What Is Behavioural Insights?
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2 Correspondence For questions and enquiries, please contact: Dilip Soman / Melanie Kim Rotman School of Management University of Toronto 105 St. George Street Toronto, ON M5S 3E6 Suggested citation: Feng, Bing, Jima Oyunsuren, Mykyta Tymko, Melanie Kim and Dilip Soman (2018), How Should Organizations Best Embed and Harness Behavioural Insights? A Playbook, Toronto, Canada: Behavioural Economics in Action at Rotman (BEAR) Report series, available at http://www.rotman.utoronto.ca/bear Email: [email protected] or [email protected] Phone Number: (416) 978-6980 Twitter: @UofT_BEAR @dilipsoman Website: www.rotman.utoronto.ca/bear 3 Acknowledgements The authors would like to thank the following individuals for suggestions on earlier drafts. Vanessa Lu provided research as- their insights and feedback. sistance, and Hasan Morshed, Gina Kim and Liz Kang provided numerous suggestions on content and design issues. We also Abigail Goodnow Dalton and Julian C. Jamison (The thank the BEAR chief scientists Nico Lacetera, Sonia Kang, Lu World Bank’s Mind, Behavior, and Development Unit Han and Tanjim Hossain. We also thank participants in our in- (eMBeD) terviews, round tables and design sessions; especially Pamela Anthony Barrows and Jessica Leifer (ideas42) Wong, Lisa Brenneman, Jennifer Nachshen, Leslie Millan, Xavier Elizabeth Hardy (Privy Council Office, Impact and Inno- Debane, Michael Sherman and Alex Jannetta for providing their vation Unit) input and comments. Owain Service (The Behavioural Insights Team) Melaina Vinski and Mohsin Bin Latheef (Pricewaterhouse- Finally, we thank or mentors and advisors Richard Thaler Coopers) (Chicago), Cass Sunstein (Harvard), David Halpern (Behavioural Julian House and Victoria Peace (Behavioural Insights Insights team) and Varun Gauri (World Bank) for inspiring us Unit) and for encouraging us to put this playbook together. We also thank our colleagues at BEAR for their comments and 4 01 What is the field of Behavioural Insights (BI)? 5 02 What can BI do for my organization? 12 Table of 03 What strategic questions should I think about? 15 04 What is the process of implementing BI? 25 Contents 05 How do I reduce the cost of experimentation? 28 06 What lies ahead? 33 07 Appendix 35 5 What is the Field of 01 Behavioural Insights (BI)? What is Behavioural Insights (BI)? 6 What are different ways of changing behaviour? 7 How has BI evolved over the past ten years? 8 Where (in the world) have BI initiatives been implemented? 9 Where is the future of BI? 10 What can I get from this playbook? 11 6 Every organization is in the business of behavioural change! Whether it is a for-profit firm encouraging consumers to Humans switch to their product, a government trying to get compli- * ance from companies or to get its citizens to pay taxes on & Econs time, a welfare organization whose goal is to get people to engage in healthy behaviours or to save for retirement be- fore it is too late, or a public health agency interested in improving the consumption of medication, behavior change challenges abound**. What is Organizations struggle with behavior change because of a fundamental empathy gap. ‘Econs’ are hypothetical individuals who have well-defined preferences, are able to accurately predict future consequences of their actions, have immense computational Behavioural Insights? abilities, and are unemotional. Humans, on the other hand, are impulsive, cognitively lazy, emotional and computationally constrained**. Empathy gaps occur when organi- zations design products, processes and programs for econs, when in fact the end user Behavioural Insights 101 is a human! Research shows that behaviour of humans differs from that of ‘econs’ in significant ways. For instance, factors including: context, cognitive laziness, procrastination, and social pressure play key roles in human decision making. The field of behavioural insights works to connect the psychology of human behaviour with economic decision-mak- ing to explain these phenomena. In dealing with human agents, organizations should assume that they will procrastinate, get tripped up with information or choice com- plexity, might forget, or will act emotionally. Organizations therefore need to embed behavioural insights (BI) into their DNA. * Thaler, R and C. Sunstein (2008), Nudge: Improving Decisions about Health, Wealth and Happiness. London: Penguin **Adapted from: Soman, D. (2015). The Last Mile: Creating Social and Economic Value from Behavioural Insights. Toronto: University of Toronto Press. 