Beware of spurious correlations

Human beings are wired to look for ‘meaning’, which makes us eager to spot connections that sometimes simply aren’t there. That’s never been truer than in today’s era of ‘big data’.

Tyler Vigen is a criminology student at Harvard who set up his own website to highlight how easy it can be to draw ludicrous conclusions from data because of the way we’re taught to look for patterns.

Vigen has loaded up a number of different sets of random data on his site and then cross-related them to identify apparent (but clearly nonsensical) statistical similarities. For example, as you can see above, there seems to be a clear link between the divorce rate in Maine and the per capita consumption of margarine in the US.

Similarly, you might say there was a link between the per capita consumption of cheese and the number of people who died by becoming tangled in their bedsheets:

chart (1)

Clearly, there isn’t really a link in either case. But it’s easy to imagine that people might accept there was – and unnerving to realise how readily we accept this kind of correlation when presented to justify a medical or scientific or commercial conclusion.

Vigen calls them ‘spurious correlations’. You can find many more examples (and even create your own) by visiting www.tylervigen.com. It’s quite amusing.

Alternatively, you could look a little harder at some of the ‘facts’ that get used in presentations around your own business and see how many of them actually stand up to robust statistical scrutiny.

Not so amusing, but potentially more revealing.

 

When engagement isn’t engaging

‘When a measure becomes a target, it ceases to be a good measure’.

That’s Goodhart’s law (named after the economist Charles Goodhart, who first articulated it to explain why private enterprise principles introduced by the Thatcher government hadn’t worked very well).

I thought about it this morning, when I was going through my emails and found one inviting me to ‘The Engaging Employees Conference’ in London.

Of the 32 scheduled speakers, the one that most caught my eye was the HR Director of Wonga, a business that collapsed five weeks ago and is currently being wound down by the administrators.

Since the sub-title of the conference is ‘Optimising Performance’, having a speaker from a failed business is probably inconvenient for the organisers. But it’s also a timely reminder for delegates of what they should really be focused on.

The fetish for measuring employee engagement has been steadily gaining ground since Gallup first pioneered it in the 1990s, with their Q12 Survey. This invited employees to answer (anonymously) twelve different questions about their experience of work. ‘Do you understand what the business is trying to achieve?’; ‘Do you understand what’s expected of you?’; ‘Do you have a best friend at work?’ and so on.

The idea is that, if you keep asking the same questions every six months, the movement in the scores will tell you which bits you’re getting right, which bits you need to focus on and, ultimately, how engaged your employees are.

According to Gallup, businesses with high Q12 scores demonstrate significantly better performance: lower turnover of staff, higher sales growth, greater productivity, better customer satisfaction scores. Which is why nearly every large organisation nowadays carries out some kind of engagement survey.

The problem, as Wonga and others have found, is that improving your engagement score does not necessarily lead to improved performance.

It’s a perfect example of Goodhart’s law in operation.

An engagement survey is useful if it helps you build a true picture of the experience your employees have at work. As soon as you turn it into a target, you’re blurring that picture and encouraging managers to ‘game’ the numbers so that their score always shows improvement, even though the underlying experience may not. It’s the tail wagging the dog.

Now, don’t get me wrong – I’m 100% in favour of engaging employees.

I just think the best way to do it is by focusing on the things that will improve their experience of working in your organisation.

Not asking them the same questions over and over again – and then fiddling the numbers to tell a story they don’t recognise.

We’re all in this together (yeah, right)

It’s a funny word, collaboration.

Seventy years ago, it was the worst kind of insult. It meant you’d betrayed your country and helped the enemy. If you were identified as a collaborator in post-liberation Paris in 1945, you’d be marched through the street with your head shaved, so your neighbours could jeer at you and throw rotten fruit.

But times have changed and the word has recovered a more positive meaning. Politicians now speak proudly of ‘cross-party collaboration’, fading music stars ‘collaborate’ with edgy hip-hop producers – and big companies want to unlock a brave new world of creativity by ‘making it easy for our people to collaborate and share ideas’.

