Value Geeks

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What is The Geek Way? Andy McAfee has just released a book with that title, in which he writes about the organizational culture of modern business firms who have achieved extraordinary results in a short period of time. He’s taking about Netflix and amazon and Microsoft and Apple and their Silicon Valley neighbors. These are all tech firms, but McAfee is not focused on the technology behind their products and services, but on the culture and mental models of their organizational setup and their managerial practices.

He calls their approach to organization and business “The Geek Way” as a device to separate their thinking from that of the typical business school where it is believed that study and analysis by wise observers can deliver some general propositions about how to run a successful business. Geeks believe the opposite: that there are no generalizable propositions and that learning does not come from others but from within oneself and within the firm. It’s cultural.

Geeks focus on a narrowly defined subject matter, and then dig into it deeply with insatiable curiosity and love of experimentation. They’re not pre-committed to any outcome of their experiments and they certainly don’t concern themselves with conventional wisdom or majority opinion. They go wherever their inquiries take them

McAfee’s book is about management geeks. Discarding conventional business school teaching about how to manage firms, the geeks the author studies think from first principles about how to manage the new firms that have emerged in the digital era and which don’t seem to conform to industrial age thinking about command-and-control management structures, hierarchical organization and business planning. The new age companies flow. They’re not managed.

McAfee proposes that there are 4 guiding principles for management geeks: speed, ownership, science and openness. Speed refers to speed of iteration – the capacity to run lots of experiments that can be quickly mounted, analyzed, interpreted and used as design feedback for the next version, next step, or next move. Ownership refers to the removal of bureaucratic barriers to rapid decision making – distributing both authority and accountability so that the right individual can make – and own – a decision without running it up too many flagpoles or organizational hierarchies. Science refers to the determination of good and bad ideas through the scientific method of falsification. A good example is an A-B test: rather than making a decision about red versus blue as a color choice, run an A-B test with customers and let the response data point to the better choice. It’s better than HiPPO – the highest paid person’s opinion. Openness refers to bringing all opinions and arguments for and against any proposition to the table without any deference to hierarchy or supposed expertise. Argumentation rather than consensus is the method to get to agreement on how to proceed. Once the argument is resolved everyone moves on in unison.

The problem with the Geek Way that McAfee describes is its introversion. Geeks tend to be introverted, unconcerned with the opinions and preferences of others and entirely concerned with their own projects, their own firms, and their own technology platforms. But that won’t do for business success. 

The purpose of business is to create value for customers. Those who work at building and growing a healthy business need to be Value Geeks not management geeks. To do so requires an extroverted approach – always looking outwards to the customer and the market, listening to customers’ hopes and concerns, translating the signals that the market sends, and turning them into ideas and projects for new and better ways to provide value in response.

The algorithm for Value Geeks is different than the one for management geeks. The four guiding principles are:

Empathy – the number one mindset and most important skillset for value geeks is empathy, the ability to identify the customer’s mental model of a desired state compared to their current state, and to be able to think like they think when ideas and propositions are run through that mental model. Value geeks can’t feel what customer’s feel – that’s a false claim for empathy – but they can simulate how they think and the implied consequences for choices they will make in the future.

Creativity – via empathy, value geeks understand customer dissatisfactions, what customers are uneasy about in their current circumstances, what they think could be better in the future or under different circumstances. But customers can’t invent new solutions; they’re not the innovators. How do innovative businesses create new value and new solutions? It requires creativity, that magic, unpredictable leap of imagination to a place that no one’s gone before. Value geeks prize creativity above all, because it holds the promise of novelty and surprise, the keys to new value. Will every creative idea be a winner? Of course not, so value geeks test and probe and experiment to add more substance and certainty until one of them is ready for market. But it’s creativity that is the essential ingredient to get the value process started.

