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September 29, 2006
The 9X Email Problem
One of the benefits of being an academic is the ability to attend seminars that seem to have nothing to do with your own work. A while back I heard John Gourville, a colleague in HBS's Marketing department, talk about his research investigating why so many new consumer products fail to catch on with their intended audiences despite the clear advantages they offer over what's currently on the market.
His explanation was fascinating, and very insightful. He said that we need to stop thinking about consumers as highly rational evaluators of the old vs. the new products, lining up pros and cons of each in mental tables and then selecting the winner. Instead, we need to keep in mind three well-documented features of our cognitive 'equipment' for making evaluations.
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We make relative evaluations, not absolute ones. When I'm at a poker table deciding whether to call a bet, I don't think of what my total net worth will be if I win the hand vs. if I lose it. Instead, I think in relative terms -- whether I'll be 'up' or 'down.'
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Our reference point is the status quo. My poker table comparisons are made with respect to where I am at that point in time. "If I win this hand I'll be up $40; if I lose it I'll be down $10 compared to my current bankroll." It's only at the end of the night that my horizon broadens enough to see if I'm up or down for the whole game.
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We are loss averse. A $50 loss looms larger than a $50 gain. Loss aversion is virtually universal across people and contexts, and is not much affected by how much wealth one already has. Ample research has demonstrated that people find that a prospective loss of $x is about two to three times as painful as a prospective gain of $x is pleasurable.
When combined, these three lead to what the behavioral economist Richard Thaler has called the "endowment effect:" We value items in our possession more than prospective items that could be in our possession, especially if the prospective item is a proposed substitute. We mentally compare having the prospective item to giving up what we already have (our 'endowment'), but because we're loss averse giving up what we already have (our reference point) looms large.
And Gourville points out three factors that make the situation worse for product developers who want their offerings to succeed. First is timing: adopters have to give up their endowment immediately, and only get benefits sometime in the future. Second, these benefits are not certain; the new product might not work as promised. Third, benefits are usually qualitative, making them difficult to enumerate and compare.
As if all this weren't enough, Gourville also highlights that the people developing new products are very dissimilar from the products' prospective consumers. You don't go work for TiVo (to use his example) if you don't 'get' the potential of digital video recorders and think they're a really good idea. And after working for the company for a while, having TiVo becomes part of your endowment; you think of things in comparison to TiVo, instead of in comparison to a VCR. Both of these factors make it harder for developers to see things as their target customers do.
Because of all of the above, Gourville talks about the '9X problem' -- "a mismatch of 9 to 1 between what innovators think consumers want and what consumers actually want."1 The 9X problem goes a long way to explaining the tech industry folk wisdom that to spread like wildfire a new product has to offer a tenfold improvement over what's currently out there.2
After I was done talking about the glories of Enterprise 2.0 at the New New Internet conference, one of the attendees asked how I could be confident that the new generation of collaboration technologies was going to succeed to a greater extent than had the previous generation of 'groupware,' the most popular version of which was probably Lotus Notes. I answered that groupware actually imposed a surprising amount of structure on people's interactions, and that because Enterprise 2.0 technologies let structure emerge, rather than imposing it, they would be more popular.
Gourville, I think, would have given a different, less optimistic, and more helpful answer. He probably would have said that acceptance of a new piece of technology among people who are free to use it or not is very much like consumer acceptance of any other new product. And therefore the endowment effect applies.
Email is virtually everyone's current endowment of collaboration software. Gourville's research suggests that the average person will underweight the prospective benefits of a replacement technology for it by about a factor of three, and overweight by the same factor everything they're being asked to give up by not using email. This is the 9X problem developers of new collaboration technologies will have to overcome.
In most companies, groupware didn't solve the problem; it wasn't that much better than email. The current generation of Enterprise 2.0 tools that I and other have been writing about is clearly different than groupware, and we believe it offers advantages. But that's not really the critical consideration. The critical consideration is brutally simple: are these tools 9 times better than email for collaboration?
Consider how high this sets the bar. Email is freeform, multimedia (especially with attachments), WYSIWYG, easy to learn and use, platform independent, social, and friendly to mouse-clickers and keyboard-shortcutters alike. It's the ultimate example of what Dion Hinchcliffe calls a 'comfort app' (a phrase I love, and plan to steal (with attribution) shamelessly). It would actually be a pretty tough competitor even if it weren't the universally-used incumbent, and so the beneficiary of the 9X problem. In short, it's not going anywhere.
So as we Enterprise 2.0 enthusiasts keep talking about the benefits and new capabilities offered by the new tools, we had better hope that the innovators who are actually developing these technologies are aware of the 9X problem posed by email, and are working on ways to deal with it.
There are, it seems, two broad strategies. Enterprise 2.0 technologists can try to increase the perceived benefits of their technologies (in other words, what the user feels she's getting), or lower their perceived costs and drawbacks (what the user feels she'll be giving up). Demos and training are part of the former strategy, but they feel like weak measures. Stronger ones are a clear explanation of what the technology does, network effects, peer pressure, word of mouth, and an extremely effective user interface and layout.
Of the items on this list, I have the most faith in the final one. The other items might bring users to the technology, but the UI is going to determine what they do once they get there -- whether they'll spend time exploring and learning, or leave quickly. I really didn't know what del.icio.us was or how it worked when I first went to the site, but once I went there I was sucked in; I wanted to learn more, and found it easy to do so.
