Category Archives: Customer Psychology

Importance of Tacit Knowledge for Organizational & Individual Growth – Part I

The two crucial challenges faced by today’s organizations in remaining competitive and thus profitable are:

Cut-throat Competition: I was talking to one of my clients who is in carbide tools, mould and die business. Twenty years back there were only 3 players. (two from Sweden and one from Israel) Today there are more than 20 players.(including those from Korea, Japan etc.) This has brought down the average margins by almost 50%
Attracting and Retaining Talent: High competition leads to higher levels of attrition. It is assumed that a new executive starts contributing to the organization only after 7-8 months. Later he starts earning his salary and the real contribution starts only after 18-20 months. However in the present context, by the time the organization expects the employee contribution; the latter has already started looking out for greener pastures elsewhere.

Peter Drucker, the eminent management thinker predicted 40 years back that the future belongs to knowledge workers and firms can have a competitive advantage only through effective knowledge management. There are three ways how firms can remain competitive:

Generate new knowledge continuously.
Disseminate the new knowledge across the organization in a systematic manner.
Apply the new knowledge to develop new technologies , products and services.

There are two types of knowledge:

Explicit Knowledge: Is the one which is available through systems, processes, technology, patents etc. This knowledge to a greater extent can be shared. Through technology transfer it can be acquired.
Tacit Knowledge: This type of knowledge is with the individual and does not reside in SOPs. It is also context-specific. This is acquired through experience. The term was coined by Michael Polanyl in 1958 who said, “we can know more than we can tell.” It can be defined as skills, ideas and experiences possessed by an individual. Quite often they are not codified, written or verbalized and hence difficult to transfer from one person to the other. Examples of tacit knowledge are playing a musical instrument, preparing a signature dish, driving car etc.

Three decades back I was working with a renowned electrical consultant called P.H. Padhye in Mumbai who was having a consultancy assignment ( paralleling of existing Petbow and Skoda DG sets with the MSEB supply) with Ceat Tyres. Once the plant had tripped off and the entire production had come to a grinding halt. The maintenance head and others were struggling to solve the problem but could not succeed even after 24 hours. When we went to the plant, Mr. Padhye told the maintenance head, “ the setting of the speed governor of your alternators are wrong and that is why the tripping has occurred.” The problem was sorted out in half an hour. This is tacit knowledge. Mr. Padhye was a very knowledgeable person. Once after a marathon session on electrical circuit design, I asked him,” how do you know so many things?” He replied, “after 32 years of experience in the industry, I know what I don’t know.”

Many of you must have heard the apocryphal story where the boiler of a steam turbine had malfunctioned. An expert mechanic was called . He asked for a hammer hit it at the right spot and lo behold… the boiler started working.. When the mechanic submitted the bill of Rs. 10,000 /- The finance manager was quite perplexed. When asked for the breakup of the bill for a task which did not take more than 5 minutes, the mechanic replied as follows:

100/- for hitting the hammer
9900/- for knowing where to hit and thus solving the problem.

You will observe that the former is explicit knowledge whereas the latter is tacit knowledge.

You will appreciate the importance of tacit knowledge through this example. recognising the face of a person in a crowd is tacit knowledge; whereas to recollect the other details is explicit knowledge. Only though experience this tacit knowledge is acquired. Every evening when the employees leave the office such tacit knowledge is leaving the organization and when a talented and experienced employee leaves the organization; such tacit knowledge is lost forever.

At a number of places I see that there are no jobs available for executives who are 45+. This shows our irrational bias towards explicit knowledge (read technology) which youngsters seem to possess. But we fail to realize that a fast-changing technology can even make a young executive redundant equally fast. What is important is not so much as knowing a specific technology but the ability to learn new things and the organization having such workforce (who are willing to learn continuously) is called as a learning organization. A number of organizations feel cost to be the only driver to retain a competitive advantage and replace older executives.