Value Propositions –  the form of the experiment to test for market acceptance is the value proposition, a promise to the customer that a product or service or experience proposed in a business offering will deliver a benefit that the customer will value. A value proposition incorporates the idea that the business listened to and understood the customer’s needs, creatively translated the customer’s signal into an innovation, and is humbly offering it for customer evaluation. A value proposition is an exquisite act of design and a persuasive act of communication, a promise that entices and a promise that is kept. Value propositions are creative art and delivery science, offered with the humility of hoping to get it right while ever-willing to improve.

Learning – value is a process, a learning process. For the customer, it’s the process of identifying, selecting, purchasing, using, experiencing and evaluating. The customer can’t know exactly what the experience will be in advance. They learn, and they evaluate by comparing actual with expected value. Similarly, the business making the value proposition is learning, too. They learned enough about needs to make a responsive design, and they subsequently learn from the customer’s evaluation of their experience how accurate the design turned out to be, and how to improve it if it’s off-target in any way. Learning is accomplished through open recursive feedback loops from the customer to the business. Value geeks welcome feedback and seek it out at every point in the process because they love to learn. Learning is fuel for value.

Empathy, creativity, value propositions, learning. These are the 4 guiding principles for that make up the value geek way. 

The hybrid workplace is an excellent example of emergence in a complex evolving system.

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Management thinking about business and how work gets done to generate value for customers requires radical revision. Happily, the understanding of complex evolving systems is improving, at least to the point that we can recognize and embrace the consequences of emergence – that property of evolving systems that results in new phenomena and new traits and new patterns that could never have been predicted based on our prior knowledge. We can’t predict future developments of our own systems. We can only observe emergent developments as they occur.

One example of an emergent pattern that no-one predicted is the hybrid workplace. This is the new condition of the office or factory in which the elements of where we do work and how we do work and how we synchronize work with each other have changed beyond recognition. Some people might be in physical proximity in a meeting or gathering, while others are remotely connected through technology from another physical location, and the tools and devices and machines and data we use are in yet another physical place and another digital dimension. Everything is in motion and the relationships between them are fluid.

How can the hybrid workplace be managed for value generation and productivity? Yesterday’s management techniques of hierarchical control no longer fit very well. Two of the best experts to address the challenges of the hybrid workplace are Julie Kantor and Felice Ekelman, authors of the book Thrive With A Hybrid Workplace. Here’s what they say.

First, focus on culture. Culture is a value proposition for employees. Some bosses have claimed that corporate culture can not survive the hybrid workplace without an office or factory where people spend extended periods of time together on a regular basis. But culture stems from intentionality – what kind of a culture do you intend to nurture? Culture is a function of the things that matter to employees, which can include learning and progressing, empowerment, shared vision, connection, collaboration and trust. These are all subjectively evaluated, and it is entirely possible to shape the appropriate value proposition when the right intent is employed and declared. Whether work is hybrid or 100% in-person and on-premise does not have to be the governing variable. Empathy – understanding the things that matter to individual employees – is the binding force.

Second, embrace change. Evolutionary biology suggests that humans prefer predictability and stability to change. But in the emergent upheaval that brought us the hybrid workplace, change came to the forefront. Changes in work habits and practices, changes in relationships and collaboration possibilities, changes in the very nature of work. Part of the new value proposition for employees is that we all are swimming in the river of change together, and we should all be open to the excitement and energy of the experience.

Third, redefine connection. In complex evolving systems, it is the connection and interaction between individuals that opens up new pathways to productivity and value generation. Julie Kantor calls this connection interpersonal glue. If there’s no glue, teams find it harder to work through challenges and conflicts. Julie urges us to find new ways of networking, new forms of “dropping by”, and new forms of mentoring, and new ways of connecting in general.

Communicating and collaboration  take new forms as well, when the medium of connection changes. We should be newly sensitive to the subjective interpretation of our communications when they come in new formats (e.g. e-mail and text compared to in-person). “How can I help” becomes the new expression of connection – making communication inbound and not just outbound, and declaring the intent to collaborate. 

