You Don’t Have to Be First But You Must Be Formative to Win
Learn how the connection between formative assessments in the classroom and the success of Stitch Fix can improve your business
Imagine you’re a freshman in college again. It’s now the Spring semester and the culture shock of living in a place where everything is prepared for you, except for your bed and homework, has worn off. The lawn is always well-manicured, the cafe has an unlimited supply of your favorite cereal, and the sidewalks — well, the sidewalks could always be repaved after a snow-and-salt winter. But what you enjoyed the most were your professors who made learning fun. You were actually able to step outside of the classroom and see a theory applied in real life.
Now think about when you show up to that one class where the student is always early. They’re always first. Let’s call them “Early Emily.” Now, you’re not insecure enough to dislike Early Emily’s academic hustle, but you don’t care for her, “I don’t have time to make friends” attitude.
One day you show up to class, and sure enough, Early Emily is the first one there. But what you and Emily didn’t expect was the pop quiz your professor has planned. What’s worse is that the quiz is not only a check on previous lectures, but it’s on a topic he hasn’t discussed yet! Everyone takes the quiz, and before the lesson begins, you get your scores. “What! I can’t believe I got a 32 out of 100!” exclaims Emily. You smirk as you leave your score of 85 on the edge of your desk to be optimally visible and collected.
At the end of class, the professor tells you the quiz won’t count against your class grade. He just wanted to see where everyone was in the next section of the course. Emily’s relieved. You’re disappointed. And the professor is enlightened.
The Power of Formative Assessment in the Classroom
Despite your let down, everyone wins in this situation. Two things have happened: 1) You realize that being the first to sit in class doesn’t automatically indicate you’re the top student. 2) Your professor used an assessment tool (pop quiz) to quickly check the students’ prior knowledge and assess it against the new content discussed for the remainder of your class period.
However, everyone is enlightened in this scenario. Emily is motivated to learn the material before an actual exam does occur. Your score encouraged you to engage with the professor more during class as you shared your thoughts. The professor was able to personalize the learning experience based on where everyone was. That’s the power of formative assessment. Teachers who leverage the informal tools of “testing” students before a significant exam create a few notable benefits:
- Learning goals becomes more defined.
- Academic achievement is improved.
- Student motivation is enhanced.
- Students receive focused and targeted feedback before a graded exam.
- The teacher can make data-driven decisions based on frequent learning checkpoints.
Leveraging a “Formative” Mindset in Business
I believe a formative approach in the classroom also works in the business. The opposite of a formative assessment is a summative assessment. Formative monitors student learning, while summative evaluates their knowledge. It’s the difference between taking a pop quiz (formative) and completing a final exam (summative). Teachers who focus exclusively on high stakes assessments (e.g., a final project) to assess student learning is equivalent to managers who only check in with employees at the quarterly performance review.
And I’m willing to wager that companies that rely exclusively on a summative approach to building talent also practice this with their customers. If summative assessment is the high stake release of a new version of a product, then formative assessment is the low stakes UX design process that helps understand what the consumer needs and how the company needs to change. Here are a few characteristics of formative assessment:
- It is an ongoing evaluation.
- The process is informal.
- Individual performance is the focus.
- It creates a feedback loop between teacher and student.
- It focuses on student growth as a tool for communication, not grading.
Do you see how translatable this is to business leadership and product design? Your favorite professors in college were likely the ones who engaged with more informal conversations and magically found a way to tailor your learning experience amidst a large group of classmates. How did they make learning feel so cool and relevant? They were formative.
Stitch Fix is a Formative Company
Successful startups become both the student and the teacher — within a formative context. A prime example is Stitch Fix. They successfully beat the Early Emily’s in the retail clothing subscription box space as a student. Simultaneously, they are formatively assessing their customers and using those learning checkpoints to improve their service.
