Thursday, February 13, 2014

The Information Age is here

Jon Gilman in Programming: Ideas, Tutorial, and Experience

It is often hard to appreciate the extent to which new innovations will impact our future as a society as we’re all living through these changes together. It’s only in retrospect that these societal trends and non-linear inflection points become entirely clear. However, Albert Wegner of Union Square Ventures gave a talk at DLD14 hypothesizing that we are at one such inflection point in our society. His view is that we are on the brink of an Information Age, which will fundamentally change how our society operates, and it is up to us to define that change, for better or worse.

To better understand the significance of the Information Age, it’s helpful to look back at previous societal innovations and inflection points. As Albert points out in his talk, there have been a number of significant societal shifts throughout the course of human history. These shifts include moving from a hunter and gatherer society to an agrarian society and then subsequently moving from agrarian society to an industrial society. These are not subtle changes in how a small portion of society operates but rather are complete overhauls that change the core of how society functions.

Imagine you‘re an expert hunter back in the hunter and gatherer age. You’re the rock star, people rely on you to bring back food and keep the community going. People’s lives literally depend on you doing your job well. But imagine that on one hunting trip, you stumble upon a group of individuals playing with plants and actually eating them. At that moment, they must have seemed absolutely nuts! Why would anyone spend their time harvesting plants when there was so much meat for the hunting?

Unknown to the hunters, these plant cultivators were also harvesting (pun intended) an enormous innovation for society. Early farmers honed their craft through continued experimentation and it eventually became clear how everyone could benefit from agriculture. These farms could be leveraged to create a more stable community (you didn’t always have to move with the animals), they could feed larger communities at scale, and this abundance allowed people to spend their time doing things other than hunting. And that was a major societal breakthrough!

Concerns about eating meat aside, let’s remember our expert hunters. Their skill set was made entirely obsolete by the evolution of farmers. The farmers went from the crazy ones eating plants instead of meat to feeding an entire village with the meat that came from animals on their farms. This transition must have been painful for our expert hunters. Society as a whole was making enormous progress but the benefits of that progress were certainly not evenly distributed.

Today, we’re faced with another major shift in how our society functions and operates. We’re at the very beginning of the Information Age, where computers and the internet are allowing us to do previously unimaginable things. The byproduct of this innovation is that skill sets that previously led to being the “rock star” will likely become obsolete in tomorrow’s world.

So when we talk about how software is eating the world, this applies to both the products/services of today’s economy and the functional skill sets required as inputs to those products and services. Think about Google’s initiative around self-driving cars. Forget Uber disrupting the taxi market, Google’s cars (or maybe Uber’s cars too) will eventually replace all drivers and anyone who made a living off driving a car will be flat out of luck.

As a society, this is once again going to be a huge breakthrough. We’ll likely have fewer accidents, be able to control traffic better, and be able to use time we previously spent driving for more productive pursuits. But again, the benefits of this progress will certainly not be evenly distributed.

The same phenomenon is going to play out across a number of industries and jobs as we fully embrace the Information Age. It’s still early, but Bitcoin and other crypto-currencies look very promising to significantly improve how online payments operates (in addition to many other use cases, which are an entire blog post in and of itself). At the end of this evolution, we’re likely to see transactional systems powered by crypto-currencies that have more transparency, lower fees, and higher volumes than systems we use today. That’s progress! But anyone with a skill set around today’s online payment world will most likely be left behind.

In reality, the final outlook for those impacted by innovations is not so dire. For sure the full transition to the Information Age is going to be painful for some and downright tragic for others. But it is up to us as individuals to choose a path. We can continue to operate under today’s assumptions around what’s required for success or we can create our own definitions for the required skill sets to succeed in tomorrow’s world. Since tomorrow’s world is squarely focused around computers and the internet, one might assume that we should all just drop what we’re doing and learn how to code. I disagree; true success will come from understanding how the internet and computers are powering this innovation and then applying your own unique personal skill set (not functional skill set) to that knowledge. Ignorance to the impending Information Age is the only surefire way to lose.

Follow me on Twitter (@jongilman) to hear more thoughts about the amazing opportunities ahead of us in the Information Age.

Here’s a link to Albert’s full talk at DLD14, it’s well worth 15 minutes of your time.

A Partial Confession Makes You Feel Worse Than Full Disclosure (or No Disclosure)

THE DAILY STAT: Harvard Business Review

February 13, 2014

A partial confession to a misdeed may appear to be a low-emotional-cost alternative to a full confession, for the obvious reason that it wouldn’t require you to fully reveal what you’ve done. But in an experiment, people who partially confessed to cheating felt worse afterward than those who had fully confessed, as well as worse than people who hadn’t confessed at all (about 2.2 on a five-point negative-affect scale, versus about 1.8 for full confessors and nonconfessors), says a team led by Eyal Peer of Bar Ilan University in Israel. Confession is a powerful way to relieve guilt, but it works only if you tell the whole truth.