Be a coach rather than a manager. Coaching is a commitment to help individuals evolve as the ecosystem changes. Coaching involves observation and active listening rather than giving instructions. Coaching provides resources, but doesn’t specify how to use the resources. Coaching facilitates but does not prescribe. Every individual should receive coaching.

With new mindsets, the hybrid workplace can be even more productive than its more restrictive predecessor workplace. Responsiveness to the real things that matter to employees can be tuned to any kind of workplace, including one that changes all the time.

Why Do People Say Bad Things About The Capitalist System That Delivers Superabundance?

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Consider this chart. It appears in a book entitled A Farewell To Arms: A Brief Economic History Of The World and illustrates the worldwide change in personal income over 3000 years.

We can think of increased personal income per person as pleasurable progress for all. Increased income is a proxy for many life improvements: better food and beverages, better shelter from heat and cold, better health and better healthcare, better education, better jobs, better transportation, better entertainment, expanded knowledge, greater freedom, and many more in a long list that covers all of life.

As the chart shows, the progress is recent. There was no progress in income per person for the first 2800 years or so depicted in this chart, and then a high energy surge of almost exponential growth in the most recent 200 years. The pivot point is the invention and introduction of capitalism. 

The pivot is often labeled “the Industrial Revolution” (as it is in our chart), referring to new forms of physical capital such as steam engines and factories that proved capable of producing more and better goods at lower and lower prices and creating the jobs that paid the wages that increased income per person and gave individuals the opportunity to become consumers. It was a technological revolution, a knowledge revolution, and, most importantly, an economic system revolution, the switch to capitalism.

Over the 200 years since the switch, capitalism has delivered more than personal income growth; it has delivered superabundance. That’s the term employed by researchers Marian Tupy and Gaye Pooley in their book of that title. Superabundance is defined by the phenomenon of us each needing to spend less and less time working to purchase more and more goods and services. It’s a new economics, not of scarcity but of abundance.

A similar story is told by Hans Rosling and Anna Rosling Rönnlund in their 2018 book, Factfulness. They provide us with long lists of “good things that are getting better, and bad things that are decreasing”. The former list includes child cancer survival, access to education, women’s rights, clean water, literacy and democracy. The latter list includes child labor, hunger, smallpox, oil spills, and many more.

These and many similar books and papers provide extensive data compilations regarding the improved lives we all enjoy as a result of capitalism. So why do so many people – students, intellectuals, democratic politicians, writers, celebrities, and cultural influencers in general – speak so badly of capitalism?

The authors of the books we’ve quoted put it down to human psychology, that we are wired to be apprehensive, skeptical, and negative even in the face of incontrovertible evidence to the contrary. Our negative affect comes from our time roaming around prehistoric forests in constant fear of being attacked by some predator. The Roslings point to psychology research that indicates that humans have a gap instinct. We are prone to divide the world in two (e.g. developed economies versus underdeveloped economies, or rich versus poor) and focus on the gap between the two extremes of perception we have just created. We don’t see a continuum and we don’t see continued progress for everyone.

It’s a little hard to accept this psychological perspective in the 21st Century, when there is so much data to refute it, but if we are looking to psychology for an explanation, we can certainly look at envy. According to Helmut Schoeck (in Envy: A Theory Of Social Behavior), envy is universal among humans.

Envy is a drive which lies at the core of man’s life as a social being, and which occurs as soon as two individuals become capable of mutual comparison.

From a perspective of envy, the absolute gains that capitalism brings are ignored and the perception that some gain more than others prevails. Envy itself is an individual emotion – a lonely one since it’s a rejection of relationships – but the great danger occurs when a culture of envy is cultivated. That’s exactly what happens in our educational institutions, both universities and high schools and even elementary and middle schools. A class of educators, resentful because they feel underpaid and underappreciated in the capitalist system that rewards innovative value-creating entrepreneurship more highly than institutional maintenance, teach our children that capitalism is unfair, extractive, and exploitative. 