The trouble is: why would you want to?

I mean, it’s easy to see what’s in it for the company. They want their employees to be more ‘open’ and ‘giving’, to embrace the hackathon culture of hip Silicon Valley tech companies; to tap into a sparkling well of innovation and value.

But it’s a lot less easy to see what’s in it for everyone else. Employees who do collaborate often find it doesn’t benefit them – quite the reverse, in fact. They see their ideas co-opted by others and used as a stepping stone to promotions and rewards that pass them by. So why bother?

The problem is that we want collaboration, but we encourage competitiveness.

We want people to work as a team, but we reward individuals.

In its most recent annual survey, the High Pay Centre noted that, between 2016 and 2017, the average annual pay of a FTSE 100 boss rose by 11% to £3.93m. That’s roughly 145 times more than their average employee earns.

Now, as it happens, I know a few FTSE 100 bosses – and they are (mostly) smart and charismatic and capable people. Not the uncaring, out-of-touch corporate fat cats lampooned in the tabloid press.

But the point I always try to make to them is that, if you really want people to collaborate, engage and share their best ideas, you need to create an environment where they feel comfortable and appreciated for doing it.

Because, if you don’t, it won’t be long till collaboration is a dirty word again.

I wouldn’t start from here

There’s an old Irish joke about a city boy from Dublin, who comes out to the country for his cousin’s wedding.

He can’t remember the way, so he stops to ask a farmer for directions. The farmer looks at him, scratches his head, thinks for a moment, frowns and says:

‘You know, if I were you, I wouldn’t start from here.’

I feel a bit like that when I’m talking to clients and they ask me (always with the same slightly embarrassed tone) how to make their SharePoint pages more engaging.

Let’s face it, if you were setting up your internal channels from scratch, how many of us would choose SharePoint as the hub? It’s an archive system, originally designed for document retrieval. Which is fine, if you want people to use it like a reference library – but not much use if you want to get them engaged with what’s going on in your organisation.

Not surprisingly, every single comms person I know agrees that SharePoint is, at best, a mediocre solution to their communication needs.

And yet, nearly all of them work for organisations that insist they use it, because ‘it’s the industry standard’. It comes as part of Office 365, it’s easy and cost-effective, the IT people are comfortable with it, it’s a done deal.

So the comms people accept it as a regrettable fact of corporate life. And, every now and then, they give us a call to see if we can wave a magic wand and make people interested in using it.

Don’t get me wrong. I’m happy to have the work.

But imagine if that happened in your marketing department: ‘We want you to make our brand really cool – but we don’t want to spend money on TV or digital, so we’ve booked you some slots on post office noticeboards…’

Or your logistics department: ‘Yes, I realise articulated lorries are a more efficient way to shift large loads, but the chairman breeds Alpacas, so that’s what we’ll be using…’

It makes me wonder whether these organisations have understood the importance of engaging their people after all – or whether they still think communication is just a box to be ticked.

Because, if you really do want to engage your people, I wouldn’t start from here.

Don’t just do it. Mean it.

It’s been quite a week for Nike.

On Monday, they launched a bold new advertising campaign, fronted by Colin Kaepernick (the star San Francisco quarterback who caused a furore by kneeling, rather than standing, during the national anthem, to protest in support of the ‘black lives matter’ movement).

Clearly, this was always going to be controversial. Conservative Americans, led vocally by their President, have railed against the protest on the grounds that it disrespects the anthem and the country.

By Tuesday lunchtime, the backlash was in full swing, with indignant mid-westerners sharing videos of mutilated Nike products on social media, accompanied by the hashtag #JustBurnIt.

All of which must have had Nike’s brand folks rubbing their hands in glee. After all, what better way to make your product relevant to teenagers than by having chubby, middle-aged rednecks get angry about it? (Not to mention the billions of dollars of free global publicity – they probably only had to run the ad once).

