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EXPERIMENTATION
The What and How of Digital
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The value of experiences is have out-innovated and out-executed all competition in the
increasing. Consumer behavior has digital domain. Harvard Business Review previously outlined
fundamentally changed, becoming the essential need for digital experimentation in their 2017
progressively digital and mobile- article “The Surprising Power of Online Experiments.”
centric. Unsurprisingly, technology
and content have taken center The aforementioned companies have achieved this state of
stage and are fundamental to how digital competence and excellence through continued focus
CARL TSUKAHARA brands connect and enhance the and investment in their experimentation programs. We
CHIEF MARKETING customer experience. Simply using recommend that in order to achieve similar results, every
OFFICER
historical data to make decisions organization must consider how to:
OPTIMIZELY
about new digital experiences has • Set up and define the core business outcomes desired by
diminishing returns in a world where your overall digital programs or transformation initiatives.
customer expectations and behaviors
are changing more rapidly. Brands must build and deploy • Apply experimentation at pace to the full life cycle of a
experiences that are forward-thinking and differentiated digital experience, implementing rapid ideation, testing,
and can directly drive improvements in measurable business and learning at every stage.
objectives, customer loyalty, and conversion. • Utilize an enterprise-caliber experimentation software
platform that enables massive scale and helps grow
Critical to this is the concept of digital experimentation, digital maturity.
or more simply, the concept of rapidly innovating, testing,
and learning which digital product features, campaigns, or • Embed this skill set in the development and deployment of
commerce experiences will predictably drive the desired products, commerce, and campaign initiatives across both
business outcome. Experimentation guides the proper the product and marketing teams.
product and marketing decisions by providing statistical • Engage with the proper partners that can help companies
evidence and highly reliable outcome forecasting that implement technology components, strategies, and
eliminate the guesswork in digital decision making. organizational structure to evolve or expand this evolution
to an experimentation-led culture.
Leading companies apply digital experimentation to get—
and stay—ahead of the competition. European media giant Organizations big or small must look to experimentation to
Sky notes that frequent testing is necessary to keep up with drive continuous iteration and innovation across all areas
constantly evolving customer expectations. Data gleaned of their digital business. To keep pace with accelerating
from frequent iteration has also guided executive decision digital transformation, companies must act now to reap
making on omnichannel innovation at HP, a cultural shift from the handsome rewards that hundreds, even thousands, of
reliance on experience and intuition. The experimentation incremental improvements can bring to the bottom line.
program at Gap Inc. has helped them address strategic
questions throughout their brand portfolio and grow their To learn more about how Optimizely can help you achieve
online business, while the Wall Street Journal is boosting digital leadership, please visit www.optimizely.com.
subscription renewals through testing.
Experimentation: The What and How of Digital Competitiveness Harvard Business Review Analytic Services 1
10 20 30 40 50 60 70 80 90 100
FIGURE 1
Rita Gunther McGrath, a professor
IMPLEMENTATION OF EXPERIMENTS at Columbia University’s business
school and creator of Discovery-
When my organization implements digital initiatives, they tend to start as:
Driven Planning, stresses that the
ORGANIZATIONAL MATURITY LEVEL:
• EARLY
• DEVELOPING
• MATURING speed of business and technology’s
ability to eliminate or reduce friction
Mostly small experiments in the market is forcing companies
58% to experiment aggressively and
45%
quickly. “The typical cycles of design,
35%
developing requirements, and creating
Mostly big enterprise-wide experiments technical specifications just takes
8% too long,” she says. “The gradual
10%
disappearance of so many frictions
11%
in business is driving much of the
Both small experiments and big enterprise-wide efforts intense speed.” As an example, she
20% points to audio books, which are
41%
becoming more popular than the
52%
written versions. Before the Internet,
Charts do not equal 100% due to “do not know” responses. people had to carry around a device
with cassettes or disks. Now they can
SOURCE: ACHIEVING DIGITAL MATURITY, MIT SLOAN MANAGEMENT REVIEW RESEARCH REPORT, JULY 13, 2017
stream books in seconds anywhere.
