Rapid Testing Mindset: A Powerful Innovation Strategy
Speed in business is invaluable. Find out how quick pivots and a minimalist mindset can help you succeed.
In this article, we’ll discuss the negative impacts of pursuing perfection, the 80/20 rule as it is applied to business value, and the positive impacts of rapid testing on learning and innovation.
Perfection isn’t perfect
As an engineer and a creator, I often find myself driven by the pursuit of perfection.
In my spare time I spend days and weeks on woodworking or home improvement projects as I hone my skills and improve the quality of my work. In fact, I’d guess that just about everyone has a skill or interest they want to learn and work hard to improve upon. Likewise, I’d guess that most people view the pursuit of greater skill and higher quality output as the path to success. For the most part I would agree with them.
It may then surprise you that one of the most powerful strategies in business is to NOT pursue perfection.
Examples of this strategy can be seen everywhere in the business world.
- New services are launched with messy, unintuitive signup processes.
- B2B applications rarely end up with clean, visually appealing interfaces.
- More and more products are releasing in “generations” rather than perfectly finished designs.
In fact, while writing this article I prepared ramen with the instructions to “ignore the indicated fill line” rather than the manufacturer simply providing a bowl with a correct fill line.
These trends are all coming from large companies with resources and talent capable of making their work “perfect”, so why are so few of them pursuing it?
How the Pareto Principle applies to business
To learn why, we first need to understand the Pareto Principle, also known as the 80/20.
First proposed by management consultant Joseph M. Juran, the 80/20 Rule states: for many outcomes, roughly 80% of consequences come from 20% of the causes. While originally used in the context of quality control, the principle has been successfully observed in many practices.
- In fundraising, 80% of the funds raised typically come from 20% of the donors.
- In computing, 80% of software issues can typically be fixed by addressing the top 20% of bugs.
- In customer service, 80% of the complaints come from 20% of the users.
The list of examples is endless but here is a good one to remember:
In business, 80% of the value often comes from 20% of the work.
What people often overlook is how this holds true for business activities as well. Typically, the bulk of any given business activity’s value is captured at the beginning, with returns on investment diminishing as the effort continues.
Even if the perfect solution is in fact achievable – and would, in fact, be more valuable – this principle shows us that the point at which expended effort becomes a net loss is far earlier than “perfection.”
Within that final 20% of quality lies the vast majority of our time and energy, which could instead be spent on accomplishing 80% of several other business outcomes.
In short, perfection wastes time and money.
Achieving optimal business results with the 80/20 rule
The chart below represents an 80/20 curve relating to the business value of tasks.
Each bar represents a task and its respective business value. What the 80/20 Rule shows us here is how 80% effort is “optimal” in relation to the value we get out of our actions.
However, with concepts as abstract as task effort, shooting for a real number is futile. We can’t accurately quantify our effort, and even if we could, landing directly on 80% would be virtually impossible.
How do you put in exactly 80% effort when doing things like deciding on sub-contractors or creating sales collateral?
Use speed to fail faster and fail forward
Acknowledging the fact that it is impossible to determine exactly how much work it takes to get to the point of diminishing returns, it makes sense to focus on failing with our assessment in the most efficient way possible.
If more value exists at the beginning of our efforts than at the end, it stands to reason that taking too long is more costly than finishing too early. Thus, our goal should be to focus on speed.
By focusing on speed, we ensure that if we miss the 80% mark we still “fail” in the most efficient manner.
To see this in action, imagine two identical startups selling their own widgets. As these businesses grow, both startups realize they need some sort of CRM to manage customers and orders.
Startup A, recognizing that this is a core part of their business, launches a two-week research project to determine the absolute best fit for their company.
Startup B, however, spends an afternoon researching options then picks one that seems decent.
Fast forward two weeks…
Startup B learned their decision was rushed and some business processes will have to remain manual. However, they now have two weeks of customer data in the system and are using this data to create sales strategies.
Startup A ended up with the “perfect” solution with all tasks perfectly automated, but no data to determine sales strategy. They are now two weeks behind their competitor. Only now are they starting to enter customer data, and it will be another two weeks before they have enough information to start developing a sales strategy.
Startup B captured the bulk of the business value (a way to build a sales strategy) despite rushing the research task and failing to address some lower value business processes with their purchased software, whereas Startup A missed out on leveraging high-value results because it was stuck waiting on “perfection”.
The difference between speed and recklessness is learning
At this point you may think I’m encouraging you to act recklessly. I know I certainly thought that the first time I saw these concepts in action.
There is a final aspect separating recklessness from strategic speed: learning. Or, more accurately: your pursuit of the 80% value should be framed in the context of learning new information to apply to your next decision or action.
When you treat every next move as a deliberate test for gathering information, you gain the insight to deploy your effort where it matters the most.
Let’s go back to our startups.
This time Startup B had massive problems with the software that they selected. A purely speed-based strategy would tell them to pick the next best software and cross their fingers it would work better. Technically they would still accomplish more because of their speed, but they also would still be charging down the same path without knowing if it was the right path.
What happens if they treat the decision as a test with the explicit purpose of learning about their sales needs?
By framing it as a learning-based strategy, Startup B would pay closer attention to the business value provided by the software and note what conditions would cause them to change directions. These insights could lead to a better next pick but, more importantly, this deliberate focus on learning may reveal that the company’s business process doesn’t actually need a CRM at all. Maybe these widgets require a unique sales process, or maybe a CRM is too complex and unwieldy to use efficiently at this stage.
If that’s the case, their next action would be to pivot quickly to some other solution, completely abandoning the goal of getting a new CRM and saving money in the process. By inspecting the results, Startup B will gain business value even in failure.
Speed helps you get to your goal. Testing helps you determine if your goal is correct.
When used correctly, the rapid testing mindset is a powerful strategy for innovation
Regardless of job title, everyone is operating with an incomplete understanding of their environment. Whether we know it or not, we conduct experiments every day with every action we take.
Despite this – maybe even in spite of this – many companies punish failure and expect every result to be positive, leading employees to push deeper into the low value, time-wasting activities as they attempt to be “absolutely sure” their results will be positive. Some byproducts of this risk aversion are lower creativity and lower trust between employees.
However, companies that embrace rapid testing, and the failures that come with it, create an environment suitable for innovation. When the organization’s goal becomes learning, failures no longer carry negative weight. Instead, failures are celebrated as steppingstones towards better results.
This environment is critical for innovation because, by definition, innovation is the exploration of the unknown. Exploration cannot exist without risk and creativity. If perfection is expected and failure is not an option, the business will get mired in slow output and groupthink.
Even failure-embracing organizations can stifle innovation if they remain focused on perfection. Innovation is a time-consuming process, often taking hundreds of iterations to find the best solution. When perfection is expected before results can be inspected, these organizations will spend the majority of their time on the low-value items that make up the last 20% of quality.
If the 80/20 Rule holds true, every “perfectly” completed task sacrifices the same effort as five 80% completed tasks. That’s four missed learning opportunities for every attempt. The result is large feed feedback loops, low agility, and even abandoned projects as the effort to gather new information becomes too costly.
Organizations embracing rapid testing will experience failure. It will be messy and often chaotic.
However, these organizations will also generate business insights far more quickly than their competitors. They’ll be more agile, more responsive to changes, and, by necessity, foster cultures of exploration and creativity.