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 on the notion of Future Surfing), let’s look at how you can leverage digital technologies and mind-sets to produce new business 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 that with longer product cycles and little technological change, you can be rational and measured using their investments. We’ve the time to construct comprehensive business cases, and run proof-of-concept and proof-of-value programmes, as we develop standardised services in fairly static markets. We could “prove” the project before we start.
But in VUCA environments, where product cycles are short and technological change is fast, going for 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.
On this complex environment, decision-makers need to use Invest to try.
Invest to try can be a dynamic approach… Begin with some well-founded assumptions, but don’t forget that however confident you could 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 can reliably test these assumptions. Here you’re looking to make variables “constant” (at least for a time).
Let’s assume, as an example, that the customers would love you to quote competitor prices when presenting quotes to them. Don’t immediately dismiss this as irrational or unlike best-practice. Test the assumption: develop a prototype experience and provide it to 50 of one’s 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? Can it boost the customer experience? Are they going to even be ready to purchase this kind of service?
It’s necessary to ask the proper questions, to stress-test your assumptions and decide 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 various and test again), or to continue with further incremental investments and cycles of user feedback.
The fast fact is ‘not necessarily’. In precisely what your company 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 ready for industry change, positioned to quickly adapt to new demands, although not indeed being the catalyst for change.
innovation strategy -Surfing… even as introduced inside our last blog, this really is about actively taking 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 demonstrated that fast-followers (future-proofers”) saw an average 5.3% revenue uplift in comparison to the competition. The real disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
Nevertheless the real goal is to blend both strategies into your organisation, using every one where it makes one of the most sense. For instance, you might apply future-surfing for your core areas of differentiation, and future-proofing for those more commoditised areas 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%, based on McKinsey.
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