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 examine how you can leverage digital technologies and mind-sets to produce start up business opportunities within highly complex environments.
We’re living 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, you can be rational and measured making use of their investments. We have the time to build 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 can “prove” the job before we start.
But in VUCA environments, where product cycles are short and technological change is fast, having a traditional method 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 need to use Invest to Test.
Invest to check can be a dynamic approach… Focus on some well-founded assumptions, bear in mind that however confident you may be, they’re still only assumptions. Invest the smallest viable level of resources (financial, human capital, intellectual etc) in building real-world prototypes and services that can reliably test these assumptions. Here you’re seeking to make variables “constant” (no less than for a time).
Let’s assume, for example, that the 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 idea: develop a prototype experience and present it to 50 of one’s most loyal customers. Require their feedback… Can it be as useful since they believed it could be? Will it increase trust and loyalty within the brand? Can it enhance the customer experience? Are they going to be ready to purchase this type of service?
It’s important to ask the best questions, to stress-test your assumptions and decide whether they’re valid.
From here, there are three options: to abandon the item or feature, to pivot it (re-cast it as being something slightly various and test again), in order to continue further incremental investments and cycles of user feedback.
Rapid response is ‘not necessarily’. In exactly what your business does, we must draw a pointy distinction two approaches:
Future-Proofing… fast-following your 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 in our last blog, this really is about actively using the battle to your competitors 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 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 merge both strategies in your organisation, using every one where it can make one of the most sense. For example, you may apply future-surfing for the core aspects 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%, based on McKinsey.
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