The teachers are reinforced by the communicators in the media, the writers, influencers, and talking heads who find that anti-capitalist content is amenable to their customers who have passed through the channels of education and become permanently misguided by the perspective they absorbed there. The media continuously reinforce the disaffected envy of their audience, deepening it, extending it, and distorting reality even further. The negativity instinct in the media leads to selective reporting and downright distortion of facts.

And then the politicians and government bureaucrats pile on. Politicians have no interest in progress and improvement. Their stock in trade is to point out how the opposition is failing – undermining or destroying prosperity. They also feed on the idea of the gap – that their constituency suffers by comparison to whomever the politicians decide to compare them to: women to men, non-whites to whites, Southerners to Northerners, less-educated to more-educated, my constituents to your constituents. It’s always about the gap for politicians. And the notion of the gap leads them to anti-capitalist rhetoric: capitalism is responsible for these gaps, that wouldn’t otherwise occur. There’d be equality under alternative systems. 

Government bureaucrats can claim to fix the gap problem in a different system that they run. Call it socialism, call it public-private, call it interventionism or regulationism, call it the entrepreneurial state. Governments are anti-capitalist because capitalism gives no role to government. Government can divide the pie, but only after capitalism has created the recipe for the pie, assembled the pie ingredients, baked the pie, served the pie, accepted and incorporated the feedback of the consumers of the pie, and nurtured the broad and deep market for pies that generates the commercial revenues that governments can then tax and redistribute. Politicians and bureaucrats must condemn capitalism so that they can offer their so-called solutions to the problems they claim capitalism causes.

We have a deep and wide circle of groups willing to say bad things about capitalism: educators, intellectuals; the students and others whom they influence; the media who act as their cheerleaders; and politicians and bureaucrats whose professional incentives are to undermine the popularity of capitalism in order to justify their own anti-capitalist ends and means. Together, they represent a formidable array.

There isn’t a word for fans of capitalism. If we use the word “capitalist”, it’s perceived as derogatory. Whatever the name for fans of capitalism, we need them to be confident, vocal, well-armed with data, and positive and persuasive in its presentation. We need to strengthen the pro-capitalist mentality.

Why Study Economics?

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Economics is the science of human thriving. It is the study of human choices and the motivations behind them. If we can understand those simple things, we can understand every transaction between humans as consumers and humans as producers, and roll that micro understanding up into the more macro understanding of firms and economies, and how they function, succeed and grow.

Thriving is what we all want. We can define it as continuously increasing our feelings of well-being. And that’s the first indicator of the value of economics. The output of any economy, of every firm and of every exchange and every transaction is more well-being – the feeling of being better off. Yes, a feeling. Economics is not measured in numbers like GDP or firms’ revenues or profits. It’s assessed by the satisfaction of individuals as to whether things are getting better or not. A growing economy is one with improving feelings of well-being. The nearest thing to a metric for this feeling of well-being is the University of Michigan Consumer Sentiment Index.

When the index is high, it’s associated with increasing stock market valuations, economic growth and prosperity. When it’s low, it’s associated with recessions. There’s no need to search for cause-and-effect, because it’s not there. The sentiment is emergent from the system.

A successful firm is one whose customers feel increasing well-being – more satisfaction, more confidence, more trust, more relatability. A strong balance sheet is one with assets that will facilitate such satisfactions and feelings of well-being many years into the future. A strong P&L is one that shows that customers are generating the cash flows that result from their willingness to pay for those satisfactions at the price the business chooses to set and results in profit.

How does economics teach us to increase well-being? Development economics as its called – the study and theory of how economic growth is generated – is a highly underdeveloped field. It has no answers because it’s looking for those cause-and-effect conclusions that just can’t be found. It’s better to look at system effects: what is the system most associated with increased well-being? It’s free market capitalism.

