Archives for June 2015

Imagine yourself walking on the side of the road, pre-occupied with your next world changing idea and daydreaming about the possibility of money and fame it might bring to you. Suddenly a panicked group of strangers run past you as if they are being chased by something. What do you do?

Do you stop and then casually turn around to visually scan the area? Do you analyse the threat and then make a decision whether to follow the running crowd or just ignore them?

Well if you are a normal human being, chances are high that you would start running with the crowd and postpone the task of analysing the threat level.

Of course, the likelihood of a lion chasing you on a busy city street is miniscule. And at the same the chances are reasonable that the running crowd will suddenly turn around and start laughing at you and shouting “Bakraa!” (Hindi term for someone who got fooled)

You might end up looking like a fool but the “fight or flight” instinct endowed by nature prefers you to be alive and considered fool instead of being torn apart by a ferocious lion in the middle of the street. And for that matter, lions don’t give any specific concessions to rational humans.

Social Proof

As per Wikipedia, social proof is –

A psychological phenomenon where people assume the actions of others in an attempt to reflect correct behavior for a given situation. This effect is prominent in ambiguous social situations where people are unable to determine the appropriate mode of behavior, and is driven by the assumption that surrounding people possess more knowledge about the situation.

In short, monkey see, monkey do. That’s how you can explain the social proof tendency to your kids. Social proof, also known as herding, is a terribly useful mental model from psychology. So let’s dig deeper.

Humans are social animals. We want what others want and we tend to avoid what others avoid. When we’re uncertain, in an unfamiliar environment, we try to resolve the ambiguity by following others

But why is it so? Why do we follow the herd? The answer is evolution – the theory of natural selection.

In the hunter gatherer environment, if you saw a group of panic struck homo sapiens running past you, the obvious conclusion was that they were being chased by a ferocious lion. It gave you a tremendous evolutionary advantage if you started following the herd behaviour under such circumstances. So that’s how the social proof tendency has been wired in human behaviour.
[Read more…] about Behaviouronomics: Social Proof Tendency

A business’s long-term staying power is determined by its corporate culture. Despite this, most companies pay less heed to building a good one, and more to short term profit making. Let’s explore what you as an investor must look at while assessing how cultured or uncultured a company is.

I was recently travelling with my family in a luxury bus from Goa to Mumbai. I call it luxury because it had a working AC and the seats that adjusted a bit. That’s it!

It was a night journey, which began on a bad note (the bus was late), and ended in a nightmare (the bus broke down in the middle of night near a lonely place called Chiplun in Maharashtra). That we were travelling with four kids added to the nightmare. Twice, the bus got filled with smoke from a faulty electrical system, so twice we had to run out with kids and luggage in our hands.

The next bus was called for only after an hour of getting stranded, and this replacement bus was supposed to reach us only five hours later.

I called up a nearby hotel and the manager there was courteous enough to send a cab to pick us up and then arrange one to send us to Mumbai. In all, a journey that was supposed to take 10 hours, took 18. The cost of travel was higher by almost 75%.

“I want a refund for the breakdown of the bus and the harassment it caused the passengers,” I asked the customer service representative on reaching Mumbai. First, he did not have any information that his company’s bus had broken down, and then when he confirmed with his representatives, he agreed on a refund.

“We will refund you Rs 400 per passenger,” he told me. “Just 25% of the total fare?” I countered. “That’s less than half of what it costs to travel from Chiplun to Mumbai in a similar bus! And what about the trouble the entire episode has caused us?”

“This is what the head office has decided!” he replied and kept the phone down before I could say anything else.

I called up their head office, and got the same answer from their senior manager. And the casual way he and his team dealt with the entire situation was equally sad!

“I won’t ever travel with your bus!” I told him. “That’s fine!” he said, and banged the phone down.

“That’s what you get in the name of customer service,” I told my wife who was constantly asking me to calm down.

Well, the bus I was travelling in was from a company called VRL Logistics, a company that recently came out with an IPO, and which constantly talks about how they delight customers! They were in fact recognized as Service Provider of the Year 2013 by some World Travel Brand Awards (says a lot about how awards are won!)

Damn the Customer!
I am willing to bet my money on the fact that if I ask you to name 10 companies in India that have delighted you with great customer service, and 10 that have troubled you with a poor one, the second list will come out faster and the first would not get complete at all.

I am sure the situation is bad across countries, but the unprofessional way companies treat customers in a populated country like India truly deserves a case study (on how not to treat customers) at Harvard Business School.
[Read more…] about Spotlight: It’s the Culture, Stupid!