Apologies for being so delinquent in posting but it’s been a busy start to the year. In addition to working on time intensive projects with a few of our portfolio companies, QED formalized a very exciting relationship with Fifth Third Bancorp. You might or might not have read about it (Fifth Third Bancorp Partners With QED Investors), but hopefully it explains why I’ve been a little light on the content recently. More on this relationship soon. With this said, back to the Blog!
Every once in a while I feel like I’m experiencing what I think of as “Advisory Deja Vu” (ADV). It’s when I’ve had the same thematic conversation on multiple occasions over a short window of time but with different founders. And more than once it’s become a theme for a Blog post, this being the case in point. So, to convey my current ADV theme, I thought it would be best to start with a simple story.
A behavioral psychologist, a data scientist and a five year old walk into a bar. All three belly up to the bar and order drinks (and in case you’re wondering, the five year old ordered milk – don’t hate on me!). After a few minutes of complete silence, the bartender addresses the group.
“I can tell that you’re bored and can use a bit of a challenge to liven things up. Do you see that woman sitting over there? Free drinks for a year to whoever tells me her favorite color.”
The challenge is accepted and they agree to meet back in an hour to reveal their guesses.
When they return, the behavioral psychologist answers first. “I spent the last hour analyzing her every movement and studying her attire and jewelry. She must like muted colors because of her subtle shade of lipstick and very minimal use of makeup. Her outfit is comprised of shades of black and gray as is her handbag. But, lots of women like to wear black and gray so this doesn’t tell me much. What’s interesting is that she went to the bathroom half-an-hour ago and came out wearing a maroon colored hair clip. It stands out nicely against her black outfit and her confidence increased once it was in place so it must be a color she really adores. As a result, I can definitively say that her favorite color is Maroon.”
The bartender responds: “Sorry. That’s not right. The woman is my wife and I bought her that hair clip a year ago. She wears it to humor me but I don’t think she likes it very much.”
The data scientist goes next. “I spent the last hour hacking into her computer and analyzing all her purchase behavior on Amazon and her searches on the web. I loaded all the data into a machine learning optimizer and using a random forest algorithm determined that her favorite color is Green.”
The bartender responds: “Sorry. We share a computer so the data you analyzed isn’t quite right. What’s funny is that you figured out MY favorite color, not hers!”
The five year old goes next: “Blue.”
The bartender responds: “That’s right. How did you know?”
The five year old: “You’re a silly goose. All I did was go up to her and ask.”
Why tell this simple story? A recent string of conversations I’ve had with Founders have all centered around something not being quite right with a business with the Founder trying to diagnose the cause using complex data analysis or econometric trends or “theories”. I’ve found myself giving the same advice over and over and a few Founders have actually taken my advice and started to report back pretty interesting findings. The advice?
“Your customers know more about themselves than you do and are more than happy to share their thoughts if you ask.”
This is a simple but profound truth that I find is often neglected by Founders and Executives at small and big companies alike. If you want to know why customers aren’t buying the high end version of your product — ask them. If you want to know why customers aren’t making payments on your loans — ask them. If you want to know why customers use your product once and never come back — ask them.
Don’t get me wrong — data is fantastic and very helpful in many contexts. I love data and what it can teach a business. I’m a big fan of tools like Full Story and Google Analytics. But, when trying to understand why your prospects and customers are behaving a certain way I’d suggest you find a way to talk to them and listen to their answers. Trust me: Ask and they will tell — Listen and you’ll learn.
Unfortunately people lie. Often. Surveys and questions often take you to a bad place.
This is a sad commentary that I have also experienced in my career. Early in my career, I worked at direct marketing companies that actually spent the time to formally speak to customers who stopped buying. These companies valued data-driven decision making. I have also worked at other companies where very smart people would look at data and make data-driven assumptions. That is what we need to stop doing. Thank you for sharing.