E.F. Schumacher in his book, Small is Beautiful has something relevant on this topic. Quote:

Education can help us only if it produced ‘whole man’. A truly educated man is not the one who knows a bit of everything, not a man who knows all the details of all the subjects (if such a thing is well possible). The whole man in fact may have little detailed knowledge of facts and theories (read explicit knowledge). He may treasure the Encyclopaedia Britannica because SHE KNOWS and HE NEED NOT, but he will be truly in touch with the centre.

He will not be in doubt about his basic convictions, about his views on the meaning and purpose of his life. He may not be able to explain these matters in words; but the conduct of his life will show a certain sureness of touch which stems from his inner clarity. (read tacit knowledge)

Unquote (italics mine)

What are the different ways the tacit knowledge can be effectively harnessed shall be looked into my next blog…

Rajan Parulekar| rajan@paradigm-info.com|www.paradigm-info.com

On Human Nature – Case of Irom Sharmila

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Irom Sharmila has called off her hunger protest against AFSPA. She went through pain, misery and deprivation for 16 long years. There were hundreds of people who have been killed in the encounters with army. What was Sharmila’s demand? It was to repeal the AFSPA act or to modify some of its provisions. Continue reading →

Three Bad Habits Sabotaging Your Productivity

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Peter Drucker was consulting for a CEO of a major bank in US. For every meeting the CEO used to assign Peter a time slot of 90 minutes. A highly effective person, the CEO was delivering consistent results for his bank year-on-year. During the one-and-half hour meeting the CEO refrained from taking any telephone calls Continue reading →

How NOT to recruit a candidate

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Natasha, a sales manager from a renowned hotel in Goa interviewed a candidate called Moin, a B.Com graduate for the post of a trainee sales executive. Moin was a tall, fair and handsome guy who spoke fluently during the interview. Natasha felt he was an ideal candidate for sales. When asked about his strength, Moin replied his strength was manipulation. Save for this ‘minor’ aberration he looked OK on other fronts.

He was shortlisted for the next interview, where he repeated the same answer when asked by the GM. The considerate GM said, “young man, please go home and refer the dictionary and check the meaning of the word manipulation. You should not give such answers. Elsewhere you would have been rejected straight away.”

After joining, Moin started throwing tantrums . When asked to usher a guest in the restaurant, he said, “I am graduate, I do not do such things.” Natasha once asked him to follow up for payment from one of the regular guests of the hotel. Moin fired the guest saying that if the latter does not pay immediately, he may have to face dire consequences. Luckily Natasha, the manager overheard the telephonic talk, seized the receiver and apologized to the guest. Within two months, Moin resigned without giving any reasons.

The manager had spent her precious time of hers as well as of others including the GM. It is very rare for someone to contribute significantly during the first six months. Precious time and money of the organization were wasted. Some of the mistakes managers make while recruiting are:

Selection Bias for common traits: The candidate revealed his interest in being a DJ which was a common interest for the manager too.
Emphasis on external appearance: Selection of candidates is based on appearance, personality as well the hearing the expected responses. For example when asked why would you like to join our company, the typical response from candidates is: “I would like to take challenges and grow with a growing organization.”
Ignoring the Obvious: Listen to what the candidate says and also what he does not want to tell. Here Moin went on harping his manipulation skills which was ignored.
Mistaken Competencies of a Job Role: Most of us feel that a good talker is a good salesman. It may be true for low-value sales. However for high-value product or service like premium hospitality, the converse is true. It is not the glib talker but the effective listener who fits the bill for a good salesperson.

For more details please refer the chapter, Why do Salesmen Love to Talk in my book Contextual Selling (for more details http://www.paradigm-info.com)

Cognitive Biases that affect Decision Making

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“I tried to get an appointment with my client for six months, I could not succeed”, said Shashi, my friend in an Omani Company. “However the moment my Scottish counterpart sitting in the next cabin called him, he got an appointment the next day”.

