design management

7. Design & Innovation

07Design Management University of Kansas, Department of Design ADS 750 (3 credits) Fall Semester 2014 Thursday 6:00-9:00p, Edwards (BEST245), Lawrence (CDR, West Campus)

design management

Week/ Date LECTURE & DISCUSSION Supplemental

Readings or Exercises

Wk 7 Oct 9 Design & Innovation 6. Design & Innovation

!“The Consumer Decision Journey”

McKinsey !

“A place at the table: Taking design from service to corporate function”,

Fluharty

Wk 8 Designing For GrowthChapters 1, 2

!Prep: Midterm Quiz: 20 questions on general topics covered in weeks 1-7

http://www.ted.com/talks/daniel_kahneman_the_riddle_of_experience_vs_memory

COURSE SCHEDULE

TONITE

NEXT WEEK

Text Reading

On Happiness:

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1. Text discussion: “Design & Innovation”

2. Articles: “A Place at the Table”; “The

Customer Decision Journey”

3. BB&D Exercise: Irrational Situations

4. “Design As Managing” videos

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Behavior Purchase

AffectLiking

Preference Conviction

Cognition Awareness Knowledge

Hierarchy of Effects Model (Beatty & Kahle, 1988)

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Leveraging behavioral economics: !Step-by-step process: !1. Rank BE concepts of

relevance to problem. Do rank analysis for the group to determine top concepts

2. Discuss all three Irrational Situates Guides. Identify which to factor into the study

3. Read the Strategy Intro and go thru the process

4. Do the Loss-Gains worksheet

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These heuristics can cause biased, or “irrational,” decision making. For example, the availability heuristic contributes to: • Hindsight bias: overestimating the probability “previously attached to events which later happened.”

• Curse of knowledge: difficulty understanding and empathizing with people who don’t know as much as you. And the representativeness heuristic contributes to:

• Gambler’s fallacy: expectation that, after flipping a coin has resulted in several heads in a row, a tails flip is “due.”

Heuristics and Biases !Many of the principles in behavioral economics are based on the idea that people use mental shortcuts, or heuristics, to assist in processing information. !In 1974, Tvesrky and Kahneman identified three heuristics:5 !• Anchoring and Adjustment: starting from a familiar point of reference, then making adjustments. • Availability: using familiar examples that readily come to mind, especially those that are accessible (vivid, easily imagined) and salient (relevant, as seen in recent events), to assess risk and make decisions. • Representativeness: assuming a limited sample or stereotype is representative of a larger trend or population.

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Behavioral economics isn’t just about money

!If people are irrational, what’s an economist to do?

Traditional economics is built upon the assumption that people are selfish, rational creatures – and that these qualities entirely dictate our behavior and decision making processes. Yet in reality people often act in ways that aren’t selfish and logical: they volunteer to do work for free, they smoke cigarettes, or they fail to take advantage of 401(k) plans. In other words, people are often irrational. Behavioral economics recognizes this, and combines knowledge from economics and psychology to study the way people make decisions in real life.1

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Decision-Making FactorsF1: Expectation • Anticipation of Rewards • Impact Bias • Placebo Effect • Surprise & Adaptation

F2: Time • Attentional Collapse • Decoupling • Hyperbolic Discounting • Impact Bias • Intertemporal Choice • Optimism Bias • Planning Fallacy

F3: Loss • Commitment • Hedonic Framin Loss Aversion

F4: Ownership • Actor-Observer Bias • Endowment Effect

S1: External Cues • Bandwagon Effect • Status Quo Bias

S2: Compartments • Business v. Social Norms • Choice Bracketing • Framing • Identity • Mental Accounting

S3: Mental Models • Diagnosis Bias • Information Avoidance • Resolving Cognitive Dissonance

S4: Quick Indicators • Ambiguity Effect • Anchoring • Availability • Certainty Bias • Clustering Illusion • Diagnosis Bias • Representativeness • Segregation Effect

Decision-Making Shortcuts

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http://www.ted.com/talks/daniel_kahneman_the_riddle_of_experience_vs_memory

Cognitive Traps: experience vs. memory

Daniel Kahneman

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Chapter 6 Design & Innovation

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http://www.youtube.com/watch?v=m2BLxt2LN_o

http://www.youtube.com/watch?v=8wRmTyyGfrw

http://www.youtube.com/watch?v=lzWl9k9zq0Y

About the book:

Chapter 2: Why this? Why now?

Chapter 1: Design As Managing

Chapter 3: Multiple Models https://www.youtube.com/watch?v=whr-0BGpTsk

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https://www.youtube.com/watch?v=7Jtll9nmB-8

design management

7. Design & Innovation

07Design Management University of Kansas, Department of Design ADS 750 (3 credits) Fall Semester 2014 Thursday 6:00-9:00p, Edwards (BEST245), Lawrence (CDR, West Campus)