Adopt an ‘Invest to Test’ philosophy to quickly abandon, pivot, or continue…
To give and deepen our discussion on digital disruption (see our last post relating to the notion of Future Surfing), let’s take a look at how you can leverage digital technologies and mind-sets to create start up business opportunities within highly complex environments.
We’re living in a so-called “VUCA world”: characterised by Volatility, Uncertainty, Complexity and Ambiguity. Across virtually all industries, we’re seeing product lifecycles shortening, technology change accelerating, and customers demanding ever-greater value from businesses.
In studying decision-making in VUCA environments, British organisational theorist Professor Ralph Stacey notes that with longer product cycles and little technological change, you can be rational and measured using their investments. We’ve enough time to build comprehensive business cases, and run proof-of-concept and proof-of-value programmes, even as develop standardised products and services in fairly static markets. digital partners are able to “prove” the project before we begin.
In VUCA environments, where product cycles are short and technological change is fast, taking a traditional way of decision-making actually gets to be a liability – potentially costing time, money and lost opportunity. Variables replace constants as our decision-making factors.
Within this complex environment, decision-makers need to use Invest to try.
Invest to try is a dynamic approach… Begin with some well-founded assumptions, but remember that however confident you may be, they are still only assumptions. Invest the smallest viable amount of resources (financial, human capital, intellectual etc) in building real-world prototypes and services that may reliably test these assumptions. Here you’re looking to make variables “constant” (a minimum of for some time).
Let’s assume, for instance, your customers would like you to quote competitor prices when presenting quotes for them. Don’t immediately dismiss this as irrational or contrary to best-practice. Test the assumption: create a prototype experience and provide it to 50 of one’s most loyal customers. Require their feedback… Can it be as useful as they believed it would be? Will it increase trust and loyalty inside the brand? Will it improve the customer experience? Would they be ready to buy this type of service?
It’s important to ask the right questions, to stress-test your assumptions and choose whether they’re valid.
Came from here, you will find three options: to abandon the product or feature, to pivot it (re-cast it as something slightly various and test again), or continue with further incremental investments and cycles of user feedback.
The fast answer is ‘not necessarily’. In everything that your small business does, we need to draw a clear, crisp distinction two approaches:
Future-Proofing… fast-following your competitors by looking into making sure you’re aware and prepared for industry change, positioned to quickly adapt to new demands, but not actually being the catalyst for change.
Future-Surfing… once we introduced within our last blog, this is about actively using the find it hard to your competitors and inventing entirely new methods to solve customer pain points.
Interestingly, in McKinsey’s ‘The case for digital reinvention’ report, the analyst firm showed that fast-followers (future-proofers”) saw a typical 5.3% revenue uplift in comparison to the competition. The actual disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
But the real goal is to merge both strategies into your organisation, using each one where it makes the most sense. As an example, you could apply future-surfing to your core regions of differentiation, and future-proofing for those more commoditised places that you’re not planning to differentiate yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts of up to 18.6%, based on McKinsey.
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