Two Caucasian ladies, one French and the other a Polish, sang an average composition on peace & harmony in Bangalore for 2-3 minutes. After their recital, there were hordes of people from the audience who wanted to get photographs along with them. The singers were neither celebrities nor accomplished singers, but the colour of their skin made all the difference! Let us look at the different types of perceptual biases most of us have.

Blind-Spot bias-: Your own cognitive bias is a bias in itself. People notice cognitive and motivational biases much more in others than in themselves. We have a positive bias towards the Caucasians but may discount brown or dark-coloured skin executives.

Anchoring bias: People are over-reliant on the first piece of information they hear. In a salary negotiation, whoever makes the first offer establishes a range of reasonable possibilities in each person’s mind

Availability heuristic: People overestimate the importance of available information. A person might argue that smoking is now unhealthy because they know someone who chain smoked and still lived upto 100. Quite often the information is taken out of context or only a sample is selected by ignoring the other data.

Bandwagon effect: The probability of one person adopting a belief increases based on the number of people who hold that belief. This is a powerful form of group-think and is reason why meetings are often unproductive.

Choice-supportive bias: When you choose something, you tend to feel positive about it, even if that choice has flaws. Like how you think your dog is awesome – even if it bites people every once in a while.

Clustering illusion: This is the tendency to see patterns in random events. It is key to various gambling fallacies. Like the idea that red is more or less likely to turn up of a roulette table after a string of reds.

Confirmation bias: We tend to listen only to information that confirms our preconceptions – one of the many reasons it’s so hard to have an intelligent conversation about climate change.

Conservation bias: Where people favour prior evidence over new evidence or information that has emerged. People were slow to accept that the earth was round because they maintained their earlier understanding that the planet was flat

Information bias: The tendency to seek information when it does not affect action. More information is not always better. With less information, people can often make more accurate predictions.

Ostrich effect: The decision to ignore dangerous or negative information by “burying” one’s head in the sand, like an ostrich. Research suggests that investors check the value of their holdings significantly less often during bad markets

It is not possible to eliminate all the biases, but the least we can do is to be aware of them and in mindfulness the chances of our decisions going wrong can be minimized.

Achieving expertise also depends on the domain!

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Why is there a gap between efforts executives put and the results they get? The linkage between the improvement in one’s skills vis-à-vis the efforts put can be termed as structure of growth.

Last two weeks I was conducting training programs on Effective Value Selling for Capital Equipments which were in the price range of Rs. 50 L to Rs. 1crore.( Approx. $100k-200K) Selling of CNC machines involves considerable technical complexity and the sales engineers need to understand the customer behaviour in a sensitive manner. For most of the participants, I perceived a huge gap between the job role and the skill set possessed.

Remember the adage, practise makes a man perfect. Generally it is assumed that the improvement of a skill is directly proportional to the efforts, time spent and the intelligence of a person which is partially true. But it also depends on the domain in which one is working. Most of the domains may have the following types of growth structure. There are a number of growth structures but the major ones are: Logarithmic, Exponential and Sinusoidal ( Please refer figure: growth figures )

Logarithmic Growth: Here one tends to get visible results during the initial phases of activity. But the growth becomes harder as you go along. For example, in athletics running 100 metres in 14-15 seconds looks an achievable task for a beginner. Chopping off the next second or two is relatively easy. But to break the 10 second barrier only athletes at international level can achieve. One needs to be an Usain Bolt to reach a figure of 9.79 seconds where the runner up can be behind by just hundredth of a second. Same is true in cricket where a cricketer can scores a century on debut and become a celebrity but then it is only people like Sachin Tendulkar who go on reinventing their styles and techniques even after reaching a few milestones.

