Hence: "Think of it this way: A pharmaceutical company would never introduce a drug without first conducting a round of experiments based on established scientific protocols. (In fact, the U.S. Food and Drug Administration requires extensive clinical trials.) Yet that’s essentially what many companies do when they roll out new business models and other novel concepts. Had J.C. Penney done thorough experiments on its CEO’s proposed changes, the company might have discovered that customers would probably reject them."
Indeed, it is not that easy to perform a business experimentation. Because once you have the idea, which people believe is a good idea, the pressure is high to implement it as fast as possible to bypass the competition, and to earn the profits as fast as possible.
This article of the Harvard Business Review is very interesting, especially on a retail point of view as most of the examples brought are real case studies of US retailers.
Here is a Checklist of What You Should Do To Test A New Business Concept
1 - Does The Experiment Has A Clear Purpose?
In determining whether an experiment is needed, managers must first figure out exactly what they want to learn. Only then can they decide if testing is the best approach and, if it is, the scope of the experiment.
When Kohl’s was considering adding a new product category, furniture, many executives were tremendously enthusiastic, anticipating significant additional revenue. A test at 70 stores over six months, however, showed a net decrease in revenue. Products that now had less floor space (to make room for the furniture) experienced a drop in sales, and Kohl’s was actually losing customers overall. Those negative results were a huge disappointment for those who had advocated for the initiative, but the program was nevertheless scrapped. The Kohl’s example highlights the fact that experiments are often needed to perform objective assessments of initiatives backed by people with organizational clout.
2 - Is The Experiment Doable?
Experiments must have testable predictions. But the “causal density” of the business environment—that is, the complexity of the variables and their interactions—can make it extremely difficult to determine cause-and-effect relationships. Learning from a business experiment is not necessarily as easy as isolating an independent variable, manipulating it, and observing changes in the dependent variable. Environments are constantly changing, the potential causes of business outcomes are often uncertain or unknown, and so linkages between them are frequently complex and poorly understood.
I believe that on this part it is very important to list all the variables that may impact the test, and right away from the beginning to understand how those variables have impacted the test results.
3- How Can We Ensure Reliable Results?
4- Have We Gotten The Most Value Out Of The Experiment?
What is fore sur is that experimentation is key before setting up new launches. The real effort is to master how much cost, and how much time you may spend on experimentation, as speed in execution also is a key factor of success in certain new business concept.