Experimentation

With consistent innovation being a requirement for any Exponential Organization, building a culture of experimentation is the best way for teams to fail, learn and grow fast.

Why is experimentation so important for your business?

Consistent experimentation in business is key to outpacing external innovation in your industry.

Building a culture of experimentation is something that all organizations should be striving towards. We have all heard the philosophy: “fail fast, fail forward.” The faster you fail and pick yourself back up, the quicker you’ll be able to push your organization further.

Silicon Valley was built on good failure, and many business leaders have indicated that the ability to experiment and learn from failure is vital to their success.

So, why is experimentation in business so important?

It comes down to this: by doing consistent business experiments, you’re not guessing what your customers want or what’s the best way to do something. You already know because your experiment proved it.

What does using a lean approach to experimentation mean?

As John Seely Brown indicated in a commencement speech at Singapore Management University: “Corporate architecture is set up to withstand risk and change and to scale efficiently and predictably, meaning that they create rather static environments. This is a very dangerous environment as it’s prone to disruption from smaller, more agile organizations using experimentation through the Lean approach and Design Thinking.”

This technique is popularly known as the Lean Startup movement, created by Eric Ries and Steve Blank and is based on Ries’s book of the same name. 

The Lean Startup philosophy (also known as the Lean Launchpad) is, in turn, based upon Toyota’s “lean manufacturing” principles first established a half-century ago—in which the elimination of wasteful processes is paramount. 

The basic principle comes down to eliminating all expenses with a goal other than creating value for the end customer.

Using the lean experimentation philosophy, a business first researches the customer’s needs and then experiments to see if a proposed product matches those needs. By relying on quantitative and qualitative data, a company forms a conclusion based on a series of well-considered questions, including:

• Does a product fit the needs of the customer?
• How did a customer solve a problem or need in the past?
• What are the current costs created by the customer problem?
• Should we adapt or change our course?
• Are we ready to scale?

This constant learning process can be accomplished in just a couple of weeks or months—at a minimal cost. Best of all, it usually becomes clear early on if a product is doomed for failure. A good way of looking at this is that when you move from point A to point B, you can then see point C. But you can’t see point C from point A. Experimentation is the only way to see possible results further down the line.

As Eric Ries explains, “The modern rule of competition is whoever learns fastest, wins.” Due to network effects, most digital markets are winner-take-all markets, making having an experimentation mindset even more critical.

Consistent experimentation in business is the only way forward

The world is constantly innovating and moving forward, and your organization needs to do the same. It is only through consistent experimentation that this is possible. By encouraging constant experimentation, you’re building a culture willing to fail. And by being willing to fail, you open your team up to more opportunities for growth.

Thirty years ago, Regis McKenna, a Silicon Valley marketing pioneer, was the first to note that whatever its reputation for success, the Valley was in fact built on failure. Or, more precisely, a willingness to accept and even reward “good” failure.

Why failure is good

Unfortunately, within the traditional corporate environment, failure more often than not still results in career-level consequences due to long lead times and significant investments. This, of course, reduces risk appetite. At the same time, sunk-cost bias (the momentum that attaches to projects solely because of the invested money) also kicks in.

Before long, a company can find itself spending even more money launching a doomed product despite clear data that it will fail, CNN+ being a recent case. In addition, consider the well-known NASA motto: “‘Failure is not an option.” Although noble and inspiring, it was ultimately a death knell for exploration. When failure is not an option, you end up with safe, incremental innovation, with no radical breakthroughs or disruptive innovations.

How an experimentation mindset allows for more innovation

Consistent innovation feeds off of constant experimentation, which requires making experiments an integral part of everyday life. Building a culture of experimentation means creating an environment where employees’ curiosity is nurtured, data is valued over opinion, and anyone can run business experiments whenever they want.

Here are five steps to implement experimentation:

• Educate your team and align incentives
• Define your hypothesis and value proposition
• Build and execute experiments to evaluate your hypothesis
• Gather and analyze data from the results of the experiments
• Learn from the data

By integrating experimentation as a core value and adopting approaches like Lean Startup, enterprise failures can be quick, relatively painless, and insightful while still accepted as an inevitable part of risk.

Celebrating failure to drive a culture of experimentation

Some corporations have even celebrated failure to counteract what they see as cultural resistance among their employees to the very idea of failure.

For example, the Procter & Gamble Heroic Failure award honors the employee or team with the biggest failure that delivered the greatest insight. Similarly, Tata offers an annual Dare To Try award, which recognizes managers who took the biggest risk. In 2013 alone, the award attracted more than 240 entries.

This doesn’t mean that just any failure or mistake is encouraged or celebrated. But if a team is operating within strategic, commercial, ethical and legal frameworks and avoids recreating old mistakes, a failure can and should be celebrated for the learning such experimentation offers.

A well-known Silicon Valley philosophy says that it’s crucial to distinguish a “good” failure from a “bad” one and even from a “bad” success—where success is more luck than accomplishment—and then to reward accordingly.

Not only does acceptance of failure free people, ideas and capital for future learning and breakthroughs, a corporate culture that accepts failure benefits from diminished internal politics. There’s much less in finger-pointing and “blame games” thanks to trust, transparency and openness.

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