Symbols and Signals

In pursuing differentiation a firm must not only lower buyers’ cost and/or increase buyers’ performance. It must also ensure that the value produced by the firm is linked to value that the buyer recognizes. Without this recognition, the value does not have impact.

Porter explains, “Buyers… frequently do not fully understand all the ways in which a supplier actually or potentially might lower their costs or improve performance – that is, buyers often do not know what they should be looking for in a supplier… The buyer’s perception of a firm and its product, therefore, can be as important as the reality of what the firm offers in determining the effective level of differentiation achieved… Buyers will not pay for value that they do not perceive, no matter how real it may be… A firm that delivers only modest value but signals it more effectively may actually command a higher price than a firm that delivers higher value but signals it poorly.” (Porter, Michael E.; Competitive Advantage, Free Press, 1985)

Signaling is especially important when dealing with intangible value, future value, or value that is difficult to measure. In education learner satisfaction and learning efficacy do not always travel together. When new concepts or processes are introduced there can often be an inverse correlation between satisfaction and efficacy. Early in a successful educational program the buyer will often perceive failure, unless an effective means is discovered of signaling the future value being delivered.

There is a similar challenge in adoption of many technology products. Well-designed technology lowers buyers’ costs or increases buyers’ performance by changing buyers’ behavior. But there is a cost – often a high social cost – in achieving the initial change in behavior that will produce the value. In many cases the technology “fails” because it is never truly adopted. It is not adopted because the initial cost of changing behavior is underestimated – or purposefully obscured – and becomes a major impediment to adoption.

In the late 1970s I was responsible for introducing an early word-processing system into a mid-sized professional firm. The principal benefit of the system was to allow the professionals who authored documents to also personally finalize edits and be responsible for the final product. This increased the speed of producing documents and, usually, improved the accuracy of final documents. The professionals – all of whom were proficient typists – generally welcomed the new technology.

The secretaries were much more skeptical. There was a nearly one-to-one-ratio of professionals to secretaries. A core value produced by the secretaries was the time consuming process of retyping various drafts on their state-of-the-art IBM Selectrics. The word processing system was seen as a threat to their employment future. Given their prominence in the office and their long-time relationship with key professionals, the secretaries could have significantly complicated adoption of the word-processing system.

About six months before the technology was installed we began a process of retraining the secretaries as “account associates.” In this new role the secretaries were focused on research, some client service, and document management. We invested in the creation of an in-office research library and crafted business relationships with public and university libraries (well before the Internet, much less Google). In a variety of ways we signaled and symbolized that the secretaries, until then part of a self-contained and quickly capped career-track, were to be integrated into the professional career-track, would be assured of good jobs, and would be expected to contribute in significant ways to the firm’s productivity.

Less than two years later traditional secretarial duties, measured in time expended, had been reduced by approximately two-thirds, revenues had nearly doubled, and most of the secretarial staff had been transitioned into much more value-producing (and usually more satisfying) roles. The word processing system contributed to this outcome. Without the technology, the transition would not have been possible. But the technology was the easy part. The hard part was designing and executing the human transition that would accompany the technology.

The new technology was the explicit value – and threat – perceived. The new behavior was the implicit value – and most important value – offered. To convert the secretaries from skeptics to buyers, we had to credibly signal future value. We could not deliver future value immediately. Until the new technology was fully adopted, creation of future value was not possible. Our credible signals and symbols of future value built a bridge to the future and the reality of increased value.

In my experience many business people – and especially business men – are incompetent in the use of signals and symbols. They either avoid symbols as “too soft” or “unreal” or they use signals that are not linked to substantive issues of cost or performance. As a result they come off as cold and uncaring or superficial and hypocritical.

Porter argues that signals must be tightly related to the cost and performance criteria that matter most to the buyers. “Signaling criteria can be identified by understanding the process the buyer uses to form judgments about a firm’s potential ability to meet use criteria, as well as how well it is actually meeting them. Examining each use criteria is a good place to start… Like use criteria, signaling criteria should be defined as precisely and operationally as possible in order to guide differentiation strategy.”

Prior to the encounter at Mt. Sinai God is characterized primarily by direct action. Following Mt. Sinai the nature of God is increasingly communicated through symbols and signals. Much of the last half of Exodus is taken up with instruction regarding the application of symbols and signals.

Late in his life Moses assured his people of future value by reminding them of past signs and symbols that had been fulfilled:
He will love you and bless you and multiply you; He will also bless the fruit of your womb and the fruit of your ground, your grain and your new wine and your oil, the increase of your herd and the young of your flock, in the land which He swore to your forefathers to give you… You shall be blessed above all peoples… You shall well remember what the Lord your God did to Pharaoh and to all Egypt: the great trials which your eyes saw and the signs and symbols and the mighty hand and the outstretched arm by which the Lord your God brought you out. (Deuteronomy 7:13-19)

In the Books of Moses the Hebrew מופת or mowpheth is translated as symbol. It is also often translated as wonder or miracle. The word for sign can also mean omen or remembrance, warning or proof. A thoughtful and substantive use of signs and symbols is crucial to the creation of recognized and differentiated value. Well-chosen and carefully used signs and symbols can do miraculous work.