The first phase of logarithmic growth is steep and success comes easily. The second phase is like a plateau where the rate of growth slows down considerably. (refer figure a. logarithmic growth)

Thanks partly to media hype, you see such growth in music ( with pop stars, Little Champs in Saregamapa shows etc.) and in sports like IPL Cricket. With some talent and average efforts some people in such domain, become instant celebrities overnight. The real challenge is in phase 2 where you need to maintain your disciplined habits. You need to move away from your regular routine and break away from those habits. You can even develop a technique which may be beyond the textbook. Tiger Woods reinvented his swing in the second phase.

Exponential Growth: There are some fields where one needs to put lot of hard work initially and the results will not be visible for considerable time. Mastering a field like Physics, computer science, music takes a hell lot of time. In the HBR Article titled The Making of an Expert by Anders Ericsson, Michel Pretula and Edward Cokely, the authors propose that to master a particular field it takes around 10,000 hours of systematic efforts. The results may not be visible initially so one needs to have lot of patience (refer figure b. phase 1 of exponential growth ). And one day, a miracle happens. Suddenly things fall in place and what you were struggling all these days and years, the obvious answers are revealed. The pieces of jigsaw puzzle get into the right place. Kekule developed the model of Benzene ring in his dreams by correlating a serpent swallowing his own tail, Einstein worked on his special theory of relativity for a number of years as a clerk in a Swiss patent office. Marie Curie had to process tonnes of pitchblende in inclement weather and in an ordinary laboratory for a number of years before extracting a few milligrams of radium. Science whether applied or pure is a typical example where the structure of growth is exponential. Einstein, Kekule or Marie Curie did not get the success overnight but had enough perseverance to sustain the phase 1

Sinusoidal Growth: Fields like spiritual growth are neither exponential nor logarithmic. You do not start your spiritual journey as your hobby or for earning a livelihood/achieving fame. ( with the exception of fake gurus,babas & bapus ) It only comes out of genuine suffering or existential dilemmas of life. ( Refer figure c. Sinusoidal Growth ) It is said if you have not suffered a breakdown you may not get a breakthrough. Initially you start from a negative state, you may get results for some time, again you fall down and each time you raise the bar. Siddharth Gautam had to experiment with different techniques that were available in his time from the age of 30, and by 36 he realized chasing the techniques itself was a mirage and he was enlightened to realize his Buddha nature.

Each field may have either one or combination of the above growth structures. So to be an expert and an authority in a specific domain, it is not only important what traits you carry ( which is your DNA ) but to see whether there is a synergy between your traits and structure of your domain.

Remember, Vinod Kambli and Sachin Tendulkar had similar talent. Sachin could sustain in the phase 2 of logarithmic growth; Kambli could not.

As a professional remember, a formal education at the university does you no harm, provided you start learning there afterwards. It is simply beyond attending a 2-day company sponsored training program.

Ground-rules for Implementing Key Account Management

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Can I send Salil, my Sales executive, age 23 years for the Key Account Management programs? said Jagdish,,Sales Manager of an engineering company. I had to tell him the following aspects which determines the ground rules for implementing Key Account Management (KAM)

Needs a Different Mindset: Successful Companies who have implemented KAM look at it as a Strategic way of doing business and not a sales activity. You need to have commitment to work with priority customers differently. For example Supply Chain management can be an integral part of KAM
Commitment from Top Management: It cannot happen at the Sales Manager’s level. The buy-in has to be at the CEO, CMO, VP-Sales level. The sr. people should sponsor at least 1-2 such accounts and interact/visit them regularly.
Select the Right Person: Maturity is the most important attribute while selecting the Key Account Manager. It is not necessary that your top-performing salesman can become a good Key account Manager. He has to be more of a generalist with good understanding of finance, inventory, planning, influencing skills and the ability to see the big picture. A typical salesperson who is desperate to close order may be a misfit. One key competency is to understand the customer’s business beyond his immediate requirement.
Identify Key Accounts Carefully: Lynette Ryalls in a HBR article says the number of accounts should be within 5-25. Even a company like Xerox does not have more than 100 customers as Key Accounts.
Appoint and Train the KAM: The communication and influencing skills of the Key Account Manager has to be exceptionally good. He should be able to talk technicality at lower levels as well the macroeconomic environment, the interest rate with CFO and CEO comfortably.
Put the right Metrics: He should not be judged on top-line results. In case of rate contracts with low margins when the cost of servicing a key account is high, the consequences can be disastrous. Performance should be judged more by the margins or net contribution. Another yardstick can be the lifetime value of the customer.
Rework on the KAM cases every six months: All major accounts need not be key accounts. There are some unique parameters on which you should decide which customer remains in the Key account basket and those who need to be taken away.

