As a business owner, people manager, or product manager, it can be tempting to stick with what works and avoid taking risks. “No one got fired for hiring IBM” is a real thing at ALL levels of business size. This means you have safe areas of your work which you can easily defend. Comfort zones you can sit back in and not grow.
But we ALL want to GROW. For that, we have to get uncomfortable.
Occasionally I ask my team (on a scale of 1=comfort to 10=accomplishment) — ‘How are you feeling this week?’ We can use the same principle for an organization.
Startups are by definition an experiment. They’re also quite uncomfortable in terms of a business and work environment. Tons of uncertainty, but also tons of excitement about the potential of it all. Enterprise and established businesses are the opposite. Safe (we think). They are safe and sound until they are not. With 1000s of layoffs daily happening at the time of this writing, nowhere is very safe.
If you want your business to succeed, you need to make smart decisions that maximize profits. However, in today's fast-paced and constantly evolving business environment, it is more important than ever to embrace a culture of adaptation. The culture of experimentation.
When you constantly test and iterate, you can stay ahead of the game. You can find new opportunities, and finally drive meaningful growth. Do something that matters. Experimentation is both a way to measure what works and a tool a leader can use to know if their team is making sound decisions.
Sounds easy, right? But here’s tricky part:
- People don’t like change, especially when salaries are tied to the status quo.
- Businesses and bosses don’t like risk or failure.
- Qualitative data on human perceptions is downright uninterpretable.
Truth is, we all know we gotta experiment to build adaptation systems to (changing) market environments. Here’s the kicker: It’s not so straightforward to get there.
Below, I will provide two business cases as to why, nevertheless, businesses should experiment. Two, distinct, business cases or justifications (one for practitioners and one for the CEO). These apply mostly AFTER you have product market fit. Before that, the org IS the experiment.
Experimentation Lets You Adapt and Learn Fast
“Some tens of thousands of years ago, humans began to realize that certain things cause other things and that tinkering with the former can change the latter... From this discovery came organized societies, then towns and cities, and eventually the science and technology-based civilization we enjoy today. All because we asked a simple question: Why?” — [Pearl and Mackenzie 2018, p. 1]
The first biz case with evidence in favor of experimenting is experimentation allows businesses to learn and adapt quickly.
In a world where tech and consumer preferences are constantly changing, you gotta stay ahead of the curve and find new ways to meet the needs of your customers. When you regularly experiment and gather data, you can dig out valuable insights into what works and what doesn’t. Then, you can adjust your strategy based on this.
Experimentation is… Experimentation is a feedback and measurement thing. Experimentation gives data and feedback on the action, not AFTER the action. It’s a superior source of data compared to analytics. Compared to anything, really.
Just take a look at Pearl’s Causal Hierarchy, a framework highlighting the separate roles of seeing (data), doing (experimenting) , and imagining (experimentation culture). It goes like this:
Think about this for a minute. Simply seeing (analyzing data) is only the first step of truly understanding the cause and effect of something. Next comes doing something about it (experimenting). In the end, you need to start asking Why. You need to keep being curious.
Because of this, experimentation is more than a mere tactic. It’s a mindset.
Here is the strategic narrative, using Andy Raskin’s framework, for the business case — Why Experiment. Note this is the ‘practitioners’ narrative, so I label it as ‘CMO/CPO’ meaning it’s applicable and sellable to a Chief Marketing Officer or Chief Product Officer:
Here are some of the most classic industry examples that were able to scale through experimentation. These are easy to find yet useful. You can also find at the end a personal example of mine:
Google: consider the story of how Google became the dominant search engine it is today. In the early days of the internet, Google's founders, Larry Page, and Sergey Brin were frustrated with the limitations of existing search engines. They believed that they could create a better search engine by using a new algorithm that ranked results based on the number and quality of links pointing to a webpage. However, they had no way of knowing for sure if their algorithm would work without testing it. So, they launched a small experiment, inviting a group of Stanford students to try out the new search engine and provide feedback. Based on the positive results of this experiment, Google was able to refine and improve its algorithm, eventually becoming the most widely used search engine in the world.
Proctor & Gamble (P&G): a consumer goods company that experiments to find new product ideas and marketing strategies. The company has a dedicated innovation center where it conducts consumer research and product testing to gather feedback and make confident, data-driven decisions.
Unilever: another consumer goods company, experiments to discover new product formulations, packaging, and marketing campaigns. They also use experimentation to optimize their supply chain and improve sustainability.
