Nudge — Why it matters in startups

I recently read the book Nudge. I’ll tell you a little about the book and then apply some of these insights to the world of startups.

The book hinges on the idea that small “nudges” can drastically change the way people behave. The authors demonstrate numerous examples of how changing default policies can drastically improve well-being. There is also an emphasis on how opt out (rather than opt in) standards can dramatically improve enrollment in programs like retirement saving and organ donation.

These points are somewhat intuitive, but certainly not widespread in our governing systems. We’ve all seen how online retailers will leave the “Click here if you want to receive our weekly deals” box checked for you. How many people forget to uncheck this and receive emails for months? Now what if they left that box unchecked and you had to check it? How many people would opt in to this?

We all know that many more people would receive the emails if they are forced to opt out, rather than to opt in. This is a simple change in the default setting, but it greatly affects the number of people that enroll. In theory, (economic theory, that is), this doesn’t make sense! People are supposed rational creatures. This means that if half want to be on the email list, then no matter how the decision were to be presented, half would end up enrolled. In practice this doesn’t happen.

I’m not here to preach about the perils of homo economicus and how humans aren’t totally rational creatures. What I can tell you is how this applies to startups.

Small factors could make all the difference in the success of a venture.

It’s easy to find a startup idea and think of a time it has failed. Google was the 17th search engine. Was it a bad idea to create a search engine because 16 companies had tried and not quite gotten it right? No, and since they got the little things right, they have dominated the search market ever since.

Think of the restaurant industry. The little things often make all the difference. If an Italian restaurant on main street fails, there are a couple things that could be to blame: it was a bad idea (customers didn’t want it) OR it wasn’t well-executed, thus, customers didn’t like it.

When we discuss startup ideas, it’s often a black and white discussion: either it has been done or it hasn’t. Say that I want to build a social network where people randomly message one person in their network at a time. There are two ways I could look at this opportunity. One, this has been tried, and people don’t like it. (Evidence) Two, I hadn’t heard of this, so the people who have tried it in the past obviously haven’t done a great job.

The hard part is deciding why the idea failed in the past. Sometimes the idea really just isn’t that good. It sounds nice in theory, but customers don’t end up wanting it as much as they originally thought. If this is why a past startup failed, then you probably don’t want to try it for yourself. BUT if you can figure that the past idea failed because of poor execution, then there’s an opportunity is present.

Knowing all this, the next time someone says that your idea has been tried before, you’ll have a good response! Remember, the little things matter and can make all the difference.

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