Filed under: Spending
When the German philosopher Hans-Georg Gadamer died in 2002, at the age of 102, he was unaware of the impact he would posthumously have on mobile electronics, distilled beverages, and personal grooming, among other consumer-product categories. A giant in the field of phenomenology, Gadamer examined how human beings perceive and make sense of the world around them. He was celebrated for adapting hermeneutics -- interpretive methods originally developed by Biblical scholars -- to the study of human perception. He wrote a lot, but he did leave some questions unanswered, such as: How can a low-end electronics company create products that wealthy consumers crave? And: What do women want in athletic gear?
According to Christian Madsbjerg and Mikkel Rasmussen, of Red Associates, that was a lost opportunity. Gadamer's hermeneutics offer insight into commercial questions as well
"It's applying very theoretical constructs to very concrete situations," says Madsbjerg, a cultural theorist. "I think that's the ultimate skill that's here. I don't think that the people that designed theories of identity ever, ever thought about toothbrushing, but it's very, very helpful."
"I'm probably more practical," adds Rasmussen, an economist. "Christian is very much into Heidegger, and I understand why, because once you get down to what it is he's really trying to say, it is really inspirational. It gives you a completely new idea about 'what is it I do, and how do I study something?' "
Sports Gear and Vodka
Since opening in Copenhagen a decade ago, Red has signed up some of the biggest companies in the world, including Intel (INTC), Novo Nordisk (NVO), and Beiersdorf (makers of Nivea skin-care products). Samsung Electronics relied on Red's research in designing what would become the world's best-selling televisions. Red helped Adidas unshackle itself from its focus on competitive sports so it could capture much of the exploding fitness and sports-lifestyle market. With the firm's advice, Pernod Ricard figured out how to sell more vodka in a world where fewer people are drinking in bars.
"The great thing about Red is that they're supersmart," says Mike Milley, the director of Samsung's lifestyle research lab. "They are an unparalleled deliverer of that well-framed idea that's going to help tell the story of what we need to do."
Red's 70 consultants, hired mostly out of graduate programs in sociology, philosophy, political science, history, and anthropology, conduct a form of ethnography, embedding themselves in the lives of consumers the way Margaret Mead did among Samoans. They interview their subjects and the people around them, itemizing the contents of kitchens and dressers while photographing and videotaping, and accompany them as they cook, or commute or primp. Then they sift the resulting information for weeks, even months, looking for connections and telltale behaviors.
Several years ago, Lego turned to the firm. In an attempt to compete against the immediate gratification of PlayStations, the company was marketing easier Lego sets, action figure lines, and jewelry kits that weren't really about building at all. Yet Red's research showed that, while kids love video games, many also love things that reward time and patience and, importantly, allow them to show off their hard-earned skills. In an example that has become Lego lore, Red found an 11-year-old German boy whose most prized possession was a pair of skateboarding shoes worn down in such a way that it was obvious to his fellow skateboarders that he had mastered a specific trick.
Those were the kids Lego should be courting, Red argued, and they didn't want easy Lego sets, they wanted hard ones. The insight helped persuade the company to jettison much of its product line, part of a larger refocusing that has put it at the top of the toy industry.
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Little Data
In the age of big data, Red practices what one might call little data: Rather than using algorithms to analyze oceans of numbers, it uses small data sets and subjective information parsed by smart, highly educated fellow human beings. Now, having honed their method during hundreds of client projects, Madsbjerg and Rasmussen have written a book, "The Moment of Clarity," a slim volume about the power of the "human sciences."
"Companies, other consultants, they're often trying to figure out what's useful or convenient for people," says Rasmussen. "I'm not interested in what's useful or convenient. I'm interested in what's meaningful." The last decade has seen a profusion of firms that offer similar services -- qualitative research is one term for it; corporate anthropology or consumer-centric strategy are others -- and companies such as Procter & Gamble (PG), Microsoft (MSFT), and Intel today have in-house anthropologists and sociologists. The best-known of the innovation consultancies is Ideo, legendary for its work with Apple (AAPL).
Red's human scientists take questions about sales figures and product lines and reconfigure them into questions about "worlds," the context in which people unthinkingly live their everyday lives. This, they argue, is what Heidegger would have done. The idea is that examining the beliefs and unconscious biases that people have about modernity, or masculinity, or domesticity, or death will eventually yield profitable insights for food and beverage companies, or kitchen appliance makers, or financial advisers peddling annuities.
"One of the attributes that Christian and Mikkel bring -- especially Christian -- is an intense desire for social science to count in business. It's almost an ethical or moral imperative," says Tony Salvador, director of Intel's social research lab.
Contemplating the Future of Food
On a snowy Wednesday morning in early February, a team of Red ethnographers in New York is spread around a table, thinking about food. The five people around the table are all 30 or younger, and between them they are fluent in eight languages. A client, one of the world's best-known food and beverage companies (Red is not allowed to reveal its name), sees consumer attitudes about food changing and is apprehensive about what that means for a product line.
