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 on the notion of Future Surfing), let’s look at how you can leverage digital technologies and mind-sets to make new business opportunities within highly complex environments.
We’re surviving 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 using longer product cycles and little technological change, you can be rational and measured using their investments. We now have time to create comprehensive business cases, and run proof-of-concept and proof-of-value programmes, as we develop standardised services in fairly static markets. big bang disruption are able to “prove” the work before we begin.
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.
In this complex environment, decision-makers need to use Invest to try.
Invest to try can be a dynamic approach… Focus on some well-founded assumptions, but don’t forget that however confident you could be, they’re 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” (no less than for a time).
Let’s assume, as an example, that the customers would love you to quote competitor prices when presenting quotes for them. Don’t immediately dismiss this as irrational or despite best-practice. Test the assumption: develop a prototype experience and present it to 50 of the most loyal customers. Require their feedback… Can it be as useful because they believed it could be? Will it increase trust and loyalty inside the brand? Will it boost the customer experience? Do they really be also ready to buy this kind of service?
It’s essential to ask the proper questions, to stress-test your assumptions and judge whether they’re valid.
From here, there are three options: to abandon the merchandise or feature, to pivot it (re-cast it as something slightly different and test again), in order to continue further incremental investments and cycles of user feedback.
Rapid answer is ‘not necessarily’. In precisely what your business does, we need to draw a sharp distinction two approaches:
Future-Proofing… fast-following your competition start by making sure you’re aware and prepared for industry change, positioned to quickly conform to new demands, although not being the catalyst for change.
Future-Surfing… once we introduced inside our last blog, this really is about actively taking the battle to your competition and inventing entirely new methods 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.
But the real goal is to unite both strategies in your organisation, using each one of these where celebrate the most sense. For instance, you could apply future-surfing for the core areas of differentiation, and future-proofing for all those more commoditised areas where you’re not planning to tell apart yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts up to 18.6%, based on McKinsey.
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