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 on the idea of Future Surfing), let’s look at how to leverage digital technologies and mind-sets to make new 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, one can be rational and measured using their investments. We now have time to build comprehensive business cases, and run proof-of-concept and proof-of-value programmes, even as develop standardised services and products in fairly static markets. We could “prove” the job before we start.
However in VUCA environments, where product cycles are short and technological change is fast, going for 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.
On this complex environment, decision-makers want to use Invest to Test.
Invest to check is really a dynamic approach… Begin with some well-founded assumptions, bear in mind that however confident you may be, they’re still only assumptions. Invest the tiniest viable level of resources (financial, human capital, intellectual etc) in building real-world prototypes and services that may reliably test these assumptions. Here you’re seeking to make variables “constant” (a minimum of for a while).
Let’s assume, for example, your customers i would love you to quote competitor prices when presenting quotes to them. Don’t immediately dismiss this as irrational or despite best-practice. Test the assumption: create a prototype experience and give it to 50 of your most loyal customers. Require their feedback… Could it be as useful since they believed it could be? Does it increase trust and loyalty within the brand? Does it improve the customer experience ? Would they even be willing to purchase this kind of service?
It’s essential to ask the proper questions, to stress-test your assumptions and choose whether they’re valid.
From here, you can find three options: to abandon the merchandise or feature, to pivot it (re-cast it something slightly various and test again), or continue further incremental investments and cycles of user feedback.
The short answer is ‘not necessarily’. In everything that your business does, we must 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 adjust to new demands, but not actually being the catalyst for change.
Future-Surfing… as we introduced in our last blog, this can be about actively using the find it hard to the competition 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 the average 5.3% revenue uplift in comparison to the competition. The actual disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
However the real goal is to blend both strategies into your organisation, using each one of these where celebrate one of the most sense. For instance, you could apply future-surfing for your core regions of differentiation, and future-proofing for all those more commoditised locations where you’re not planning to tell apart yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts of up to 18.6%, based on McKinsey.
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