Ryan McManus, investor, startup
advisor, board director, and previously
founder of Accenture’s digital strategy
Enterprise-wide experimentation also
transformation business—points
bolsters innovation by reaching out
to several other seminal market
across the organization to generate as
changes that call for enterprise-
many ideas as possible. As employees
wide experimentation programs.
see their ideas put to the test and
First, products are becoming
produce revenue, the momentum
quickly commoditized. To keep
builds. This original research report,
their customers, businesses have to
based on interviews with executives
constantly improve digital products
and other subject matter experts,
and experiences. As Jeff Bezos,
delves into the rise of experimentation
founder of Amazon, Inc., said in a
as the next major digital corporate
recent earnings call with investors,
capability and how companies are
“One thing I love about customers is
making it work.
that they are divinely discontent. Their
expectations are never static—they go
Why Experiment in Overdrive? up. It’s human nature.”2
Testing an idea—building a prototype,
Waning customer loyalty adds to the
running direct mail tests, conducting
pressure as clientele are easily swayed
focus groups and user tests—has
to opt for expensive products or go
been standard procedure for decades.
for a better deal, including products
But in recent years, enterprise-wide
enhanced with new digital capabilities.
experimentation has burgeoned into
Customer expectations are advancing
a core capability that drives digital
at breakneck speeds, and most
competitiveness. With the pervasive
companies have inadequate sensors to
digitalization of business, companies
spot changes in time to react. “What
can quickly and accurately test their
was right a year ago when you were
web site experiences, back-end
planning is not necessarily right today,”
operational effectiveness, product
says Abdul Mullick, head of digital
SOURCE: HARVARD BUSINESS REVIEW ANALYTIC SERVICES SURVEY, JUNEfeatures,
2016 offers, and marketing
transformation at European media and
messages.
telecommunications company Sky.
2 Harvard Business Review Analytic Services Experimentation: The What and How of Digital Competitiveness
The rise of approaches such as agile
is another harbinger of the growing
“What was right a year ago when you were
importance of experimentation. “Many
companies are moving toward an agile
planning is not necessarily right today,”
enterprise and changing the whole way
that they think about making changes
says Abdul Mullick, head of digital
to everything they do,” says Paul
Wilmott, a senior partner at McKinsey.
transformation at Sky.
“They are moving away from
traditional project timelines toward the
speed that agile provides. And that is
arguably all about experimentation.”
Experimentation: The What and How of Digital Competitiveness Harvard Business Review Analytic Services 3
“CEOs need to coach company leaders and inspire them to
encourage new ideas and experiments and assure that results are
promptly turned into action,” says Professor Rita Gunther-McGrath,
Columbia University.
4 Harvard Business Review Analytic Services Experimentation: The What and How of Digital Competitiveness
For example, medical science has The CEO should step center stage
suffered embarrassment based on to drive the effort. It is his or
uncontrolled studies—basically her responsibility to champion
observational studies of an entire experimentation, and the CEO should
population over time—that made frequently ask about what experiments
inaccurate assumptions about are being conducted and champion
causality. For example, eating eggs was the successes. CEOs also need to
once frowned upon because there was build buy-in on the part of other
a correlation between egg consumption senior executives whose roles in the
and high cholesterol. But scientists organization will change. “Executive
later discovered that avoiding eggs had leadership devolves from its traditional
little or no positive effect on cholesterol role,” says McGrath. “They no longer
levels. If the body’s cholesterol goes too make all the decisions. The data
low, it manufactures more to reach a assumes that role. CEOs need to coach
basic level. company leaders and inspire them to
encourage new ideas and experiments
There are also plenty of examples in
and assure that results are promptly
business. A major retailer, for example,
turned into action.”
