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Procter & Gamble Co/The
How companies can profit by understanding and tweaking our routines
The Power of Habit:
Why We Do What We Do and How to Change It
By Charles Duhigg
Random House; 371 pp; $28
When Alcoa (AA) introduced Paul O’Neill as its Chief Executive Officer in 1987, investors thought the new boss was pulling a prank on them. Standing on a stage, O’Neill did not speak about increasing market share or earnings forecasts. Instead, he pointed out the nearest emergency exits. “In the unlikely event of a fire or other emergency,” he said, “you should calmly walk out, go down the stairs to the lobby, and leave the building.” O’Neill’s sole focus that day was on how to make a habit of worker safety.
A big investor immediately called his clients and told them to sell, sell, sell. But as Charles Duhigg recounts in his fascinating book, The Power of Habit, O’Neill soon emerged as one of the best CEOs in modern business history, thanks to his unusual emphasis on safety. By attuning employees to proper procedure, O’Neill streamlined production. “Costs came down, quality went up, and productivity skyrocketed,” Duhigg writes, knocking down the conventional wisdom of manufacturing CEOs before O’Neill. He turned hard-core, ladder-climbing, capitalist executives into soft, feel-good samaritans.
Human habits seem intractable and inexplicable, as ingrained in our beings as the color of our hair. “They are so strong, in fact, that they cause our brains to cling to them at the exclusion of all else, including common sense,” Duhigg writes. But it turns out our habits are quite malleable, and as the author shows, companies are getting ever more adept at identifying, co-opting, and shaping our behavior patterns to increase profits.
A habit is essentially an equation written on the blackboard of the brain’s basal ganglia. First there is a cue: An iPhone dings during a meeting. Then there is a routine: The iPhone is discreetly examined. Then there is a reward: A Words with Friends opponent has made a move, and now it’s time to pounce. We crave the ding and the rush of endorphins it promises.
Though scientists didn’t put a name to this mechanism—the habit loop—until well into the 20th century, entrepreneurs have long understood the importance of routines. Duhigg points to Claude Hopkins, the wizard behind Pepsodent and the man who, in the early 1900s, got us all to start brushing our teeth every day. He found a cue: feeling a weird film on teeth. Through ads, he offered a solution: brush every morning. The reward: clean, bright tingly teeth.
Companies that figure out how to induce new habits can enhance their bottom lines. Procter & Gamble (PG) used habit loops to jump-start sales of Febreze. Soon after they launched the fabric deodorizer in 1996, Febreze executives realized it was not going to be the massive hit they expected. It turned out that people who had smelly homes were so acclimated to cat pee and cigarette smoke that they didn’t notice the nasty odors. There was no reward at the end of the Febreze loop and thus no loop.
But in their field research, P&G executives stumbled on a customer who used Febreze because she liked the way it made her house smell after she was done cleaning. Ding! “We were looking at it all wrong,” an executive tells Duhigg. “No one craves scentlessness. On the other hand, lots of people crave a nice smell after they’ve spent 30 minutes cleaning.” P&G overhauled the marketing material to emphasize the fresh scents Febreze gave to a clean house. Two months later sales doubled. “Eventually,” Duhigg writes, “P&G began mentioning to customers that, in addition to smelling good, Febreze can also kill bad odors.”
P&G’s Febreze experiment is quaint compared with Target’s tactics. As described by Duhigg, the company has a team of statisticians dedicated to studying consumer habits. They look at ages, incomes, job history, what credit cards they have, and almost every item a customer purchases in its stores or even looks at online. Then they send precisely timed coupons and reminders to adjust buyers’ habits without their even realizing it. If a shopper is buying a lot of bread at Target (TGT) but no milk, that must mean they are getting their milk elsewhere. Target’s puppet masters then offer irresistible come-ons—cues—to get shoppers to start buying milk in its stores. Target can piece together when a woman becomes pregnant (for example, when she buys baggy jeans, vast quantities of vitamins, and unscented lotion around the second trimester), then send her offers for products she’s probably craving.
At Alcoa, O’Neill surely realized the reward executives craved most was moving up the corporate ladder. The typical routine to do that at Alcoa—like at most big companies—had been to sell more stuff while lowering costs in your business unit. But Alcoa had hit a wall before O’Neill arrived. Profits from its aluminum products had stagnated, new product lines were a bust, investors were nervous. O’Neill changed the company’s operation structure: Any time an employee got hurt, the senior members of the department had to deliver a plan to O’Neill showing how the injury would never happen again. Executives who didn’t embrace this one, simple routine were fired or not promoted.
To understand why injuries happened, executives had to become intimately involved with work processes and manufacturing techniques, which led to conversations with frontline employees about their ideas, which led to streamlining operations, which led to lower costs. “In other words, to protect workers, Alcoa needed to become the best, most streamlined aluminum company on earth,” Duhigg writes. The newly instilled habit worked: By the time O’Neill retired in 2000, Alcoa’s profits had quintupled.
Duhigg explains how individuals, too, can tweak their behavior patterns to change bad habits. This is how some people, for example, trick themselves into exercising every day. Cue: running shoes left next to the bed. Routine: run first thing in the morning. Reward: endorphine rush and a healthy breakfast. Duhigg notes that habit loops help explain how bad habits arise in the first place. Cue: feeling sad. Routine: drink. Reward: forget the troubles. He also writes about how understanding the mechanics of habit loops is partly what helped Alcoholics Anonymous succeed in battling addiction. However, Duhigg misses an opportunity for a deep discussion of the obvious converse of the Pepsodent experiment: brands that profit by encouraging self-destructive habits like drinking, smoking, or gambling.
His enthusiasm for corporate ingenuity seems to blind him at times to the sinister aspects of habit manipulation. He even admits to being taken in. “It was really helpful that Target was sending me exactly the right coupons for what I needed to buy,” he notes. But reading the quirky anecdotes and the whizbang science of it all becomes habit-forming in itself. Cue: see cover. Routine: read book. Reward: Fully comprehend the art of manipulation.