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Digital Disruption: The best way to Disrupt and avoid disruption
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Digital Disruption: The best way to Disrupt and avoid disruption

Wednesday, July 27, 2016 3:37 am - 6:37 am
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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 relating to the idea of Future Surfing), let’s look at the best way to leverage digital technologies and mind-sets to make new company opportunities within highly complex environments.

We’re surviving 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, it's possible to be rational and measured using their investments. We have enough time to build comprehensive business cases, and run proof-of-concept and proof-of-value programmes, once we develop standardised products and services in fairly static markets. We could “prove” the project before we begin.

But in VUCA environments, where product cycles are short and technological change is fast, going for 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.

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

Invest to try is a dynamic approach… Begin with some well-founded assumptions, but don't forget that however confident you may be, these are 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” (no less than for a while).

Let’s assume, for example, that your customers would like you to quote competitor prices when presenting quotes for them. Don’t immediately dismiss this as irrational or unlike best-practice. Test the assumption: build a prototype experience and give it to 50 of your most loyal customers. Require their feedback… Could it be as useful since they believed it could be? Does it increase trust and loyalty inside the brand? Can it improve the customer experience? Do they really be prepared to buy this type of service?

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

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

The fast response is ‘not necessarily’. In digital partners that your company does, we have to draw a clear, crisp distinction two approaches:

Future-Proofing… fast-following your competitors by making sure you’re aware and ready for industry change, positioned to quickly adjust to new demands, but not being the catalyst for change.
Future-Surfing… even as introduced inside our last blog, this is about actively utilizing the battle 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 showed that fast-followers (future-proofers”) saw the average 5.3% revenue uplift when compared 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 each one where it makes probably the most sense. For instance, you could apply future-surfing for the core aspects of differentiation, and future-proofing for anyone more commoditised places that you’re not planning to tell apart yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts as high as 18.6%, according to McKinsey.

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