More entrepreneurship.

Entrepreneurship is the function that drives growth in the free market system of capitalism that brings prosperity. Entrepreneurship is misunderstood by most economists and all policymakers. Entrepreneurship is the economic function that creates new value, and value is what we all seek. Value is the feeling of being better off after experiencing a good or service that’s been prepared for us or sold to us. It’s the feeling of betterment – better off today, and better off tomorrow because of all the great offerings entrepreneurship brings to us. Entrepreneurship is what drives capitalism. It can take place in a startup or in a giant corporation, so long as the intent is to improve customers’ lives. It is highly restricted in an economy where government regulation strangles innovative opportunity, or where government directs investment funds to one industry rather than another – for the simple reason that entrepreneurship is experimentation to find out what customers prefer, and regulation often doesn’t permit experimentation. What drives growth? Those of us who are not entrepreneurs don’t know – we leave it to entrepreneurship to run the crazy experiments that will help the rest of us to find out.

Production before consumption.

The conventional wisdom of economic pundits and government planners is the opposite of the entrepreneurial view. They believe that consumption – what they sometimes call aggregate demand – is the driving force of the economy. If the economy, as they measure it, slows down or stalls, their answer is to put more spending power in the hands of consumers so that they buy more products and services. They believe that demand brings production into being. Without demand, there’d be no production. The opposite is the true case. Entrepreneurs reveal to consumers that there is more they can want – better goods and services, new technologically innovative products, faster deliveries and lower prices. By demonstrating the availability of more – by producing, that is – entrepreneurial businesses generate demand for their offerings. Demand does not bring businesses into existence; businesses bring demand into existence. Any and all restrictions on production should be lifted to bring productive growth to any economy anywhere in the world.

Less quantitative, more qualitative.

Economics is usually presented as a quantitative science. Economic “quants” focus us on numbers like GDP or economic growth rates or trade imbalances or debt levels. They want us to think of economics as a science on par with physics and mathematics. But it’s not. Economics is about well-being, and how humans increase well-being for themselves, their families, their firms and their communities. Well-being is subjective, a feeling on the part of individuals. It can’t be measured, enumerated, ranked or stacked or trended. Economics aims for a world in which we can consciously and deliberately raise and expand and extend well-being, without always trying to capture the improvement in numbers. Feeling better off is a qualitative phenomenon.

Less economic policy.

The word policy should never be conjoined with the word economics. Policy equates to politics, i.e. a biased, group-interest driven perspective on economic decision-making. Economics teaches us that markets can freely determine all allocation decisions, and all selections between what individuals and groups prefer, favoring new and better and jettisoning what’s out-of-date and inferior. Politicians may not always like market choices, and may therefore introduce policy that contradicts the markets, but this always leads to less total well-being. And since there is no possibility of isolating cause and effect in a complex economic system subject to an incalculable number of influences, interactions, constraints, and unanticipated feedback loops, policy never “works” – it can not lead to the outcomes it promises.

Students of economics will understand and appreciate these catalysts for well-being – that’s why economics is worth studying.

Complex Adaptive Systems: The Daoism Of Western Science.

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Western science, like all of our institutions, thrives on novelty. New theories and new sciences abound: quantum physics, computer science, network science, string theory. The lines of inquiry are always extending beyond yesterday’s boundaries.

One recently developed science is complexity and complex systems. In a reversal of the traditional reductionism in science – which looks for explanations at ever smaller micro-scales, from molecules, to atoms, and now to hadrons and quarks – complex adaptive systems theory looks at the world holistically as systems, including systems embedded in systems embedded in systems, and asks how they perform at the system level. The economy is a system, society is a system, a firm is a system, a city is a system, a brain is a system, and so on. A system can be contrasted with a collection of objects that are disconnected, like a bag of marbles or nails.