But let’s hope that, before they started all this hoopla, they took a deep breath and re-read the second line of the advert: ‘even if it means sacrificing everything’.

Because it’s easy to believe in something. But it’s a lot less easy to keep believing in it when the consequences escalate.

I’m not talking about a few good ol’ boys cutting Nike swooshes out of their socks. I’m talking about shop windows being smashed. About people being attacked because they work for Nike. About retailers being too scared to sell Nike products – and shoppers being too scared to buy them. About sales falling off a cliff because they misjudged the reaction.

What happens then? Do Nike’s senior leaders apologise and backtrack, in a bid to stop haemorrhaging money? If they do, the brand’s credibility will be shredded for a generation.

I hope that doesn’t happen. I admire Kaepernick – and Nike for having the guts to celebrate him. And I’m confident the backlash will be much less extreme than I’ve suggested above. But, if it isn’t, I hope they hold their nerve and tough it out.

As the advertising guru Bill Bernbach once put it, ‘a principle isn’t a principle until it costs you money.’

We may all be about to find out how authentic Nike’s principles are.

 

One size does not fit all

A few years ago, some anonymous wag in Amsterdam posted an online Anglo-Dutch translation guide, where apparently innocuous English phrases are explained in terms of their hidden meaning:

WHAT THE BRITISH SAY WHAT THE DUTCH HEAR WHAT THE BRITISH MEAN
‘I hear what you say’ He accepts my point of view You’re wrong – please stop talking about this
‘Perhaps you would like to think about…’ Just an idea – feel free to ignore it This is an order
‘Oh, by the way…’ This is a minor detail… The primary purpose of our discussion is…
‘I’m a bit disappointed that…’ It’s not a big deal It’s a very big deal: I’m really annoyed
‘Perhaps you should think about that some more’ It’s a good idea: keep developing it It’s a bad idea: come back with a better one
‘I’m sure it’s my fault’ He thinks it’s his fault It’s obviously your fault
‘I almost agree’ He’s close to agreement I don’t agree at all

It’s funny because it’s true: the British have turned verbal misdirection into an art-form. What’s less funny is that, if you come from a country where people express things more literally, this can be a real problem.

As more and more businesses become genuinely global, the need to communicate across international borders can pose serious risks.

Management Consultancy McKinsey published a report in 2013, which showed that high-performing global companies consistently do worse than local competitors in new markets. The gap is most significant in key strategic activities, such as executing plans, encouraging innovation and building relationships with government and business partners.

Ironically, one of the biggest problems is that we all speak the same language. English has become the lingua franca of international business, especially at executive level. And, while it may make the process of decision-making faster and less cumbersome, it also tends to pull everything down to a lowest common denominator level that dilutes creativity and promotes bland, generic thinking.

If you don’t believe me, try watching a selection of TV commercials and see how easy it is to spot the ones that were made for ‘more than one market’.

Language is not like binary code: if you take the nuance out of communication, you take the interest out, too. And the results are predictably easy to ignore.

 

 

The dance of death

One of my favourite advertising stories is the pitch made by Allen Brady Marsh for the British Rail account back in the 1970s.

It was BR’s first major foray into advertising and their senior management team was visiting a shortlist of agencies. They knew their account was valuable and prestigious, so they’d become used to a fairly high level of sucking-up from the agencies they visited.

When they got to ABM, however, they found the reception dirty and unwelcoming. The furniture was worn and coffee-stained, the air was thick with smoke and the floor was covered with discarded crisp packets. The receptionist was filing her nails and chatting to a friend on the phone.

‘We’re from British Rail,’ the chief executive announced. The receptionist glanced up, waved airily at the threadbare seats and carried on talking.

Ten minutes later, they were still waiting in reception. No one had come to see them. When coffee eventually arrived, it was served lukewarm and in cracked china. They were livid: enough was enough. They got up to leave.

At that moment, Peter Marsh, ABM’s colourful Chairman, strode purposefully through the connecting doors, his arms outstretched and a warm smile on his face.

