In the lead-up to the World Business Forum, Industry Moves talks to featured speaker and expert behavioural scientist, Kelly Peters. Having had the “privilege and luxury” of being at the forefront of innovation throughout her career, Kelly tells us how businesses, armed with powerful insights, can effectively tackle complex challenges, and encourages us to unleash our inner scientist. We also hear about her research around investors’ appetite for risk, her favourite innovation project, and her search for Australian ‘mavericks’ that are eager to disrupt the industry using science.
Q&A with Kelly Peters
Can you tell us what led you to co-found BEworks and what led you down this particular career path?
At BEworks, our philosophy is to change the old way of thinking and to bring the business world into an age of scientific enlightenment. Along with my co-founders, Dan Ariely and Nina Mazar, the team at BEworks is passionate about understanding why people make the decisions they do and in turn, influencing their behaviour with nudges that have been empirically validated through experimentation. Armed with these powerful insights, businesses can innovatively and successfully tackle very complex challenges.
For many years, I believed that strategy was a way of thinking, not a book of knowledge. I must confess it has taken me this many years to make the shift from Cartesian, a priori wisdom, to a system that is built from the ground up with hypotheses and evidence, not theory and frameworks. I used to love those frameworks: stars and dogs, SWOTs and five forces. But then I started to notice that others were using the same templates and, perhaps not surprisingly, getting the same answers. I also observed that the way decisions were made about human behaviour were too far removed from actual customers and an understanding of what influences how they actually behave. There was no science, or insights from cognitive or social psychology, biology, or neuroscience.
Which companies in Australia, in particular in the finance industry, do you feel are successfully utilising behavioural science methods into the development of their products?
The Australian market is a new one for us, but what I can say is that we typically partner with organisations that have a maverick mentality. Financial services led in this space because we're evolving from behavioural finance but it's exploding all over. These mavericks are people who want to transform how their company makes decisions. They're not coming at this using a behavioural economics approach. They're coming to us as industry leaders.
Mavericks are not necessarily always the most senior person in the organisation, but they understand the power of science and the richness and reliability of the scientific method as a way to change execution. Take agile development, for instance, and now add even more rigour and science to agile development. They're hungry for the rigour and they're hungry for the unique insights on consumer decision making and tactics that can influence that behaviour. They provide that inspiration and help us to better help them reach their strategic priorities. We’d love to find some Australian ‘maverick’ companies that are eager to disrupt the industry using science.
It has been said that you were one of the first people to see the commercial potential of the Web in 1993. How has this impacted your career progression?
I’ve always had the privilege and luxury of being on the frontiers of innovation throughout my career. I’ve always been on the edge of disruption, whether it was developing behavioural economics teams in the financial services sector or publishing one of Canada’s first online magazines. I have always felt compelled to speak in support of a way of thinking that I believe is necessary to transform the world for the better. More so now than ever, when we live in a post-fact, post-truth world; people don’t know how to discern truth from fiction. It’s critical that we check sources when people are making claims and demand the proof of that claim. I believe that the scientific method is the best way to do that – that’s how we can transform society and the economy. We have to unlock the scientists within us.
"At BEworks, our philosophy is to change the old way of thinking and to bring the business world into an age of scientific enlightenment."
BEworks recently conducted research on investors’ risk appetite in their investment decisions. What was one of the most interesting findings to come from this research?
In Canada, Financial Advisors are required to assess their clients' investment risk appetite. The goal of this is noble - it is intended to allow advisors to provide advice that suits the needs of the client (ensuring that an advisor doesn’t push someone who prefers low-risk investments into something that is risky, or vice versa). However, our research shows that the set of investment options clients are presented with during the Know Your Client phase directly impacts the risk perceptions of clients. In particular, traditional risk profiling methods typically fall short of capturing clients' actual risk appetite and instead may prompt clients to over or under-estimate the amount of investment risk they ought to shoulder.
In your 12 years working in the finance industry, what do you regard as one of the most significant innovation projects that you’ve worked on?
We’ve done numerous innovation projects in financial services, from acquisition, to collections, to new product development and testing. However, one of our favourite innovation projects to share happens to be in the consumer-packaged goods sector.
