The value prop of opt-out vs opt-in

The world has been transitioning from opt-in to opt-out for awhile. Have you noticed?

What does that mean?

In the old days, if you wanted to buy clothes you had to opt-in to the whole process. You opted-in to shopping, finding and then buying. You did a lot of the work.

Stitch Fix changed clothes buying to an opt-out value proposition. Many people attracted to Stitch Fix for low cost styling, but stay for the convenience of the opt-out process.

Of course, styling and fit are key value components. If Stitch Fix missed on those marks, few would stay.

But, as a customer, I’ve found more value than I expected because I can now avoid a good deal of the opt-in clothes shopping process while keeping my wardrobe up-to-date.

Of course, Stitch Fix did not invent this approach. After all, fruit-of-the-month clubs have been around for awhile.

But, they did tweak it with some technology so customers get more of what they want by  doing less. I imagine the business does less, too. It seems having one or two locations that you ship orders from should be more cost effective than stocking and running a network of retail stores.

And, by more of what I want, I mean that on several dimensions. I get styles I like, clothes that fit and keep my wardrobe up-to-date. I also get to try new brands and to try slightly experimental styles (a risk profile you can set) that I might not pick out myself.

By doing less, I mean I don’t have to drive to multiple retail stores, rifle through their racks, try on things, compare, winnow down, stand in line, buy and then drive home.

Managers who haven’t thought how they can deliver their products or services with an opt-out model in valuable ways for their customers should be.

The importance of the ‘paradise on top of the mountain’ in igniting interest in soccer, or anything

I’m reading Daniel Coyle’s book, The Talent Code: Greatness isn’t Born. It’s Grown. Here’s How.

In it, Coyle reinforces a key ingredient that I think is missing in soccer in the U.S.: cues that ignite an interest in the sport and guide long-term development toward mastery in youth, or as Coyle describes: “a paradise at the top of the mountain.”

Coyle illustrates the point with a few talent hotbeds. He writes about KIPP (Knowledge is Power Program) schools and how KIPP teachers use making it to college to ignite interest in being good students and guide their long-term development, and how that starts in the first minutes a child is in the program:

If we had to classify the primal cues the KIPP students received in those first few minutes, they would fall into three categories.

1. You belong to a group.
2. Your group is together in a strange and dangerous new world.
3. That new world is shaped like a mountain, with the paradise of college at the top.

These three signals might seem unique. But in fact they’re identical to the primal cues that any young Brazilian soccer players or Russian tennis players might receive, if you replaced the word college with the words being Ronaldinho/Kournikova.

I think there’s more than wanting to be like Ronaldinho, or now Neymar (the book was published in 2009) or Gabriel Jesus. Those top level successes serve as one level of inspiration.

But, young soccer players in Brazil have closer-to-home role models that they aspire to be like, as well: their older siblings and neighbors and the local club’s first team who are all pretty good.

They are more likely to interact with these role models than their counterparts in the U.S.

First, there’s more free play where kids of all ages play together and younger kids learn from older ones.

Contrast that to the U.S. where free play in soccer is almost nonexistent, so that first level of ignition from the older to younger kids doesn’t take place.

Second, in the soccer clubs, the older kids might serve as the younger kids’ coaches. The young kids get to know them and want to watch their first or second team games on the weekends, which further motivates them to want to play like their older heroes, so they, too, someday can make the club’s first team.

Since, school sports aren’t a thing in Brazil like they are in the U.S., these first teamers don’t disappear from the club for half the year to play with their school team, with strict rules to keep them from playing with their club during that time. So, they are there more often to build those relationships with the younger players.

And, this is important. If you’re an 8 year-old and your team is winning, it’s easy to think you are doing well and don’t have anything to work on. You no vision of what to work toward.

But, if you’re an 8 yo, and winning games, but still not playing like your team’s 16 yo assistant coach, then you feel like you have something to work toward because you know that is what it will take to make it to the first team some day. You have a vision of what to work toward.

Contrast this with the U.S. where club soccer kids are separated in age and skill levels, and rarely get to interact with older players. They’re coached by adults. So, these youth don’t get to know the club’s teenage players or the local high school’s players.

Because of this, it’s rare for the second level of ignition to take place, within the club, where younger players want to work toward being like players who are just a few years older than them.

In other words, soccer players in the U.S. rarely get a glimpse of the the right “mountain with paradise at the top,” when it comes to soccer.

So, they are more like the 8 yo’s winning games and not having a long-term vision of what they should be working toward. They think, “We’re winning. We must be doing something right.”

Why many companies don’t innovate well

While discussing this post about innovation with a friend, it occurred to me why so many managers “don’t put enough hooks in the water” with their innovation efforts.

That post likened primitive survival fishing to business innovation.

A good primitive survival fishing strategy is to put 10 or more hooks in the water. This recognizes that any one hook has a 10% chance of catching a fish each day. If you want to catch a fish every day, you need to put 10 hooks in the water.

