I watched a video several years ago, because my colleague Shraddha, who was doing a course organised by the Stanford SEED Programme, found it so relevant that I was given no choice. The video was a lecture by a professor of the Graduate Business School (GBS) of Stanford University, Prof Baba Shiv. Later I’ve seen many talks by him on YouTube, he’s a very insightful and prolific speaker, but I’ve never found the original talk which impressed me so much.
In this talk, Prof Baba Shiv talks about sales, customers, and their decision making processes. (He used to be in sales before he came to academics.)
He explained that he has discovered that decision makers who become our clients in B2B sales fall into one of two types. I’ll call them Type 1 and Type 2, because I cannot remember the words he used.
The Type 1 profile
- They are happiest when things are going steady and there are no problems.
- If they have to manage change, like manage the upgrade of their servers or get a new application developed through a contractor, they become very unhappy and stressed.
- They see problems as very stressful. They are afraid of problems. Stability makes them feel content.
- They would rather not manage any change, than try to improve anything.
The Type 2 profile
- They are bored when things are going steady and there are no problems.
- If they have to manage change, do something new, they are excited.
- They see problems as exciting. They hope to learn something, do something useful or interesting, solve some tricky problem which really challenges their skills. They feel alive when they are doing something new which they believe will improve things.
- They are afraid of missing out on something potentially good.
I asked ChatGPT…
I asked ChatGPT about Baba Shiv and his model of two personality profiles, and this is what I got:
Prof. Baba Shiv, a professor of marketing at Stanford Graduate School of Business, discusses the concept of Type 1 and Type 2 personalities, primarily in terms of decision-making and behavioral tendencies. His framework often revolves around understanding how people approach challenges, opportunities, and stressors based on underlying psychological and neurological predispositions.
Here’s an overview:
Type 1 Personalities (Fear-driven)
- Mindset: Type 1 individuals tend to operate from a “fear-based” perspective.
- Characteristics: They may be more risk-averse, cautious, and conservative in their decisions. They’re often meticulous and may be motivated by a desire to avoid negative outcomes.
- Decision-Making: Type 1 personalities might prefer more structured environments and rely on established rules, protocols, or guidelines. They often think carefully about potential risks and consequences before taking action.
- Reactivity: Because they are sensitive to perceived threats, they might experience more stress or anxiety in uncertain situations and may avoid taking bold actions.
- Neurological Basis: This type often has a more active amygdala (associated with fear responses), which can make them more attuned to potential dangers or negative outcomes.
Type 2 Personalities (Reward-driven)
- Mindset: Type 2 individuals operate more from a “reward-based” mindset, focusing on opportunities and rewards rather than potential threats.
- Characteristics: They are often more open to taking risks, exploring new ideas, and innovating. Type 2 personalities may display greater optimism, flexibility, and a tolerance for ambiguity.
- Decision-Making: These individuals tend to be more comfortable in less structured settings, embracing change and the potential for positive outcomes. They may be more proactive in pursuing opportunities even when they involve a certain degree of risk.
- Reactivity: Type 2s are usually more resilient to stress and have a lower sensitivity to fear, allowing them to navigate challenges with more optimism and flexibility.
- Neurological Basis: Their brains often show less amygdala activation, which may allow them to approach situations with a focus on rewards rather than risks.
Practical Implications
Prof. Shiv’s framework helps explain how people make decisions in business and life. For instance, Type 1 individuals might excel in roles that require careful planning and risk management, while Type 2 personalities might thrive in innovative, entrepreneurial roles that involve uncertainty and creativity.
By understanding these tendencies, people can leverage their natural inclinations and develop strategies to manage areas where they might have limitations or blind spots.
I found the explanation quite good, specially this distinction between fear-driven and reward-driven profiles.
The two profiles as your client
If your client is a Type 1 person, then
- She will only select an offering which is tried and tested and has been in the market for the last 20 years.
- She will not choose the option which has better features or performance, if it means she has to take a less established offering.
- She will choose for safety, not quality. Safety for the organisation, but sub-consciously and more critically, safety for herself. She does not want problems.
If your client is a Type 2 person, then
- She will choose the offering which is new and better than the run-of-the-mill options. If everyone else blindly uses a specific offering, she’ll be inclined to be sceptical about it.
- She will feel afraid that if she does not choose the newer or better offering, she’ll miss out on something better.
- She will make her choice based on what, sub-consciously, excites her, lets her explore new frontiers, push the envelope. And if her choice results in some uncertainties or implementation problems, she’ll be thrilled to work doubly hard to sort them out and learn from the process.
How does this affect us?
You have to decide who you are serving, and who you are.
If you are a small company selling goods or services which are less recognized brands, but are technically superior, forget trying to sell to a Type 1 client. Even if you succeed in bagging the order, the client will never be happy. She will always be nervous, and will always doubt whether you can deliver. Every time you slip up, even in a minor matter, she will go into deep self-criticism, wondering why she took the unnecessary risk of giving you the order.
Therefore, you must seek out Type 2 clients.
If you know about the famous Technology Adoption Curve or Innovation Adoption Life Cycle, you know the graph:
A small, technically superior, lesser known company must look for Early Adopters (see graph). The Type 1 clients are not even Early Majority in this curve — they are most closely mapped to Late Majority or Laggards.
On the other hand, if you are part of a sales team of a well-heeled giant brand which has huge brand recognition and a large established base, but your offering may not be technically at the cutting edge, then seek out Type 1 clients. Decision makers of large enterprises are usually of this profile. Type 2 personalities will often get bored working for a large, conservative and bureaucratic organisation. sitting in a nice cabin and pushing papers when there are real problems to solve.
Where the shoe pinched for us
I started a business in software services and consulting a few decades back. Any bootstrapped business is usually driven by Type 2 priorities, and I was no exception — I was, and am, a die-hard techie. I’m a Type 2. We took pride in being technically more competent than our ultra-large competitors.
We started selling our services to the IT teams of our very large enterprise clients, not because it was a deliberate strategy, but because we were in the financial capital (Bombay) of one of the world’s largest markets (India), and the financial services sector is the biggest buyer of IT products and services worldwide, outside defence and government sectors. So, there was steady business for us.
And it took me about 15 years to realise the cultural chasm between our priorities and those of our clients. Almost all of them were Type 1. Ever since then, we have been trying to re-invent our strategy, and it has been only since 2022 that we have succeeded in finding a new identity for ourselves. In 2023, we changed our company name in recognition of this re-imagining exercise — we became Remiges.
When I saw the talk by Prof Baba Shiv, I almost literally took a stick and beat myself. It was one of the most depressing realisations I went through — a realisation of the sheer magnitude of the strategic error I had inflicted on my business. If a techie entrepreneur like me has any maturity, he or she must find out the right market where Type 2 clients are waiting, and identify and target them, one by one. These clients are as desperate for solution providers like us as we are for them. The corporate CTO of large enterprises in the financial services sector are very rarely the right fit for us. Maybe we should have approached mid-sized companies who were well funded but were hungry to transform their businesses using IT. Maybe we should have targeted startups and new-age fintech companies.
Today, with this realisation deeply incorporated into our GTM (go-to-market, for the non-cognoscenti) strategy, we talk different languages to different client profiles. Our core DNA remains aggressively Type 2, with a large and very effective outer team which effectively addresses Type 1 sentiments in clients.
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