12 MIN READ

Business Experiments

Taking Intelligent Risks

(Also known as Pilot Projects and Pilot Experiments)

Learn how to test your ideas.

Your boss has asked you to develop a new service that will boost customer retention, and you've come up with several ideas that you think might work.

The problem is, you're not sure which ones will have the biggest impact. And you don't have the time and resources to implement each idea fully. So, which idea should you move forward with?

This is one situation where it's useful to set up business experiments. This allows you to test ideas on a small scale, before you take big risks or commit significant resources to a larger project.

In this article, we examine how to conduct business experiments, and discuss how you can learn from them.

Why Run Business Experiments?

Many businesses don't grow unless they innovate, and innovation comes from developing and implementing new ideas. However, innovation usually carries a risk of some kind: fundamental assumptions may be wrong, new products may not work sufficiently well, customers may not accept your ideas, and so on.

This is why it's so useful to run business experiments. By testing ideas, you can understand how they might perform on a larger scale. You can also learn from your failures and mistakes, and refine your ideas to make them better.

Business experiments can involve anything from very basic tests (for example, changing the welcome message on your website, or testing a new process for dealing with telephone inquiries) to more complex projects (for example, testing a new product or service with a small number of customers).

Business Experiments and Risk

Business experiments can sometimes seem fraught with uncertainty and risk. After all, there's often no way to know whether they will succeed.

However, that's the point. When you do a business experiment, you open yourself up to risk in a very controlled way. Although you clearly want to avoid failure, you're actually willing to fail, so that you can avoid more costly mistakes in the future, and so that you can develop and exploit high-risk opportunities.

In the short term, business experiments may seem too small and too risky to be worth the effort. But, when you look at the benefits over the long term, you'll see that it's often more costly not do to them. By being willing to learn – both from the ideas that succeed and the ones that fail – you'll uncover the successful ideas that will help your business or organization be the very best that it can be.

Tip 1:

Depending on your role, you may need to get permission from your boss or senior managers before you conduct a business experiment, even if the risks are minimal. Use your best judgment here.

Tip 2:

If you need to plan how to get support for your experiments, see our article on Sales Skills for Non-Salespeople, and our Bite-Sized Training session, Sell Your Idea!

Tip 3:

Business experiments won't be suitable in all situations – for example, where you're dealing with a very small market, or where success can be copied very quickly. Here, you'll have to make a decision based on your instincts and on the information that you have available.

Tip 4:

Before you conduct a business experiment in a "live" environment, you may also want to test your ideas with users and customers through interviews, focus groups, or surveys, where appropriate.

Note:

Mind Tools Club members and corporate users can listen to our Book Insight review of "Experimentation Works," by Stefan H. Thomke. This book show how business experiments have been run successfully by a wide range of organizations worldwide.

How Do Business Experiments Work?

To organize an effective business experiment, consider using the approach below. This is based on a process developed by innovation expert Thomas H. Davenport in his Harvard Business Review article, "How to Design Smart Business Experiments."...