How to escape the “herd behavior”?
Implementing new technologies is always a big challenge: there is often a tendency to think that new approaches may not work and that “if it’s not broke, don’t fix it”. However, it is not possible to pursue this type of thinking for long – especially in a society that changes at the speed of light with daily new technological discoveries.
In the last few months, Soluparts brought several trends that should soon dominate the market, promising to break paradigms, optimize and streamline processes making companies more competitive. Some already seem closer to reality, like big data – able to help manage complex purchases – while others, like blockchain and supply chain 4.0, still seem like a privilege of few companies in the current scenario.
Before implementing any of them, there is an essential step: analyzing the return and viability of each new technology or process that shows up on the market in view of the capacity and response time of the sector or company in which you operate.
In this article, we will discuss some tips for you to follow when adopting any of these new trends, so that the process is beneficial for your company.
What is the herd effect?
In his book The General Theory of Employment, Interest and Money (1936), economist John Maynard Keynes presents an analogy to the “herd effect” in the financial market, related to a “beauty contest”: imagine a hypothetical contest with 100 candidates, in which whoever chooses the six most beautiful would win a prize – that is, the winner is the one who can guess what the general opinion will be about the most attractive candidates.
In the financial market, things work in a very similar way: successful managers often have to understand which investments should be made according to a “general” opinion and view, rather than considering their personal taste solely and exclusively.
With the development of society, this effect of “understanding what the majority thinks” can be applied to different segments and situations. In order to understand it a little better, a 1992 MIT study tried to come up with a model capable of capturing the herd effect and understanding how people act.
According to the study’s author, people tend to use the other people’s information to make their own decisions – instead of using their own information. At one extreme, this can have serious effects, as people would almost completely abdicate their opinion to follow only that of others.
Thus, the need to combine market information and going after one’s own needs is clear, adapting them to the context of each company. Otherwise, the chances of failure are immense.
In the 21st century, the information age has conquered different companies – and the apparent need to invest in them in all sectors, without a clear strategy or very well-targeted benefits can have discouraging consequences.
In a 2019 study conducted by McKinsey, it was found that digital transformation goes wrong in 70% of companies. For Harry Robinson, senior partner at the consultancy, aligning people’s behavior in relation to new technologies and processes is one of the main obstacles to success.
In the supply chain
Understanding the impact of supercomputers, augmented reality and other issues is no easy task. Knowing where to invest is a major task – especially in the pandemic, a time that brought so much crisis to different sectors.
For Michael J. Jacobides and Martin Reeves, in the current context, companies that seek to emerge stronger in the face of the troubled economic scenario must develop a systematic understanding of changing habits. That is, once again, the dimension of people taking on an essential role.
Thinking about the sector themselves, not all the technology in the world will be able to work in organizations that do not have trained and aligned people to use them in the best possible way – there is no point to invest in VR glasses if employees who participate in the experiment are overwhelmed: augmented reality has to be very well-thought-out in order to bring benefits when mapping the storage of stocks and deposits; similarly, chatbots may not be the best alternative for communicating with customers, for example.
“Unless we are sensitized to new habits and their indirect ripple effects in the face of the current scenario, we will not be able to identify weaknesses, and we may miss opportunities to get a head start and shape the market”, the authors point out.
Given this principle, it will be necessary to constantly refine the value of the supply chain, relying on clear and effective communication with all the agents involved in this process. Thinking about ways to share resources, for example, can be a turning point in post-covid-19 society. In addition, attention to startups and niches will be essential.
How to escape the herd effect trap?
It is possible to summarize this article in three main points:
Calculate return on investment
Measure where the investments will be made, research the tools necessary to implement them and align within the company how it will be done.
Study and analyze the applicability of this trend in the market, in the supply chains and in your industry and, if possible, benchmark with those who have already succeeded in adhering to this new technology.
Analyze your company’s organizational culture
Analyze if your company has the organizational mindset and culture for adopting that specific trend. There are trends such as the use of virtual reality and augmented reality, which have worked very well for automakers like FIAT, for example. Still, the process is very new and there are very few professionals who are capable of managing its usability available.
Robotics is another technology that, despite being widely adopted in several industries, needs technically qualified labor for the new operation. Learn more about the subject.
Given this scenario, it is essential to ask yourself: is this really necessary for my company? Will people have the necessary tolerance to learn from it? Among other questions.
Try to understand if this trend will really succeed or will be temporary. Looking at the technical side of the issue, adhering to a tendency quickly – as well as letting it go quickly – can be a good strategy for early adopters.
Getting the business “on track” as quickly as possible after a failed attempt is the best way to avoid wasting talent and capital in the organization.
To help you research new market trends – especially in the supply chain – follow the Soluparts blog. In addition to the latest news, we also bring negotiation and career development tips, so that you are always ahead!