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 around the notion of Future Surfing), let’s take a look at the best way to leverage digital technologies and mind-sets to make new business opportunities within highly complex environments.

We’re residing 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 the time to create comprehensive business cases, and run proof-of-concept and proof-of-value programmes, even as develop standardised services and products in fairly static markets. We could “prove” the project before we start.

However in VUCA environments, where product cycles are short and technological change is fast, going for a traditional approach to decision-making actually turns into a liability – potentially costing time, money and lost opportunity. Variables replace constants as our decision-making factors.

In this complex environment, decision-makers require to use Invest to try.

Invest to check is a dynamic approach… Start with some well-founded assumptions, but remember that however confident you might be, they’re still only assumptions. Invest the smallest viable amount 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, for example, that the customers i would love you to quote competitor prices when presenting quotes in their mind. Don’t immediately dismiss this as irrational or contrary to best-practice. Test the assumption: create a prototype experience and provide it to 50 of one’s most loyal customers. Ask for agile business transformation … Could it be as useful since they believed it could be? Will it increase trust and loyalty within the brand? Does it improve the customer experience? Are they going to be prepared to pay for this kind of service?

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

Came from here, you will find three options: to abandon the item or feature, to pivot it (re-cast it something slightly different and test again), or continue with further incremental investments and cycles of user feedback.

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

Future-Proofing… fast-following your competition start by making sure you’re aware and ready for industry change, positioned to quickly adjust to new demands, although not actually being the catalyst for change.
Future-Surfing… as we introduced inside our last blog, this is about actively using the find it hard to your 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 an average 5.3% revenue uplift in comparison to the competition. The true disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.

However the real goal is to merge both strategies for your organisation, using each one of these where it makes one of the most sense. For example, you might apply future-surfing for the core areas 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%, according to McKinsey.

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