Trunk Club was an Early Emily competitor to Stitch Fix. It launched in 2009 but ramped up its brand awareness after Nordstrom acquired them in 2014 when the subscription box trend emerged. Although it was founded first, Trunk Club was expensive. When Stitch Fix came on the scene in 2011, it used what’s called a Reverse Positioning strategy. Stitch Fix successfully stripped out features from high-end offerings that didn’t add appreciable value for specific customers and instead added new, unexpected, highly valued product attributes that were overlooked by Trunk Club — such as private labels. In essence, they offered the same premium clothing to more customer segments at a lower price. In five years, TrunkClub gets acquired for $350 million, while Stitch Fix goes public within six, at a valuation of $1.4 billion in 2017.
Stitch Fix’s CEO, Katrina Lake, demonstrates four formative qualities that have also permeated the culture of her company. She’s like that coveted professor on campus who 1) knew her material, 2) understood the students, 3) placed their learning first, but 4) was also strategic in managing the classroom. Here’s how those four traits translate from class to business.
Know Your Playing Field Well Enough to Find the Gaps
Just like the professor you admire who’s not only fun but knows what they’re teaching, Katrina Lake was intimate with the retail industry before launching Stitch Fix. While at Stanford University, she focused on the retail and restaurant industries as a consultant for the Parthenon Group. Eventually, Lake found a gap in how both industries still operated business in the 21st century:
I was intrigued that they still provided fundamentally the same experience they had in the 1970s — or even the 1950s — despite how much the world had changed.
She was also able to use other case studies from unrelated industries to create meaningful forecasts for retail, namely, the emergence of Netflix and the fall of Blockbuster:
Whenever Netflix hit about 30% market share, the local Blockbuster closed. The remaining 70% of customers then faced a decision: try Netflix or travel farther to get movies.
Lake instinctively and empirically understood that industries like retail were soon to suffer Blockbuster’s fate if they did not adapt quickly. And while she was not the first to create an online platform for clothing, she was knowledgeable enough to pinpoint the gaps and then use her expertise to solve those problems in a differentiated manner. Case in point: focusing heavily on data.
The one characteristic that makes formative assessment essential is its inherently data-driven nature. The ability to quickly assess students, update lessons, and improve engagement based on the feedback it collects is similar to Stitch Fix’s efficient use of data. No other subscription box company does it as they do — a least not yet. As of 2019, Stitch Fix has 3,900 stylists who, under the strategy of chief algorithm officer Eric Colson (former data science VP of Netflix), take the data points or “signals” of the app users’ clothing preferences. This information is then used to develop sophisticated algorithms that can pre-select fashion styles for its customers. In others, they use machine learning to corroborate only fashion choices but also predict fashion trends.
It’s the data that drives their innovation, just as the learning checkpoints in the classroom prompts a teacher to leave the podium and have an informal conversation while leveraging the constructivist approach to teaching, to facilitate shared meaning and convey the same information.
If Stitch Fix were all about data science, then the company would look and feel impersonal. So while data science is at the root of their culture, Lake knows that “shopping is inherently a personal and human activity.” Those same 3,000+ stylists aren’t data collectors, but personal assistants who can help someone find a tuxedo for their June wedding or empathize with one trying to lose weight and look good while in transition.
Be a Hands-on Leader
Last but not least, all great teachers are phenomenal at managing their classrooms. The way that Lake manages her engineers and data scientists is unique. Most companies have their data science report to the CTO. However, at Stitch Fix, the data goes directly to the CEO herself. It is the difference between a professor talking to their assistant about a student’s performance vs. them sitting down with that student and maybe even their parents to discuss what’s going on.
When it’s all said and done, students don’t remember how well a teacher has taught, but how invested, they were in their academic and personal success. It is what Stitch Fix understands, and it’s what startups and established companies need to be reminded of. Product features aren’t as memorable as we think. It’s our ability to receive the millions of data signals our customers send and interpret that information into stories, needs, and desires of real people with the help of technology and the empathy of our leaders and employees.