7 What Are Different Ways of Changing Behaviour? Four Approaches to Get People to Switch from One Option to the Other* Lawyer Economist Marketer Behavioural Scientist “Restrict unwanted “Incentivize behaviour” “Persuade people” “Nudge people into behaviour” better choices” Make Option A unavailable Impose a tax on choosing Make Option A unavailable Create an environment to move people to choose Option A or provide a bene- to move people to choose where it is easy for people Option B fit for choosing Option B Option B to choose Option B rather than Option A *Adapted from: Soman, D. (2015). The Last Mile: Creating Social and Economic Value from Behavioural Insights. Toronto: University of Toronto Press. 8 How Has BI Evolved Over the Past Ten Years? The Business of Behavioural Change Thaler and Sunstein publish Nudge BEAR publishes “Practitioner’s guide to Many companies and organizations nudging” and launches BE101x (Massive both government and private Open Online Course) sectors launch behavioural teams 2010 2011 - 2014 2018 2008 2012 The U.K. government is the first to The province of Ontario establishes Be- 10 years since establish a Behavioural Insights havioural Insights Unit (BIU), then Canadian Nudge is published Team (BIT), a.k.a the “Nudge Unit” Federal government establishes Impact & Innovation Unit (IIU). Later, the government of British Columbia also launches a BIU 9 Where (in the World) Has BI Been Implemented? The Geography of BI Since 2013, OECD has been at the forefront of supporting public institutions to apply BI. Currently, there are over 200 institutions around the world applying BI to improving public policy. Source: OECD. (2018). Behavioural Insights and Public Policy. OECD. Reproduced with permission from Faisal Naru. 10 Over the past ten years, we have seen a great deal of progress in the field of applied Behavioural Insights. Withthousands of trials being run by over two hundred government or other units around the world, human behavior has become the focus of a lot of activity in the policy, welfare and business world in a number of different decision domains. That said, a large portion of this work tends to center around the last mile – where an end user (i.e., a citizen, welfare recipient or customer) directly Where is the interacts with an organization or its product or service*. Teams working in this area are often problem solvers, tasked with applying recent learnings in behavioural in- Future of BI? sights to a context beneficial to their organization. While these efforts bring many positive benefits to the respec- tive organizations, the problem solver’s role focuses more Taking Stock on knowledge consumption and application rather than knowledge creation. Inspired by the growing interest in behavioural insights from all sectors, as well as an absence of any formal guidelines on establishing internal BI teams or embedding BI more generally in organizations, BEAR set out to create a playbook that will help interested organizations ask strategic questions and begin thinking beyond the last mile. * Soman, D. (2015). The Last Mile: Creating Social and Economic Value from Behavioural Insights. Toronto: University of Toronto Press. 11 Are you interested in using BI Highlights the Canvas of BI – in your organization? Identifies opportunities of using BI What Are you wondering how to build Raises three strategic questions and BI capability in your organization? provides frameworks to answer them Can I Get Do you want to learn more from this Provides a list of what works about tips & tricks? Playbook? Answers to… Are you currently running Suggests ways to reduce any trials or experiments? the cost of experimentation 12 What Can BI Do for My 02 Organization? What are the applications of BI? 13 What are examples of using BI in different applications? 14 13 What Are the Applications of BI? The Canvas of Behavioural Insights is Broad Decision Making Tools Behaviourally Informed Design Tools that help agents make better choic- Combining the principles of BI with es by providing feedback, rules of thumb, design thinking to create behaviourally computational support, decision support informed products, policy and processes* or peer comparisons. Choice Architecture Self-Control Products Designing choice contexts to Products that allow customers to steer choices (also known as close the intention-action gap by nudging) imposing a cost on undesirable behaviours** * Hampton, D, M. Leung and D. Soman (2016), “The Empathic Mindset: Blending Behavioural Insights with Design Thinking,” Rotman Magazine, Spring, 94-97. **Soman, D and K. Ly (2018), “The Growing Market for Self Control,” Rotman Magazine, Fall. 14 What Are Examples of BI? The Canvas of Behavioural Insights Decision Making Tools With a mandate to improve Canadian financial literacy and Behaviourally Informed Design facilitate positive behaviour change, the Financial Consumer A regulator of financial markets employs BI to improve Agency of Canada (FCAC) offers financial