How Culture affects your Context and Behaviour

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A number of readers ask me the significance of the word Context in my book Contextual Selling. Generally speaking American, European cultures are considered to be low context cultures whereas the Asian cultures like Japanese, Chinese, Indian are considered as high-context cultures.

Social Psychologist Richard Nisbett says that the orientation towards independence (low-context) or interdependence ( high-context ) actually decides the cognitive processes of thinking, decision making etc. In one of his experiments, a group of American and Japanese people were shown images which consisted of a big fish and a number of small fish with sea weeds around. The Americans were able to recollect the big fish; the Japanese more of the small fish and the seaweeds. That background of any situation can be termed as the context.

In the low-context cultures your communication has to be clear and to the point. People are individualistic and perceive themselves as being unique, self-made and autonomous. The communication is understood at a binary level yes/no, black/white 0-1 etc. In a business meeting involving Americans/Germans, you talk business and come to the point straight. If he does not want to buy your product he may say , “ Sorry I do not want to buy your product.” On the contrary, in Asian cultures, there are shades of grey between black and white. Remember, when an Indian client tells you, “we shall get in touch with you”. You need not necessarily take him at face value. The meanings can vary from: you may go now, I do not like the product/your demeanour, I am busy, I have already bought it from your competitor etc. That means one need to read between the lines in Asian culture. You not only have to hear what your customer says but also what his body language conveys. In case there is a divergence between his body language and the words; better believe the body language.

Independence is the hallmark of low-context, In high context culture there is equal (sometimes more) emphasis on other people’s opinion, the interdependence. Now do you know why we value others’ opinion more than us? And why most of the career options for students get narrowed down to engineering and medicine. If it is matrimony, then the bride has to fair and lovely no matter whether the groom is pitch dark.

Hazel Rose Markus, another social psychologist carried out an experiment at the San Francisco international airport. He had kept four blue and one orange pens at a counter to fill up the immigrations form. The US/Europeans picked up the orange pen which was distinct. The Asians picked up the Blue which was more common.

Thomas Talhelm, a psychologist from University of Virginia has made an interesting hypothesis in his article in Science in May 2014. He says the culture whether having high or low context is linked to farming of rice and wheat.

Rice which is mainly grown in Asia needs complex irrigation system, standing water which needs to be drained out every season. One farmer’s use of water may affect the other’s farm which gives rise to an interdependent paradigm. Wheat on the other hand, generally requires only rainfall and needs half the effort of that growing of rice. It also needs less of coordination and cooperation. ( Remember the giant mechanized wheat farms in the US?)

To test his hypothesis of wheat and rice corresponding to Independence and interdependence mindsets, he carried out an experiment in China. Wheat is grown in the northern side of Yangtze river, whereas rice is a major crop on the southern side. Talhelm asked the two groups to identify two common items from bus, train and a rail track. The people from north identified bus and train which are modes of transport ( low context) whereas people from the south side identified rail and rail track having commonality. ( High-context) when asked to draw pictures of self and others the farmers from north showed a big picture of self vis-à-vis small picture of others. Whereas for the rice growers of south, it was the other way round. May be this is the way our context, our environment conditions our thinking. I do not know whether the South Indian and the North Indian orientation has anything to do with the above hypothesis. ( with inputs from an article originally published in NYT by Mr. T.M. Luhrmann)

Does success in Small Value Sales a Guarantee in Key Accounts too?

