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 concept of Future Surfing), let’s take a look at the best way 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, you can be rational and measured with their investments. We have the 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. We are able to “prove” the project before we begin.
However in VUCA environments, where product cycles are short and technological change is fast, going for a traditional approach to 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 need to use Invest to check.
Invest to try is a dynamic approach… Begin with some well-founded assumptions, but remember that however confident you could 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” (no less than for a while).
Let’s assume, for instance, that your customers i would love you to quote competitor prices when presenting quotes for them. Don’t immediately dismiss this as irrational or unlike best-practice. Test the idea: develop a prototype experience and present it to 50 of one’s most loyal customers. Request their feedback… Is it as useful since they believed it could be? Will it increase trust and loyalty in the brand? Can digital success enhance the customer experience? Do they really be willing to buy this type of service?
It’s essential to ask the right questions, to stress-test your assumptions and judge 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 to continue further incremental investments and cycles of user feedback.
Rapid response is ‘not necessarily’. In everything that your company does, we have to draw a clear, crisp 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 indeed being the catalyst for change.
Future-Surfing… once we introduced in our last blog, this really is about actively using the battle to your competitors and inventing entirely new methods 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 a typical 5.3% revenue uplift in comparison 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 every one where it makes probably the most sense. For example, you could apply future-surfing for the 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 up to 18.6%, according to McKinsey.
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