I'm not a usability expert at all, so I'm not even going to try to set out guidelines for a great Enterprise 2.0 UI. I just want to point out the sharp difference between the look and feel of most corporate technologies, and most Web 2.0 ones. My favorite Web 2.0 sites are elegant, uncluttered, and bright; they have a jewel-like quality to them. I can't really say the same about most of the corporate systems I've seen and used.
A great UI not only heightens the perceived benefits of a proposed collaboration technology, it also lowers the perceived costs. An intuitive interface lets users quickly say to themselves "Oh, I understand. This isn't hard at all. In fact, it's about as easy as email."
The greatest challenge here, I think, doesn't have to do with making the browser sufficiently application-like (AJAX is a pretty powerful set of technologies). It has to do with making technologists sufficiently user-like -- getting them to stop thinking in terms of bells and whistles and elaborate functionality, and to start thinking instead about busy users with short attention spans who need to get something done, and who can always reach for email. From what I've seen (and learned from Gourville) this isn't easy, but it is critically important.
I want to end this post on an optimistic note, so let's concentrate on the biggest advantage Enterprise 2.0 technologies have over email. As I wrote in my initial SMR article, email is a channel technology. It creates a private conduit between the sender and receiver. Other parties don't know that the email was sent, and can't consult its contents. Wikis, del.icio.us, Flickr, Myspace, Facebook, and YouTube, on the other hand, are all platform technologies. They accumulate content over time and make it visible and accessible to all community members.
Prior to the arrival of Enterprise 2.0 technologies, companies had few effective platforms for sharing knowledge work, and no platforms that fostered emergence. So the new tools are not direct substitutes for email; instead, they're intended to provide capabilities that email can't. Will they succeed? It depends heavily, I believe, on whether companies and their managers want technology platforms for collaboration. This desire will be an important factor in solving email's 9X problem.
1Gourville, J. T. (2004). "Why consumers don't buy: The psychology of new product adoption." Harvard Business School Note #504-056
2Andy Grove, "Churning things up" Fortune, July 21, 2003
In our pursuit of our Product Capitalist (R) model, we’ve seen plenty of evidence of the over-optimistic bias of inventors as well as the endowment effect as applied to prospective users (and, in our case, prospective licensees of IP). Gourville’s 9X improvement threshold heuristic is consistent with those, such as Doug Hall at Eureka! Ranch, who emphasize the importance of overt benefit and dramatic difference. The relevant questions are straightforward: What benefit does the technology offer to whom, where, when? Is it a 10X improvement over the status quo? Based on what evidence? As a small, virtual organization that depends upon myriad collaborations with individual inventors, law firms, product development firms, market research companies, and large corporations, the answer in regard to collaboration tools such as Groove, Basecamp, Skype, and others is clear: we couldn’t exist without them.
Andrew - are you sure about the relative argument in your poker analogy? Amy commentary I see on TV suggests the opposite, where commenters refer to bets that reduce the stack by specified amounts and refer to the overall chip position, depending on the fall of the cards. That would seem counter to the simple ‘up or down’ scenario.
E-mail is the defacto collaboration (although designed for 1:1 communication) tool. Simple, easy to use and more than that it’s 1-click publishing capabilities. It is critical to the enterprise and not going anywhere.
However, there is a lot of uprising in the tools market to prevent people from succumbing to the e-mail overload. GMail’s interface to Zimbra’s tagging to upcoming release of 2007; followed by tools for searching/indexing e-mails. What we have to fix is the way we collaborate and the convergence of blogs, wikis and e-mail somewhere on the horizon.
Great post, with the three evaluations! It kind of also explains the reasons for branding. And why it is so important to have the first service of a kind on a market (like del.icio.us)...
This is an astute post, raising a wonderfully interesting problem. All the same, lets see if we can dismount from the parachute caught in the trees.
Andrew, you are postulating effects of the new generation of software as *emergent*. As we know, emergent effects cannot be calculated in advance by way of a fixed formula. No matter how much information we have in advance, it is true by definition that we don’t have the information to come to such a conclusion.
Emergent effects are subject to the influence of unknowable initial conditions. I.e. sometimes, these new technologies will work wonders, and other times they won’t be so very useful. The benefit they bring is the former; i.e. they allow conditions which *can* lead to extraordinary emergent effects to do so.
Does this make sense, Andrew?
Andrew, sometimes we (well, me) misunderstand a newly introduced concept, but continue to mentally build it into something that is perhaps useful. When I first read this posting, I thought of the “endowment” as the benefits of collaboration given collectively back to the corporation by its employees; a higher form of “work”. People already get paid to work, so why collaborate? Why give more than what is paid for? No one can be held accountable for failing to deliver the fruits of collaboration. So how does the company create an environment to secure this endowment? It’s more than giving employees sharper tools.
Reg the statement “So the new tools are not direct substitutes for email; instead, they’re intended to provide capabilities that email can’t.”
Has there been direct substitutes for email in the past ? which have not succeeded ? (and therefore?) Is it wrong for to work on new tools that can substitute email for collaboration ?
Goureville’s two-page paper on “why consumers don’t buy’ is for sale on this website for $6.95—a high ratio of pages to pricing, in this non buyer’s opinion. Go ahead, call me loss-averse.
I don’t buy the 1-to-nine ratio as a threshold for adoption either. I don’t think Goureville could possibly have meant that.
Stuff that spreads by wildfire generally does something completely new, rather than offering an incremental improvement, no matter how large the increment may be. When something stands head and shoulders above the rest, it’s often because it’s a completely different animal, not just a larger beast.
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