Wednesday, February 12, 2014

Excerpt from "The Up Side of Down: Why Failing Well Is the Key to Success"


by Megan McArdle


How a Brain Scientist and a Psychologist Helped Me Stop Procrastinating

Around the turn of the millennium, Peter Skillman embarked on an interesting exercise in design philosophy. Skillman, who is now an executive at Nokia, was the head of “user experience” for Palm, the company that essentially invented the handheld computer. For five years, he ran various groups of people through a design exercise he created, which would come to be called the Spaghetti Problem. He assembled a variety of different groups, from American students to 150 Taiwanese telecom engineers, and split them into smaller units of three or four, at which point they were given twenty pieces of spaghetti, a meter of tape, a marshmallow, and a piece of string. They had eighteen minutes to create the tallest freestanding structure that would support a marshmallow.
This sort of team-building exercise is not new; I did a version of it involving straws and an egg with eight fellow students during my business school orientation weekend. What was new was Skillman’s perspective: instead of looking at it like a management guru, Skillman thought about it like a designer. In 2007, he shared what he had learned with the Gel conference, a sort of smaller version of TED.1
Unsurprisingly, the engineers did very well. The business school students finished dead last, which is probably also unsurprising to anyone who has spent a weekend doing team-building exercises with future MBAs. According to Skillman, they spent too much time arguing about who was going to be the CEO of Spaghetti, Inc. Lawyers did almost as badly.
And who did the very best? Skillman unveiled their pictures, and a wave of laughter swept through the audience. Up on the screen was a series of snapshots of kindergarten students, mugging for the camera in front of . . . well, about what you’d expect if your kindergartner made you something out of spaghetti and tape.
How did the kindergartners beat the engineers? By the simple process of experimentation and iteration. They didn’t let themselves get hemmed in by assumptions about what the rules were—they were the only group of people who asked for more spaghetti. And because they had more spaghetti, they didn’t have to waste time sitting around talking about how the tower should look, or who should get to write the vision statement. They just dove in and started creating, discarding anything that didn’t work. Since, as Skillman points out, “very few people understand the structural properties of spaghetti,” this was the fastest route to success.
The structures built by the engineers rose above the workspace with the elegant logic of a suspension bridge. The wild, asymmetrical kindergarten creations lurched drunkenly like modern art installations on a debauched spree. Yet they all supported a marshmallow, at a height that was on average a full inch taller than what the engineers had achieved. The engineers had years of schooling and work experience to teach them how to build sound structures. But the kindergartners had something even more powerful: they were not afraid of failure. By trying and failing, they learned what didn’t work—which, it turned out, was all the knowledge they needed to figure out what did.
“Multiple iterations,” Skillman told the audience, “almost always beats single-minded focus around a single idea.” The people who were planning weren’t learning. The people who were trying and failing were.
“If you have a short amount of time, it’s more important that you fail,” he said minutes later. “You fail early to succeed soon.”

Customers Are Willing to Pay More When They’re Warm

THE DAILY STAT: Harvard Business Review

February 12, 2014

Shoppers on a popular web portal were about 46% more likely to go to a “To Purchase” page when the daily temperature averaged 25 degrees Celsius (77 Fahrenheit) than when it averaged 20 degrees (68F), say Yonat Zwebner of The Hebrew University of Jerusalem, Leonard Lee of Columbia, and Jacob Goldenberg of the Interdisciplinary Center in Israel. The researchers also found that people in a warm room were willing to pay more than those in a cool room for 9 of 11 consumer items shown to them, and other participants were willing to pay 36% more for items when holding warm, versus cool, therapeutic pads. Exposure to physical warmth activates the concept of emotional warmth, eliciting positive reactions and increasing product valuation, the researchers say.

Monday, February 10, 2014

AudioTech book summary "The Human Brand: How We Relate to People, Products and Companies"

by Chris Malone and Susan T. Fiske
A summary of the original text.

The Human Brand, summarized by arrangement with John Wiley & Sons, Inc., from The Human Brand: How We Relate to People, Products, and Companies by Chris Malone and Susan T. Fiske.  © 2013 by Chris Malone and Susan T. Fiske.
In this summary:

  • Understand what is actually going on in our brains when we describe our relationships with brands in deeply personal ways.
  • Discover why we relate to companies, brands, and products in the same way that we naturally perceive, judge, and behave toward one another.
  • Realize why two categories of perception—warmth and competence—drive most of our emotions and behavior toward people and businesses.
  • Profit from the implications of this natural devotion people feel toward certain companies, brands, and products
  • Achieve success and sustain it by putting your customers' interests ahead of your own, in accord with the principle of worthy intentions.
The Human Brand
People everywhere describe their relationships with brands of all kinds in deeply personal ways—we hate our banks, love our smartphones, and think the cable company is out to get us. What's actually going on in our brains when we make these judgments?
In The Human Brand, customer loyalty expert Chris Malone and social psychologist Susan Fiske show that we relate to companies, brands, and even inanimate products in the same way that we naturally perceive, judge, and behave toward one another.
Early humans developed a kind of genius for making two specific kinds of quick judgments: What are the intentions of other people toward me? How capable are they of carrying out those intentions?
Social psychologists call these two categories of perception warmth and competence, and they drive most of our emotions and behavior toward other people—and in today's modern world, toward businesses too. As a result, we become devoted to certain companies, brands, and products, but we also have high expectations for loyalty from them in return.
Based on evaluations of 45 companies across 10 separate studies, this summary shows how your organization can achieve success and sustain it by forging genuine relationships with customers.

The Middle Ages of Marketing
We live in a time of rapid change and uncertainty. Large companies and brands that once seemed invincible are struggling and steadily losing market share, calling into question much of what they believed about running a successful business. American Airlines is besieged by smaller, friendlier Southwest just as Lululemon has besieged the Gap.
Americans have decided that bigger is no longer better, and in the case of some of America's best-known brands, bigger may be much worse. At the same time, lots of smaller companies and brands are growing rapidly and filling the void with far fewer resources and a very different approach to doing business. Many of these upstarts are guided by purpose-driven missions that say as much about who they are as people as it does about the products and services they provide. They speak to us more intimately then the big corporations do.
The growing divide between big national brands and their customers has been decades in the making. In the eyes of customers, old-line companies don't listen; they advertise. They don't adjust themselves to our needs; they try to sell us what they've got. They aren't flexible, because they have strict policies to ensure consistency and efficiency—and deadening, impersonal aloofness.
In short, big companies and the people who work in them are in the habit of shaping our expectations in the exact opposite direction of the way our brains are wired.
Social psychologists have deduced that primitive humans were forced to develop a primal, unconscious ability to make two specific kinds of judgments quickly and accurately:

