In volatile times, uncertainty can be turned into a competitive advantage.
Predicting the needs of your customers has always been tricky. In one 2005 survey, for example, 80% of corporate executives said they believed they were delivering superior products to their customers — but only 8% of their customers agreed.1 It’s even harder to please your customer when things are as uncertain as they are today. Shifts in politics, immigration patterns, and trade policies are shaking the foundation of international commerce. Consumers are both more informed, thanks to the internet, and more fickle, thanks to social media. When you consider all that — and the rapidity and frequency of technological change — predicting the future needs of your customers may seem like a fool’s game.
Given the obvious costs of misjudging customer preferences, how should companies at the brink of a product launch behave in the face of great market uncertainty? Should they “wait and see” until uncertainty resolves? Or should they commit resources for a full-scale launch and ride it out?
The conventional wisdom these days is that being early to market is the right choice. But our study of 550 manufacturing companies and analysis of service companies with considerable sunk investments suggests that this is not always the case. (See “About the Research.”) Often, being better matters more than being first. We’ve observed that many companies can benefit by taking a mixed approach, which we like to call “act and see.” By deferring the large-scale launch of new products and using the time to conduct effective R&D, companies can glean valuable insights and develop capabilities that give them an edge on competitors that rush in with less caution. But implementing an act-and-see approach isn’t easy. Business leaders must ensure that the company has the personnel and the structure to make effective learning from experimentation commonplace.2
The idea of experimentation in the face of uncertainty is not novel for those who are familiar with concepts such as discovery-driven planning, probe and learn, disciplined entrepreneurship, active waiting, and lean startup. So, what’s new? Our work shows how prelaunch experimentation can build capabilities that help you create value in uncertain market environments. What’s more, those capabilities will make it harder for competitors to copy you.