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 around the idea 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 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, it’s possible to be rational and measured using their investments. We’ve the time to create 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, taking a traditional approach to decision-making actually becomes a liability – potentially costing time, money and lost opportunity. Variables replace constants as our decision-making factors.
On this complex environment, decision-makers need to use Invest to try.
Invest to check can be 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 littlest viable quantity 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 time).
Let’s assume, for instance, that the customers would love you to quote competitor prices when presenting quotes in their mind. Don’t immediately dismiss this as irrational or unlike best-practice. Test the idea: build a prototype experience and present it to 50 of one’s most loyal customers. Ask for their feedback… Is it as useful since they believed it could be? Does it increase trust and loyalty within the brand? Can digital partners improve the customer experience? Would they be prepared to pay for this type of service?
It’s necessary to ask the proper questions, to stress-test your assumptions and choose whether they’re valid.
From this point, you will find three options: to abandon the product or feature, to pivot it (re-cast it as being something slightly various and test again), or to continue further incremental investments and cycles of user feedback.
The short fact is ‘not necessarily’. In precisely what your small business does, we need to draw a clear, crisp among 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… as we introduced within our last blog, this is about actively utilizing the find it hard 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 the average 5.3% revenue uplift as compared to the competition. The actual disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
Nevertheless the real goal is to blend both strategies for your organisation, using each one where it makes probably the most sense. For example, you could apply future-surfing for your core areas of differentiation, and future-proofing for all those 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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