The Three-Minute Rule - Anthony Tjan
At our venture capital firm, Cue Ball, we are pretty maniacal about understanding customers. We encourage our portfolio company CEOs to dive deep — very deep — and learn about their customers along every possible dimension. My Partner, Dick Harrington, and developed a customer-driven approach and capability set that we put in place at Thomson which ultimately was a key driver of the company's transformation into a global media and information powerhouse. We wrote about this in a 2008 HBR article, Transforming Strategy One Customer at a Time.
While there are obvious ways to gain significant customer understanding, such as surveys and focus groups, some of the most interesting insights come from less direct analyses. Take our three-minute rule as an example. You can learn a great deal about customers by studying the broader context in which they use your product or service. To do this, ask what your customer is doing three minutes immediately before and three minutes after he uses your product or service. At Thomson, one of our products provided investment analysts with financial earnings data. What we hadn't fully appreciated — until we applied the three-minute rule — was that immediately after getting our data, a large number of analysts were painstakingly importing it into Excel and reformatting it. This observation led us to prioritize developing a more seamless Excel plug-in feature with enhanced formatting capability over other product development initiatives. The result was an almost immediate and very significant uplift in sales.
The three-minute rule also helps highlight unique cross-selling opportunities. Many years ago, I remember doing some ethnographic research on female drug-store shoppers. One fascinating pattern we saw was that a significant number of women picked up a disposable camera after putting newborn diapers into their shopping carts. Follow-up interviews confirmed that snap-happy moms were often new moms. Placing disposable diapers close to inexpensive disposable cameras furthered this purchase pattern and would not have otherwise been an intuitive merchandising or cross-selling strategy.
One final retail example is described beautifully by my friend Paco Underhill, a shopping-pattern guru. In his book, Why We Buy, he describes how shoppers who do not have a shopping basket or shopping cart go quickly to the checkout when their arms get full. Okay...so what? A casual observer says that is obvious. A savvier approach might be to interview people in a checkout line with an armful of goods to ask where they were three minutes earlier and if they would have considered buying anything else if it hadn't been so difficult to carry so many items. Underhill concludes that more establishments should consider putting shopping baskets in the middle of the store to keep customers in shopping mode longer (since research showed that few would go back to the front of the store to get a cart once engaged with shopping).
These situations illustrate the narrow-mindedness to which it is easy to fall prey. In the Thomson example, we were thinking of ourselves as a data provider, though we were really part of a broader workflow solution. We failed to realize the importance of customer context over our own product capability. In the cross-selling and shopping-basket examples, the three-minute rule reminds us that rearranging the context of a shopping experience to better meet customer patterns can be extremely effective. Customers seek solutions, but it is likely that your offering is only part of one. The three-minute rule is a forcing mechanism to see the bigger picture and adjacent opportunities.
So what are you doing three minutes after reading this?
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