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Exclusive: IDEO Investor Kyu Acquires BEworks, a Behavioral Economics Firm

Jan 09, 2017

Start with a dollop of graphic design. Add several dozen marketing ideas. Stir in some serious design chops. Then sprinkle a bit of behavioral economics on top and bake for 32 months.

The result, according to Kyu CEO Michael Birkin? A model for a creative services company fit for the 21st century.

Kyu (pronounced "Q"), the corporate collective that in February shocked the design world by taking a minority stake in IDEO, the world-famous Palo Alto, Calif. design firm known for its creation of the first Apple mouse, is making yet another move.

On Tuesday Kyu plans to announce that it has acquired BEworks, a seven-year-old Toronto firm that uses behavioral economics to solve business and governmental challenges. The price was not disclosed.

BEworks is the seventh company in the Kyu collective, a New York City-based division of the Japanese holding company Hakuhodo DY Holdings. Kyu's other member firms include conference company C2, creative agency Digital Kitchen, branding agency Red Peak, ad agency Sid Lee, corporate consultancy SYPartners, and of course IDEO.

BEworks CEO Kelly Peters and chief behavioral scientist Dan Ariely, both co-founders, will be "full partners" in the endeavor. Nina Mažar, a professor at the University of Toronto’s Rotman School of Management, will be a "minority partner."

Kyu is largely a collection of advertising, marketing, and design firms that competes with global giants like Omnicom, WPP, and Publicis. As Kyu's newest member, BEworks distinguishes itself with a strong science streak. The firm's 25 or so doctorate-carrying researchers use behavioral science techniques to better understand the mindset of consumers and apply those learnings to the marketing, product, pricing, and operations efforts of government agencies and Fortune 1000 companies.

"We believe that if we as a creative group are going to really provide more compelling solutions, we can't just serve the market that exists," Kyu CEO Michael Birkin tells Fortune. "We've actually got to try and think about how we design the market—how we look at marketplaces and make them more fertile to the ideas that we have."

Birkin explains Kyu's purpose thusly: "To broaden and deepen the role of creative services in problem solving in the 21st century." He describes Kyu's federated structure as a way to facilitate that. Each of the seven companies in the collective is a sort of lens on the world; layer them one on top of the other and you have a richer view through which to help organizations tackle major cross-disciplinary issues.

Such as aging: How do you talk with consumers about advanced age in a way that doesn't suggest eventual death but reframes it instead as a later, vibrant stage in life? That's the kind of grand issue that Kyu is trying to tackle, Birkin says.

"It occurred to us that looking at where we can apply some more scientific thinking into the creative process would also deepen the quality of what we do," Birkin says.

Peters, the BEworks chief, says her firm is focused on understanding the science of decision making. "To know how people make the choices that they do is a fascinating area in and of itself," she says, and the company could stop there by offering those insights. But "there's also now the science of how we persuade, the science of how we influence that behavior. So it's one thing to have the research insights; it's a whole other level now to be able to influence or 'nudge' that behavior."

And, of course, validate it with quantitative evidence. Move object X amount, influence customer Y amount—and perhaps more easily sell someone health insurance or stop them from using so much electricity in the summer.

"How do you use these nudges to actually change these difficult behaviors?" Peters asks. "That's the mission we're on."

Birkin cites the introduction of linear perspective in art during the Renaissance—"looking at the world from the perspective of man rather than God," he notes—as inspiration for Kyu's unusual strategy to compete with its much larger rivals. Seeing differently is the point, he says.

"Digitization has changed a hell of a lot. It's been transformational, and we're still going through it," Birkin says. "We're in a world now where digitization is creating individual universes—worlds—for each one of us." Just as scientific ideas came to art 500 or 600 years ago, so they must come to what we now call "creative services."

"You do have ground for moving forward," he says. "And that's what we're searching for."

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