1.                   What are the intentions of other people toward me?
2.                   How capable are they of carrying out those intentions?
Today, we judge others almost instantly along these same two categories of social perception, which are known as warmth and competence.
A person who demonstrates both warmth and competence inspires feelings of trust and admiration, motivating us to seek a continuing relationship with that person. One who displays competence in the absence of warmth, however, tends to leave us feeling envious and suspicious, while someone we perceive as warm but not competent stimulates feelings of pity and sympathy. A person who exhibits low levels of both warmth and competence often provokes feelings of contempt and disgust.
Survival for our distant ancestors depended upon their ability to quickly judge others according to these criteria.
We are merely the latest in a line of thousands of generations to inherit this time-tested ability, and we apply it in all our relationships, including those involving commercial transactions. We engage with brands on the same basis of warmth and competence because they have the capacity to stir up these same hard-wired primal passions. We experience feelings of affection and admiration for brands and companies that do well by us, and we feel insult or even rage when we believe that those companies have treated us badly.
To understand where we are today, we need to go back about 130 years. During the 1880s, the Industrial Revolution was in full bloom. The rapid expansion of railway networks and telegraph lines prompted the evolution of mass production, retailing, and advertising.  The first national product brands arrived on the scene, including Levi Strauss, Tabasco, and Heinz.
The people who produced those goods faced a number of obstacles. It may be hard to believe today, but humans were never mentally wired to trust and enjoy goods made by "unknown hands." Before the advent of mass production, people knew their butchers, bakers, and candlestick makers by name. Before 1880, there were hardly any packaged goods or ready-to-wear clothing. There were no fixed prices for goods, and often barter was substituted for money. For all these reasons, commercial exchange entailed little distinction between the seller and the product or service offered. Customers were, in effect, buying the person who stood behind the product. Human transactions of all kinds had been that way for so long that we have within us an embedded preference for trusting, face-to-face exchanges in all our affairs.
By artificially separating the producers of products and services from their end customers, the Industrial Revolution introduced middle players such as distributors and retailers to mediate relationships between producer and customer. Producers came to believe that the mass communication of features, benefits, and positioning would be enough to yield lasting customer loyalty, without actually having to deal directly with those individual customers.
These and other myths, from the Middle Ages of Marketing, are now being shattered every day. Customers are now abandoning many of the largest and most established consumer brands in favor of smaller companies with fewer resources and very different ways of doing business. We are increasingly calling it quits on the relationships we've had with many of the world's largest and most established companies and brands—all because newer, more transparent and trustworthy ones have come along that treat us better.
The rest of this summary will explore the many dimensions of warmth and competence in order to shed new light on why some companies have surged in popularity while other brands have been flagging.
A new Relationship Renaissance between customer and company is emerging out of the Middle Ages of Marketing. Customers already have near-instantaneous power to pass judgment on how companies and brands conduct themselves in public. That power will continue to grow for decades to come.
Our look at this phenomenon will unfold in six parts:

  • First, we'll explore the extent to which our warmth and competence judgments drive our interactions with all kinds of social groups, including companies and brands.
  • Second, we'll discuss why the short-term-profit focus of most companies almost guarantees that they will seek exploitive relationships with even their most loyal customers.
  • Third, we'll look at the other side of the story: the companies who have earned our fanatical loyalty because they succeed in connecting with our need for warmth and competence. Companies that put the customers' interests ahead of their own, in accordance with the principle of worthy intentions, are able to prosper financially by activating our automatic perceptions of their warmth and competence.
  • Fourth, we'll examine the idea that while mobile and Internet technologies have energized the Relationship Renaissance, they can also serve to eliminate warmth and humanity from our economic exchanges.
  • Fifth, we'll show why setbacks and problems can provide companies with opportunities to build stronger relationships with customers—as long as these troubles are handled with worthy intentions.
  • Sixth, we'll offer some specific guidance for navigating the Relationship Renaissance that lies ahead.
With the waning of the Middle Ages of Marketing (the age of mass everything) the Relationship Renaissance constitutes a rebirth of pre-industrial values, of an age in which customers can again insist on personal relationships with their product and service providers. For all businesses, large or small, a consistent focus on building personal relationships with customers will be an essential ingredient for lasting success in the decades to come.

1. Warmth and Competence
We have a spontaneous and immediate attraction to signs of warmth and competence in others. Warmth and competence judgments prompt us to feel friendly toward some, and alienated by others. Warmth and competence judgments explain why some inspire our loyalty, while others provoke only feelings of suspicion.
Decades of social science research have shown that within the two broad categories of warmth and competence perception, detailed dimensions of how we perceive others can be measured and interpreted to reveal the predictable patterns of emotions and behaviors that result from them.

