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 on the notion of Future Surfing), let’s take a look at how to leverage digital technologies and mind-sets to make start up business opportunities within highly complex environments.
big bang disruption ’re living 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 that with longer product cycles and little technological change, you can be rational and measured with their investments. We now have the time to create 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 approach to decision-making actually becomes 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 try.
Invest to check is a dynamic approach… Start with some well-founded assumptions, but don’t forget that however confident you could be, they’re 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 trying to make variables “constant” (a minimum of for a time).
Let’s assume, for example, your 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: build a prototype experience and provide it to 50 of your most loyal customers. Require their feedback… Is it as useful as they believed it could be? Does it increase trust and loyalty inside the brand? Will it improve the customer experience? Are they going to be also willing to pay for this kind of service?
It’s essential to ask the proper questions, to stress-test your assumptions and judge whether they’re valid.
From this point, you will find three options: to abandon the item or feature, to pivot it (re-cast it as something slightly different and test again), or continue with further incremental investments and cycles of user feedback.
Rapid response is ‘not necessarily’. In everything that your business does, we have to draw a sharp 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, although not being the catalyst for change.
Future-Surfing… once we introduced in our last blog, this is about actively taking the battle to your competition and inventing entirely new methods 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 a typical 5.3% revenue uplift in comparison to the competition. The real disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
But the real goal is to blend both strategies for your organisation, using each one where it can make probably the most sense. For example, you might apply future-surfing to your core aspects of differentiation, and future-proofing for those more commoditised locations where you’re not planning to tell apart yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts as high as 18.6%, in accordance with McKinsey.
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