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This question when asked by my clients, I am reminded of Marshall Goldsmith’s book, What Got you Here, Won’t Get you There! One of our clients nominated his star performer, Akshay for our training program. The main reason being he was not able to reach his desired targets in selling high-value capital equipments, the way he was selling laptops and mobiles in his previous organization. It is generally believed that a great salesman can sell anything to anybody. Translated otherwise, most of us feel that a great salesman is the one who can sell a refrigerator to an Eskimo. The above statement is not true for the following reasons:There has been a paradigm shift from a Sellers’ to a buyers’ market. Today’s customers have more choices vis-à-vis their counterparts in 90s.

Thanks to internet, today’s customers are knowledgeable. A person before buying a mobile or a car has done enough research on the net comparing products technically as well as commercially.
If you try to sell something a customer does not need, there is possibility the customer express his anger and frustration on twitter/trip-adviser etc. and in no time the contents may go viral.
In a low-value sale, generally the customer knows what he wants to buy and the interaction between the salesperson and the customer is transactional. The salesman needs to inform the product features, the price and the competitive comparison.
In case of a high-value sale, or a key account sale, quite often the customer may not clearly know what he needs, he may have a vague idea. He needs a solution not a standard sales pitch. Precisely for this reason the salesman needs to be an active and empathic listener and also willing to probe deeper. He also needs to understand the customer’s business that is customer’s customer. Here the interaction is more on relationships. You will observe that the some of these competencies can be acquired but others are natural traits like strategic thinking. This is one of the reasons why a Star Performer in Small Sale may not always succeed in high-ticket deals or Key Account Management.

Paradigm Trainers Private Limited is having training programs on Key Account Management and Advanced Negotiation Skills in Bangalore ( 14/15^th Nov.) and Mumbai ( 21/22^nd Nov.) for more details : www.paradigm-info.com

How Does a Customer Perceive Value – A Case Study

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Allied Technologies is a manufacturer of Special Purpose Machine (SPM) and friction welding machines in Bangalore. The company had received an order to manufacture tablet filling machines from one of its clients. Servo drives is an important sub-assembly for this application. Being an SPM, the company had invited a market leader called MACK servo ( name changed) along with a medium sized company called Leonardo Automation. In the morning session, after the client gave a presentation about the SPM dimensions and application, the senior managers of MACK Servo started pitching in their products. The MD was a bit perturbed as he could sense the sales pitch. He was expecting the vendors to provide a solution rather than pitch a product.MACK Senior managers changed the approach sensing the client discomfort.

Mr. Anil Purohit, the Director from Leonardo is a person known for his technical expertise. Rather than speaking about his servo products; he started speaking about the machine design and the relevance of the number of units needed in the SPM as suggested by the design team ( of the client) At one point of time Anil even suggested the client that the same result can be achieved by using less number of servo drives. The design team was quite apprehensive as the vendor was challenging the former’s competence.. However the client MD gave a patient listening to Anil’s proposal.. The meeting with both the vendors was over prior to lunch.The team from MACK were thanked profusely for their efforts. Anil was asked to wait.

After lunch the MD called for another round of meeting with the mechanical design team where Anil was also invited. The team listened to his novel idea of bringing down the machine cost by innovative design. A decision was taken where Leonardo was considered as a sole vendor and the order was placed on it. The price of Leonardo Servo was higher vis-à-vis MACK. However the overall cost was lower due to an innovative design approach.

This was achieved due to the technical expertise of Anil about his product but also for value he brought for the client’s machine design.

Quite often salespeople feel price is the main factor in today’s business environment. However it has more to do with your technical expertise and what value your bring to the customer. Can the salespersons change their paradigm from price to cost of ownership?

Rajan Parulekar, rajan@paradigm-info.com