Innovating through global uncertainty – a hypothesis-driven approach
On Monday in Finland the Prime Minister announced our country’s first State of Emergency since World War II. The global economy is in “a tailspin,” according to the Guardian. People around the world are afraid, which means many of the organizations they belong to—businesses, governments, institutions—are equally uncertain.
Right now, many of the best minds in innovation are sitting at home, reading the news, wondering what to do. As individuals, but also as organizations. And as brands.
At Cambri, we’re thinking back to the companies who came out of the 2008 recession stronger and better. We’re wondering how we can help our customers (and our customers’ customers) survive this challenging time, while also positioning for success in the long run.
Of course, we don’t have the answer. But, because it’s us, we do have a hypothesis.
It’s time to question assumptions.
The response to COVID-19 has already proven that many default business practices are based on imperfect assumptions. Practices like commuting to the office, industry conferences, and international travel aren’t as mandatory as we thought they were, a month ago. Even the most traditional corporate cultures will be re-calculating the core value of these activities in the coming months.
But internal operational policy is one thing. What assumptions have brands been making about their customers, their marketing, and their products? Are those assumptions going to hold up in the coming months?
The big question is: will we all return to business-as-usual, or are we going to learn from this massive experiment?
It’s time to commit to experimentation.
Harvard business professor Stefan Thomke, in the March 2020 issue of Harvard Business Review, says a "sustained commitment" to experimentation is the only way a company can reap the benefits.
Thomke quotes Expedia CEO Mark Okerstrom: “In an increasingly digital world, if you don’t do large-scale experimentation, in the long term—and in many industries the short term—you’re dead." Okerstrom goes on to say that because of experimentation, "we don’t have to guess what customers want; we have the ability to run the most massive 'customer surveys' that exist, again and again, to have them tell us what they want.”
Meanwhile, Jeanne Ross and Nils Fonstad have spent years studying companies undergoing digital transformation, including LEGO, Toyota, Audi, Deutsche Telekom, and Posten Norge. Their most recent research, published in 2019 in Sloan Management Review, shows that purposeful experimentation (i.e., testing that starts with better assumptions and better questions) leads to demonstrably more successful innovation.
This is why Amazon, Facebook, Google, Microsoft, and Booking.com all use digital experimentation (e.g., A/B testing) in their marketing and innovation processes. Simultaneously, formerly brick-and-mortar operations like FedEx, State Farm, and H&M use online testing to optimize their digital presence.
The simplest way to find out what our customers need in this moment is to ask them. And the most valid way to ask them, according to Ross & Fonstad, is through hypothesis-driven concept testing.
It’s time to disrupt the innovation process.
It’s probably safe to say that in the medium-term we’re all going to be looking to streamline our budgets, and focus on the core essentials. How do we do that without cutting corners, stagnating, or losing touch with our customers?
According to Ross & Fonstad: that “the purpose of hypothesis-driven concept testing is to limit risk, and, where possible, preempt failure.” In other words: a leaner, less wasteful innovation process involves more testing, not less.
And according to Thomke, companies that embrace large-scale testing are making a cultural shift, not just a technical one.
"What matters is how decisions are adjudicated under uncertainty in an organization. They should not be based on faith or personal opinion alone. If they can be put to the test, they should be."
Here at Cambri, we believe that rigorous, rapid, purposeful testing is the best way for companies to navigate through the next few months of uncertainty, and come out positioned for future success. If you'd like to read more, check out Thomke's full article, or read a more about hypothesis-driven concept testing.
Thomke, S. (2020). "Building a Culture of Experimentation." Harvard Business Review.
Ross, J. & Fonstad, N. (2019). "Forget ‘fail fast.’ Here’s how to truly master digital innovation." Sloan Management Review.
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