The Cobra Effect
When solutions become bigger than the problem; How can businesses avoid the venom of the Cobra?
The Cobra Effect is a an economic term, which stems from the initial British Colonization of India. The British government was concerned with the amount of venomous snakes in the area, so they offered a bounty for every snake killed. The problem with any system you create is that people will try to game the system. Frankly I believe it’s instinctually human nature. Locals started to breed snakes in order to receive the bounty. When the government caught on and ended the program, the locals had no need for the snakes and released them all, making the problem bigger than ever before.
“Good intentions, poor execution”
This is first level thinking, meaning you don’t think of the cause an effect deeper than the surface level.
How does this relate to business & marketing? Because just like what happened in India, well intended CEO’s or Managers don’t think through the second level effects, third level effect and so on, of their idea that is brilliant in theory.
We can easily understand what the first level effects are, but learning to think deeper and more critically can be challenging.
Here are some examples of how the Cobra Effect can display in your business:
Marketing: If you want your marketing team to increase the number of sales opportunities to the business, your marketing team might run a promotion and offer an incentive. Offering an incentive to your potential client might seem like a good idea right? Wrong. Your marketing team is going to think of the most appealing incentive to generate as many opportunities as possible, not the best suited for the target audience you’re trying to draw in. You might generate sales opportunities but your incentive may have very well attracted an unqualified audience. Now you’re obligated as a business to still hand over the incentive to people you have no chance to convert in a client. The marketing team hits their KPI at the expense of your sales department being p*ssed off.
Sales: If you need to increase sales and you instruct your team they need to increase their sales conversions by 20% over the next 12 months. Naturally they are going to start pitching your product to anyone and everyone in whatever way they believe will sell it. Regardless of whether or not it’s actually the right solution for the prospect. The result of this is that whilst sales would increase, so would your cancelations and most likely at too close of a rate for the resourcing output to be worthy. The safety net metric would be the churn rate.
Commission Structures: If you are setting your commission structures for your sales team, and lets say you have a long sales process. If you are incentivising your team on the front initial sale let’s call this an “appointment” and not on the outcome (end sale), your sales team is naturally going to try to sell as many people as possible into an appointment so they hit their KPI for commission. Even if they know that person won’t convert into an end sale (outcome) to the business. This is high on the list of cases I see commonly. Incentivise your team on the end outcome.
Telesales/Customer Support: If you want your telesales team to increase the volume on inbound/outbound enquiries they attend to they need to firstly increase their response time and secondly increase the volume of dials they make. The result of this, is that they would limit the amount of time they spent on the phone to each prospect or customer quickly trying to rush off to make the next dial or take the next request. The second level effect here is a drop in customer satisfaction…and we all know how quickly one online review can damage a business these days.
“Systems thinking”, whilst thrown around as a trending term, is a skill of which many are yet to master. One which you need to master to avoid the Cobra’s venom.
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