Strategic experiments are the right way to manage an increasingly uncertain business environment where analysis and planning do not work any more. Shift your strategic actions towards failing early, often and cheaply.
In a business environment with little uncertainty, strategy is about climbing the mountain in front of you. Analysis can point the way to the “best” answer, then you can launch the whole company towards executing it with a robust 3 year strategic plan, with everyone determine and accountable for achieving it.
Unfortunately, there are now few businesses where this approach still works well. The uncertainties of digital technology and changing customer habits have crept into even the most traditional industries like construction and retail. requiring them to rely less on analysis and planning in crafting strategy.
So how do you craft strategy in an uncertain world? Forget about strategy and just respond fast? Then we will miss opportunities where first mover advantage is important. Instead of analysis, we need to borrow tools from Lean Startups, and rely on strategic experiments to forge our path.
These strategic experiments are not just trying stuff randomly and keeping what works. Poorly designed experiments waste time and talent, or even worse, give you the wrong answers.
Well designed strategic experiments start from identifying the critical assumptions in your current business model may be outdated and then designing how to test your new assumptions about how the business now works rigorously. You will create a portfolio of tests, each designed to give answers to these assumptions as cheaply and quickly as possible. They are the strategic equivalent of “rapid prototyping”.
Regardless of whether your business environment used to be stable or uncertain, your future business environment has become more uncertain recently. Has your balance of analysis and planning vs experimentation changed to fit this? Are you running more cheap, fast tests than you used to and cutting down on the “mountain climbing” initiatives?
Shifting your strategic actions from a few major initiatives to a portfolio of tests will require cultural change. For example, it will shift the focus from individual success (by definition, you expect some of the tests to fail even with the best efforts of great leaders) to organisational learning. You will hold your people accountable for learning, not delivering on promises. You will need more organisational flexibility to staff temporary projects and shift resources more frequently.
Due to natural inertia, it is likely that your organisation is behind the curve and its strategic thinking relies too much on analysis and planning and not enough on strategic experiments. Act today to redress this imbalance!