Zara: a fashion retail company, experiments to test new designs and styles, as well as to optimize its inventory management and logistics. They also use experimentation to reduce lead time and get new products to the store faster.
Uber: they use experimentation to test new features and improve their user experience. For example, the company has tested and implemented different pricing strategies, such as surge pricing during peak hours to optimize revenue, thanks to testing.
Airbnb: much like Uber, they also use experimentation to test new features and improve their user experience. For example, the company tested and implemented different pricing strategies to optimize revenue that in this case landed in outcomes such as dynamic pricing based on demand.
Dell: Dell experiments to test new products, features, and marketing strategies. For example, the company has used experimentation to test new designs, such as the Dell XPS 13 laptop, to gather feedback and make data-driven decisions.
Codeacademy: My personal example comes from Codecademy. I worked with Codecademy’s testing program while they grew 5X over a 2-year period, crushing expectations. They did this with great leadership, and strict adherence to brand and design principles. However, I mostly attribute the growth to the focused attention they paid to testing down the funnel, on the trial to paid model and pricing. Credit card upfront models were (eventually after many iterations) a huge success, pricing tiers for different global markets helped a lot, and anchoring and personalization of messaging in cart and checkout created massive gains in lifetime value by shifting the plan mix to mostly annual subscribers vs monthly. You can see that all of these are quite close to their business model, but they weren’t afraid to experiment and adapt.
Experimentation Fosters a Culture of Innovation and Creativity
The second business case for why businesses should experiment is that it helps to foster a culture of innovation and creativity.
In a traditional business environment, it can be difficult for new ideas to get off the ground. They may be met with skepticism or resistance from those who are comfortable with the status quo. People don’t like change, especially when its tied to their salary. But if they encourage a culture of experimentation, companies can create a safe space for employees to pitch and test new ideas, even if they may not all be successful.
This can lead to the development of new products, services, or processes that can drive business growth and give the company a competitive edge. This can also lead to a culture that attracts more A players, modern workers in today’s workforce who demand autonomy and creativity in their work. A/B testing can grow a business, but it’s more likely that the people that run the A/B tests are actually growing the business.
Here is Andy Raskin’s framework again, to rest my case. Note this is the ‘resources’ narrative, so I label it as ‘CEO’ meaning it’s applicable and sellable to a Chief Executive Officer (the ultimate resourcer):
And with it, here are the most classic industry examples, together with a personal example of mine at the end:
Patagonia: the outdoor clothing and gear company Patagonia is known for its commitment to sustainability and innovation. One way they have fostered this culture is through their "innovation workshop," where employees are encouraged to come up with new ideas and prototypes for products, and then test and iterate on them. This has led to the development of a range of innovative products, such as a jacket made from recycled soda bottles and a line of fair trade-certified clothing.
HubSpot: they have a program called the "Growth Experimentation Team," which is dedicated to testing new ideas and identifying opportunities for growth. The team uses a rigorous experimentation process and data analysis to evaluate the potential of new initiatives. This approach has helped the company identify new areas for growth and expand its product offerings.
Procter & Gamble: they not only test fast but foster this creative environment with a program called "Connect + Develop" that encourages employees to collaborate with external partners to identify new opportunities for growth. This program has helped the company innovate and launch new products, such as Tide Pods and Swiffer. P&G has also used experimentation to test new marketing and sales strategies, such as through the use of social media and online marketplaces.
Salesforce: with "Salesforce Labs", a program that encourages employees to experiment with new ideas and technologies, they’ve helped the company identify new opportunities for growth that led to the development of new products, such as Einstein, an artificial intelligence platform for CRM.
Gympass: My personal example is Gympass. A huge Brazilian company, their growth philosophy was brought in with Speero’s help and it has transformed how all functions of the organizations think about ‘testing’. Web testing is table stakes. They use the same language and systems of learning management across email, acquisition, retention, and product to elaborate hypotheses, metrics, and conclusions. The culture of the org is set by an experimentation squad where education programs, office hours, and readouts all help to foster the culture of data literacy.
I’ll add that we don’t have to experiment. Experimentation not the only way to grow a company. It’s not the only way to measure. But to me, it comes down to one simple question: what kind of work environment do you want to tolerate?
Do you want decisions coming top-down from leadership? Or would you rather have leaders that are responsible to provide data and tools so that front-line workers, and product owners, can make decisions?
In my opinion, there is no choice. It’s been proven. If you want to adapt faster than your competition, allow autonomous action on the front line.
Wars aren’t won by generals or soldiers. Wars are won by generals who let their soldiers take the initiative.