Adopt an ‘Invest to Test’ philosophy to quickly abandon, pivot, or continue…
To give and deepen our discussion on digital disruption (see our last post relating to the idea of Future Surfing), let’s examine the best way to leverage digital technologies and mind-sets to make new company opportunities within highly complex environments.
We’re residing in a so-called “VUCA world”: characterised by Volatility, Uncertainty, Complexity and Ambiguity. Across almost 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, you can be rational and measured with their investments. We have time to build comprehensive business cases, and run proof-of-concept and proof-of-value programmes, as we develop standardised services in fairly static markets. We are able to “prove” the job before we begin.
But in VUCA environments, where product cycles are short and technological change is fast, having 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.
Within this complex environment, decision-makers want to use Invest to check.
Invest to check is really a dynamic approach… Focus on some well-founded assumptions, but don’t forget that however confident you might be, these are still only assumptions. Invest the tiniest 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 seeking to make variables “constant” (at least for a while).
Let’s assume, for instance, that your customers would like you to quote competitor prices when presenting quotes in their mind. disrupt the industry ’t immediately dismiss this as irrational or despite best-practice. Test the assumption: build a prototype experience and provide it to 50 of your most loyal customers. Require their feedback… Is it as useful since they believed it could be? Will it increase trust and loyalty within the brand? Will it improve the customer experience? Would they be also 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 this point, you will find three options: to abandon the item or feature, to pivot it (re-cast it as being something slightly various and test again), or continue further incremental investments and cycles of user feedback.
The short response is ‘not necessarily’. In exactly what your company does, we have to draw a pointy distinction two approaches:
Future-Proofing… fast-following the competition start by making sure you’re aware and ready for industry change, positioned to quickly adapt to new demands, however, not actually being the catalyst for change.
Future-Surfing… as we introduced within our last blog, this can be about actively using the find it hard 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 demonstrated that fast-followers (future-proofers”) saw a typical 5.3% revenue uplift as compared to the competition. The real disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
Nevertheless the real goal is to merge both strategies into your organisation, using every one where celebrate the most sense. For instance, you might apply future-surfing for the core regions of differentiation, and future-proofing for all those more commoditised locations where you’re not planning to tell apart yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts up to 18.6%, based on McKinsey.
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