Too many choices? Too little sense

What do the new book by economist Paul Ormerod and our latest report have in common?  They’re both (in part) about choice and how too much choice drives irrational behaviour.

Put simply, Ormerod’s argument is that when people face a large number of choices (which complex financial product to invest in, for example), we copy what others are doing.  Technology, whether in the form of recommendations on Amazon to complex financial markets, has magnified this trait but it didn’t create it.

It’s a point which really came home to us when writing our latest report, on the views of procurement teams tasked with buying consulting in some of the world’s largest organisations.  Ten years ago it was tempting to downplay or even dismiss the role of procurement in the process of buying/selling consulting services, but not anymore.  It’s true that procurement’s influence is felt more in some areas (buying relatively standardised consulting services across borders) than others (high-end ‘craft’ consulting on which the end-client’s job may depend) and that, for all their aspirations to do more, too much of its time is focused on price negotiation and contract administration.  But it’s a rare – indeed, naïve – consultant today who thinks they can side-step this part of the process.  Procurement teams may not decide which consulting firm to hire – that’s a role which still rightly falls to end-users – but they do have an important say in which firm gets to be on the shortlist.

Our latest survey asked a group of around 100 procurement managers in multinational organisations which firm they consider to be most credible in the transformation space.  Two things surprised us: the firm they named (let’s call it Firm X), and the fact that so many people named it.  None of the (now very extensive) feedback we have from end-users prepared us for the result: in the qualities that matter for transformation – such as the ability to deliver – Firm X isn’t rated particularly highly.

But if the ability to do transformation work doesn’t matter to procurement people, what does?  It certainly isn’t price: Firm X couldn’t, by any stretch of the imagination, be considered cheap. The answer has to come down to brand and reputation: procurement people put Firm X at the top of the list because they think it should be there.  Like the investors Ormerod describes, they’re copying.

The implications of this are legion: the extent to which the attitudes of many procurement teams are out-of-step with those of their internal customers; the resilience of brands; procurement teams, lacking the resources, opportunity and (possibly) inclination to carry out their own primary research, may be encouraging organisations to make the wrong decisions.  But, above all else, it gives some sense of how high the barrier is for other firms to prove that they are better than Firm X is when it comes to transformation.  And the final irony here is that their response has been to copy – each other.  Even the most cursory glance at the marketing literature, case studies and thought leadership produced around transformation reveals a paucity of new ideas.  Clients can hardly be blamed for failing to make a rational choice when they don’t seem to have anything to choose between.