In The Behavioral Review This Week: Thinking outside the box, Why major FMCGs are going Organic, Pitfalls of business advice, and more

Discovering innovation, FMCGs going organic, business advice pitfalls, and more in this week's Behavioral Review

In The Behavioral Review This Week: Thinking outside the box, Why major FMCGs are going Organic, Pitfalls of business advice, and more
Photo by Matt Ridley / Unsplash

Table of contents:


  1. How does Innovation happen?
  2. Why Amul and major FMCG players are Going Organic

Beyond BS:

  1. Why should you always take Business advice with a grain of salt?
  2. How we’re buying perfume could signal how we’re feeling about the economy
  3. A treasure trove of Hollywood intellectual property is heading for the public domain

This week in the IP Wave, Shivani explored the importance of innovation for startups seeking differentiation in a crowded and tightened market. Building upon this, we ask:

How does Innovation happen?

Photo Credit: Timoelliott

Innovation is often perceived as a product of breathtaking ingenuity or a eureka moment. However, historical evidence and behavioural science present a far more intricate picture. Innovation has often been propelled by behavioural reactions to challenging environments, reinforcing the adage that necessity is the mother of invention.

One of the central behavioural pillars underpinning innovation, especially in tight markets, is the propensity to take risks. Faced with challenging environments, businesses often stray from the beaten path, pioneering novel solutions to navigate adversity. Despite the risks associated with rapid technological obsolescence, market pioneers like Edison and contemporary firms advancing quantum computing have embraced the risk, challenging the status quo and effecting transformative change.

Another critical behavioural aspect is the ability to adapt. History shows that the most innovative entities are often those that can fluidly respond to market needs and shifting dynamics. For example, Tupperware innovatively leveraged post-war austerity to introduce affordable and practical food storage solutions. This fluid responsiveness underpins many successful innovations and involves empathising with customers, understanding their needs, and translating those needs into innovative solutions.

The role of cognitive bias in decision-making has also been pivotal in stimulating and hindering innovation. The 'Not Invented Here' paradox highlights the potentially detrimental effects of in-group bias, wherein internal ideas are favoured over external ones, potentially limiting innovation. On the other hand, challenging environments can often ignite cognitive reappraisal, prompting fresh perspectives and inspiring innovative thinking.

Photo Credit: Timoelliott

The prevalence of persistence and resilience is another recurrent behavioural theme within the historical narrative of innovation. Innovations, such as the Macintosh or penicillin, didn't materialize instantaneously or effortlessly. They entailed long periods of trial, error, and determination, illustrating the need for a resilient mindset in pursuing and realizing innovative ideas.

In short, Leveraging these behaviours can support businesses in navigating constraints, enabling them to innovate, differentiate, and thrive within competitive landscapes.

Why Amul and major FMCG players are Going Organic

Photo Credit: Amul Website

Amul's recent foray into the organic market is just the latest example of the growing demand for "clean" and "natural" products. But why has organic become so popular?

For one, it's all about the 'health halo'. Consumers have become increasingly concerned about the presence of harmful chemicals and additives in their food, and organics are marketed as a healthier and more natural option. Second, the eco-consciousness factor plays a big role. Organic farming practices are seen as more environmentally friendly, and consumers are eager to support sustainable practices. Plus, let's be real, organic just sounds fancy and prestigious. It's the culinary equivalent of wearing a designer label, and consumers are willing to pay a premium for it.

Fueled by a rising tide of health awareness and a growing concern for the environment, "organic" has transcended mere buzzword status to become a cultural phenomenon that reflects the changing zeitgeist. Consumers are seeking products that align with their values and promote a more responsible and healthy lifestyle. And let's be real, the rise of "wellness culture" and "clean eating" has made organic seem like the cool, trendy choice. It's not just about avoiding chemicals and pesticides, it's about feeling like you're making a conscious, ethical choice. Organic is no longer just a niche market, it's become mainstream, and brands are cashing in on the demand.

There's a whole bunch of other reasons why organic is hot right now, including:

  1. Food scandals and recalls, like E. coli outbreaks, have made consumers more wary of traditional agriculture practices.
  2. Social media influencers and celebrities have jumped on the organic bandwagon, making it trendy and aspirational.
  3. Younger generations, like Gen Z and Millennials, are more conscious of the environmental and social impact of their purchases, and they view organic products as a way to make a positive impact.
  4. There's a growing interest in "farm-to-table" and "locally sourced" products, and organic fits perfectly into this trend.

The act of purchasing organic can function as a social identity cue, a form of "virtue signalling". By choosing organic, consumers align with a cluster of values around health and sustainability, associating themselves with others who share these values. Thus, consumers don't just buy a product; they buy into a lifestyle and an identity. Furthermore, these purchases also serve as self-affirmation, a means of validating one's self-concept. By choosing and consuming organic foods, consumers can see their values reflected in their actions, enhancing their sense of authenticity and consistency, two concepts highly prized in psychology.

Lastly, the market dynamics shouldn't be overlooked. Organic products still represent a small percentage of total food sales, and their premium pricing can be attributed to basic supply-demand logic: high demand versus relatively low supply. By charging a premium, companies can ensure a balance between keeping their businesses profitable and meeting the growing demand.