Four Red ethnographers have just returned from two weeks in the field, one pair in Latin America, the other in Europe. Each has studied seven households, augmented with interviews with store owners, journalists, food experts and activists. Earlier, the team's leader and a Red partner spent three weeks with the client company interviewing staffers.
The meeting is the second day of the six weeks that the team will spend analyzing its field data and shaping the findings into recommendations -- Red charges $250,000 to $300,000 a month for its services. A management consulting firm such as McKinsey or Bain typically charges more than twice that. The ethnographers take turns introducing the households they studied: a young accountant and her family, a civil engineer who used to be a chef, a hipster filmmaker.
"There's a lot of stuff you just said that's juicy," one of them, Morgan Ramsey-Elliot, says to another, Sandra Cariglio, stopping her as she describes the layout of a particular household larder. Photos of one subject's apartment trigger a discussion of why someone might splurge on high-end furniture while scrimping on food. It's taken as a given that the subjects' descriptions of their own behavior will only sometimes match up with what they actually do, and whenever the group unearths an example, they take note. "We need to pause on that because it is weird -- or interesting, to be more polite," says Charlie Hill, the partner in charge of the team.
"We're looking for tensions, gaps -- 'asymmetries' is a word Christian uses a lot," says Hill, "places where things don't align." Places, especially, where the unexamined assumptions of the client company and the unexamined habits of the consumer don't match up. "That's the easiest way I have of explaining to my teams where an insight comes from," he says.
Heidegger doesn't come up during the pattern-recognition sessions, and it may be that, at least in part, the philosophers and anthropologists Madsbjerg talks about serve more as a branding mechanism, signifying intellectual rigor the way Warren Buffett's modest Omaha home signifies prudence. In an increasingly crowded marketplace of corporate anthropology firms, Red's pitch is that it is the company that can do the smartest stuff with the information it gathers.
Teen Bikers Don't Watch the Olympics
Red's clients seem convinced. "They have this ability to take even existing market data and decode it in a different way," says James Carnes, the global creative director for sport performance at Adidas. "At the core of what they do well is that they ask the right dumb question, the one no one else has asked." Adidas, for example, for decades defined being a sporting-goods company as providing equipment to competitive athletes. The approach served it well as it expanded from a German shoemaker into a global company. By the early 2000s, however, it meant that "we would create products for archery, because archery is in the Olympics," says Carnes, "and then you have 100 million women on the planet dedicated to yoga whom we were ignoring."
"I remember at one point we were spending all this time working on Olympics sprint-bike equipment, and they came in and said they found something: The number of 16-year-olds who globally watched more than one hour of the Olympics was basically zero," he says. Teenagers were and are a hugely important demographic for the company. "This event that we consider to be the epicenter of sports glory was not being watched by the target," Carnes says. What Red helped Adidas do, in his telling, is realize the ways that what felt like rational decisions to its executives were stemming from a set of assumptions of which they weren't aware.
Hiding the TV
In the mid-2000s, Samsung wanted to figure out how to sell high-end televisions to design-conscious Europeans. At the time, Samsung TVs, like those made by Sony (SNE), Sharp, and Panasonic, were sold as high-performance machines. The packaging loudly showcased screen size, resolution, and other technical specs, and the TVs had what one Red respondent described as a "very Star Wars" aesthetic of bright indicator lights and functional black-and-gray plastic. They were expensive, and Samsung assumed people would want to show them off.
Talking to their Scandinavian subjects, Red's ethnologists found the idea of camouflage coming up again and again. People didn't want their TVs to dominate their living rooms, and they didn't want them to be visible when they were turned off, which was much of the time. One subject had jerry-rigged a system so he could hide his entertainment center in a cabinet and the remote control would work even when the doors were closed. Another had his television in a corner, like a framed poster he hadn't gotten around to hanging up.
Red also found that the final decision on a TV purchase was usually made by the woman of the house. "When women decide, they see it as furniture," Madsbjerg says. "What's important to them in the situation is that 'it should fit into my home, and it should fit as much as my couch and my books and whatever I have in my home.' " This idea, that TVs are furniture, not electronics, proved a breakthrough, guiding a series of design decisions at Samsung -- a move toward subtler lighting and more tactile finishes that would make televisions blend in rather than stick out. The company today enjoys a reputation for elegant design and is the world's largest TV maker. It also remains a voracious consumer of Red research.
"I am constantly amazed at the kind of insights these guys get," says Bill Hoover, the chairman of Red's board and a veteran of three decades at McKinsey, "and it's often not really clear where the insight came from. I've seen Red in meetings with hard-core board members who've dealt with the Big Three consulting firms their whole lives who are just blown away."
