How To Unlock Strategic Success With Experimentation
The enemy is not your competitors, but old ways of doing things. Top-down decision-making frequently fails. Rigid strategic plans lock leaders into a pre-determined path, decreasing options. You can’t select which projects will succeed ahead of time. There’s no executive path to success.
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Introduction
Strategic planning in medium to large organisations sees senior business leaders “select” key projects to deliver next quarter, or in the upcoming financial year.
The “selection” of key strategic projects is based on what business leaders perceive to be the right direction for the company, or what they think customers value.
That’s why top-down strategic decision-making often fails. We are unable to predict in advance which projects will be successful, and which ones won’t.
Product teams need to flip the model in their organisation to encompass a large portfolio of small experiments, rather than a small portfolio of big bets.
This approach decreases the probability of missed opportunities, preserves optionality, and provides greater ROI on your innovation or product investments.
In this article we’ll discuss the following:
Why a big portfolio of small product experiments always wins?
Why placing a few big bets is flawed?
Why you need to create multiple exists from the highway?
Why new innovations are rare events?
Why it’s important to hit the ball between the fielders?
1. A big portfolio of small experiments always wins
A big portfolio of small experiments always wins out
Product innovation needs to be viewed as a large portfolio, where many, many small trials (experiments) are conducted across the portfolio.
The occasional “winning” trial will pay for the failed trials.
This approach enables you to minimise the probability of missing opportunities, rather than to maximise profits should there be a win.
Speed of learning is amplified.
Risk is dampened.
2. You can’t select the winners
A small portfolio of big experiments
If this is your product innovation portfolio, you’re doomed.
A small portfolio of large trials will always produce a much lower ROI than a larger portfolio of small trials.
What’s scary is that the preferred strategic planning process in the majority of medium to large organisations is still a small portfolio of large bets.
Using this approach, senior business leaders typically select key projects that will be delivered during the upcoming financial period.
This approach is flawed.
It’s no wonder that so few of these strategic business projects produce customer value or improve business performance.
“The enemy is not a competing company, but the old way of doing things”
You can’t select the winners ahead of time.
There’s no executive pathway to success.
That’s why top-down strategic decisions frequently fail. Senior business leaders are no more skilled at being able to predict the future than you or I.
Businesses should be more focussed on understanding how they can decrease the costs of experimentation, and increase the availability of experimentation, to try and offset downside.
“Doing too much strategic planning has the side-effect of decreasing options”
Experimentation is about creating more options.
Experimentation works by producing negative information.
The negative information and learnings from experiments (I.e., disproving a hypothesis) closes the knowledge gap on what we do know, and don’t know.
3. Create multiple exits from the freeway
Rigid business plans get leaders locked into a pre-determined path.
It’s a little bit like a freeway without any exits – devoid of options if course correction is required.
“The ability to change opportunistically and take a different path is always required”
All businesses need to be flexible, with frequent “exits” available.
Credit: Unsplash - Use experiments to create multiple exits from the freeway
If your business is still trying to pick winners, using intuition or just going with what feels right, you need to have multiple freeway exits available when intuition is proven incorrect.
The horizon of the strategic planning process needs to shift from multi-year, three to five-year plans to multi-year, one-year plans.
The strategic plan becomes an expression of intent to experiment, rather than a roadmap of what you’re going to deliver.
4. Product innovations come from rare events
Market and industry leading innovations come from the fat tails of the distribution curve.
Highly differentiated products and technological advancements aren’t discovered in the middle 68% of normal distribution, one standard deviation from the mean of the bell-shaped curve.
The rare innovation events are unearthed in the tails of the distribution curve.
“The bulk of the gains come from the rare event, Black Swan: 1 in 1,000 can lead to 50% of the total contributions of your portfolio” - Nassim Taleb
Think …
Company size (50% of capitalisation comes from 1 in 1,000 companies)
Bestsellers (% of total revenues from Harry Potter books for Bloomsbury Publishing)
Personal investments (a small number of our personal investments produce a high return)
If you want to do average things, for average people, stick to the normal distribution curve, that’s fine too.
After all, most new product innovations released to market are only imitation dressed up as innovation.
If you want to be a game-changer, push out to the fringes of the distribution curve to discover the lower probability, high-yield returns.
Conducting lots and lots of experiments is how you push to the fringes, discovering the rare events.
Be unique, not admirable.
5. Look for spaces between the fielders
Look for the white space opportunities between the fielders
if you want to be more innovative, product teams need to learn how to push out to the edges of the paper.
To do this, you need to learn how to hit between the fielders. You can’t be a market leader if you’re following the leader.
Learn to hit the ball where the fielders aren’t.
The story of Willie Keeler
Wee Willie Keeler was the smallest player in the history of US Major League Baseball. He stood at only 5’4” (163cm) tall and weighed 140 pounds (63kg).
Keeler didn’t let his diminutive size hold back his success in major league baseball.
He amassed a streak of 200-hit seasons that lasted from 1894 to 1902.
After 19 years in the major leagues he retired with a lifetime batting average of .347.
What’s more, Willie Keeler achieved this using a bat the same size a child would use.
For some perspective, the batting average in the modern era of major league baseball is approximately .243. In 2021, the highest batting average was Vladimir Guerrero Jnr of the Toronto Bluejays, with a season high average of .321
How did Keeler do it? He used brains instead of brawn.
He learned how to find the spaces between the fielders.
He hit it where they weren’t.
Think more like an Artist than Product Manager
Hitting the ball to the white space opportunities is a counterintuitive skill. Humans are conditioned to notice what’s there (the fielders), not what’s not there (the spaces).
These spaces are known as positive and negative space.
Artists are highly skilled at being able to notice the positive and negative spaces.
Product Managers need to think more like artists when they’re looking for new market space, or white space.
The idea is to head for the uncluttered market space (between the fielders) instead of space characterised by the bloody competition (the fielders).
If you keep hitting the ball to the fielders all the time, you’re not going to be able to establish any level of differentiation.
Conclusion
The enemy is not a competing company, but the old way of doing things.
You can’t select winning projects ahead of time. There’s no executive pathway to success.
That’s why top-down strategic decisions frequently fail.
Rigid business plans get leaders locked into a pre-determined path. All businesses need to be flexible, with frequent “exits” available.
Product innovation should be viewed as a large portfolio, where many, many small trials (experiments) are conducted over time.
This approach decreases the probability of missed opportunities, preserves optionality, and provides greater ROI on your product innovation investments.
Learnings from experiments close the knowledge gap on what we do know, and don’t know.
Figure out how you can decrease the costs of experimentation, and increase the availability of experimentation, to offset downside in your strategic planning process.
Need help with your next experiment?
Whether you’ve never run an experiment before, or you’ve run hundreds, I’m passionate about coaching people to run more effective experiments.
Are you struggling with experimentation in any way?
Let’s talk, and I’ll help you.
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