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 produce new company opportunities within highly complex environments.
We’re surviving in a so-called “VUCA world”: characterised by Volatility, Uncertainty, Complexity and Ambiguity. Across virtually 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, one can be rational and measured with their investments. We’ve enough time to create comprehensive business cases, and run proof-of-concept and proof-of-value programmes, as we develop standardised services and products in fairly static markets. We can “prove” the work before we begin.
In VUCA environments, where product cycles are short and technological change is fast, taking a traditional method of 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 require to use Invest to check.
Invest to try is a dynamic approach… Begin with some well-founded assumptions, bear in mind that however confident you may be, they are still only assumptions. Invest the littlest 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 seeking to make variables “constant” (a minimum of for a time).
Let’s assume, for example, 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: build a prototype experience and present it to 50 of your most loyal customers. Ask for their feedback… Can it be as useful since they believed it might be? Can it increase trust and loyalty within the brand? Can it enhance the customer experience? Would they be prepared to pay for this kind of service?
It’s essential to ask the best questions, to stress-test your assumptions and judge whether they’re valid.
From here, you can find three options: to abandon the merchandise or feature, to pivot it (re-cast it as being something slightly different and test again), or to continue further incremental investments and cycles of user feedback.
The short fact is ‘not necessarily’. In everything that your company does, we have to draw a clear, crisp distinction between two approaches:
Future-Proofing… fast-following the competition start by making sure you’re aware and ready for industry change, positioned to quickly conform to new demands, but not indeed being the catalyst for change.
Future-Surfing… as we 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 showed that fast-followers (future-proofers”) saw a typical 5.3% revenue uplift when compared to the competition. The true disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
However the real goal is to blend both strategies in your organisation, using each one of these where it makes one of the most sense. As disrupt the industry , you might apply future-surfing to your core areas of differentiation, and future-proofing for those more commoditised areas where you’re not planning to distinguish yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts as high as 18.6%, based on McKinsey.
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