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 around the concept of Future Surfing), let’s take a look at 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 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 by investing in longer product cycles and little technological change, one can be rational and measured making use of their investments. We now have time to construct 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 success could “prove” the work before we start.
But in VUCA environments, where product cycles are short and technological change is fast, taking 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.
In this complex environment, decision-makers require to use Invest to try.
Invest to Test can be a dynamic approach… Begin with some well-founded assumptions, but don’t forget that however confident you could be, these are still only assumptions. Invest the smallest viable amount of resources (financial, human capital, intellectual etc) in building real-world prototypes and services that will reliably test these assumptions. Here you’re looking to make variables “constant” (at least for a while).
Let’s assume, for instance, your customers 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… Can it be as useful since they believed it could be? Does it increase trust and loyalty in the brand? Will it boost the customer experience? Would they be also prepared to pay for this kind of service?
It’s necessary to ask the right questions, to stress-test your assumptions and judge whether they’re valid.
Came from here, there are three options: to abandon the product or feature, to pivot it (re-cast it as being something slightly various and test again), or continue with further incremental investments and cycles of user feedback.
Rapid fact is ‘not necessarily’. In everything that your business 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 ready for industry change, positioned to quickly adapt to new demands, although not actually being the catalyst for change.
Future-Surfing… once we introduced inside our last blog, this really is 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 demonstrated that fast-followers (future-proofers”) saw the average 5.3% revenue uplift in comparison to the competition. The real disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
However the real goal is to blend both strategies in your organisation, using each one of these where it can make probably the most sense. As an example, you may apply future-surfing for your core regions of differentiation, and future-proofing for anyone more commoditised locations where you’re not planning to differentiate yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts up to 18.6%, in accordance with McKinsey.
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