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 on the notion 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 residing 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, you can be rational and measured using their investments. We now have enough 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 can “prove” the job before we begin.

However in VUCA environments, where product cycles are short and technological change is fast, going for a traditional method of decision-making actually becomes a liability – potentially costing time, money and lost opportunity. disrupt the industry replace constants as our decision-making factors.

On 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, bear in mind that however confident you may be, they are still only assumptions. Invest the littlest viable quantity 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 some time).

Let’s assume, for instance, 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 despite best-practice. Test the idea: build a prototype experience and give it to 50 of the most loyal customers. Ask for their feedback… Could it be as useful because they believed it would be? Will it increase trust and loyalty within the brand? Will it enhance the customer experience? Do they really be also ready to pay for this type of service?

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

Came from here, there are three options: to abandon the item or feature, to pivot it (re-cast it as being something slightly various and test again), or to continue further incremental investments and cycles of user feedback.

The short response is ‘not necessarily’. In precisely what your company does, we must draw a sharp among two approaches:

Future-Proofing… fast-following your competitors start by making sure you’re aware and ready for industry change, positioned to quickly conform to new demands, although not being the catalyst for change.
Future-Surfing… as we introduced within our last blog, this is about actively utilizing the battle 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 indicated that fast-followers (future-proofers”) saw the average 5.3% revenue uplift as compared to the competition. The real disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.

However the real goal is to unite both strategies for your organisation, using every one where it makes one of the most sense. For example, you could apply future-surfing for your core regions of differentiation, and future-proofing for all those more commoditised locations where you’re not planning to distinguish yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts of up to 18.6%, based on McKinsey.

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