Adopt an ‘Invest to Test’ philosophy to quickly abandon, pivot, or continue…
To increase and deepen our discussion on digital disruption (see our last post relating to the idea of Future Surfing), let’s look at the best way to 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 just about 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 have 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. We could “prove” the work before we start.
But in VUCA environments, where product cycles are short and technological change is fast, having a traditional method of decision-making actually turns into a liability – potentially costing time, money and lost opportunity. Variables replace constants as our decision-making factors.
Within this complex environment, decision-makers want to use Invest to try.
Invest to Test can be a dynamic approach… Focus on some well-founded assumptions, but don’t forget that however confident you might be, they are still only assumptions. Invest the smallest viable quantity 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” (at least for some time).
Let’s assume, for example, that the customers would love you to quote competitor prices when presenting quotes to them. Don’t immediately dismiss this as irrational or unlike best-practice. Test the belief: create a prototype experience and give it to 50 of the most loyal customers. Require their feedback… Can it be as useful as they believed it might be? Can it increase trust and loyalty inside the brand? Will it boost the customer experience? Would they even be ready to pay for this kind of service?
It’s necessary to ask the proper questions, to stress-test your assumptions and decide whether they’re valid.
From here, you will find three options: to abandon the product or feature, to pivot it (re-cast it something slightly various and test again), in order to continue with further incremental investments and cycles of user feedback.
The fast response is ‘not necessarily’. In exactly what your company does, we have to draw a pointy distinction between two approaches:
Future-Proofing… fast-following your competitors by looking into making sure you’re aware and prepared for industry change, positioned to quickly adjust to new demands, but not indeed being the catalyst for change.
Future-Surfing… even as introduced in our last blog, this can be about actively using the battle to the competition and inventing entirely new approaches to solve customer pain points.
Interestingly, in McKinsey’s ‘The case for digital reinvention’ report, the analyst firm indicated that fast-followers (future-proofers”) saw a typical 5.3% revenue uplift when compared to the competition. The true disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
But the real goal is to merge both strategies in your organisation, using each one of these where it can make probably the most sense. For instance, you might apply future-surfing for your core areas of differentiation, and future-proofing for anyone more commoditised places that you’re not planning to distinguish yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts of up to 18.6%, according to McKinsey.
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