Petr Šídlo: On Ethics in Business

Originally, we planned to ask Petr Šídlo, the founder of the Direct People innovation agency, about product development. However, the conversation gradually began to roll from the concept of MVP (Minimum Viable Product) to business ethics. We wondered if it was right to change human habits through products and instill the need in people to always be buying new things. Petr's answers were so interesting that we felt it would be a pity to leave them out, and that’s why we followed up on the first interview with this shorter interview.

Is it possible to develop a product that will create a new habit in people?

It is suicidal if a startup tries to do it because it is very expensive and complex. What's more, the question is whether creating habits is ethical. If we want to change the people’s behavior for whatever purpose, there is always a risk that a group of people will be hurt rather than helped. In his book Hooked: How to Build Habit-Performing Products, Nir Eyal describes the way in which products change habits through the example of Facebook, outlining how that works through four consecutive steps – stimulus, action, reward, and investment.

When you receive a notification (stimulus), you go to check Facebook (action) because you are waiting for what will come. Sometimes it is a comment, sometimes a like (reward), but it is the tension that is important. The circle is closed when you respond to the comment (investment) and wait for another notification. This model is based on the human psyche of prehistoric times, when unusual things meant dangers and kept us vigilant. To what extent is the use of this or another mechanism ethical? To what extent is it about making money through a mechanism that was useful in evolution? In the digital world, this mechanism is a subject of abuse.

Petr Šídlo, co-founder inovative agency Direct People

Maybe I should have asked if it is possible to awaken a need in people for a product. I think companies are trying to make people dissatisfied through marketing, and offer them solutions with the help of the product.

This is the target of marketing that works with an existing product – you already have a product and you are trying to create a problem for people or help people discover or realize the problems or needs that they have that will lead them to purchase the product. However, if we are talking about creating new products, it is much better to understand the needs that already exist. I think there is no latent need that one would not know about. At most, it is possible that a person has not found any available solution and thus becomes resigned to the need and defers it. To say that there is a category of problems people do not know about is a product manager’s way to doom. Because at that moment I pass into the role of someone who thinks they know more than their customer.

Take, for example, cellulite – it is an artificially created problem that women did not previously think about. But cosmetic firms have created the idea that they have to deal with it, and therefore they are dealing with it today.

And where are we heading now? That it’s possible to create a problem in the heads of people? Yes, that’s possible, but it's expensive and unethical. When I say expensive, I do not mean merely twice than a product that solves the problem people already have and know, but a hundred times more expensive. That is why I would once again emphasize that when I have the task of creating a product, I will not build it on anything that I need to first explain to people.

Is it more common for entrepreneurs to figure out solutions to an existing problem, or to first think up the product and then get the problem down?

 

The second option is more common. Surprisingly, there are still quite a lot of technically-oriented entrepreneurs who have a product but do not even know what problem the product solves and whom it can help. Then there is a group of people who have been thinking about an existing problem but have never talked to the target group and are sincerely surprised that people do not have such a problem as they supposed. Unfortunately, such interaction usually occurs after several years of so-called product development and after a lot of money has been thrown out. Finally, there are a few entrepreneurs who develop the product as it should be done. They speak to customers, build a minimum viable product, find out that it sells, and naturally build a startup. The latter makes up less than 20% of functional startups.

If we take the current world, how many companies really solve problems and how many only invent products for hypothetical problems?

I don’t know the answer. Everyone who successfully earns money from their business probably does something people need. Those whose products nobody buys are doing something wrong. They may even produce something that people are not interested in. When shopping,people look not only for functionality, but also emotions and social aspects. For example, people buy jewelry and perfumes because they want to impress other people or because of their need to feel good.

On one hand, companies respond to demand, and on the other hand, most companies force people to overconsumption. Take for example fast fashion stores.

I don’t think companies force people to need something; rather, they make these things accessible for them. Brands such as H&M, Zara, or New Yorker sell clothes that look pretty good at first sight and will last through a couple wash cycles but in most cases will not survive two years. We may wonder if it’s good that they are making lower-quality things. For these companies, it has a certain logic to it, because they offer it at a price that people are okay with, and people do not even expect to buy things from these companies that will last ten years. It's easier to go to the shopping mall, pull a shirt off the hanger and pay at the counter than to go to the tailor and get one sewn. These companies use the Hooked model I mentioned. Businesses that can better take advantage of human nature are more successful.

Is it ethical?

It is a question what is and what is not ethical. I think it's a difference of whether the product uses our evolutionary mechanisms but gives us the chance to reject it, or not. I think it’s quite possible that in ten years we will be wondering how it’s possible that someone invented such an unethical thing as the endless newsfeed and notifications. Ten years ago, no one thought it might be unethical. Today, it has become a societal problem and the boundaries of ethics are only just being set up because they were not obvious before. I think people at Facebook knew back then that the mechanism they use is not ethical, but they found out it worked. The ethics question was overwritten by the feeling they were doing something people liked, and only later it turned out that there is a different dimension.

What can we do as users and customers not to let ourselves be manipulated?

That's a good and hard question. I would like to offer a simple answer, but the problem of manipulation is that it will look for new forms of infiltration that will get under our skin. The important thing is to be attentive and think critically about what we invite into our lives. We should only let in things that serve a purpose. Get inspired by minimalism and continually purify life from everything that goes against our values, goals, and priorities. Take time out, go to nature with family and realize that we do not need that much more in our lives. :-)

Petr Šídlo believes that innovation is not about spells and coincidence, but about the way of thinking and craftmanship you bring to it. He co-founded the Direct People innovation agency in 2010 to help innovative companies bring successful products and services to the market. Among these are Dr.Max, Škoda Auto and Škoda Digital, LMC, Air Bank, Adastra, IDC, WAG, Sazka, T-Mobile, Olympus, Česká spořitelna and many others. Petr Šídlo is the mentor of the StartupYard Incubator​, member of jury in the Social Impact Awards​ and he runs regular workshops on Innovation Leadership within ELAI Institute.