Applying behavioral design—the combination of behavioral economics and human-centered design—to digital transformation helps technology and business leaders focus on the user. This approach can increase the uptake of new systems and improve the bottom line by encouraging small changes that add up to big results.
Technology is relatively easy, as any veteran CIO will tell you. It’s people that are hard. For all the technical challenges that accompany the introduction of new systems or products, human factors are most likely to determine their ultimate success or failure. In fact, according to Gallup Research, companies that apply the principles of behavioral economics outperform their peers by 85 percent in sales growth and more than 25 percent in gross margin. Nonetheless, many organizations still take a technology-first approach.
Until now, this traditional approach to digital transformation has been perfectly reasonable, and understandable—it’s easy to become enamored with emerging technologies. However, the game has changed. It’s simply unrealistic to keep up with the rapid pace of change and nearly impossible to track—and make sense of—each and every new technology.
CIOs can cut through this digital clutter by turning the technology-first method on its head and taking a human-first approach.
A People-First Approach
With a deeper understanding of what makes people tick, technology and business leaders can make better technology decisions and create more meaningful digital transformations, engaging experiences, and valuable disruptions.
Why now? Over the past five years, markets and technology have changed rapidly. First, the nature of customer experiences is unlike anything that could have been predicted. Increasingly, customers can’t describe the experience they want to have, let alone begin to imagine what they expect in the future. Second, completely new competitive models have entered the picture, disrupting old rules of engagement. These developments make it imperative to understand human behaviors in new ways.
A first step in making this change is to flip the script. Don’t start by asking: “How did our use of technology and analytics affect our markets and value chain, and what was the result?” Instead, ask: “What behavioral shifts will have the greatest impact on our economics? Who should we focus on?”
While retailers, consumer goods manufacturers, and emerging technology providers have been the earliest adopters of a human-centered approach, it is quickly catching on in other sectors, from financial services to health care. And many of the companies taking this approach are able to improve initial adoption of new technologies and sustain ongoing engagement with them.
Behavioral economics isn’t new. Scientists have studied human decision-making for years and uncovered the many seemingly irrational ways in which we operate. Although we assume that, given enough data, people make logical choices in their best interests, that’s often not the case. Our brains can’t help but make predictable, systematic errors that affect our judgment, decision-making, and behavior.
In fact, scientists have uncovered some fundamental truths about human behavior that can help business leaders design for better outcomes. One such truth: People dislike losing much more than they enjoy winning.
In our behavioral design research, we saw evidence of this tendency with a financial services company launching a new savings program. While prototyping the program, the company found that customers subscribed at higher rates when shown how much money they had lost rather than when told how much they could save. By and large, customers’ aversion to failure was stronger than their desire for success.
What else can we learn about irrational behavior from science? The order and framing of options have a significant impact on choices. For example, people are more likely to rely on existing mental models to make their decisions rather than to acquire new information. They are also more likely to remember high and low points than entire experiences.
Designing for human behavior is the new frontier in designing for people and measuring success. A deep understanding of behavioral change can drive better outcomes in operations, for downstream customers, and in the end market.
Behavior and the Bottom Line
Behavioral design, which marries behavioral economics with human-centered design, explores the entire decision-making process with an eye to the factors that affect an individual’s choices. As such, it helps increase the likelihood new products or technologies will be adopted. The biggest influences include:
- Self/kinship: a person’s sense of self, both individually and socially.
- Expectations: the attitudes and presumptions people bring from prior experiences.
- Influences: the social norms and cultural forces that shape a person’s beliefs.
- Framing: the ways in which choices are presented.
- Time distortion: the ways in which people overly value the present and poorly understand the future.
- Barriers and enablers: situations that hinder or empower the ability to make choices or reach goals.
- Experience: the structure and sequencing of key interactions.
By combining the principles from behavioral economics with user insights and business context, organizations can more systematically mitigate the risks of introducing new technology products and solutions.
Indeed, this approach has driven some of the greatest disruptions in the consumer marketplace, such as those caused by Uber and Amazon Prime. Small behavioral changes enabled by technology have contributed to the success of each.
Uber removed uncertainty and simplified the personal transportation experience—from hailing and waiting for service to paying for a trip—and has thus far completed more than 5 billion trips worldwide. Amazon Prime radically reduced barriers to purchasing video, e-books, and other merchandise with one-click ordering, guaranteed delivery, and free media. As a result, Amazon Prime members make twice as many purchases and spend nearly twice as much money as its nonmember customers.
By considering what might prevent people from engaging with their offerings in the first place, the various barriers that may stop customers from moving forward with the transaction, and the feedback mechanisms and other capabilities that reinforce future engagement, these disruptors were able to put customers at the heart of their technology solutions.
Behavioral Design in the Enterprise
Deloitte’s forthcoming book, Detonate, explores in detail how this approach can be applied when implementing new enterprise solutions. Fundamentally, leaders must be willing to blow up the playbooks and adopt a “beginner’s mind.”
Consider, for example, what it would take to create efficiency by persuading a production line worker to change a step that has been ingrained in his workflow for 20 years. What would it take to make an executive feel comfortable running a new product through fewer review cycles in order to bring a new solution to market faster?
Humans are at the heart of most of enterprise operations right now and will be for the foreseeable future, even as automation becomes increasingly pervasive. In either context—with or without automation—three steps of the behavioral design process can be applied:
- Understand. Develop an understanding of the current state of user behavior or the context in which humans are making decisions and determine the desired business goals or outcomes.
- Discover. Identify the key enablers of or barriers to behavioral changes and begin to craft interventions that address those challenges or make behavioral change easier on users.
- Create, test, and refine. Test the solutions and continue to gather feedback over time, creating a closed-loop system that enables sustained behavioral change.
By considering the human side of technology, IT and business leaders can stop trying to keep up with the dizzying pace of technology advancements and adopt an approach that creates a virtuous cycle of user-centric innovation better positioned for success.
Article copied from the Wall Street Journal and written by Jeff Wordham, principal; Geoff Tuff, principal; and Bill Briggs, principal, Deloitte Consulting LLP