December 17, 2019

Perfectionism is costing German businesses billions in growth


Posits

The cost of maintaining a culture of perfection is coming at the expense of innovation

I’ve known for years that German companies have a serious fear of failure, trading perfection for innovation. But it wasn’t until I read GO Group Digital’s recent report, “How digital experimentation is driving growth worldwide”1 that I got validation. The results for Germany were worse than I expected.

While companies in Germany scored relatively well in most of the key pillars important for creating a strong experimentation program, when it came to trust, or the amount of empowerment employees are given to propose and execute bold new ideas – ideas that might fail – Germany’s score was the lowest. 

It gets worse. German companies that claimed revenue growth greater than 17.5 percent per year, which GO designated as “fast-growth,” collectively scored 12 percent lower than the pillar leader (the U.K.; Canada and the United States nearly tied).

Slow-growth companies in Germany also displayed alarming numbers. Only slow-growth companies in Australia had weaker numbers than Germany.

Compared to all English-speaking markets, even what we imagine to be our most innovative companies, those that report the fastest growth, still scored the lowest in terms of trust. What gives? 

This weak culture of trust could cost us dearly. We know that experimentation-led businesses – those that use customer insights to propel innovation forward – will unlock nearly 1.1 trillion euros in 2020, according to Forrester Research.2 If German companies can’t find a way to empower its employees to take calculated risks without fear of failure and regardless of the results, then how can we expect innovation to thrive? 

The lack of trust that is stymying innovation isn’t an abstract problem either. GO showed that for every point increase in an experimentation program’s health score – where trust is one of four success pillars – German companies could see a potential 1.5 percent year over year revenue gain. Simply put, improving our health pays. 

…experimentation-led businesses will unlock nearly 1.1 trillion euros in 2020, according to Forrester Research

Chart explaining how lack of trust hurts German business performance

The German psyche rewards perfection, not innovation. To unpack the reasons why German companies suffer from weak cultures of trust, we need to dive into the nation’s psyche and acknowledge there could be a problem when it comes to seeking perfection.

Our culture is one where things are built to last forever. We pride ourselves on German precision. Our engineering capabilities are touted in advertisements around the world. To fail, therefore, risks inviting personal shame. The idea of giving employees permission to fail-and-learn, therefore, feels at odds with our cultural values. We have to first acknowledge this conflict if we’re going to overcome it. In an age of disruption, to foster innovation means we have to invite risk into our businesses, not fear it.

…to foster innovation means we have to invite risk into our businesses, not fear it.

Interestingly, by building a stronger and healthier culture of experimentation, executives can learn how to create a better culture of trust at their company. But it takes time, believe me, which is why it’s important to start today. 

Executives need to collaborate with their teams and then set the metrics and goals. 

Empowering employees to discover, discuss, and execute ideas to delight customers doesn’t mean executives need to relinquish total control nor does it mean business strategy is run as a democracy.

To foster trust, executives should collaborate with the experimentation team and a cross-section of department leaders to ensure experimentation goals are aligned with strategic business goals or a North Star metric. Set these vital metrics by gathering insights into what the business should measure in order to determine business performance. The final details should be signed off by management, not left to the team, as the North Star sets the overall direction and measurement for the business as a whole.

Be sure not to focus on micro-conversion metrics. These may be indicators, but they’re not proof that you are improving strategic goals. Focusing on these vanity metrics will erode trust, especially, at the top, of the organization.

Demonstrate that it’s ok to fail, but that it’s not ok to not learn from it.  

Most experiments fail.3 But all, if organized correctly, reveal an insight into customer behavior. Show that failure isn’t a negative by championing these insights just as you would when a positive experiment reveals how to unlock additional revenue.

One of the ways I like to promote trust is to build experimentation programs that test new business ideas before they launch. If the program can demonstrate through customer data that the idea is popular, then great, that success capital earns valuable trust across the company. Likewise, if the idea proves unpopular, the experimentation program is trusted by management to save money. Whatever the case may be, the importance lies in the program’s ability to learn and the company’s courage to communicate the customer insight discovered.

Finally, put risk into perspective. Nothing ventured, nothing gained.

Interestingly, the GO Group’s research showed Germany had the highest executive buy-in score for experimentation, with 43 percent of fast-growth companies acknowledging senior-leadership oversight of their experimentation program. The number jumped to 60 percent once mid-level manager positions were added. Superficially, this is great. But because of the lack of trust, I fear that all this means is that companies are running low-value A/B tests. No one would consider these tests to be real growth-seeking experiments.

No company has every disrupted an industry or transformed itself by simply changing the color of a website button.

When the feeling of trust is low and employees do not feel empowered, then by chance should some plucky team propose a bold experiment, executives feel they need to be involved in the decision-making process, rather than allowing that team to conduct the experiments per the established goal framework. This often results in death-by-committee decision making and/or HiPPOs 4 vetoing the very idea that could lead to real business growth.

No company has every disrupted an industry or transformed itself by simply changing the color of a website button. As Jeff Bezos, founder of Amazon, said, “Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten…This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments.” 

Chart showing experimentation steps and how it promotes agility and growth

Experimentation creates an innovation feedback loop that German businesses need.

Innovation and business growth come from change. Change always is risky. If German companies do not trust their employees, then they will not take risks. Without taking any risk, there can be no change. Innovation and business growth struggle in this setting, as the GO report revealed. Successful organizations empower their employees to take calculated risks – to achieve objectives aligned to their guiding business goal.5 It’s an exercise I hope we Germans learn how to trust.

André Morys is the co-founder of konversionsKRAFT and a managing partner at GO Group Digital. Reach out to him about building or growing your experimentation program in Germany and Europe. Read the full GO Group briefing report to see how fast-growth companies are building healthy cultures of experimentation to accelerate innovation. This article was translated from German and originally posted on LinkedIn.

  1.  GO Group Digital 2019 Briefing Report, Fast vs. slow: How digital experimentation is driving growth worldwide.
  2.  Forrester Research (July 2016) Insights-Driven Businesses Will Steal $1.2 Trillion In 2020 — It’s Time To Join Them
  3. According to GO’s CRED, a database comprising all of its partner offices’ experimentation results, 67.5 percent of experiments fail.
  4. Great summary of the origin of the acronym, HiPPOs by Ron Kohavi.
  5.  Excerpt from GO Group Digital’s 2019 Briefing Report, Fast vs. slow: How digital experimentation is driving growth worldwide.

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About the GO Group

The world’s leading experimentation experts build global experimentation programs and solutions for the GO Group. Contact the Group to learn how its experience and international setup can build or revitalize your experimentation program. The GO Group operates at the intersection of consultancy and conversion, enabling its enterprise clients to unlock business growth and value through the power of experimentation.

Learn more about the GO Group at www.gogroupdigital.com

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