June 2018 | Nano Tools | Innovation
Nano Tools for Leaders® are fast, effective leadership tools that you can learn and start using in less than 15 minutes — with the potential to significantly impact your success as a leader and the engagement and productivity of the people you lead.
Contributor: Yoram (Jerry) Wind, PhD, The Lauder Professor Emeritus of Marketing; Academic Director, The Wharton Fellows Program; Director, SEI Center for Advanced Studies in Management, The Wharton School, University of Pennsylvania
Make innovation more cost-efficient and less risky through continuous, adaptive experimentation.
Let’s say your team comes up with ideas for two new projects. You choose project A. Revenue the first year surpasses expectations and the project is declared a success. But what if project B would have generated even greater revenue, as well as driving interest to other existing company offerings? In the “choose one” model, you have to base your decision on instinct — with no way of comparing the potential of both projects.
Alternatively, the most innovative and agile companies today are using adaptive experimentation (AE) to conduct continuous real-world experiments that provide rapid insights and improve business decisions. Not confined to innovation projects, it can also be applied to decisions about budget allocation, advertising campaigns, pricing, and more. Experimenting with variations can tell you what effect each action is having, and what to do next. By pursuing several approaches, you can learn which alternatives will add the most value, and which ones are likely to waste resources. Using this “fail fast, fail cheap” experimental approach can help you identify the decisions that could lead to the best outcomes, yielding better results with each step.
Because measuring success or failure is embedded in the process, and because failure yields valuable information, permission to fail is an integral element. AE also creates a compelling competitive advantage: continuous experimentation means your competitors can’t discern your master experimental design.
Adaptive Experimentation is a continuous loop, rather than a linear process. The learning that takes place in Step 5 lets you refine your approach and decide on your next objectives as you circle back to Step 1 — which means you improve your outcomes over time.
Whether used to develop new products and services, target marketing programs, or create better customer experiences, AE can help you encourage breakthrough ideas and create an innovation culture.
Nano Tools for Leaders® was conceived and developed by Deb Giffen, MCC, director of Custom Programs at Wharton Executive Education. Nano Tools for Leaders® is a collaboration between joint sponsors Wharton Executive Education and Wharton’s Center for Leadership and Change Management. This collaboration is led by Professors Michael Useem and John Paul MacDuffie.
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