrew, what’s your prediction about how many drivers we’ll employ in 10 years time, compared to today?” I said, “I predict almost none”.

How do I know?

Well, I don’t, but I’m a close follower of the?World Economic Forum’s prognostications. If you haven’t gotten acquainted with their concept of the “Fourth Industrial Revolution”, you should, as it compellingly shows us why telemarketers, freight agents, auditors, financial analysts and pretty much everyone who works in insurance, tax, payroll and procurement will be out of a job by the late 2020s. (The WEF is 98% certain of this).

At the other end of the scale, they’re equally certain that workers in data analysis, robotics, mental health, emergency management, and clinical healthcare (and, I’m delighted to say, strategic advisors) are safe from technological displacement.

Question: “In your organisation, do you know which are the jobs at risk? What are you doing to prepare yourselves for this shift?”

I’m on holidays until January 16th, so the above are a ‘summer edition’ of this year’s 5 Minute Strategic Mindset segments that have been most popular. I look forward to being back with you shortly, however, if you’ve enjoyed reading, please click the ‘heart’ so it keeps the 5MSM pulse beating.

See you next Friday morning,

Andrew