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 the best way to leverage digital technologies and mind-sets to make 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, one can be rational and measured with their investments. We’ve time to create 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 could “prove” the project before we start.
In VUCA environments, where product cycles are short and technological change is fast, having a traditional approach to decision-making actually gets to be a liability – potentially costing time, money and lost opportunity. Variables replace constants as our decision-making factors.
Within digital transformation , decision-makers require 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 may be, they’re still only assumptions. Invest the smallest viable quantity of resources (financial, human capital, intellectual etc) in building real-world prototypes and services that may reliably test these assumptions. Here you’re trying to make variables “constant” (at least for a time).
Let’s assume, as an example, your 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: create a prototype experience and provide it to 50 of your most loyal customers. Request their feedback… Is it as useful since they believed it could be? Does it increase trust and loyalty inside the brand? Will it improve the customer experience? Would they be also ready to pay for this kind of service?
It’s essential to ask the best questions, to stress-test your assumptions and decide whether they’re valid.
From here, you can find three options: to abandon the product or feature, to pivot it (re-cast it as being something slightly different and test again), in order to continue further incremental investments and cycles of user feedback.
The short fact is ‘not necessarily’. In precisely what your small business does, we must draw a pointy distinction between two approaches:
Future-Proofing… fast-following your competitors by looking into making sure you’re aware and prepared for industry change, positioned to quickly adjust to new demands, but not actually being the catalyst for change.
Future-Surfing… even as introduced within our last blog, this can be about actively taking the battle to the competition and inventing entirely new methods 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 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 in your organisation, using each one where celebrate the most sense. For instance, you might apply future-surfing to your core aspects of differentiation, and future-proofing for all those more commoditised locations where 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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