The CEO of a Fortune 500 beverage and brewing company was in the process of designing a new product that could change the landscape of the market. The company’s R&D department began developing a reusable in-home draught beer appliance – this would be the first product of its kind ever available en masse. Wanting to avoid joining the large list of failed products launched yearly, there was a need for the design and application of a methodology that would help significantly reduce the risk of product launch failures. The problem was: ‘How can you accurately optimize pricing and packaging for a product that wasn’t ready for market yet?’ Our goal was to provide our client with an evidence-based, go-to-market strategy detailing how the product should be positioned in-store to significantly increase the likelihood of a successful launch. We designed an in-store experiment to explore the impact of a variety of conditions.
Our best performing condition’s sales rate was six times higher than the worst performing condition’s sales rate (2.4% compared to 0.4%). As a result of our work, our client was armed with the necessary data to avoid a product launch failure and maximize their product sales using an evidence-based pricing and packaging mix. The In-Context Methodology allows products to be accurately pre-tested, mitigating risk and optimizing sales without delaying product launch.
"Mavericks are not necessarily always the most senior person in the organization, but they understand the power of science, and the richness and reliability of the scientific method as a way to change execution."
Information privacy is a hot topic at the moment, following on from the Facebook/Cambridge Analytica data breach. What measures need to be in place to ensure that data on consumer behaviour is collected ethically?
It’s worth noting that the situation with Facebook and Cambridge Analytica shouldn’t be characterised as a data breach - it’s very different from when a company is hacked and sensitive customer data is stolen. In that case, the safeguards should naturally be around increased security on both the company side and the customer side.
In this case, customers willingly provided their data, but were unaware that that data would be sold to another company who would use that to try and influence their behaviour. Understanding how we can help people make better decisions about when and what information to share is incredibly important. Here you’ll hear most people, including Mark Zuckerberg, talk about the need for informed consent, and more granular levels of control over who we share our data with.
The problem with this argument is that research in behavioural economics shows that the more people feel like they have control over their data, the more likely they are to share that sensitive information. This is known as the “control paradox”. We also know that people are willing to give up sensitive information for relatively little gains, like a slice of pizza or a cookie. You might make the conclusion that people don’t actually care about protecting their private information, but the reaction to the Cambridge Analytica incident suggests otherwise. What we need is to start leveraging behavioural insights, like the use of defaults to help guide people to the decisions that are actually in line with their own preferences.
What's the best piece of advice you have received?
My father was a successful entrepreneur. He had hard times and then was successful again, and then he fell on hard times once more. He was always willing to take a risk, because life is short and you need to be willing to take risks to achieve good things. You’ve got to be ready and willing when an opportunity presents itself, and when you take that opportunity you should be fearless.
I’ve brought this wisdom to build this business in service of our clients. As scientists, our curiosity becomes the thing that motivates our fearlessness. It’s the curiosity to want to know why, and when you have that curiosity, you’re motivated to climb over walls that you shouldn’t be climbing over – to see with your own eyes, without caring that you’re trespassing. You’re motivated by that curiosity, and you’ve got to know, you’ve just got to know! So it’s not necessarily that you’re fearless, it’s that your curiosity creates the courage to take qualified risks.
"We also know that people are willing to give up sensitive information for relatively little gains, like a slice of pizza or a cookie."
You’re speaking at the upcoming World Business Forum; can you give us a taste of what we can expect from your presentation?
My presentation, which will focus on how science can accelerate innovation, is really intended to stimulate scientific thinking. I’d like people to say they learned how to 'do' science for business strategy. When you start thinking like a scientist, your filter on the world becomes dogmatic, and that manifests itself. You can't kind of do ‘some’ science. You’re either running an experiment – a proper experiment – or you're not. That’s just a hint of the dogmatism of science. You have a certain way of seeing the world, and other methods seem inferior to that. Not in all domains, but in judgement and decision-making, and wanting to understand how the world works.
I hope that my speech inspires people to be curious, and be more doubtful and sceptical. That’s the first prong of this, to start getting people to ask, ‘are you sure?’ If I hear that question, we’re already on our way to inspiring a hunger for better evidence.
Want to hear more from Kelly? Click here for more details about the World Business Forum. Industry Moves is a supporting partner of the World Business Forum, which will be held on the 30th and 31st of May 2018 in Sydney. Industry Moves' readers can use the promo code IM10 when purchasing their tickets to receive a 10% discount.