Skip to main content

Stories that inspire experimentation

Ingersoll-Rand is a giant company that makes dreary products such as industrial grinders, used in auto-shops to sand down auto bodies. Historically, Ingersoll-Rand has been slow a bringing new products to market, with an average four-year product introduction cycle. The company decided to to something about the slow development cycle. It created a project team whose goal was to produce a new grinder in a year - one quarter the usual time. This team did a lot of things right in this direction, including the use of stories to emphasize the group's new attitude and culture. One story, for instance, involved a critical decision about whether to build the new grinder's casing out of plastic or metal. Plastic would be more comfortable for the customer, but would it hold up as well as metal?

The traditional Ingersoll-Rand method of solving this problem would have been to conducted protracted, careful studies of the tensile and compression properties of both materials. But this was the Grinder Team. They were supposed to act quickly. A few members of the team cooked up a less formal testing procedure. While on an off-site customer visit, the team members tied a sample of each material to the back bumper of their rental car, then drove around the parking lot with the materials dragging behind. They kept this until the police came and told them to knock it off. The verdict was that the new plastic composit held up just as well as the traditional metal. Decision made.

This story became known as the Drag Test and worked to reinforce the team's new culture. The assumption was that they still needed data to make decisions. But they needed to do it a lot quicker.


Popular posts from this blog

Super Crunchers: Why Thinking-by-Numbers Is the New Way to Be Smart

This book by Ian Ayres provides a very readable summary of what can be done to improve performance using the incredible volumes of data accumulated in business, government, health care, and education. The chapters about randomized testing are particularly interesting to experimentation based management. Randomized tests are also increasingly being used to evaluate various government programs, finding eg. that additional job location assistance more than paid for itself for those receiving unemployment benefits, guiding HeadStart programs to target those most likely to benefit. Capital One has been running randomized tests since at least 1995 - tests include page layout, and type and size of offers.

New HBR article by Tom Davenport

Managers regularly implement new ideas without evidence to back them up. They act on hunches and often learn very little along the way. That doesn’t have to be the case. With the help of broadly available software and some basic investments in building capabilities, managers don’t need a PhD in statistics to base consequential decisions on scientifically sound experiments. Some companies with rich consumer-transaction data—Toronto-Dominion, CKE Restaurants, eBay, and others—are routinely testing innovations well outside the realm of product R&D. As randomized testing becomes standard procedure in certain settings (website analysis, for instance), firms learn to apply it in other areas as well. Entire organizations that adopt a “test and learn” culture stand to realize the greatest benefits. That said, firms need to determine when formal testing makes sense. Generally, it’s much more applicable to tactical decisions (such as choosing a new store format) than to strategic ones (such ...

Capital One: benchmark in experimentation based management

Capital One is a diversified financial services company offering a broad array of credit, savings and loan products to customers in the United States, UK, and Canada. It ranks #115 on the S&P 500 and #4 in Diversified Financials (BusinessWeek, 2005). Its stock has outperformed the S&P index since 1999. Founded by Richard Fairbank in 1988 based on his belief that the power of information, technology, testing and great people could be combined to bring highly customized financial products directly to consumers, Capital One has emerged as one of the America's largest consumer franchises with almost 50 million customer accounts and one of the nation's most recognized brands. In an interview for Fast Company Magazine Nigel Morris, Cap One’s president thus defined the reason behind their success: “Very few companies have the ability to test and learn.” Testing and learning form the foundation on which Capital One is built. The company tests every product offering, every proce...