wanted to test the impact of a new
store design. So it tried the new ideas in Sometimes experimentation will
a number of locations, and the results be warmly received by executives
were strong. But when the company if experiments are conducted with
rolled out the new design to more rigor and the surrounding data is
of its stores, the results were much reliable. “Before we launched our
lower. The retailer failed to account for global experimentation program,
different variables affecting different executives had very little data and had
locations: competitors opening new to rely on their own preferences and
stores nearby, factories or other sense of intuition,” says Herriot Stobo,
major employers moving, and the director of omnichannel innovation
corresponding impact on shopping. and solutions at HP Inc. “They were
actually happy to have definitive data
Controlled experiments eliminate
and were ultimately very open to
the problems of not knowing all the
changing direction based on what our
variables at play and confusion about
customers were telling us.”
what the numbers mean. They divide
a test population into two different Pontus Siren, a partner at the
groups. One is given the new idea. innovation consultancy Innosight,
The other group, which has the same points out that many executives may
characteristics as the first, is not shown be comfortable using data but have
or given the change. Thus, the results little experience in creating it. “An
can be nearly definitive, since the experiment is an effort to create unique
experiment measures any change in data that other companies don’t have,”
behavior among identical groups. he says. “Business leaders have to
create the data, which is a very different
A New Take on Creating a Culture exercise. They need to understand the
of Innovation basics of experimentation and how to
Although discovery is the main act on the results.”
objective, an enterprise-wide
experimentation program also changes
the culture and senior executive
involvement in innovation. The data
from experimentation replaces position
in the corporate hierarchy as the basis “AN EXPERIMENT IS AN EFFORT TO CREATE UNIQUE
for decisions. In addition, the need to
feed the experimentation program with
DATA THAT OTHER COMPANIES DON’T HAVE,”
a steady flow of compelling ideas brings
practically everyone in the organization
SAYS PONTUS SIREN, A PARTNER AT THE INNOVATION
into the innovation fold. CONSULTANCY INNOSIGHT.
Experimentation: The What and How of Digital Competitiveness Harvard Business Review Analytic Services 5
To feed the enterprise-wide A platform to manage multiple
experimentation program, experiments across the enterprise
organizations need to harness new is critical, says McManus.
ideas from across the enterprise. Enterprises need to know exactly
Experiments generate near-real–time what experiments are being run,
insights into market changes, which how they are managed, criteria for
spur the creation of even more new continuing with or disengaging from
innovations, especially as people see experiments, and how other changes
their ideas being taken seriously. At in the enterprise affect the innovation
Sky, for example, all ideas are put to the portfolio. Without that knowledge,
test unless they would be impractical to variables could change without the
implement or run afoul of regulations. experimenter realizing it, which will
produce “useless data,” says McManus.
Experimentation programs need
Platforms can also include tutorials
analytics professionals. In addition to
and templates for managers to conduct
designing experiments, they can help
some of their own experiments, which
the CEO and other executives build
can be monitored on the platform.
momentum by demonstrating to the
company what good experimentation Tying experimentation into overall
looks like and the results it can deliver. corporate goals and measures is
Enterprise-wide experimentation also critical according to Gap Inc.’s
often starts as a centralized unit, Paransky. For Gap Inc., enterprise-
with analytics professionals working wide experimentation is the vehicle
with marketers, usability specialists, that drives the company’s digital
product managers, and business transformation. “Experimentation
unit strategists. They can then grow is embedded in almost everything
into a center of excellence to make we do as a company,” he says. “We
experimentation a part of every have enterprise goals around digital
business unit and function. transformation that cascade through
the organization. Testing and learning
By and large, the skills of middle
drive our digital evolution and
managers don’t need to change
transformation.”
that much. But these managers
must become deeply familiar with They are also the anchor of the
technology and understand the basic company’s continuous learning
discipline of experimentation and process. “We’re constantly using
analytics. That allows them to work experimentation to drive our
effectively with analytics professionals continuous improvement,” he says.
or use platforms that provide “The key is that we’re focusing on the
self-guiding tools and templates. biggest wins, the biggest levers in terms
“Managers often enter experimentation of what we’re experimenting with.”
programs sleepwalking,” says Mullick.
