Business | Experimentation
TESTING TIMES
WHAT IF….? THAT’S THE START OF SO
MANY QUESTIONS THAT, HOPEFULLY, LEAD TO
INNOVATIVE ANSWERS. BUT IN BETWEEN YOU HAVE TO DO SOME EXPERIMENTATION.
IS YOUR MANAGEMENT TEAM UP FOR THAT?
“Will the dog eat the dog food?” You can argue, debate and theorise about that all you like but the only way to resolve one of management consultants’ favourite questions, is to stick a plate of food under Fido’s nose. This principle has defined us as a species. More than 5,000 years ago, an unknown innovator in Mesopotamia discovered that if you stood a wheel, invented to make pots, on its side, and added some spokes, it could be used as a means of transport. The question of ‘what if`?’ has inspired our ancestors to create 17,000 ancient cave paintings in Lascaux, Johann Gutenberg’s movable type and, much more recently, the transformational iPhone. Unfortunately, many organisations decide not to test a proposition. This partly reflects an almost universal internal bias: we are constitutionally incapable of seeing ourselves - or the company we work for - as the rest of the world sees us. This failure is so widespread there is even a term for it, ‘egocentric empathy gap’, which describes our tendency to project our worldview onto other people.
The most damaging aspect of this delusion is that it convinces us that if we know what they think, we needn’t bother to ask them. This tendency is particularly prevalent among entrepreneurs who, by virtue of their own success, have come to rely on instinct, intuition and experience. In fairness, they’re not always wrong but the occasional reality check would certainly improve the quality of decision-making. This ‘we know what they think’ rationale lies at the root of one of the most calamitous mistakes in modern business history. In 1975, Eastman Kodak was one of the first companies to invent a digital camera. The managers involved were convinced it had enormous potential although it could seriously disrupt photographic film, the company’s core business, where it enjoyed a 90% share of the American market. The leaders had become complacent monopolists who, according to management thinker Rosabeth Moss Kanter, “suffered from a mindset of perfect products rather than the high-tech mindset of make it, launch it, fix it.”
The prototype digital camera was hardly perfect - it
was a bit bulky and, according to Kodak’s technical experts, who made the final call, didn’t offer the technical quality customers had come to expect from film. They were so sure about this they didn’t even bother to consult customers, let alone ask more lateral questions such as how important was quality to users, especially when compared to the convenience of not having to visit - and pay - a store to develop and print photos? And what improvement in quality - if we assume that, as usually happens, most inventions become more sophisticated over time - would persuade consumers to turn to digital? (This decision was even more bizarre because in 1935 the company founder George Eastman had dismissed
14 | April/May 2024
similar concerns to launch Kodachrome colour film.) To be fair to Kodak’s managers, the best of them probably knew that a revolutionary change was coming but doubted the company’s ability to manage it. They may have been right, but a few experiments might have changed the internal debate - and saved the once mighty conglomerate from all kinds of corporate turbulence. They may also have, in the way leaders at big companies do, overestimated the complexity of the tests. Often, it is enough to walk people through a storyboard.
The disaster could have been avoided if executives had thought broadly enough to recognise the wisdom of William Goldman, most famous as the screenwriter on ‘Butch Cassidy and the Sundance Kid’, who once said of the movie business: “Nobody knows anything.” This would matter less if we weren’t all so bad
at envisaging the future. As American management thinker Jeanne Liedtka puts it: “Even venture capitalists, whose living depends on picking the right business, only get it right 20% of the time.” Studies repeatedly show that we can barely explain the rationale for our own behaviour, let alone predict it, and are even more blind-sided when it comes to imagining how colleagues and customers might react. The simplest, and shrewdest, way for Kodak to have proceeded would have been to conduct a few modest hypothesis-driven tests, based on the age-old question of ‘what if?’. In other words, if we do x to explore y and discover z we can keep refining - and improving - our hypotheses?
This modus operandi is completely different to the traditional linear method of management which defines a problem, generates and evaluates a broad range of solutions and proceeds to explore the most promising option. This is all very well if decision makers get it right the first time but, let’s be realistic, how often does that happen? If the favoured solution fails, it is back to square one, albeit with an incurred cost in terms of money and time to market. This process also encourages ‘sunk cost syndrome’ in which managers assume that they were right all along and just need to tinker a little bit. A hypothesis-driven approach to experiments would
have been far more useful than Coke’s research in the mid-1980s, when they effectively asked hundreds of thousands of consumers how nice New Coke tasted. This is a prime example of what Liedtka calls “the focusing illusion”, in which we overrate the importance of one - or a few - factors. In Coke’s case, they bet the farm on taste. This is pretty much what Kodak’s quality-conscious engineers did. Innovating on any scale is an act of courage. In a
modern business, there are so many places where good ideas can go to die: on a spreadsheet, in a conflab between middle managers, in the boardroom or in market research. When potential customers trialled the Sony Walkman portable CD player in the
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