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Customer behaviour vs customer data

How social science in business is making strides

Management teams and investors everywhere seem to have become obsessed with data and seeing customer behaviour and product development as a number. This number can be fed into an algorithm that explains everything – without the messy complexity of normal human action.

If you ask any business leader these days what influences their investment decisions, you’ll almost certainly hear terms like:

  • Big data
  • Artificial intelligence
  • Disruption

There is now so much data around that businesses can track and measure – accurately and objectively – pretty much anything that customers do. Who needs linguistics, anthropology, psychology or any other social sciences to explain the world when a spreadsheet can do it all for you?

For private equity in particular, an industry that lives and dies by the numbers, this theory is especially seductive.

 

The value of understanding customer behaviour

ReD Associates, a consultancy that has the opposite approach to big data has, surprisingly, been receiving a lot of attention. Founded in the early 2000s in Denmark, the company has been pushing the value of social sciences in business for over 10 years. And its ideas are getting more and more traction.

Since they started, co-founders Mikkel Rasmussen, Christian Madsbjerg and Filip Lau haven’t looked back. The business now employs 90 staff and has offices in Copenhagen and New York. In April 2016 Cognizant, the Nasdaq-listed technology company, formed a strategic partnership with ReD and took a 49 per cent stake in the firm.

ReD has led a “quiet revolution” in business theory by focusing on the day-to-day world of the customer rather than taking a distant approach based on customer data. Their emphasis is on the science of how people experience the world (phenomenology).

 

LEGO learns from customer play

LEGO is an example of a company that took a step back from customer data and focus groups and looked for answers by understanding the people playing with its toys.

The company spends thousands of hours with children and their families, observing how they interact. Its marketing and product development teams operate more like an anthropological department at a university than conventional business divisions.

 

Customer behaviour attracting attention from investors

ReD’s unique approach has been noticed by the private equity community. These firms have been calling on ReD to help uncover the reasons for certain trends, and to help their portfolio companies understand human behaviour and the opportunities this can unlock.

Businesses are relying on data more than ever before. Numbers, however, have their limitations. Companies that recognise this and acknowledge the value of social sciences can enjoy the best of both worlds.

 

 


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