How to run simulated innovation experiments in a business
In the previous delivery, I discussed the use of experiments to reduce risk in innovation, i.e., minimize the “guessing” when trying something new. I also presented my opinion that many organisations generally avoid experimentation and have considerable difficulty executing them.
Although the process of experimentation can be straightforward, the perception is that it is hard in practice due to a myriad of organisational and technical challenges sometimes. Hence, I want to make it practical by sharing some thoughts and examples on running experiments as part of the organisation’s innovation efforts.
Experimentation for Business 101
I want to keep it simple, so remember that, in essence, an experiment is simply the test of a hypothesis. A hypothesis, in turn, is an imagined relationship or explanation of phenomena. E.g., you theorize that sugary water will make a plant grow faster. Now you want to test this theory with an experiment. So, you take two similar plants and give one sugary water and the other only water with no sugar in, and monitor their growth. Now let us look at some practical examples of this hypotheses testing in business.
There are many different kinds of experimentation techniques that businesses can use, like A/B testing, prototypes, pilots, dry runs, mock-ups, etc. I want to share one example in the “online” world – using A/B testing, and one example of a physical product – using prototyping.
A/B testing (also known as split testing) is mostly used in website and app design. In the online world, the number of visitors on your website equals the number of opportunities you have to expand your business by acquiring new customers and build relationships by catering to existing ones.
It is your “conversion funnel” that decides whether your website gets good traffic and if it converts more visitors to customers. A/B testing involves a process of showing two variants of the same web page to different segments of website visitors at the same time and comparing which variant drives more conversions.
In an A/B test, you take a webpage or app screen and modify it to create a second version of the same page. This change can be as simple as a single headline or button, or be a complete redesign of the page. Then, half of your traffic is shown the original version of the page (known as the control), and half are shown the modified version of the page (the variation). As visitors are served either the control or variation, their engagement with each experience is measured and analyzed to determine whether changing the experience had a positive, negative, or no effect on visitor behaviour. By doing this simple experiment, you can select the version that gets the best results.
Concerning experimenting with a prototype before launching a physical product, the story of Sony’s black or yellow Walkman is still fascinating. [For the younger readers, a Walkman was a device used to listen to music on the move in the “old days,” basically the predecessor of the MP3 player].
What is a prototype? A prototype is a simulation of the final product. Prototypes can range from low to high levels of being realistic, depending on what questions you are trying to answer and your skill level of creating prototypes.
Anyway, the story tells of a focus group conducted by Sony to gauge the impressions of a yellow Sony Walkman. Sony asked the group, what do you think of this yellow Walkman? They received a great response from their focus group – people really loved this new yellow Walkman. However, when the group members went to leave and were offered a yellow Walkman or a black Walkman, they selected the black Walkman. The Sony Walkman is just an example of changing a product’s colour but the principle is the same for any other product feature. First test if your intended customers like the button on the left side or the right side, before starting the production line.
These are just two simple examples of experimenting before launching an innovation, and there are many more examples of how businesses run experiments to drive innovation. My key message is that by approaching complex problems or questions with experiments, companies and organisations can reliably and accurately serve their customers with the right products, services, and experiences.
This is my last delivery for the year. I hope you found some value in my articles; it has indeed been a pleasure writing them. I want to strengthen my case for experimentation again with another quote from Jeff Bezos: “To innovate you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Most large organizations embrace the idea of innovation, but are not willing to suffer the string of failed experiments necessary to get there.”
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