“That can result in oceans of poorly
constructed experiments, which will
affect the results.”
6 Harvard Business Review Analytic Services Experimentation: The What and How of Digital Competitiveness
Experimentation also plays a seminal
role in helping organizations spot and
keep pace with radical change in their
markets. According to a 2018 MIT Sloan
Management Review report,3 many
companies simply throw money at
technology disruption in the quest for
the next big idea. Experimentation
hones market knowledge and also
EXPERIMENTATION ALSO PLAYS A SEMINAL ROLE IN
provides key insights for the success of
existing businesses.
HELPING ORGANIZATIONS SPOT AND KEEP PACE WITH
Finally, organizations that are most
RADICAL CHANGE IN THEIR MARKETS.
successful in leveraging enterprise-
wide experimentation programs have
conquered much of the fear of failure
Top Down or Bottom Up
that plagues many company cultures.
CEOs and senior executives often
The sheer volume of experiments
drive experimentation programs. Dow
makes it easy to show how each idea
Jones, Gap Inc., and HP Inc. started by
leads to another and reaches a positive
creating a centralized unit with senior
outcome. The team looking after Sky’s
managers, fostering collaboration
web-based self-serve platform, Sky.
between the unit and the rest of
com, leverages the volume of tests
the organization. Sky started with a
it does and its high success rate to
center of excellence and is planning
create a “safe zone,” where failures are
to federate the experimentation
celebrated and the stigma of coming
program. Executives are making
up with an idea that doesn’t pan out is
sure that managers understand the
significantly lessened.
fundamentals. They have also installed
a platform that will provide “self-serve”
Getting the Ball Rolling capabilities for basic experiments.
Despite the power of enterprise-
McGrath points out that bottom-up
wide experimentation as the primary
efforts can also be successful. She
competitive tool in a digital age,
cites an air company where the
most companies seem to struggle to
chief innovation officer built the
get out of the starting gate. To get
experimentation program from the
the ball rolling, McGrath suggests
ground up and under wraps. Senior
that companies focus on three core
executives began noticing that they
capabilities.
were receiving proposals with a similar
Ability to create ideas: Businesses format and based on experimentation
need people who can come up with data. The quality of the proposals
ideas. These individuals should prompted the C-Suite to find out how
come from all parts of the company, they were being created, and then it
especially those on the front line. launched an experimentation program
across the enterprise.
Incubation: Companies need
sophisticated experimentation
capabilities and the ability to act
on data.
Acceleration: Many ideas will have
operational implications for everything
from customer care to regulatory
compliance. Businesses need to be
adept at adjusting their operation
quickly and effectively.
Experimentation: The What and How of Digital Competitiveness Harvard Business Review Analytic Services 7
Conclusion Although managing by data changes
Controlled experiments are rising the role of executives and managers,
as the primary core capability of companies are achieving broad buy-in
digital competitiveness. Analytics are and creating innovative cultures.
important and foundational, but they As the results pour in, they build
are based on the past and may not credibility, and new ideas add to the
accurately identify what is changing company’s fortunes.
at this very moment. Customer
Amazon’s Jeff Bezos once extolled the
ENTERPRISE-WIDE research can be valuable but needs to
be validated.
importance of experimentation with
an analogy to baseball. In baseball,
EXPERIMENTATION CAN Dow Jones, for example, posed a an “at bat” can score four runs at
ENDNOTES
1 “Achieving Digital Maturity,” MIT Sloan Management Review research report, July 13, 2017
2 Amazon 2017 letter to shareholders, April 18, 2018
3 “Coming of Age Digitally,” MIT Sloan Management Review research report, June 5, 2018
4 Sonia Thompson, “Jeff Bezos Credits Amazon’s Success to This One Thing. Too Bad Most Companies
Aren’t Willing to Do It,” Inc., August 1, 2017
8 Harvard Business Review Analytic Services Experimentation: The What and How of Digital Competitiveness
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