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As a result of their testing, these organizations are finding out whether supposedly better ways of doing business are actually better. Once they learn from their tests, they can spread confirmed better practices throughout their business. A smart company not only looks towards the outside, but also pays attention to the assets it has, and especially its human resources. Defining what a thebizbit is can be as difficult as defining what a smart person is.
Beyond using the tactical-versus-strategic criterion, there are other ways to decide whether formal testing makes sense. For instance, it is useful only in situations where desired outcomes are defined and measurable. Sales and conversion-rate changes are frequently used as dependent variables in tests and are reliably measured for separate purposes. Other outcomes, such as customer satisfaction and employee engagement, may require more effort and invasiveness to measure.
If there is concern that changes in underlying demand may confound the comparisons across time, consider repeating the different actions in multiple short time periods. At eBay, there is an overarching process for making website changes, and randomized testing is a key component. Like other online businesses, eBay benefits greatly from the fact that it is relatively easy to perform randomized tests of website variations. Simple A/B experiments can be structured within a few days, and they typically last at least a week so that they cover full auction periods for selected items.
Thanks to new, broadly available software and given some straightforward investments to build capabilities, managers can now base consequential decisions on scientifically valid experiments. Of course, the scientific method is not new, nor is its application in business. The R&D dailygeek centers of firms ranging from biscuit bakers to drug makers have always relied on it, as have direct-mail marketers tracking response rates to different permutations of their pitches. To apply it outside such settings, however, has until recently been a major undertaking.
When a chain of convenience stores wanted to test the best way to shift demand from national brands to its private-label brands, it increased the prices of the national brands and decreased the private-label brand prices. Once it established that shifting demand feedsgenics was feasible, the retailer then refined its strategy by varying each of the prices individually. The key to success with treatment and control groups is to ensure separation between them so that the actions taken with one group do not spill over to the other.
A shared understanding of what constitutes a valid test—and how it jibes with other processes—helps executives to set expectations and innovators to deliver on them. Then the details of the test are designed, which means identifying sites or units to be tested, selecting freaklytech control groups, and defining test and control situations. After the test is carried out for a specified period, managers analyze the data to determine results and appropriate actions. Results ideally go into a “learning library,” so others can benefit from them.
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