The Change Threshold

All great innovations are a significant improvement on something existing or something new, and they are appealing.

Entrepreneurs and enterprises invest in understanding how to find that ‘something’ and how to mould it rapidly into a marketable product; service design, design sprints, ideation sessions, stretching, building, breaking, shaping, lean – it seems everyone is on the same quest to unlock the secret to the success of businesses like Tesla and Uber.

However, less emphasis is given to something of equal importance – let’s call it the change threshold – and it’s so significant that it might make or break your next venture.

When you ask someone to adopt a new process or product, what you are doing is asking them to change. How much change is too much before a user/customer will resist your offering and what is the sweet spot for optimum adoption?

Well, to help us understand this, let’s briefly explore change, what it is and how we respond to it.

Change is risk potential. With change, there is a risk that things will not be as good as they were before the change and there is also a risk that they will be better after the change. Like the stock market, there needs to be a risk premium applied on the part of the company targeting the new user. That means, in order for them to change, you need to give them what they already have + the premium. The premium could be a superior experience, they could save money, they could make money, or it might make them sexier / higher status.

Here are four key change threshold levers to consider for your next idea or project.

memory

Memory

As human we have content-addressable memory, compared to a computer which has byte-addressable memory. Our brains, rather than going for a specific piece of information in a specific file location, we look at associations, we look at a new task and recall a similar one in an effort to work out how to achieve an action.

So whatever the change is, it needs to be similar enough to something I have done in the past in order for me to intuitively understand it and ultimately buy/adopt it.

user

Personality

Are you a neophile or a neophobe?

Someone with neophilic tendencies will bore easily and become frustrated with routine and tradition, they will break with tradition and gravitate towards novelty. Whereas the neophobe will find change uncomfortable and prefer routine and stability.

These traits appear in demographic clusters. If you are designing a product or service, you need to understand your target markets trait profile through research and ethnographic study.

wallet

Wealth

Lower socio-economic status is associated with risk aversion. This comes back to our concept of the risk premium, if for you the cost of a change going wrong is high then you are going to be more change resistant e.g. you are concerned that an early generation electric car may be unreliable and you need a reliable car to perform your job so you wait till the 4th or 5th generation. While higher socio-economic individuals are more inclined to take educated risks, they might buy the latest electric car and also keep their SUV (just in case).

Knowing your target markets socioeconomic demographics will help you to manage the change threshold.

aging

Age

I was at a Sydney Startup talk and someone mentioned that in the room were a couple of grey hairs, I looked around the room, no one looked to be any older than 40, then a languishing hand appears in the crowd, he had been outed, the one 38 year old entrepreneur in the room. Gasp!

This is a great example of how age is inversely proportional to risk tolerance, a startup is the ultimate high risk venture, the risk premium is through the roof, if you win, you win big, if you don’t…

 

By 2045, 40% of the US population will be over 65, in Australia 25%.

As a population we will become increasingly change resistant at a time when change velocity is at its greatest. Change resistance, is a tendency generally observed as we age and it manifests as attempts to decrease uncertainty. A new thing, is an uncertain thing. So new things tend to be less favourable.

So get to know your target audience and understand their unique change thresholds.

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