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 notion of Future Surfing), let’s examine how you can leverage digital technologies and mind-sets to create start up 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 that with longer product cycles and little technological change, it’s possible to be rational and measured making use of their investments. We have time to construct comprehensive business cases, and run proof-of-concept and proof-of-value programmes, once we develop standardised services in fairly static markets. We can “prove” the job 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.
On this complex environment, decision-makers need to use Invest to Test.
Invest to try is a dynamic approach… Begin with some well-founded assumptions, bear in mind that however confident you might be, they are still only assumptions. Invest the tiniest 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 trying to make variables “constant” (no less than for some time).
Let’s assume, as an example, your customers would love you to quote competitor prices when presenting quotes to them. Don’t immediately dismiss this as irrational or contrary to best-practice. Test the belief: build a prototype experience and give it to 50 of one’s most loyal customers. Ask for their feedback… Could it be as useful as they believed it would be? Does digital transformation increase trust and loyalty in the brand? Will it enhance the customer experience? Do they really even be prepared to pay for this kind of service?
It’s essential to ask the right questions, to stress-test your assumptions and choose whether they’re valid.
Came from here, there are three options: to abandon the merchandise or feature, to pivot it (re-cast it as being something slightly various and test again), in order to continue with further incremental investments and cycles of user feedback.
The short fact is ‘not necessarily’. In exactly what your company does, we have to draw a pointy distinction between two approaches:
Future-Proofing… fast-following the competition start by making sure you’re aware and prepared for industry change, positioned to quickly conform to new demands, but not being the catalyst for change.
Future-Surfing… as we introduced within our last blog, this really is about actively taking the find it hard to your competitors and inventing entirely new ways 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 an average 5.3% revenue uplift when compared to the competition. The true disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
Nevertheless the real goal is to merge both strategies for your organisation, using every one where it makes probably the most sense. For example, you may apply future-surfing to your core regions 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 of up to 18.6%, according to McKinsey.
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