  • Warmth is judged by assessing whether people are kind, friendly, and good-natured. Do they seem sincere, honest, moral, and trustworthy? Do they appear to be helpful, tolerant, fair, generous, and understanding?
  • We assess people's overall level of competence to understand how successful they would be in carrying out their intentions towards us. Do they appear efficient, capable, skillful, clever, and knowledgeable? Do they seem to possess the confidence and ability to carry out their plans?
These judgments are a remarkably simple but powerful mode of social perception that, by some measures, influences more than 80 percent of all human social behavior. We use warmth and competence to assess not just people, buteverything in our lives that acts or seems to act of its own free will. So we make warmth and competence judgments about people, groups of people, pets, animal species, teams, companies, brands, and nations. Likewise, when the car sometimes "acts up" or when the computer seems to have a mind of its own, we even make warmth and competence judgments about inanimate objects.
Studies show that of the two dimensions, warmth comes earliest and carries more weight in our perceptions. Studies show, for example, that you are judged for your trustworthiness within a split second of someone's seeing your face. Moments later, you'll be judged for your competence.
Warm implies trustworthy. We judge other people's trustworthiness after seeing their faces for a fraction of a second, in the blink of an eye. People with slightly surprised, happy faces and baby-faced people tend to gain our trust almost immediately. Conversely, we immediately distrust people with furrowed brows or frowning, angry faces, judging them cautiously and with suspicion.
Our judgments of competence arrive a fraction of a second more slowly, in maybe two eye-blinks. People with strong, dominant faces tend to win our immediate respect as competent, and we assume that people who look weak and submissive are actually incompetent, no matter the objective truth. Snap competence judgments of this kind can even predict election outcomes. Research participants shown photos of unfamiliar out-of-state political candidates were able to pick out the winners on the basis of assumed competence two-thirds of the time.
The fundamental dimensions of warmth and competence make the most sense when they are combined to reflect distinctive sets of emotions and behavioral responses. Each combined pattern of warmth and competence perceptions leads to a predictable set of human emotions, and those emotions stimulate a predictable pattern of behavior:

  • Warm and competent people make us feel admiration and pride, which leads to the behavioral response of attraction, affiliation, and alliance.
  • Cold and competent people make us feel envy and jealousy, which leads to obligatory association and potential sabotage.
  • Warm and incompetent people evoke sympathy and pity, leading to patronizing help and social neglect.
  • Cold and incompetent people stir feelings of contempt and disgust, leading to rejecting and avoidance.
Similarly, the warmth and competence model offers a simpler and more direct way to measure our perceptions as customers.
Consider first that every corporation is literally a body; the word comes from the Latin word for body, corpus. As customers, we perceive corporations as acting with intention and volition, just as we perceive other people. Human psychology has encoded in us the imperative to be wary of others, but also the sense that they have warm intentions toward us and might offer us something of value. Out of our need to secure access to resources, we perceive, judge, and trade with brands and companies just as our most distant ancestors did with people and social groups.
To quantify the extent to which warmth and competence influenced the behavior of customers, in 2010 the authors asked 1,000 U.S. adults to evaluate BP, Tylenol, Shell, Advil, McDonald's, Burger King, Tropicana, and Minute Maid.
The findings showed that companies and brands were judged so strongly along the lines of warmth and competence dimensions that these judgments explained nearly 50 percent of all purchase intent, loyalty, and likelihood to recommend a brand or company. To put that 50 percent figure in perspective, consumer research is normally considered to be significant if it reveals a new variable explaining as little as 15 percent of customer behavior.
In the wake of the Deepwater Horizon oil rig explosion in April 2010, the customers in the study showed widespread distrust for BP and reported a low rate of purchase intent and brand loyalty for BP locations, about 40 percent lower than for Shell stations.
The results for Tylenol, however, showed that the brand was largely unharmed by the bad publicity surrounding its product recalls due to poor sanitary conditions and violations of safety standards in 2009-2010. Tylenol scored twice as high as BP on such warmth characteristics as "honest and trustworthy" and "acts in the customer's best interests." In fact, customers reported substantially higher purchase intent and brand loyalty for Tylenol than for its competitor, Advil, even though the Advil brand had enjoyed a blemish-free record.
Customers appeared to have interpreted Tylenol's production problems to be a short-term, forgivable lapse in competence that did not impair its reputation for warm intentions. Tylenol's maker, Johnson & Johnson, has long acted on a company-wide credo that directs employees to put customers first. The company's behavior in the face of Tylenol product-tampering deaths in 1982 became a textbook case of effective crisis management. Through the parent company's willingness to take a large financial hit and go far beyond what the situation required, Tylenol retained the trust of consumers.
In contrast, when the Deepwater Horizon blew up and sank in the Gulf of Mexico, BP spokespeople laid blame with the rig's owner and sought to minimize the extent of the oil spill. CEO Tony Hayward insisted that the environmental impact would be "very, very modest." Underwater cameras recorded in real time the company's failures to staunch the gusher of oil polluting the gulf, cementing the image of BP as fundamentally incompetent. Along with a record of recent safety failures that included a deadly refinery explosion in 2005 and an Alaskan oil spill in 2006, BP had no store of goodwill on which to draw.
A peer-reviewed, academic study subsequently showed how warmth and competence dimensions drive people's purchase and loyalty behavior.
The study, involving well-known companies, showed recognizable clusters of brands spread out across the intentions-and-ability matrix. The most popular brands—Hershey's, Johnson & Johnson, Campbell's, and Coca-Cola—all landed in the well-intentioned, capable quadrant of high warmth and high competence. People admired them, said they would purchase from them, and expressed loyalty to them.
Troubled brands—which included BP, AIG, Goldman Sachs, and Marlboro—all rated as low on ability and low on intentions. People expressed neither planned purchase nor expected loyalty. These brands landed in the "contempt and disgust" quadrant, ranking low on both warmth and competence.
Luxury brands—Mercedes, Porsche, Rolls Royce, and Rolex—rated high on ability but tended to score low on good intentions. People reported feeling envy toward these as a result of their ability to enact their intentions. Both dimensions strongly predicted purchase and loyalty behavior.
Finally, government-subsidized corporations fell into the region of sympathetic and pitied brands. The U.S. Postal Service, Amtrak, and public transportation agencies were all regarded as well intended but incompetent. Again, both dimensions predicted purchase and loyalty—their intentions ranked positively but perceptions of competence were low.
The research confirmed that customers reward perceptions of warmth and competence with feelings of admiration, purchases, and customer loyalty. Just as we all assess other human beings, we also assess the intentions and abilities of companies and brands. Perceptions of a company's intentions and abilities trigger specific customer emotions, which in turn drive customer behavior. Companies and brands win our affiliation and loyalty just as real people do, by worthy intentions and capability, through warmth and competence.
All this research suggests that if companies are going to succeed with customers in the Relationship Renaissance, a new language of loyalty is needed, one built around warmth and competence.
Our loyalty as customers doesn't commit us to abstract companies or brands. Rather, we become loyal to what we experience, learn, or infer about the intentions of people behind those companies and brands.