There’s a particular focus on Complex Adaptive Systems (CAS): a class of systems found in many fields such as economics, biology, and social sciences, characterized by a collection of individual agents acting independently and constantly reacting to what the other independent agents are doing. These agents interact locally with each other at the micro level in unpredictable ways, and through these interactions, system-level structures and patterns emerge without central control. 

The concept of emergence is key: unpredictable outcomes occur, without any traceable cause-and-effect links. The scientists’ favorite word in this context is non-linear. Their treasured linear equations are of no use in predicting future outcomes in a complex adaptive system. That means, for example, that the policies politicians and bureaucrats prescribe to fix what they perceive as economic and social problems are useless when viewed through the lens of efficacy, and damaging when viewed through the lens of the independent agents – people – interacting within the system. Their freedom of interaction, the essence of the system, becomes impeded by policy.

Complex Adaptive Systems open up another cause-and-effect problem in business. How can we celebrate the great achievement of hero CEO’s if outcomes emerge, rather than tracing back causally to the decisions and actions of the great business leader?

How do we deal philosophically with the idea that outcomes emerge, without any traceable cause? That’s anathema to Western science. Perhaps Eastern philosophy offers a better approach. In Daoism, the Dao is The Way. The focus is not so much on the outcome, more on the way or the path. There is no outcome, only constant change. The images of Daoism include water and river imagery: the river flows over boulders and pebbles, between mountains and banks, bends left and right, and becomes bigger and bigger, and never stops. Heraclitus famously said that a person never steps in the same river twice, because each time, the person has changed and the river has changed. Change is the essence of existence. The way is universal, we follow it – go with the flow.

Complex adaptive systems that constantly adapt to the changing environment and to the interactions of independent agents are said to be self-organizing. They follow The Way, as the way emerges. They exhibit dynamic change, never stepping into the same river twice. The appropriate observation point is holism rather than reductionism – interconnected Eastern thinking rather than analytic Western thinking.

The pursuit of the Dao – the Way – entails harmonizing with this process rather than controlling it. Embracing harmony is key for adjusting our philosophy. Thus, in CAS parlance, the trade-offs between different levels and agents within a system would need to be inclusive rather than controlling, for the classical concept of harmony is one in which diverse interests prevail in a dynamic balance. Harmony is understood as the ‘unity of any nonidentical objects’, which in their diversity allow for ‘the possibility of new things arising’. Translated into CAS, harmony is inclusive of discord but not overtaken by it. If discord does overtake the system, dynamic harmony loses its integrative quality and breaks up into chaos; alternatively, when it is stifled by uniformity, harmony ceases to exist.

Seen through the lens of business, CAS and The Dao require changes in standard business thinking. Control and prediction have been the twin pursuits of business management. But harmony results from balance, not control. Pursuing innovation in a linear fashion through R&D investment in projects can exclude “the possibility of new things arising” in an emergent way, because it uses reason and analytics to favor some investments and excludes others. Emergence is not even contemplated.

Western science and business management tend to prefer the identification of causal change – or that which we can attempt to control and seek to predict. The new science of complexity is less mechanistic than the standard model, and closer to Daoist intuitive thought. Complex Adaptive Systems, in its nonlinear treatment of change, provides a bridge between East and West, an integrative perspective.

Business Is Not A Set Of Practices Or Strategic Methods Or Planning Techniques. It’s A Mindset

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In the current business era, there’s a lot that seems mandatory: using quantitative methods of strategy and planning, following documented IT-enabled processes, organizing fixed structures that can be captured in org charts, and complying with government-mandated rules and regulations. Even the acts of creativity that contribute to innovation are specified, documented, and captured in software. There’s a bias towards fixed cause-and-effect thinking: if a business takes action X, it will result in outcome Y. We are told that case studies will reveal this cause-and-effect linkage in hindsight, to be re-applied in future planning.

