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 concept of Future Surfing), let’s take a look at how you can leverage digital technologies and mind-sets to create new company 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 by investing in longer product cycles and little technological change, you can be rational and measured making use of their investments. We’ve 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 could “prove” the work before we start.
However in VUCA environments, where product cycles are short and technological change is fast, taking a traditional method 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 require to use Invest to try.
Invest to try can be a dynamic approach… Focus on some well-founded assumptions, bear in mind that however confident you could be, they are still only assumptions. Invest the littlest viable level 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” (a minimum of for a while).
Let’s assume, for example, that the customers would like you to quote competitor prices when presenting quotes to them. Don’t immediately dismiss this as irrational or despite best-practice. Test the belief: build a prototype experience and provide it to 50 of one’s most loyal customers. Ask for their feedback… Could it be as useful because they believed it might be? Can it increase trust and loyalty in the brand? Will it improve the customer experience? Do they really even be willing to buy such a service?
It’s essential to ask the proper questions, to stress-test your assumptions and decide whether they’re valid.
From here, there are three options: to abandon the item or feature, to pivot it (re-cast it as something slightly various and test again), or continue further incremental investments and cycles of user feedback.
The short response is ‘not necessarily’. In everything that your business does, we need to draw a sharp distinction between two approaches:
Future-Proofing… fast-following your competition start by making sure you’re aware and ready for industry change, positioned to quickly adjust to new demands, however, not being the catalyst for change.
Future-Surfing… once we introduced in our last blog, this is about actively taking the battle to your competition and inventing entirely new approaches 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 an average 5.3% revenue uplift in comparison to the competition. The true disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
But the real goal is to unite both strategies for your organisation, using every one where it can make probably the most sense. As an example, you may apply future-surfing for your core aspects of differentiation, and future-proofing for all those more commoditised areas where you’re not planning to differentiate yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts as high as 18.6%, according to McKinsey.
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