2. The Loyalty Test
Warmth is a word that can be used to describe a wide array of admirable qualities, but they all add up to a reliable, trustworthy concern for others. Social psychologists note that warmth benefits others, while competence benefits the self.
A person who is honest, reliable, and agreeable demonstrates warmth by demonstrating concern for other people's interests and needs, even if the person might gain more in the short term from doing otherwise.
The same goes for companies. Companies that exercise genuine warmth exhibit a willingness to respond sincerely to their customers' needs, even at their own short-term expense. The most-admired ones tend to be those that establish trusting, long-term relationships with their customers by making it a point to put customers first and themselves second.
For instance, the Nordstrom department store chain offers such legendary customer service that it has been known to take back a dress that no longer fits because the owner has gained weight. That's an extreme example of a commitment to the needs of others. That's authentic warmth—and loyalty to the customer.
If that seems like an unprofitable way to run a business, consider how costly it is to operate with a more transactional orientation, with a sharp focus on short-term sales and profits. Companies and brands that seek quick and impersonal transactions with us tempt us to leave them every day. They may be highly competent, but by acting in defiance of our need for warmth, they trigger our natural feelings of distrust.
If they lack warmth and offer little sense of their loyalty to us, these companies leave us cold. Having failed to earn our loyalty, they are forced to go on expensive hunts for new customers to replace the ones they keep frustrating and losing.
In essence, we unconsciously conduct a loyalty test as we assess the warmth and competence of a person, a company, or a brand. We make a series of fast calculations in relation to the categories of warmth and competence that heavily influence our willingness to extend our loyalty.
When a company treats us competently but coldly, we don't feel particularly grateful, even if the service or product provides us with excellent value for the dollar. Instead, as the research shows, we see a cold and competent company acting in a transactional exchange for its own benefit first, with little thought given to our needs or desires. We feel used.
Competence without warmth is likely to leave us feeling suspicious. It makes us worry that our competent partner might cast aside our needs the minute that it's in that partner's interest to do so.
An example of a company that knows how to build loyalty through warmth is Mercedes Benz. Mercedes is a luxury brand, but that's not what sets it apart from other carmakers in terms of customer loyalty. At 55 percent, Mercedes has the highest rate of customer loyalty among all luxury carmakers, so the company attempts to go one better and make customer referrals a business objective.
For instance, Mercedes practices what it calls "random acts of kindness" with its customers, offering them invitations to exclusive events related to the Masters golf tournament, Fashion Week in New York, or the U.S. Tennis Open.
Mercedes's alliance with 14 exclusive hotels around the country means that when Mercedes drivers check in, they're rewarded with a bottle of wine and a $100 spa and resort credit, presented as tokens of gratitude for Mercedes ownership. Each new buyer of a high-performance AMG Mercedes vehicle gets to schedule a day on a racetrack with a professional driver to learn how to drive the car under extreme, intense conditions. Mercedes succeeds by passing the loyalty tests of their customers—loyalty tests that their competitors often fail.
For loyal customers to trust, commit, and support them, businesses first have to demonstrate genuine warmth, concern, and commitment to those customers' needs and interests. As you'll see, customers handsomely reward companies and brands that exercise this simple but powerful application of warmth and competence insights, through something called the principle of worthy intentions. When a company or brand goes beyond normal expectations to express worthy intentions, it turns loyal customers into passionate advocates who actively recommend others to them.

