Adopt an ‘Invest to Test’ philosophy to quickly abandon, pivot, or continue…
To extend and deepen our discussion on digital disruption (see our last post around the idea of Future Surfing), let’s examine how to leverage digital technologies and mind-sets to make new company opportunities within highly complex environments.
We’re residing 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 by investing in longer product cycles and little technological change, it’s possible to be rational and measured using their investments. We now have enough time to create comprehensive business cases, and run proof-of-concept and proof-of-value programmes, once we develop standardised services and products in fairly static markets. We are able to “prove” the project before we begin.
But in VUCA environments, where product cycles are short and technological change is fast, taking a traditional method of decision-making actually becomes a liability – potentially costing time, money and lost opportunity. Variables replace constants as our decision-making factors.
On this complex environment, decision-makers need to use Invest to try.
Invest to Test is really a dynamic approach… Start with some well-founded assumptions, but don’t forget that however confident you might be, these are still only assumptions. Invest the littlest viable amount of resources (financial, human capital, intellectual etc) in building real-world prototypes and services that can reliably test these assumptions. Here you’re trying to make variables “constant” (no less than for a time).
Let’s assume, for example, your customers would like you to quote competitor prices when presenting quotes in their mind. Don’t immediately dismiss this as irrational or unlike best-practice. Test the belief: create a prototype experience and present it to 50 of your most loyal customers. Ask for their feedback… Can it be as useful because they believed it might be? Will it increase trust and loyalty inside the brand? Will it improve the customer experience? Do they really be willing to pay for this kind of service?
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It’s necessary to ask the proper questions, to stress-test your assumptions and decide whether they’re valid.
Came from here, there are three options: to abandon the product or feature, to pivot it (re-cast it something slightly various and test again), or to continue with further incremental investments and cycles of user feedback.
The short response is ‘not necessarily’. In precisely what your company does, we have to draw a clear, crisp distinction between two approaches:
Future-Proofing… fast-following the competition 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… even as introduced in our last blog, this really is about actively taking the battle to your competitors and inventing entirely new ways to solve customer pain points.
Interestingly, in McKinsey’s ‘The case for digital reinvention’ report, the analyst firm demonstrated that fast-followers (future-proofers”) saw a typical 5.3% revenue uplift when compared to the competition. The real disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
But the real goal is to merge both strategies for your organisation, using every one where it makes one of the most sense. As an example, you might apply future-surfing for the core areas of differentiation, and future-proofing for anyone more commoditised locations where you’re not planning to distinguish yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts as high as 18.6%, in accordance with McKinsey.
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