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 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 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, it’s possible to 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, as we develop standardised products and services in fairly static markets. We could “prove” the job before we begin.
However in digital transformation , where product cycles are short and technological change is fast, taking 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.
Within this complex environment, decision-makers want to use Invest to check.
Invest to Test is really a dynamic approach… Start with some well-founded assumptions, but don’t forget that however confident you might be, they’re still only assumptions. Invest the tiniest viable amount 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” (a minimum of for a while).
Let’s assume, for example, that the customers would love you to quote competitor prices when presenting quotes for them. Don’t immediately dismiss this as irrational or despite best-practice. Test the belief: develop a prototype experience and give it to 50 of one’s most loyal customers. Require their feedback… Can it be as useful since they believed it might be? Can it increase trust and loyalty inside the brand? Can it improve the customer experience? Are they going to even be willing to buy such a service?
It’s necessary to ask the right questions, to stress-test your assumptions and judge whether they’re valid.
From this point, you will find three options: to abandon the merchandise or feature, to pivot it (re-cast it something slightly different and test again), or to continue with further incremental investments and cycles of user feedback.
Rapid answer is ‘not necessarily’. In everything that your small business does, we need to draw a pointy distinction two approaches:
Future-Proofing… fast-following the competition start by making sure you’re aware and prepared for industry change, positioned to quickly adapt to new demands, but not actually being the catalyst for change.
Future-Surfing… even as introduced in our last blog, this is about actively using the find it hard 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 showed that fast-followers (future-proofers”) saw the average 5.3% revenue uplift as compared to the competition. The true disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
However the real goal is to blend both strategies for your organisation, using each one of these where celebrate one of the most sense. For instance, you might apply future-surfing for your core aspects of differentiation, and future-proofing for anyone more commoditised locations where you’re not planning to distinguish yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts as high as 18.6%, according to McKinsey.
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