3. The Principle of Worthy Intentions
Lululemon has taken the women's activewear industry by storm. Started in 2000 as a single yoga gear store, it has expanded rapidly to more than 200 stores in North America and Australia. Despite high prices, the retailer has developed an almost cult-like following among its loyal fans.
Despite a brief period of yoga pants recalls in early 2013, fans of Lululemon are clearly sold on the company's competence, on the quality and fit of its unique products. They love the way Lululemon fabrics and designs flatter their figures and swear by its reputation for holding up under repeated washings.
Yoga pants, which can sell for under $50 at competing retailers, start at $78 at Lululemon, and they are almost never available at a discount. Lulu fans think the products are worth the cost, because almost 95 percent of all Lululemon purchases are made at full price.
There are a good number of unique ways, however, in which Lululemon draws in its fans with warmth as well as competence. Lululemon stores tend to be small and are left a little messy on purpose, to project a relaxed, lived-in look. Pants are hemmed for free. Customers are called "guests." Sales clerks are called "eds," for educators, and they are better trained and better paid than most other retail clerks, and they're expected to educate customers about the clothing and help them find the perfect fit.
But the real difference in Lululemon is the way that each individual store builds a community around itself. Before each new store is set to open, Lululemon scouts the area to identify influential local yoga and fitness instructors who would be willing to become "community ambassadors." The ambassadors get discounts on Lululemon clothing, and in exchange their classes are promoted by Lululemon online and inside the stores. Lululemon ambassadors also lead free yoga classes.
Lululemon's culture encourages its guests to set goals for themselves, and not just fitness goals, either. The Web site offers a free downloadable goal-setting worksheet to help you "create your ideal life."
In so many ways, the company expends time and resources putting the customer's interests ahead of its own, and the response has been overwhelming. On a revenue-per-square-foot basis, Lululemon in 2012 ranked third behind only Apple and Tiffany & Co. Buoyed by the fanatical loyalty of its guests, Lululemon has emerged from nowhere to become one of the most profitable clothing stores on earth.
Lululemon's winning formula reflects the principle of worthy intentions. This principle is a relationship-building strategy that involves attracting and keeping customers by consistently putting their best interests ahead of those of the company or brand.
Businesses face a difficult challenge if they try to gain our loyalty with competence alone. Most of us, most of the time, are perfectly satisfied with the competent goods and services we're already in the habit of buying. We're unlikely to change these habits on rational grounds, especially because differences in comparative quality have become harder and harder to discern. Only the emotional connections of worthy intentions have the power to change minds. When we are offered someone's worthy intentions, in the form of a relationship set openly in our favor, only then are we likely to shift our perspective and try something new.
In the Relationship Renaissance, the most valuable commercial relationships take on the character of the traditional one-to-one business relationship. Lululemon has perhaps the most loyal customers in retail today, and it has no loyalty or "rewards" program at all. In fact, Lululemon doesn't even keep data on its individual customers. It spends no money at all on the customer relationship management software that many retailers rely on to send out little birthday cards, teasers, and discounts to their most loyal customers.
Why? Because Lululemon operates in ways that ensure that its most loyal customers don't need automated acknowledgments via email or the postal service. Meanwhile, all the resources Lululemon saves by not managing a customer loyalty program can be diverted toward product development (enhancing competence), building community with complimentary yoga classes and local charitable giving (demonstrating warmth), and, of course, profits. Lululemon saves millions by having no national or local advertising budgets at all.
When any organization consciously pursues a course of worthy intentions, warmth and competence will tend to play off each other. By making the breakthrough of leading with worthy intentions and increasing their perceptions of warmth, they open up new opportunities for developing and expressing competence, too.
For example, small retailers know that competing on price against the likes of Walmart and Target is useless, so worthy intentions become their primary competitive edge.
One way that Connecticut bike shop owner Chris Zane has built a sense of trust with his customers is by giving away every bike part that costs him less than a dollar for free. He used to charge about $1.99 for small parts that cost him nearly nothing—nuts, bolts, and the small master links on the bicycle's drive chain. But then he realized that the need for these parts "come during painful times for our customers." A father who enters his shop with a crying child and a bike with a broken chain has enough troubles without being nickel-and-dimed for a master link. So Zane started giving away the parts for free.
In his book Reinventing the Wheel, Zane writes, "We do this because it lets our customers know we're not out to milk them. We're there to save them the hassle and the expense of getting their kids back out on the street and riding their bikes."
When he tracked the annual expense of these giveaways, he discovered it had cost him just $86 to offer free parts to 450 customers—which represented 450 chances to show worthy intentions toward customers with whom he expects a lifelong relationship.
This approach builds loyalty among his customers who could buy a bike for about 50 percent less at Walmart, but prefer to shop at his store because he puts their interests first.
The ability to perceive and judge the intentions and abilities of others has been imprinted on us over thousands of generations. As a result, no new technologies or innovations—not even the Internet—can materially change how it continues to guide us during our lifetime.

4. The Price of Progress
If a company's website is used for interactive relationships and not for one-way commerce, then it can be a powerful tool for communicating a company's warmth and competence through its expression of worthy intentions. Large corporations cannot love us back, but if company employees can use websites, Facebook, Twitter, or other social media to give us the experience of individuality and responsiveness, then the prospects for relational loyalty are there, even though the communications are transacted online.
A number of academic studies have shown that we interact with both computers and Web sites as what are called "social actors." We do not "think" they are human. However, we know that computers and websites were created by people. As a result, we process our experiences of interacting with them as a reflection of the intentions and abilities of those that built them, using the same warmth and competence perceptions that guide our behavior toward people, companies, and brands. But we also respond to both computers and websites with human emotion.
A customer loyalty study of six of America's largest retailers confirmed the extent to which we recognize expressions of worthy intentions and detect warmth and competence through our on-line shopping experiences. The research involved two online retailers (Amazon and Zappos) and four other retailers that sell through online Web sites plus brick-and-mortar retail stores (Sears, Walmart, Best Buy, and Macy's).
Customers ranked each of the four big, legacy brick-and-mortar retailers as more competent than warm. However, in each case, the Web sites of these retailers were given a greater edge of competence over warmth than the physical stores.
This response seems logical. Online stores are impersonal, efficient, and convenient. Physical stores, filled as they are with people, faces, and conversations, offer more opportunities for warmth and worthy intentions to be displayed.
However, the research relating to Zappos suggest that a warmth deficiency is not necessarily an attribute of all online retail sites. Zappos was the only one of the six retailers that customers actually rated slightly higher on warmth than on competence—despite its total lack of physical stores. Zappos proves that it's possible for an online store to demonstrate warmth through its policies, practices, and website functionality. Even Amazon, which is noted for its absence of human presence on its site, rated surprisingly high on warmth.
In fact, for both brick-and-mortar and online retailers, customer warmth perceptions were more strongly correlated with loyalty than were competence dimensions. What's more, these same warmth dimensions explained an even greater proportion of online customer loyalty than they did brick-and-mortar loyalty. As a result, it's clear that warmth and worthy intentions are just as important for building customer loyalty online as they are offline.
At even the finest call center operations around the world, the person helping you on the phone needs to be mindful of his or her productivity, of the need to move on to the next call as soon as your needs are satisfied.
But not at Zappos. When you call Zappos, perhaps with questions about a pair of shoes or gloves, you are guaranteed to speak with someone who has only worthy intentions. You have the full attention of that Zappos employee, who has only your interests in mind.
One team member talked for 9 hours, 37 minutes with a customer. The previous record had been eight hours and 47 minutes. There is no record that either customer bought anything on those calls.
When customers call, they get lots of opportunities to interact directly with Zappos employees, who are able to express worthy intentions and allow customers to experience their warmth and competence. As a result, Zappos generates 75 percent of its sales every day from repeat customers—with no need for discounts, mass advertising, or rewards-based "loyalty" programs. Customers know when they are really appreciated.

