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 concept of Future Surfing), let’s look at the best way to leverage digital technologies and mind-sets to create new company opportunities within highly complex environments.

We’re surviving 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 investing in longer product cycles and little technological change, it’s possible to be rational and measured making use of their investments. We’ve the time to build comprehensive business cases, and run proof-of-concept and proof-of-value programmes, once we develop standardised services and products in fairly static markets. We are able to “prove” the project before we begin.

In VUCA environments, where product cycles are short and technological change is fast, taking a traditional way of 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 Test.

Invest to try can be a dynamic approach… Focus on some well-founded assumptions, but don’t forget that however confident you could be, they’re still only assumptions. Invest the smallest viable level of resources (financial, human capital, intellectual etc) in building real-world prototypes and services that will reliably test these assumptions. Here you’re seeking to make variables “constant” (no less than for a while).

Let’s assume, for example, that your customers would love you to quote competitor prices when presenting quotes in their mind. Don’t immediately dismiss this as irrational or unlike best-practice. Test the belief: build a prototype experience and present it to 50 of the most loyal customers. Require innovation strategy … Is it as useful because they believed it might be? Will it increase trust and loyalty inside the brand? Will it improve the customer experience? Would they be also prepared to buy this kind of service?

It’s necessary to ask the right questions, to stress-test your assumptions and judge whether they’re valid.

From this point, there are three options: to abandon the product or feature, to pivot it (re-cast it something slightly different and test again), in order to continue with further incremental investments and cycles of user feedback.

The fast fact is ‘not necessarily’. In exactly what your company does, we must draw a pointy distinction two approaches:

Future-Proofing… fast-following the competition by looking into making sure you’re aware and ready for industry change, positioned to quickly adjust to new demands, however, not being the catalyst for change.
Future-Surfing… as we introduced inside our last blog, this really is about actively taking the battle to your competition and inventing entirely new ways 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 an average 5.3% revenue uplift when compared to the competition. The true disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.

However the real goal is to unite both strategies into your organisation, using each one of these where celebrate the most sense. For example, you could apply future-surfing for the core regions of differentiation, and future-proofing for all those more commoditised areas 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.

More information about disruptive innovation go to this useful resource.