‘Gentlemen,’ he beamed. ‘You’ve just experienced what it feels like to be a British Rail passenger. Now let’s see what we can do to put that right.’

It was a jolt of theatrical brilliance, which won the account, by forcing British Rail’s senior team to confront (perhaps for the first time) the reality of their service problems.

It’s what advertising people call the ‘dance of death’: the process of prompting your clients to face up to sometimes unpalatable truths about their brands.

When I talk about this to people who work in small businesses, they find it very strange. Why would you willingly ignore a problem which is obvious to your customers – and which, if left unresolved, will pose a clear risk to the future of your business? It makes no sense.

Yet there’s something about walking through the sliding glass doors of a large publicly-listed corporation that seems to have a strangely lobotomising effect on most people. We hear meaningless, made-up words and, instead of challenging them, we start using them ourselves. We parrot earnest value statements, when we know they don’t have any connection to the reality of our daily working lives. And we accept bad ideas because they come wrapped in a veneer of fashionable buzzwords or backed up with obtuse data.

But customers don’t bother with any of that. If what we’re saying or doing doesn’t make sense, they just go and shop somewhere else.

That’s why we could all use a little dance with death every now and then.

 

Loose-tight

For a period of around 20 years, from the early 70s to mid 90s, the UK was the undisputed world power in advertising. One of the great figureheads of that dominance was Steve Henry, whose London-based agency HHCL produced some of the most iconic campaigns of the time. If you lived in the UK then, you’ll remember the work they did for Britvic (You know when you’ve been Tango’d), the AA (The fourth emergency service) and Ronseal (Does exactly what it says on the tin).

One of the things that made HHCL so successful was the way they worked. As Henry explained in one of his excellent blogs: ‘You need a structure. At HHCL, we had very tight processes, because we believed in the concept of ‘loose-tight’. Tight processes meant we could explore loose – i.e. unstructured – thinking.’

The crucial point was that HHCL’s processes were designed to help produce outstanding work, rather than improve their margins by operating more efficiently.  They were all about creativity, not money.

This is in stark contrast to the model of large advertising groups, such as WPP, Omnicom and Publicis, which have grown rapidly by acquiring agencies and introducing efficiency measures – making them more profitable but, in Henry’s view, less creative and, hence, less valuable in the long term: ‘We’ve seen the ad industry become a lot more efficient – but at what cost? Nowadays, it can turn out bland, invisible work faster than at any time in history.’

It’s a familiar refrain. As advertising becomes safer, it becomes easier to ignore – and, consequently, less valuable to the brand owners who want to stand out and get people’s attention.

The underlying motivator is a fear of failure: if you have to do work twice, your profits will be damaged and your shareholders will be unhappy. Which is why nearly all advertisers and agencies now rely on focus groups to pre-test their ideas.

There are two big problems with this. The first problem is that your competitors are also testing their ideas through focus groups and getting exactly the same kind of feedback. Which means there’s a pretty good chance they’ll come up with the same ideas and solutions you do.

The second problem is that focus groups tend to be unfavourable to original thinking. It’s a truism that people feel more comfortable with things they know and understand than they do with things that are new and unfamiliar.

That same instinct for safety – the desire to avoid risk and only back dead certainties – is why most businesses are not very creative places. When looking at a problem, their first instinct is to apply a solution that worked somewhere else. Once they’ve got a solution they think won’t fail, they stop thinking and turn it into a process.

Whereas, if they carried on thinking, they might come up with a better solution.

 

The power of the press

Archaeologists in Greece have just unearthed a clay tablet containing the oldest known extract of Homer’s Odyssey.

Although it dates back thousands of years, the tablet is nowhere near as old as the Odyssey itself, which is thought to date back to the 8th century BC.

In those days, of course, most stories were never written down, because very few people knew how to write. The only reason the Odyssey survived is because it was such a good story that people would learn it, word for word, and recite it around flickering campfires.