5. Show Your True Colors
Sooner or later, even well-managed companies and brands make mistakes and experience accidents. When that happens, there is often a mismatch between what we as customers expect to hear from companies in crisis and how executives at most of those companies prefer to respond. Companies engulfed in a scandal, disaster, or product recall often put up proud faces of competence, as if to reassure us that they have the situation under control.
But at that moment what we desire most are signals of warmth. If our internal warmth detectors are not satisfied that a troubled company has worthy intentions toward us, then we naturally suspect that its leaders' assertions of competence are aimed at preserving the company's profits first, and our interests second.
When a company is hit with product recalls, it's natural for company leaders to fear that we will judge them harshly for their lack of competence. Fear of that judgment has motivated many companies to try to keep their mistakes quiet.
The trouble with that kind of thinking is that it ignores how forgiving we tend to be of companies who make honest mistakes and then apologize for them. More than 90 percent of those surveyed agreed that "Despite modern technology and honorable intentions, even the best run companies and brands can make mistakes that lead to product recalls." Having been embarrassed by a terrible mistake, the public determination of your competence might rest with your perceived warmth—whether you are judged as having made an error despite good intentions.
A July 2010 warmth and competence study of 1,000 U.S. adults revealed that BP, then in the midst of the Deepwater Horizon disaster, was ranked with greater contempt (scoring low in both warmth and competence) than any other brand studied. Only the banks associated with the 2008 financial crisis came close to BP in terms of low regard by the public at large.
Toyota, whose vehicle recalls were earning it almost as much negative publicity as BP, scored well above BP and the banks in the study. However, survey respondents still rated Toyota far below average on both warmth and competence, which marked severe erosion in brand reputation for the company, placing it far behind rivals Honda and Ford in both perceptions.
Farther up on the scales of both warmth and competence was the Tylenol brand. Tylenol had been suffering from months of negative news at the time of the survey. Tylenol manufacturer McNeil Consumer Healthcare and its parent company, Johnson & Johnson, voluntarily recalled children's medicines after FDA investigators found irregularities in its manufacturing processes. Johnson & Johnson has a long record of responding to trouble by going beyond what is necessary to ensure the safety of its customers.
Social science tells us that those who cling to prideful claims of competence are much harder to forgive than those who humbly admit their faults. When companies such as Johnson & Johnson and Toyota confess to their failings, we have a spontaneous desire to forgive and forget. In contrast, the defensive utterances by the leadership of BP, Goldman Sachs, and Bank of America during their times of crisis after the Deep Horizon spill and the 2008 economic crash have left us mainly with indelible impressions of their unworthy intentions.
As long as we detect worthy intentions in the form of honesty and transparency, we have a tendency to overlook even great lapses in competence, and we reward those expressions of worthy intentions with our loyalty. A famous study of audiotape conversations between patients and primary care physicians showed that physicians who talked longer and laughed more with patients, "indicating warmth and friendliness," were much less likely to be sued for malpractice than doctors who had shorter, more businesslike visits. Other studies of this kind show that low warmth is a highly predictable indicator of the likelihood that a doctor will be sued, even though malpractice is supposed to involve matters of competence.
Success, it's been said, is determined not by whether you fall down but by how you get up. To that extent, every company's mistake represents an opportunity to improve its standing in terms of warmth and competence among its customers, but only if the company is ready to respond to its moment of truth with worthy intentions.

6. The Relationship Renaissance
The question this summary should raise is not whether business people are warm and competent, but whether they're perceived that way. Even if they think they've expressed worthy intentions to others who are important to them, can they be sure they're experienced as such? And if they learned that they weren't, what would they be willing to do about it?
Most executives, after all, believe they are acting reasonably and prudently when they make critical business decisions. Like most people, they view themselves as being both warm and competent, and they expect others to view them as such. They are largely unaware of how their decisions and resulting actions will be perceived by their customers and other stakeholders.
For all of us, ensuring that our warmth and competence are getting through to others reduces to three imperative actions:

