In times of great stress, business leaders often find comfort in time-honored sayings such as staying the course or following the plan.
These terms have become cliches for a reason–because they work. It is important to have a direction and to follow a plan especially when the future looks murky.
For a plan to be truly successful, however, it must also leave room for experimentation.
The world is a very different place than it was 100 years ago and a successful business plan in the 1920s would have looked very different than one would today.
Take for example lifestyle and beauty brand L’Oréal. When the company opened in 1909, more than a century ago, the film industry was in its infancy. There were no televisions, no social media, and no selfies. Had the company not been able to innovate–to test hypotheses–it might have joined the likes of other glamorous lifestyle brands such as Pan Am, Daimler, and Bullocks, and become simply relegated to a footnote in history.
Instead, L’Oréal Group’s research department has grown to 4,000-people strong with a mission dedicated to “improving response to Beauty needs and aspirations of consumers.”
It isn’t just beauty products they are innovating, however. Their marketing team is also constantly staying abreast of consumer needs and trends.
“As marketers, it’s on us to maintain relationships with consumers as their appetites change, which often means using new tools and technology, and rethinking how we tell our stories,” said Axel Adida, global digital chief operating officer, L’Oréal in a Think with Google interview
Every Business Should Plan for Experimentation.
There are plenty of examples of once-mega popular brands that struggled and ultimately failed to adapt to meet changing consumer appetites. And plenty of cases where the opposite is true. The stunning success of the Netflix model comes to mind.
Building a mail-order DVD company when people were growing increasingly uninterested in standing in line at video stores, Netflix’s original subscription model offered an alternative to going out in the rain and snow. It also offered a way to avoid looking for and not finding “out of stock” videos. Most importantly it gave consumers an alternative to late fees.
Ten years after delivering its first DVD, Netflix dipped its toes into new waters, experimenting with a streaming content service in Canada. In 2010, the same year that the Blockbuster video store brand declared bankruptcy, Netflix shifted its focus more fully into streaming and introducing the service in the U.S. By 2014, Netflix had once again shifted its model and was receiving Academy Award nominations for its movie productions.
Similar to L’Oréal, Netflix has a giant research and development (R&D) infrastructure. In 2021, the streaming service spent a whopping $2.27 billion on R&D, and that number reflected a 25 percent increase over the previous year.
Risk Mitigation
While L’Oréal and Netflix are investing significant resources in research and development, not all businesses need a multimillion-dollar budget to dip their toes into experimentation. Especially since experimentation can be an intimidating process leaving CEOs concerned about the cost of “failed” experiments.
Mitigating risk is an important consideration in any research plan. Here it is best to learn from the scientific theory of controlled experiments in which all factors remain consistent except for one variable.
For those new to experimentation, one possible mitigation method is in starting small. Even something as simple as A/B testing in email campaigns, for example, can net valuable information.
A/B testing can consist of nothing more than testing whether or not to include a PS in your email messaging. According to 25 Little Email Marketing Experiments by Hubspot, testing audience response rate might include other experiments such as whether or not to include a headshot in your email, whether or not to use HTML, and even whether or not to use a first name greeting in your email opener.
While email might be a good place to start, all phases of your business should include some room for experimentation.
Defining Success
It is also important to know that failed experiments aren’t always a measure of failure.
So many major corporations are now including “experimentation” as part of their business culture, that the business media has caught on. This led to a trend of business articles on the subject, going so far as to celebrate the virtues of failure, like this 2018 Forbes article Failing Your Way to Sucess.
Perhaps Jeff Bezos, CEO of Amazon.com explained the benefits of failure best in the 1998 Amazon.com SEC Filing. In the filing, which also noted that Amazon.com had become the fastest company to ever reach $100 billion in annual sales, Bezos wrote:
“Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten..”
In that same filing, Bezos also wrote, “failure and invention are inseparable twins.”
Experiments can be scary because they can disrupt your current business. But isn’t it better to be the company doing the disrupting rather than the one following another’s company’s new business model? Making experimentation a true part of the corporate culture means that employees must be allowed the freedom to explore and the freedom to fail.
Establishing an experimentation-friendly environment works best when ensuring your research and development is guided by a caretaker who understands your business as well as the core values behind your vision.
If you’re looking to build a controlled experimentation-friendly environment that is in keeping with your core values, we’d love to support you and your senior team. Please contact us and we’d be happy to schedule a call to discuss your strategic vision.