Regulation is often used as a scapegoat for a company’s decision not to truly embrace an innovation agenda and the practices that support it.

“We can’t experiment with new products because we have our operating licenses to maintain, a reputation to protect and shareholders to serve” is what many a corporate executive will tell you.

However, in an era where listed companies have a one in three chance of being delisted in the next five years (six times the delisting rate of companies 40 years ago!), large organisations simply can’t afford not to experiment given that it is critical to the development of disruptive innovation and new business models, what organisations need most right now.

But how does one experiment when a corporate watchdog is breathing down your neck and watching your every move?

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Experimentation Is About Testing Assumptions, Not Finished Products

First, we need to be clear about why and how we experiment.

If you’re a large insurance company then it’s not a matter of simply releasing a new policy via your website to the public and testing whether or not anybody bites.

As an insurer, any new insurance policy would no doubt require regulator approval before release to the public, which would add significant time and cost to the entire process. This goes against the nature of experimentation which is all about moving quickly and taking lots of small bets to determine what customers like and what they don’t like in order to support strategy and find opportunities for product market fit.

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So how do you move quickly then?

Experimentation is about validating key assumptions that underpin a business model.

For example, if you’re thinking about launching a new online peer to peer lending service targeting young adults you’ve got a few key assumptions to test which might include:

1. There is a percentage of young adults that aren’t satisfied with existing lending channels
2. These young adults are not credit risks
3. Young adults would use an online platform to borrow and lend money
4. Interest rates charged are sufficient for both borrower and lender

These are but a few key assumptions that may apply. Others might extend to different aspects of the business model such as distribution channel, payback periods, customer profiles, customer acquisition strategies, fees and so on.

Taking the above example though, do we really need to go through the motions of building, releasing and promoting a full blown peer-to-peer lending solution to simply test whether these assumptions hold true? Of course not. That would be fiscally irresponsible, a case of “me too” and putting the cart before the horse.

These assumptions can be tested using a combination of tools such as design thinking exercises, online and offline surveying, consumer credit reports and hitting the streets.