High-growth companies discover their opportunities differently. They certainly use strategic planning and analytics, as do most of their competitors. But at their core, they do something else.
Babson Executive Education asked companies their top method to find revenue or cost savings opportunities, then compared that to their growth rates. Whereas low-growth companies tended to favor analytics or strategic planning, over half of high-growth companies focused on experimentation, as shown in the chart on the right.
High-growth companies understand that they can spend endless time debating the latest market research and its implications. They can get teams together for strategic planning off-sites. Or they can leverage the power of their people to quickly experiment to find the best opportunities. Market research and planning are important. But it is the action implicit in experimentation that drives growth. By moving to a culture of experimentation, you can be in your third iteration of an idea before your plodding competitors move the idea out of their planning processes.
Opening experimentation to your customer-facing staff offers three benefits:
- Experimentation brings more brains to the process. By opening up your development process, you bring in more and higher-quality ideas. More importantly, this limited version of crowdsourcing involves those who are the closest to the customer, increasing the number of high-quality ideas. Involving your front-line staff has the added benefit of creating greater employee engagement, as staff members finally get the opportunity to test out their ideas – something your competitor’s staff never gets to do. A proper experimentation process also helps inform your teams about the key business drivers, which has an additional set of benefits, as employees discover the power of inventory turns or improved cash flow.
- Experimentation brings high-quality ideas to fruition more quickly. Experimentation lets you quickly discover which ideas are the good ones, and to move them forward without delay. A standard process backed by appropriate resources enables ideas to move from raw idea to tested concept within weeks or months – typically far faster than most ideation processes.
- Experimentation lets bad ideas die quickly. Every company – indeed, every employee – has both good and bad ideas. In fact, opening the process to more people guarantees an increase in bad ideas. But who is to say which ideas are good or bad? The challenge has always been the subjectivity involved in judging concepts. By testing ideas on your customers, you provide objectivity to the process – ideas are tested on what customers actually do, rather than what they say. Over time, this will also increase the quality of your ideas.
But be warned: Moving your Research and Development to your customer-facing teams is messy. By opening up the process, you lose control of the ideas. Nothing is more disconcerting to corporate staff than seeing field employees developing their own value propositions, uninformed by the corporate beliefs and access to the latest research. Corporate staff members prefer uniformity between locations – it is far easier to manage if all locations look and act the same. But the benefits brought on by this inclusive process outweigh the messiness. Field teams can develop ideas in the morning and have them tested in the afternoon, continually iterating until a refined idea is created.
I witnessed this in my time at Best Buy. My last post discussed a field-generated idea, but this experience originated from a corporate initiative. I came late to “The PC Experience,” a project reflowing the computers department that included a new “Solutions Table.” Our customer feedback showed that it was confusing to have separate vendor-created end-caps teaching about different products in a disjointed fashion. This project created a central table for all the education programs to work together.
For the first round of the experiment, the corporate team simply took the existing educational experiences, added a few more, and put them all on one table. The results were fairly predictable: nobody knew what to do with this new thing in the center of the department. Customers avoided it, but even our associates had no idea how to use the table – it was overwhelming.
That’s when we went back to the drawing board and took another look at our roles. Rather than redesigning the experience ourselves, we invited the store team to create the experience that resonated with their customers. We met, built prototypes and iterated until we had it right. The store team dramatically simplified the experience in ways we never considered. They also recreated the signage, developing fresh new ideas to help customers understand the role of the Solutions Table, and how to interact with it. Their customer immersion led them to think differently than we did – expanding our thinking.
The results were impressive. Service sales (the key metric behind the experience) rose significantly as customers learned more about the Slingbox and other highlighted products, and wanted the Geek Squad to help them enjoy the same experience they saw in the stores. Product and attachment sales also increased, and the concept scaled to all stores.
Great Clips sees similar success from their experimentation, as documented here. One of their stylists had a hypothesis that offering Ladibugs head lice treatment would help solve a thorny customer problem while also generating enough revenue to merit inclusion in Great Clips’ very small product portfolio. By giving their franchisees and stylists the authority to experiment, Great Clips now has thousands of employees generating revenue ideas.
Internet sites have even greater potential to experiment. Why does Google show 10 results per page? A common request is to increase the number of responses per page, but when Google tested that idea they found that traffic actually decreased – the ½-second delay caused by the additional results led to fewer people continuing their search. Google has 50-200 tests running on their site at any given time.
For those interested in web-site tests, consider subscribing to WhichTestWon. The WTW team emails regular tests, asking you which version generated more traffic/clicks/revenue. It’s great information, and it’s fun to see “How good is your gut?”
But you do not need to be a 500-store retailer or a Google to experiment. A friend of mine, Tom Chase, built a janitorial service from one person to a multi-million dollar company through experimentation. Not only did he continually test sales concepts, his experimentation also resulted in a completely new methodology, which he dubbed “Team Cleaning.”
So, now that we know the importance of experimentation, how do we start? Watch for my next post, including the Three Keys to Create a Culture of Experimentation.