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 notion of Future Surfing), let’s look at how to leverage digital technologies and mind-sets to produce 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 almost 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 using their investments. We now have time to build comprehensive business cases, and run proof-of-concept and proof-of-value programmes, as we develop standardised products and services in fairly static markets. We can “prove” the project before we start.
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 want to use Invest to try.
Invest to try can be a dynamic approach… Start with some well-founded assumptions, but remember that however confident you could be, these are still only assumptions. Invest the littlest viable quantity of resources (financial, human capital, intellectual etc) in building real-world prototypes and services that will reliably test these assumptions. Here you’re seeking to make variables “constant” (no less than for a while).
Let’s assume, as an example, that the customers would like you to quote competitor prices when presenting quotes for them. Don’t immediately dismiss this as irrational or despite best-practice. Test the idea: create a prototype experience and give it to 50 of your most loyal customers. Require their feedback… Could it be as useful as they believed it would be? Does it increase trust and loyalty within the brand? Does digital transformation boost the customer experience? Would they be willing to purchase such a service?
It’s important to ask the proper questions, to stress-test your assumptions and judge whether they’re valid.
Came from here, you will find three options: to abandon the product or feature, to pivot it (re-cast it something slightly different and test again), or continue with further incremental investments and cycles of user feedback.
The short response is ‘not necessarily’. In precisely what your small business does, we have to draw a clear, crisp distinction between two approaches:
Future-Proofing… fast-following your competitors start by making sure you’re aware and ready for industry change, positioned to quickly conform to new demands, however, not actually being the catalyst for change.
Future-Surfing… even as introduced inside our last blog, this really 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 demonstrated that fast-followers (future-proofers”) saw an average 5.3% revenue uplift in comparison to the competition. The actual disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
However the real goal is to blend both strategies for your organisation, using each one where celebrate one of the most sense. As an example, you could apply future-surfing for your core regions of differentiation, and future-proofing for anyone more commoditised locations where you’re not planning to differentiate yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts of up to 18.6%, according to McKinsey.
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