  • First, we must overcome our natural inability to fully appreciate how we come across to others, by soliciting honest feedback from them.
  • Second, we must embrace that feedback and significantly change our words and actions.
  • Third, we must shift our priorities. Responding to candid feedback won't accomplish much if we remain focused only on our own best interests.
The first imperative is to become more self-aware. In this digital, mobile, and networked world, when it has never been easier to make millions of impressions on others, it's never been more important to be aware of how our words and actions are perceived by others in terms of warmth and competence. Ongoing self-awareness of this kind may well be the most crucial competency we all must develop in the Relationship Renaissance.
Companies and brands that genuinely desire the trust and loyalty of their customers need to commit to measuring and managing perceptions of their warmth and competence as diligently as they assess and manage their finances. These two dimensions of human perception provide the means for all of us to diagnose whether we are succeeding in communicating our worthy intentions to others. We can use these dimensions to help us see through our blind spots and adjust our behavior accordingly.
The most basic dimensions of warmth are simply whether others see us as warm and trustworthy. Similarly, the most basic dimensions of competence assess the degree to which others see us as competent and capable.
The nature of both human relationships as well at those with companies and brands is such that candid and objective feedback is not usually provided in any timely or consistent way. For us to truly know where we stand and to become more mindful of when we act in the future, this feedback must instead be actively sought and gathered.
The second imperative is to embrace significant change. Companies can thrive by listening to their customers—including their most spirited critics—and using what they learn to revolutionize their approach to what they do.
We now expect to be able to communicate with companies, and we expect them to listen. That two-way communication is the basis for any relationship, whether it be with people, brands, or even companies. We naturally want relationships only with those who approach us with worthy intentions. Those in charge of companies and brands must be willing to thoroughly examine their priorities, policies, and practices from a warmth and competence perspective.
As we perceive improved behavior from companies, we will in turn reward them with our loyalty, treat them as if they are better people, and so on in a virtuous circle. Psychologists call this the "Michelangelo phenomenon."
The more we behave toward relationship partners as if they have achieved their ideal selves, the more likely they are to attain those ideal selves. In this way, we "sculpt" the idealized selves of our relationship partners, just as Michelangelo's imagination caused an idealized figure to emerge from a slab of marble. But, as researchers point out, the partner in such a relationship must actually aspire to the ideal self we are assuming and affirming in our interactions with that partner.
Companies that behave honestly, transparently, and unselfishly after product recalls and mishaps demonstrate an ideal to which they aspire, though they may have fallen short in a particular instance. We customers forgave the company's leadership, and in forgiving them, we affirm their ideal, encouraging them to continue to aspire to it.
Similarly, company executives who welcome criticism and respond wholeheartedly to customer dissatisfaction demonstrate their desire to be better. Even the harshest critics, when treated fairly and with respect, often become a company's most loyal fans, because in getting their complaints resolved they've been granted a sense of that company's ideal self.
Many of the companies and brands that best align their efforts with our warmth and competence expectations began doing so from their very inception, guided by a purpose-based mission that became woven into the fabric of how they do business each day. Companies and brands that have made a good living during the Middle Ages of Marketing paradigm face a much more difficult challenge, because fundamentally changing the way they do business will not be easy.
However, those hoping to grow and thrive during the Relationship Renaissance need to embrace this new form of "enlightened self-interest" and adapt accordingly. The alternative is likely a future filled with cold, faceless commerce; transient customers; unfulfilled employees; and thin profit margins
Finally, the third imperative is to fundamentally shift priorities. Ultimately, it's not enough to respond and change selectively in response to candid feedback from others. Lasting change requires a sincere examination and adjustment of the goals and priorities that led us astray in the first place.
Sustained success in the future will require companies and brands to significantly shift their emphasis from an excessive focus on short-term shareholder value to a much more balanced approach that creates shared value for multiple stakeholders, with particular emphasis on customers and the employees who serve them.
Mark Kramer and Michael Porter have called for corporations to move from simply creating shareholder value to creating "shared value." They advocate for companies to reconceive their products and markets, redefine productivity in the value chain, and build supportive industry clusters at company locations, all with the goal of benefiting multiple stakeholders in a virtuous circle of mutual support.
They cite the efforts of such giants as GE, Walmart, Nestlé, Johnson & Johnson, and Unilever to create shared value of this kind. Nestlé, for example, redesigned its coffee procurement processes, provided advice to small growers, helped them secure resources, and began paying them directly for higher-quality beans. Higher yields and better beans raised the farmers' incomes and provided Nestlé and its customers with a reliable supply of good coffee.
For much of the modern era, the relentless drive for quarterly results has encouraged companies to pursue business in a way that turns out to be deeply flawed. When that pursuit spills over into excess, customers inevitably jump to negative conclusions about all of the people associated with a misbehaving company or brand, even though most of those people actually wince at those perceptions and deeply wish it were otherwise.
Corporate managers should be delighted to throw out the old playbook. A number of companies already have—some instinctively grasping the principles of warmth and competence, and a few embracing them by design. Human nature favors the movement toward a business culture of worthy intentions.
Research tells us that when people are able to act in ways consistent with their ideals, they enjoy enhanced personal well being, including greater life satisfaction and psychological health.
The conclusion is unavoidable: In this age when reputations can be made and broken around the world in a single day, our capacity to express warmth and competence is among our most precious assets. It follows that the most natural and sustainable way to achieve any kind of meaningful success—personal, professional, or commercial—is to earn the lasting loyalty of others by keeping their best interests at the center of everything we do.
Doing so doesn't require that we recklessly disregard our own interests. Rather, it recognizes that our success as humans has always depended on the cooperation and loyalty of others. In that regard, keeping the best interests of others in balance with our own is simply a form of enlightened self-interest. It's a mindset that embraces the warmth-and-competence perceptions that drive our choices and shape the human brand in each of us.

About the Authors

Chris Malone is a founder and managing partner of Fidelum Partners, a research-based consulting and professional services firm that helps clients achieve sustained business growth and performance. As a consultant and keynote speaker, he has worked with hundreds of senior executives in organizations ranging from Fortune 500 companies to start-ups and non-profits.
Chris has over twenty years of sales, marketing, consulting, and organizational leadership experience, and a track record of driving growth and profitability. He was chief marketing officer at Choice Hotels International and senior vice president of marketing ant ARAMARK Corporation, and has held senior marketing and sales positions at leading organizations including the Coca-Cola Company, the National Basketball Association, and Procter & Gamble
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Susan T. Fiske is Eugene Higgins Professor, Psychology and Public Affairs at Princeton University. She investigates social condition—especially group’s images and the emotions they create—at cultural, interpersonal, and neuroscientific levels. She is author of over three hundred publications and winner of numerous scientific awards, including election to the National Academy of Science. Most recently she has edited Beyond Common Sense: Psychological Science in the Courtroom (2008), the Handbook of Social Psychology (2010, 5/e), the Sage Handbook of Social Cognition (2012), and Facing Social Class: How Societal Rank Influences Interaction (2012). Currently she is an editor of Annual Review of Psychology, Science, and Psychological Review.
Susan has written two upper-level texts: Social Cognition (2013, 4/e) and Social Beings: Core Motives in Social Psychology (2014,3/e). Sponsored by a Guggenheim, her 2011 Russell-Sage-Foundation book is Envy Up, Scorn Down: How Status Divides Us.

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