Almost all companies use experimentation to develop and test new products and services. But in an increasingly turbulent business environment, strategies—as well as products and services—can become obsolete quickly and unpredictably. Therefore companies must broaden the arena of experimentation to include business models and strategies.
Yet there are challenges in applying traditional approaches to experimentation more broadly. Such approaches can be costly and time consuming, and they can saddle the organization with an unreasonable burden of complexity. Market-facing tests and pilots can jeopardize a company’s brand and reputation. And market research based on consumers’ perceptions can be a remarkably poor predictor of success for novel concepts and strategies.
To overcome these barriers, a growing number of adaptive competitors are using an array of new approaches and technologies to expand the scope and impact of experimentation in their businesses. In doing so, they are creating a “simulation advantage” by achieving superior “economics of experimentation.” In other words, these companies are able to generate, test, and replicate a larger number of innovative ideas more quickly, at lower cost, and with less risk than their rivals can. (See the exhibit.)