You're irrational: Tips for designers, developers and business owners

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How to make sure irrationality doesn't stop you from delivering successful innovation and design.

You and your colleagues are irrational. People like Dan Ariely and Daniel Gilbert have convinced us of that. Irrationality affects us as entrepreneurs, product managers, designers and developers too. It can lead us to make make bad business decisions and deliver sub-standard products.

This talk covers three patterns of irrationality (cognitive biasses):
- loss aversion,
- the Ikea effect
- the identifiable victim effect.

It talks about about how to counteract them, to deliver popular and successful interactive products and services.

Published in: Business, Technology

You're irrational: Tips for designers, developers and business owners

  1. 1. Know thy irrational self: Tips for designers, developers and business owners Phil Barrett Flow Interactive South Africa
  2. 2. The power of FREE! 26¢ 1¢
  3. 3. There are limits to our rationality - of course <ul><li>Classic economic theory: Weigh up the pros and cons of a decision in full detail. </li></ul><ul><li>Reality: We simply don ’ t have time, information or brain power. </li></ul><ul><li>Solution: Use a shortcut! Leads to “ bias ” . The shortcut often provides an advantage. But it can be a disadvantage in specific circumstances... which can be manipulated by others </li></ul>
  4. 4. HBR poster boys Still quotable Classic Latest book
  5. 5. There are a lot of documented cognitive biasses About 120 on Wikipedia ’ s list Bias blind spot bias: Biasses don ’ t affect you!
  6. 6. Cognitive bias affects you as a business owner, designer, developer...
  7. 7. Three effects I ’ ve seen on recent design projects <ul><li>Loss aversion (and the endowment effect) </li></ul><ul><li>The IKEA effect </li></ul><ul><li>The identifiable victim effect </li></ul>
  8. 8. Loss aversion Losses outweigh gains
  9. 9. I ’ ll toss a coin. Will you take this bet...?
  10. 10. Heads: I pay you R1000 Tails: You pay me R1000
  11. 11. Heads: I pay you R2000 Tails: You pay me R1000
  12. 12. Heads: I pay you R3000 Tails: You pay me R1000
  13. 13. Losses are (at least) twice as powerful as gains $ Value $500 60 -$500 -120
  14. 14. It may be an old crock, but it ’ s my old crock. Endowment effect:
  15. 15. I my revenue stream We have a solid revenue stream. Why would we spend it on innovating an expensive new product which might fail?
  16. 16. But you must innovate to survive “ The longer-term effect of the capital markets ’ preference for remaining at the same knowledge stage is stagnation. At some point [...] the company will be outflanked by competitors taking more exploratory approaches. Earnings will stop growing and analysts will savage the company for its lack of innovation. [...] Freeing up time and capital to engage in new activities creates enduring competitive advantage. Roger Martin, Dean of Rotman Business School, Toronto
  17. 17. I my feature set
  18. 18. To deal with loss aversion, reframe
  19. 19. Framing a choice as a loss makes it less popular Imagine that the US is preparing for the outbreak of a lethal flu, which is expected to kill 600 people. Choose a program to address the problem. a) 200 people will be saved b) 1/3rd chance that 600 people will be saved. 2/3rd chance that no people will be saved. 72%
  20. 20. Framing a choice as a loss makes it less popular Imagine that the US is preparing for the outbreak of a lethal flu, which is expected to kill 600 people. Choose a program to address the problem. a) 400 people will die. b) 1/3rd that no-one will die. 2/3rd chance that 600 people will die. 22%
  21. 21. I my feature set: reframed “ Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away. ” <ul><li>If you lose features you gain </li></ul><ul><li>simplicity </li></ul><ul><li>a launched product </li></ul><ul><li>happy customers </li></ul>(And anyway, you ’ re not losing those features. They are still in the backlog.)
  22. 22. I my feature set: tangent Don ’ t panic and launch here Work through and find the underlying simplicity
  23. 23. I my revenue stream: reframed You will lose your revenue stream because competitors will disrupt the market. Keep your business safe by investing in this innovation now.
  24. 24. The IKEA effect We overvalue the things we make
  25. 25. If you ’ ve ever built self-assembly furniture you may have noticed that you valued it more. The “ IKEA ” effect.