This is also a good business innovation strategy. Each innovation experiment has a low chance of success (even the ones that sound like sure winners), so best to get as many hooks in the water as possible, to improve your chances of finding a few that work.

Many primitive survivalists don’t consider those odds or think they can beat them by knowing the best spots to fish. This is like managers who think they know how to pick winning innovations.

These types of managers tend to view the ‘putting more hooks in the water’ strategy as a sign of weakness, an admission that they don’t have the answer to lead the organization forward. And, they believe their job is to have that answer.

Sometimes they are lucky and catch a fish. They then mistakenly view that as a success of knowing where to fish instead of chance.

Over the course of their career they are likely to hit a one or two successes, which is enough for them to believe it was their skill, instead of luck. The failures, though, they write off as bad luck.

When they fail, they move on to their next employment and hope for the best.

The core problem is with who hires them. They hire people who exude confidence in knowing where to fish and, like the less successful primitive survivalists, don’t find putting more hooks in the water as desirable.

I can envision how these interviews go.

“What are your ideas for moving the company forward?”

“I don’t know. I like to try a lot of stuff and see what works.”

If your mindset is in the ‘knowing where to fish’ camp, this does not sound acceptable. You might think, ‘Well, if it was as simple as that, we could do that without you. Why do we need you?”

More on how I would answer that in a future post.

Co-ops and employee-ownership

These two forms of business organization are interesting since they align two of the three main stakeholders of organizations.

REI Co-op is a retail co-op that sells outdoor recreation equipment. I am a co-op “member”. I paid a $20 one time fee for the honor.

I receive my dividend each year in the form of product discounts that add up to 10% on what I spent the previous year.

The co-op aligns the interests of the customer and owner, because they are the same people. Customers want good quality products and services and good prices.

As owners, though, we also want the co-op to stay in business so we can keep buying good stuff, so we don’t want prices to be too cheap, or else the quality we desire as a customer may be sacrificed.

Because of this co-op customers may more aware that reasonable prices (rather than rock-bottom prices) serve their interests than customers of other types of organizations.

Credit unions are similar. They are essentially banks owned by the bank’s customers.

One of my parents worked for an employee-owned company.

Employee ownership aligns the interests of the employees and owners, because they are the same people.

The employees want to be paid well and also want the product quality and prices to be reasonable so the business will continue to do well.

Employee-owners may be a bit more aware of where their paychecks come from than employees of other types of organizations.

I wonder why these types of business organizations aren’t more common.

What if the union bought GM? Instead of having to bargain with management about compensation, they could pay themselves what they want.

Or, how about a streaming service owned by it’s members? What would that look like? Could that compete with Netflix?

“Vested interests are universal”

Every once in a while, we experience moments of clarity. I experienced one while listening to this EconTalk podcast.

In it, Terry Moe discusses the special case where the power of vested interests in the New Orleans school district was wiped out after Hurricane Katrina and the effects that had on the re-emergence of the public school system there. It was a very interesting episode and well worth a listen.

The moment of clarity is here, with Moe speaking:

Let me just take a step back and say: Vested interests are universal. Every institution in every policy area generates vested interests. And these are interests of people who get the services of those institutions but also who get the jobs that those institutions generate or the business contracts that those institutions generate. And, this is true in agriculture; it’s true in defense; it’s true in the environment–you name it. And it’s not just true in this country: it’s true in every country; and it’s been true throughout time. This is a universal thing. All institutions generate vested interests, and those vested interests have a stake in protecting their institutions from change because those institutions are the source of their benefits. And in many cases, those benefits, like jobs and profits, have absolutely nothing to do with whether the institutions are performing well.

And so these vested interests, which have a stake in investing in political power, will use their political power in order to stop reforms even when the institutions are performing very badly. And that is the problem that all societies face, and that our society faces, in trying to have a healthy democracy in which our institutions actually work. When we have institutions that are failing, the vested interests will still protect them and make it virtually impossible for us to reform them.

This is true in state, federal and local government, U.S. Soccer, business, non-profits, school districts, universities, unions, tenure and so on.

All these things can be good.

But, a question rarely asked is what happens when they aren’t performing well?

What brings about change that might improve performance?

Do those changes threaten vested interests benefiting from the current system?

In my opinion, competition is a more preferable option to limiting the power of vested interests than natural disasters. It acts is the same manner on vested interests without all the collateral death and destruction.

Three beliefs in soccer in the U.S. that need to change

ONE

Current belief: Talent is developed.

What this should change to: Talent is discovered.

 

TWO

Current belief: We need to identify the top level talent and focus on making them better.

What this should change to: “Push up the bottom to push up the top” – Tom Byer

 

THREE

Current belief: We know what a good player is and what a good team is.

What this should change to: Maybe we don’t.

 

In future posts, I write in more detail on how the current belief holds us back and how the new belief could move us forward.