All that changed in 1439, when Johanes Gutenberg invented the mechanical printing press. For the first time, it became possible for written information to be shared beyond a tiny elite. It was a hugely significant moment in the emergence of the modern world: it democratised learning and led directly to the renaissance, the enlightenment and the revolutions (both political and industrial) of the eighteenth and nineteenth centuries.

It also transformed the way we tell stories. Thanks to Gutenberg and those who followed him, we have the luxury of being able to forget things, because we know that forgetting them no longer means they are lost forever.

Which, in some ways, is a bit of a shame.

Like the ancient world to Homer’s Greek audience, modern businesses are complex and confusing things. The people who work in them, or buy from them, are busy and often distracted. And, like those ancient Greeks, they’re searching for meaning to help them make sense of it.

But the stories we tell have become much more complex, too. We don’t have to keep them simple any more because, thanks to Gutenberg and his successors (such as Microsoft and Google), we can write down and share as much detail as we like. We can weave in lots of different narratives and ideas. We can use film and graphics and satellite technology to add richness and detail and immediacy.

This can make our stories more engaging. But it can also make them less clear, harder to remember and, somehow, a bit less real.

When was the last time you heard someone in your business (or any business) give a compelling speech or presentation straight off the cuff, with no props?

When was the last time you read a company’s mission statement or values and thought ‘wow – I’d love to work for them’?

Is it time we stopped being so clever and got back to telling better stories?

Try this test on your own business:

Choose five people at random and tell them to imagine you’re someone they’ve just met at a party. Ask them to explain, in one sentence, what the business does.

Then ask them to explain, also in one sentence, what they do and what difference it makes to their customers.

That should give you a pretty good sense of (a) whether the people in your business actually have a shared sense of purpose and (b) whether they can articulate it in terms that are meaningful to anybody else.

If the answer to either of those is ‘no’, you’ve got some work to do.

 

Stop talking about innovation

A hundred years ago, it was a big deal when an aeroplane flew across the English Channel. Who would have believed then that we would be watching a live camera feed from the surface of Mars – and picking up data from a man-made satellite as it left our solar system?

Thirty years ago, who would have believed you could take a picture without film? Or make a phone call from the top of a mountain?

Even today, how many of us really believe you can manufacture objects in your own home with a 3D printer?

Yet it’s happening.

The pace of technological change is so fast nowadays that even visionaries like Bill Gates struggle to keep up (although he now denies making the regularly-quoted assertion that ‘640k of memory ought to be enough for anybody’). Today’s science fiction is tomorrow’s fact. And the corporate graveyards are littered with the corpses of big companies that didn’t adapt in time.

In 2009, Nokia was the world’s fifth-largest brand, worth $35bn. Two years later, it was a Microsoft footnote, swept aside by a smartphone Tsunami that it hadn’t seen coming.

In January 2008, Woolworths was one of the UK’s oldest and best-known retail names, with a swaggering Christmas advertising campaign and stores in every high street in the country. By January 2009, it had vanished.

That’s how fast fortunes turn.

An Innosight report suggests that more than 75% of the companies on today’s S&P 500 index will not be on the list 15 years from now. In most cases, this is because they will be overtaken or acquired by fleeter-footed rivals.

So it’s hardly surprising that innovation – in products, in services, in behaviour, in ways of working – is something almost every CEO regards as a priority. But recognising innovation as a priority and creating an innovative business are two very different things.

If you look around your own business (and be absolutely honest with yourself here), how much do you see that’s genuinely new?

There’s probably plenty of superficial innovation going on: an extra blade on your razor, a new flavour in your ice cream range, a one-hour delivery option.

But doesn’t it all feel a bit safe? A bit like what everyone else is doing? Where are the game-changers? Where’s the disruptive behaviour? Why do the big ideas always seem to come from somewhere else – from younger, hungrier rivals?

The depressing truth is that most companies are so scared of failure that they won’t do anything that isn’t guaranteed to succeed.

And that reluctance to make mistakes, as the Innosight research shows, is exactly why most of them won’t be here in 15 years.