Experimenting: the growth engine for the day after tomorrow

Why do you need a second engine?

Because every business model is finite. That holds no matter how well it runs today, and it holds especially when it runs well: success blinds you to the question of what comes next.

The best way to be ready for the next upheaval is not having to predict it. That works through two transformations running at the same time.

The first realigns today's business to make it more resilient. That is the work described in the previous steps.

The difference lies in the time horizon and in how you handle uncertainty. Today's business is planned, managed and optimized. The business of the day after tomorrow is hypothesized, tested and discarded. Running both with the same tools works for neither.

The second builds tomorrow's growth engine. It looks for new markets, new demand and new business models, and it works with different methods and different time horizons.

What connects the two transformations?

The capabilities that set you apart today. Without that connection you have two separate companies under one roof, and then the older one wins every conflict over resources and attention.

So the guiding question is: which unique capabilities and resources do you hold in your core business that also give you an advantage tomorrow and the day after?

The test for such a capability is simple: how long would a well-funded new entrant need to build it? Anything achievable in under two years will not carry a second engine.

That can be manufacturing expertise, access to customers, data from day-to-day operations, a brand or a service network. What matters is that the capability is hard to build and that a young competitor cannot simply buy it.

This is exactly where an established company has the advantage over a startup. It is rarely used, because the new business is usually conceived as far away from the old one as possible instead of growing out of its strengths.

What does innovation mean in this context?

Something more modest than the word suggests. For Joseph Schumpeter, innovation was above all creating something new by combining what already exists in a novel way.

What already exists does not have to come from inside your own company. The line Steve Jobs attributed to Picasso means exactly that: good artists copy, great artists steal. It refers to the ability to look beyond your own edges, to see what works elsewhere with fresh eyes and to combine it with ideas of your own.

Apple's portable music player had a predecessor in another manufacturer's portable cassette player. What was new was the combination: same need, different technology, different business model.

In practice that means you do not need an invention. You need a systematic look at solutions from other industries and the question of what can be transferred to your field.

How do you separate the new business from the old?

Organizationally and financially, and from day one. A venture with an uncertain outcome reliably loses the internal competition for attention and resources against day-to-day business with a guaranteed contribution margin.

That is especially true for approaches that attack your own business. A model that cannibalizes existing revenue will never be prioritized within the existing structure, and that is exactly why such models usually emerge outside established companies.

In mid-sized companies, separation is a question of time and reporting lines, not of corporate law. One person released two days a week who reports directly to management is already separation enough.

What must not be separated is the connection through capabilities. The new business should grow out of your strength, not alongside it. Otherwise you could just as well have put the money into a fund.

When do you start?

Not at the end of the process, even though the step sits there. The question about the growth engine for the day after tomorrow comes up on its own as soon as you have made review and refinement a routine.

The annual strategy review is a good occasion. If you are checking anyway whether the assumptions still hold, the question about the next engine is just one more question in the same session.

In practical terms: there is no start date from which you begin experimenting. There is a rhythm in which the question gets asked regularly, and a routine that turns it into work.

The most common mistake is waiting for day-to-day business to calm down. It will not. In owner-led companies there is an added twist: the person who thinks most entrepreneurially is also the one most needed in daily operations.

The pragmatic entry point is a two-day kickoff workshop with a mixed team from across the organization. That is where the routine and its methods are introduced and then carried into the company.

What separates experimenting from just trying things out?

A defined process. Without it, the new routine becomes an activity that is well intentioned and produces nothing.

An experiment has an assumption, a metric and a point in time when a decision is made. Trying things out has an idea and an enthusiast.

So define and communicate explicitly how ideas are supposed to turn into real new business: who decides on the next stage, based on which criteria, and what happens to whatever drops out?

Set a budget and an end date for every stage before you start. An experiment without an end date becomes a permanent condition, and a permanent condition ties up attention without ever leading to a decision.

The willingness to end a venture is the hardest requirement here. A company that has never stopped one of its own experiments is not experimenting, it is collecting side projects.

Keep the effort small at the start. A company that begins with two days per quarter and scales up after a year gets further than one that launches a dedicated unit and quietly dissolves it eighteen months later.

One final point that protects you from disappointment: most attempts will not work out. That is the nature of the thing, not a sign of poor work. And what gets measured is not the hit rate, but whether the process produces a viable second business over the years.