  26. 26. Dan Ariely decided to test the IKEA effect. With origami frogs. They were hard to make and most people did a bad job. How much would people bid for their own frogs? And the frogs of others? And expert -made frogs?
  27. 27. We think the things we make are expert quality. <ul><li>Average bid for own frog: 23¢ </li></ul><ul><li>Average bid by someone else for that same frog: ¢5c </li></ul><ul><li>Average bid for expert-made frog: 27¢ </li></ul>Even when they are not.
  28. 28. So maybe that piece of software you worked on is not quite so perfect after all.
  29. 29. To deal with the IKEA effect, gather responses to prototypes
  30. 30. Get feedback from a select few about an MVP <ul><li>MVP: Minimum viable product. </li></ul><ul><li>Will they pay money or make effort for it? </li></ul><ul><li>Which features do they gravitate to? </li></ul><ul><li>What ideas do they have for things to add? </li></ul>
  31. 31. Usability testing gives you a blast of vivid reality Can people use it? Does it make people happy? What don ’ t they understand? And why?
  32. 32. Bonus item... Reframe: Assume you will fail “ Discovery-based planning suggests that managers assume that forecasts are wrong, rather than right, and that the strategy they have chosen to pursue may likewise be wrong. Investing and managing under such assumptions drives managers to develop plans for learning what needs to be known, a much more effective way to confront disruptive technologies successfully. Clayton Chistensen The Innovators ’ s Dilemma
  33. 33. The identifiable victim effect We are more likely to help individuals than vaguely-defined groups
  34. 34. An experiment: How much of your $5 would you give? <ul><li>Food shortages in Malawi are affecting more than 3 million children. In Zambia, severe rainfall deficits have resulted in a 42% drop in the maize production from 2000. As a result, an estimated 3 million Zambians face hunger. More than 11 million people in Ethiopia need immediate food assistance. </li></ul>
  35. 35. Experiment, part 2: How much of your $5 would you give? This is Rokia. Her life would be changed for the better as a result of your financial gift. With your support, and the support of other caring sponsors, Save the Children will work with Rokia ’ s family and other members of the community to help feed her, provide her with an education and basic medical care.
  36. 36. We ’ re twice as likely to help when we feel empathy for an individual <ul><li>Abstract stats: 23% of earnings were donated </li></ul><ul><li>Identifiable person: 48% of earnings were donated </li></ul>
  37. 37. Design the product to make “ users ” happy <ul><li>Which users? </li></ul><ul><li>What are these people really like? </li></ul><ul><li>Will I ever meet them? Would I like them? </li></ul><ul><li>How bad is it for them? </li></ul><ul><li>What will happen if I don ’ t fix it? </li></ul><ul><li>Do I care? </li></ul>77% of designers between the ages of 28 and 38 say they feel unengaged with their target users.* *Made that up. But you get the the point.
  38. 38. To deal with the identifiable victim effect, get out of the building (and make personas)
  39. 39. Observation: Real people, real reactions <ul><li>Meet real users. Interviews, shadowing, diary studies, usability tests. </li></ul><ul><li>Video clips or observation. </li></ul><ul><li>Real annoyance, frustration, delight, engagement, relief, boredom, constraints, failings... </li></ul>
  40. 40. Personas keep the empathy and reality levels up <ul><li>A good persona: A specified victim that almost becomes like an old friend. </li></ul><ul><li>Everyone can relate to the images you use. </li></ul><ul><li>Banish “ the user ” . Now we say “ Kobus ” or “ Mandisa ” . </li></ul>
  41. 41. Overcome loss aversion with reframing to invest in innovation and trim your features . Combat the IKEA effect by getting real user feedback early. Use identifiable victims to help the team to care about the people you ’ re designing for.
  42. 42. Thanks! [email_address]
  43. 43. <ul><li>Thanks to all the people who shared CC Flickr photos... </li></ul><ul><li>Oldsmobile: By Terry McCombs </li></ul><ul><li>Swine flu face mask by hitthatswitch </li></ul><ul><li>Self assembly photo by cromely </li></ul><ul><li>A frog and its origins by Tojosan , Todd Jordan </li></ul><ul><li>Origami frog, green: By Frustrated Writer , Nicole Sikora Heschong </li></ul><ul><li>Mali girl by Frerieke </li></ul>

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