Smart experimentation: moving in‐market with maximum velocity and minimum risk

Abstract

PurposeCompanies lose tolerance for risk in tough economic times. The level of risk inherent in new ideas prevents organizations from investing in big, bold innovations that could unlock valuable new sources of revenue and profit. This paper describes how to apply methods extracted from the scientific approach to experimentation to de‐risk radical new business model innovations.Design/methodology/approachThe ideas presented in the paper were distilled from many years of experience working with organizations such as McDonalds and Best Buy, which have successfully applied the principles of experimentation to developing and launching new business concepts.FindingsRoad‐tested principles from the scientific method, combined with business acumen, define the new science of systemic innovation. Every bold new business concept should be de‐risked and tuned by applying six methods: break it down; sequence learning; iterate; operate at multiple levels of abstraction; create a safe learning environment; and apply experienced hands and new voices.Originality/valueThe paper presents a systemic and rigorous new method for de‐risking radical new business concepts based on well‐known methods extracted from the scientific lab. The approach is particularly important for large companies seeking new sources of growth while facing intense competition in their core businesses from relatively new players.