Power of Parsimony — Greater Gain from Less Complexity
When I was a new employee at Telkomsel, I tried to make a good impression with a bunch of presentation slides and complicated analyses. Instead of being impressed, my mentor said:
“Smart people simplify complicated things, and foolish people complicate simple things.”
Daang! Since then, I’ve always looked for the simplest language to communicate an issue or proposed solution, rather than relying on complex explanations that may not be fully comprehended by everyone. Over time, I eventually discovered that approach is an essential component of the parsimony principle.
I learned a lot about the parsimony principle during my segmentation project, which is useful when designing methodologies, choosing hypotheses, and fine-tuning statistical models. My learning process revealed that having hundreds of features in a model is pointless if only a few have substantial prediction power, or if there are multiple variables that explain the same thing, leading to multicollinearity.
The parsimonious models are simple models with great explanatory predictive power. They explain data with a minimum number of predictor variables. It is also prevented overfitting, modeling errors caused by the noise in the data set. When placing new data, an overfitted model will struggle to generalize because it has failed to explain fundamental patterns and relationships. As a consequence, offering personalized products to customers based on a model that failed the overfitting test could lead to poor performance when deployed on a larger scale.
The parsimony principle is not only applicable to statistical works. Businesses can apply the laws of parsimony in a variety of ways. Consumer behavior is guided by simplicity as the easier it is for people to buy, the more likely they are to buy.
During the pandemic situation, simplicity is inextricably linked to frugality (when everyone is cautious with their spending and resources). Consumers need simplicity (clear product features, terms, and conditions) to minimize negative consequences if they made wrong purchase decisions since their wallet size is shrinking.
According to the HBR article (read more: https://hbr.org/2012/05/to-keep-your-customers-keep-it-simple) The single biggest driver of stickiness is “decision simplicity” — the ease with which consumers can gather trustworthy information about a product and confidently and efficiently weigh their purchase options. This study also proposes the “decision simplicity index,” a gauge of how easy it is for consumers to gather and understand information about a brand, how much they can trust the information they find, and how readily they can weigh their options. The easier a brand makes the purchase-decision journey, the higher its decision-simplicity score.
Decision-simplicity evokes Cognitive Parsimony, which reflects the human tendency to favor low-effort strategies that help them to decide faster.
In conclusion, the context of innovation is to support the decision-making process as simple as possible for customers, while also allowing them to see clearly what options they have in various instances. When developing a highly customized product offer, consider whether the offering aids the customer in making faster selections or merely adds noise to their decision-making process, prompting them to behave differently as a result of their frustration.
