HBR: The Discipline of Business Experimentation

January 1, 2015

Management

Link to Harvard Business Review article on experimentation and analytics in business settings

https://hbr.org/2014/12/the-discipline-of-business-experimentation

Soon after Ron Johnson left Apple to become the CEO of J.C. Penney, in 2011, his team implemented a bold plan that eliminated coupons and clearance racks, filled stores with branded boutiques, and used technology to eliminate cashiers, cash registers, and checkout counters. Yet just 17 months after Johnson joined Penney, sales had plunged, losses had soared, and Johnson had lost his job. The retailer then did an about-face.

How could Penney have gone so wrong? Didn’t it have tons of transaction data revealing customers’ tastes and preferences?

Presumably it did, but the problem is that big data can provide clues only about the past behavior of customers—not about how they will react to bold changes. When it comes to innovation, then, most managers must operate in a world where they lack sufficient data to inform their decisions. Consequently, they often rely on their experience or intuition. But ideas that are truly innovative—that is, those that can reshape industries—typically go against the grain of executive experience and conventional wisdom.

Managers can, however, discover whether a new product or business program will succeed by subjecting it to a rigorous test. 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…

Read rest of article on HBR:
https://hbr.org/2014/12/the-discipline-of-business-experimentation

About SARK7

Scott Allen Mongeau (SARK7) is an INFORMS Certified Analytics Professional (CAP) and a Data Scientist in the Cybersecurity business unit at SAS Institute. Scott has over 20 years of experience in project-focused analytics functions in a range of industries, including IT, biotech, pharma, materials, insurance, law enforcement, financial services, and start-ups. Scott is a part-time PhD (ABD) researcher at Nyenrode Business University. He holds a Global Executive MBA (OneMBA) and Masters in Financial Management from Erasmus Rotterdam School of Management (RSM). He has a Certificate in Finance from University of California at Berkeley Extension, a MA in Communication from the University of Texas at Austin, and a Graduate Degree (GD) in Applied Information Systems Management from the Royal Melbourne Institute of Technology (RMIT). He holds a BPhil from Miami University of Ohio. Having lived and worked in a number of countries, Scott is a dual American (native) and Dutch citizen. He may be contacted at: webmaster@sark7.com All posts are copyright © 2015 SARK7 All external materials utilized imply no ownership rights and are presented purely for educational purposes.

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2 Comments on “HBR: The Discipline of Business Experimentation”

  1. mrerrolk Says:

    Agree,
    Big data and analytics is about failing fast and then you might stumble upon a golden nugget. So rather work with several POCs in parallel then going live with one big thing.

    Reply

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  1. Why is ‘data scientist’ a contentious title? | BAM! Business Analytics Management… - September 30, 2015

    […] > Read more on the discipline of business experimentation […]

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