There appears to be no room for individualism, spontaneity, unpredictable interactions, or rebellion. Those concepts are insufficiently objective for today’s business executives, consultants, professors and executives. The goal in business is primarily stability: to make a plan and achieve it, to set targets and hit them, to predict quarterly earnings with accuracy, to define processes in the knowledge that they will be followed unfailingly. The goal is to turn business into a science, with hard numbers, laws, and data-driven methods.

But in excess, this objective approach does not support the primary goal of business, which is value. 

The purpose of all firms is to generate value for customers and value is not objective or measurable or amenable to design or planning. Value is a feeling – a feeling of well-being or satisfaction experienced by customers. Different customers experience more value or less value than each other even when using the same product. Value occurs when the customer has used the product or service and compare the consumption experience with their going-in expectations. Value is subjective from beginning to end – from the search for potentially satisfying experiences to the realization in use to the evaluation after use. 

In fact, it is not the firm’s job to create value. It’s the customer’s role to find the most effective solution to their wants and needs. They can express some doubt or uncertainty that there’s anything available to them that exactly meets their need, although they might buy something that the best available option, even though their satisfaction is incomplete. They’re always looking for the discovery of something better. This is the role of the customer – the genius role of insisting on something better, thereby stimulating innovative action among producers to respond with new value propositions. Together, the producer and the customer imagine a new future value via a new or improved service or product; the producer can help the process along with product enhancements and advertising and PR and perhaps prototypes to help the customer’s imagination along.

If the customer’s imagination is piqued, the firm must commit resources to assemble the product capacity that will put an actual, purchasable offering into the marketplace for consumption. There’s no guarantee that this will be profitable or successful. The customer has the final decision. There’s no planning, predictive modeling, sales goal targeting or quantification of any kind that can eliminate or overcome this uncertainty. The customer will choose between all the alternatives available, including to buy nothing at all. It’s all contingent, and there are infinite possibilities. Firms choose their path towards facilitating the customer’s value experience, but there are no objective certainties.

So if business is not objective, quantifiable, or plannable, how would we describe it?

The philosophical word is subjectivism. Businesses would be better equipped for marketplace success if they followed subjective methods. They’re dealing with people and their emotions and their interactions with others in a complex social system. There’s no hard science, no spreadsheets, no data set that can predict the outcomes. 

That raises the question, what are the skills for business, if they’re not numeracy and hard science and mathematical economic. The answer is empathy. The skills of empathy – the ability to see inside customers’ minds and simulate a view of the world as they see it, to imagine what they are imagining, to reconstruct their mental model as opposed to imposing your own – are the most important in every business, and for every individual in every position and every function in business. Everyone must display customer empathy. What is the experience they are having? What’s imperfect about it from their point of view? What might result in a better experience for them, a potentially greater satisfaction for which they might be willing to pay. This empathy is best exercised at the level of the individual customer. If a business can get the empathic diagnosis right for one business, then they can investigate how it scales. Every customer is different, but there might be some patterns of response and interaction that spread out among a population of customers. 

Empathic diagnosis can reveal customers’ intent. What ends are they aiming for? What’s the highest value they seek? How can the firm’s proposition stimulate them to believe that it might contribute to that highest value? Uncovering the customer’s intent can indicate what experiments to run to find out whether any of the propositions a firm is able to get customers to imagine a future where new value is a possibility for them. Experiment is a key word: there’s no certainty in advance. Possibility is another key word: there is a wide range of possible outcomes. But by running the experiments and responding to feedback, the number of possibilities, the range of uncertainty, can be narrowed.

Once the results of experiments are in, then the firm can start unleashing its quants to do the economic calculation. How much will the customer pay based on these experimental results? How many customers might there be? How frequently will they buy. How much advertising budget should I spend to make the value proposition more widely known. Quantification is appropriate for these questions, once the empathic diagnosis is authenticated. 

Of course, the quantification can’t be accurate, and circumstances will change. It’s subjective calculation – the right method for an uncertain and subjective world.