Nudge: The clever way to business success

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Written by Shelley Hoppe on 29 September 2020 in Features
Features

Shelley Hoppe explains why you should invest in becoming a behavioural business.

Two years ago, after reading all the usual trendy and popular non-fiction on the subject of behavioural science – or “nudging”, as it’s more commonly known – I decided I wanted my whole team to learn how to think behaviourally.

It felt like the next big thing, like one of those societal shifts that will later seem so obvious, you can hardly believe that it had to be introduced in the first place. A bit like law enforcement using psychological profiling when analysing crimes (which actually only started in the late 1970s), or UX design becoming ubiquitous for anyone working in tech. For the team, and for clients, these skills were going to be crucial. 

The reason is, while managing global businesses across multiple cultures and languages is a difficult feat, we can take some solace in our one unifying quality: we are all humans. And as humans, our core drivers and motivators are the same.

Understanding these drivers, and how they can be used to deliver more engaging and effective processes and communications, is key for any 21st century business.

Is it possible to build a ‘behavioural business’?

For any organisation where most of its people are aware of these universally human traits it’s getting easier and easier to do so as the body of knowledge about human behaviour grows. Over the last 10 years or so, there has been a rise in the application of its insights.

Behavioural science has shown a demonstrable ability to boost crucial business metrics in several ways

Beginning with use in government policy – such as the foundation of the Behavioural Insights Team by the UK Government – the field has quickly expanded into the business world; from financial services, to management consultants, and the tech giants too.

So why are all these governments and organisations all choosing to embrace a behavioural approach? The simplest answer is: because it works. Behavioural science has shown a demonstrable ability to boost crucial business metrics in several ways – improving everything from employee engagement and change processes, to innovation and sales conversion.

As legendary behavioural economist Richard Thaler notes, making impactful changes in human behaviour only requires a small ‘nudge’ – small adjustments to the environments people find themselves in. The reason is we’re all ‘situational’ to some degree, meaning small changes in the contexts we find ourselves in can lead to huge impacts on people’s decision-making.

A classic example is changing the defaults for employee pensions from ‘opt in’ to ‘opt out’. Just a small change that preserves people’s freedom of choice, but one that Harvard economics professor David Liabson found caused pension enrolment rates to skyrocket from 40% to 90%. And crucially, without costing anything to implement.

This is not an isolated case study either: there is strong academic research which suggests understanding and applying behavioural science delivers impressive and consistent results right across the board. In a recent paper  from UC Berkeley, researchers crunched the numbers on 165 behavioural science trials, testing 349 low-cost interventions that reached more than 24 million people.

 

The analysis shows a clear, robust and profoundly positive effect from nudging – producing an average improvement of a massive 8.1% (from a baseline of 17.2% to 18.6%) on key policy outcomes, such as money saved or policy sign-ups.

So who’s investing in these skills?

A lot of companies, according to reports by LinkedIn and Reuters. In fact organisations like BCG (who have actively been using behavioural science insights since 2009) and PWC, describe the field as one of their key growth areas, citing its importance in their graduate consulting scheme as examples.

They are not alone either – a lot of the financial services industry is embracing the field, as well as the advertising giant Ogilvy who even run their own annual behavioural science festival. There are currently 300 behavioural teams in governments, businesses and other organisations – and this number is growing all the time.

Even behavioural science conferences are on the rise, with twice the amount of events listed on behaviouraleconomics.com in 2020 as compared to 2019.

Behavioural science in training

With this rising tide, it’s not only worth considering upskilling your workforce to think more behaviourally, it’s also incredibly valuable to start applying these techniques to internal training courses right away.

Let’s face it – despite the billions spent each year on training and development, many of these initiatives have little to no impact on business results. The problem is that the format is not always conducive to shifting behaviour over the long term.


We’ve all had the experience of walking away from a training or an all-hands event feeling motivated – but when you get back to your work environment, everything’s the same, and the feeling dies away.

We can all remedy this. By thinking more behaviourally, using simple techniques like the ‘Generation Effect’, the ‘IKEA Effect’ and the ‘Spacing Effect’, people will develop new skills and achieve better outcomes.

The key is to know and understand the effects the training has on each individual learner – and to use this understanding alongside technology to build courses in the most effective way.

What’s coming next?

Building a behaviourally informed organisation will become a leading priority over the next 5-10 years. As more and more businesses start to optimise the ways they train their staff we’re going to see a huge increases in business results for those that have made the jump early.

Some businesses have already done it, like Apple, Amazon, and Mckinsey and they’re each reaping the rewards today. Very soon, taking a more behavioural approach will become crucial for commercial success.

 

About the author

Shelley Hoppe is agency director at Spoon London

 

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