In fact, India has seen a marked shift towards organic farming over the last decade, with a whopping 145.1% increase in organic agricultural land under cultivation. Reinforcing this fact, the Economic Survey of 2022-2023 revealed that India boasts 4.43 million organic farmers, leading the tally on a global scale. Looking ahead, projections from the US Department of Agriculture heighten the allure of the organic market for investors. They predict that by 2026, India's organic market—which spans food and beverages, health and wellness, personal care, beauty, and textiles—will burgeon into a 10.1 billion USD industry. These trends serve as a testament to the strong momentum propelling organic products into the mainstream market, thereby validating pricing strategies and influencing major brands like Amul to invest in organic lineups

In summary, the organic products phenomenon is a fascinating intersection of many factors, including health, environment, identity, perception, and market dynamics. But the burning question still looms: does buying organic food actually live up to its claims? While organic food may contain fewer synthetic pesticides and be grown using more sustainable farming practices, there is a lack of consistent scientific evidence that it is nutritionally superior to conventionally grown food. In addition, the premium price point of organic products creates access issues for many, leading to a lack of inclusivity in the organic movement. The jury is still out, and the answer to this question will likely depend on your personal values and priorities when it comes to your food choices.

Beyond BS

Why should you always take Business advice with a grain of salt?

In 2005, W. Chan Kim and Renée Mauborgne introduced the concept of "Blue Ocean Strategy," advocating for businesses to explore untapped markets without competition. Simultaneously, Bain consultants Chris Zook and James Allen emphasized the importance of staying focused on the core to achieve success. However, the dichotomy between these approaches raises a critical question: How can companies simultaneously pursue a core-focused strategy while venturing into uncharted "blue oceans"?

The success of Amazon, which initially warned against diversifying beyond books, challenges the conventional wisdom of these strategies. The prevailing issue lies in the quality of business research, often resembling what physicist Richard Feynman termed "cargo cult science." Feynman's analogy highlights the danger of mimicking behaviours without a genuine understanding of underlying principles. Case studies, a common research method, face limitations due to their inherent subjectivity and selective reporting. Managers, reluctant to discuss failures, contribute to survivorship bias, focusing on successful ventures while overlooking the majority that floundered. The lack of documentation and transparency in business research further compounds these challenges.

Human cognition, marked by biases and a penchant for creating narratives, plays a significant role in shaping management ideas. The halo effect, where positive attributes in one area influence perceptions in others, contributes to the adoption of flawed strategies. Business gurus, often lacking practical experience and insulated from failure, propagate ideas that may not withstand scrutiny.

The aphorism "life is cruel and full of traps" serves as a reminder to be cautious amid the allure of optimistic thinking. The business world's complexity defies simplistic solutions, emphasizing the need for careful inquiry and critical questioning. Constantly questioning assumptions, seeking missing data, and exploring alternative interpretations are essential components of effective decision-making. Read the article by Co-founder of ChangeOS, Greg Satell

How we’re buying perfume could signal how we’re feeling about the economy

Photo by Ulysse Pointcheval / Unsplash

Sales of perfumes are experiencing a significant boom, in what seems like a contradiction to the prevailing economic instability. In particular, sales of mid-sized bottles are up by 38% this year compared to 35% last year.

Experts suggest this might be attributed to the psychological phenomenon known as the "lipstick effect". This concept suggests that in times of economic downturn, instead of curtailing all non-essential purchases, consumers tend to lean towards less expensive luxuries, providing small personal indulgences that offer emotional comfort without causing significant economic strain.

A notable manifestation of this trend is the observable surge in demand for mini fragrances. These smaller, less costly versions of full-scale perfumes enable consumers to experience the luxury and personal joy of a new scent without the considerable financial commitment typically associated with high-end fragrances.

Amid continued uncertainties surrounding the economic climate, this propensity for indulging in small-scale luxury purchases expands beyond just perfumes. The Circana 2023 report indicates a broad increase in sales across a wide variety of "feel-good" products across the globe, including those belonging to both premium and affordable ranges within the cosmetics, skincare, and haircare sectors. In essence, the "lipstick effect" appears to be driving consumers to prioritize personal wellbeing and indulgence, subtly altering their purchasing habits to accommodate small luxuries even in the face of economic uncertainty. This trend suggests invaluable insight for businesses within the cosmetic and personal care sectors, highlighting the potential importance of catering to the consumer demand for affordable luxury. Read more here

A treasure trove of Hollywood intellectual property is heading for the public domain

Photo Credit: TIME

The expiration of copyright for classic works like Winnie-the-Pooh is leading to a wave of creative innovation, as filmmakers and others reimagine these characters and stories for new audiences. The expiration of copyrights, such as A.A. Milne's "Winnie-the-Pooh," has led to unconventional adaptations, like the low-budget slasher film "Winnie-the-Pooh: Blood and Honey." The impending release of once-protected classics, including Disney's "Steamboat Willie" and iconic characters like Batman, signals a shift in the industry. Hollywood, preparing for this evolution, emphasizes trademark defences as it navigates the intersection of copyright and trademark laws. As the creative landscape transforms, the debate over copyright terms continues, with implications for artistic innovation and the enduring influence of cultural treasures. The behavioural consequences of this could influence aspects ranging from creative freedom to the financial dynamics of movie-making.

In the face of these changes, the pivotal question that arises is - how are filmmakers and audiences going to respond to this influx of classic narratives in the public domain? Read more

Thanks for reading The Behavioral Review! We'd love to hear your thoughts on this week's articles.

Written by Farheen.