Making experimentation strategic

Experiments are meant to be tiny. Is there such a thing as a strategic experiment??

I got asked this question with a differing viewpoint in a strategic goals session, where we were thinking of small bets that we would make to change our strategic situation. We were formulating small and specific actions that we would take. "This is not strategic" was said. This is kind of the same as "can a tiny action be strategic?"?

Let's explore.?

Strategy is directional. Strategy is?choice.??

?Proactive strategy puts forth choices on where to play and how to win. That is: it is a conscious choice where to excel and overdeliver – where to achieve differentiation. What do we bring forth to customers that other companies cannot match??

The best way to dilute a strategy is to put everything forward as important and best. Then every action potentially moves something forward. Doing anything is fair game. It can therefore even be said that any action is helping with the strategy. But that doesn't sound right. So: strategy is choice.??

Future strategy is a set of choices meant for winning in the future. This future hasn't yet happened so best we can do is to put forth?hypothetical choices. That is we believe differentiating on X will allow us win. We believe there will be a way to be unique in the future. The mechanics of that differentiation is to be imagined and designed.??

This notion of?mechanics?of future allows us to both explore the validity of our thinking. We can treat the possible future as?a?set of hypothesis as well as to start nudging the future to be like we want it.??

Building knowledge?

Every experiment builds new understanding.?Every experiment you run with care builds your confidence on being right. Similar to strategies, experiments are directed. Experiments provide knowledge whether our theories are valid and "workable in the world". It can be said that a strategy is a set of coherent theories about the future.??

?Let's take an example. The Ikea strategy well known. It's a low-cost strategy but one that has taken many unconventional steps. If we go back in time to 80's and simulate thinking ahead to today, it would have been quite unclear if?

1. People would travel significant distances to the IKEA store to shop in a giant furniture store?
2. People would be willing to assemble even the big pieces of furniture themselves?
3. People would consider the trade-off between price and convenience leaning toward price?

?In hindsight, this is all clear to us as it has already happened. When IKEA started on the journey, it was not clear at all if this was the way that world would turn out.?

To predict the validity sum of theories (the strategy), you can test the parts. You can turn each every one of the three IKEA assumptions into experiments. Then you can test one at a time. You build knowledge.??

An experiment that uncovers confidence in one part of the strategy working adds to the overall confidence that the strategy "will work out".??

Every winning bet adds to differentiation.??

Adaptive strategist can be said to aim for a serial competitive advantage. That is sustainable advantage is actually a continuous stream of small and incremental edge over competitors. Adaptive strategy punches small holes through the performance curve.??

Small incremental bets and experiments are used to see which paths lead to strategic success. The notion of being able to fully predict what will and will not work is replaced by?continuous?learning and accumulating progress.?

Let's revisit Ikea again.?

1. I'm rather sure IKEA hadn't fully?optimised?the packaging from the get go. The flatness and efficiency of the packaging is an ongoing?optimisation?topic?

2. The size of the IKEA store didn't start out with the current size. The size of the store grew as it was noticed it was better for the customers and business over time.??

Every bet does not add to differentiation. A good portion of bets don't take us a step ahead. Innovation is just hard. But there is a set of bets that actually do work. Those build incremental differentiation.?

Keeping the link to strategy?

Small experiments and bets can be strategic. The key is maintaining the linkage and learning toward the core of the strategy: where to play; how to win. Experiments that uncover knowledge related to "how to win" are strategic. Draw your experiments from the assumptions behind your future strategy.??

Bets that add to differentiation are strategic.?Experiment with the strategically selected edge of performance.?

Not all bets are strategic. Especially when the direction is "everything goes" then you probably are not strategic with your experiments.?