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 new business 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 using longer product cycles and little technological change, one can be rational and measured with their investments. agile business transformation have the time to construct comprehensive business cases, and run proof-of-concept and proof-of-value programmes, even as develop standardised services in fairly static markets. We are able to “prove” the job before we start.
In VUCA environments, where product cycles are short and technological change is fast, taking 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 want to use Invest to try.
Invest to check is 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 can reliably test these assumptions. Here you’re looking to make variables “constant” (at least for a while).
Let’s assume, for instance, that the customers i would love you to quote competitor prices when presenting quotes in their mind. Don’t immediately dismiss this as irrational or unlike best-practice. Test the belief: 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? Can it increase trust and loyalty in the brand? Can it enhance the customer experience? Are they going to even be ready to purchase such a service?
It’s important to ask the proper questions, to stress-test your assumptions and judge whether they’re valid.
From here, you can find three options: to abandon the product or feature, to pivot it (re-cast it something slightly various and test again), in order to continue further incremental investments and cycles of user feedback.
The fast fact is ‘not necessarily’. In precisely what your business does, we must draw a clear, crisp distinction between two approaches:
Future-Proofing… fast-following your competitors start by making sure you’re aware and prepared for industry change, positioned to quickly adjust to new demands, however, not being the catalyst for change.
Future-Surfing… as we introduced in our last blog, this really is about actively taking the battle to the competition and inventing entirely new approaches 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 the average 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 into your organisation, using each one of these where it can make one of the most sense. As an example, you could apply future-surfing for your core aspects 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 as high as 18.6%, according to McKinsey.
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