Being managers, you often have to make tough decisions. Which new policy or initiative should be introduced? Would a new incentive system or a new marketing campaign be better? Companies need to gain an edge, and decisions on how to achieve that are often costly and difficult. Which route will have the biggest positive impact?
Randomised Control Trials (RCTs) can improve decision-making
Before you commit to one of the two ways you are choosing from, it would be great if you could experiment with both options in order to see not only the costs, but also the benefits. Randomised Control Trials (RTCs) are used in medical and pharmaceutical research. This method allows researchers to develop evidence-based recommendations thanks to randomly chosen participants. Today, many social organizations use this methodology for identifying effective poverty-reduction policies. Take advantage of this method promoted by INSEAD.
A chance for corporations
Corporations don’t really use the above-mentioned methodology; only internet-based firms use A/B testing, which is a similar approach. They use it as a tool for evaluating different web-page designs. That is why INSEAD wants to promote it and introduce field experiments in many more corporations. It allows you to improve your policy design, just as big data made it easier for companies to better understand their situation and foster business growth.
Where it has helped already
Indonesia used this method to test whether identity cards would improve the delivery of subsidized rice to the poorest citizens. They found out that identity cards would help. The World Bank and many regional bodies use it as well. It helped to identify the most cost-effective programs. Malaria prevention, agriculture and microfinance have all been examined by this methodology. Contrary to expectations, microfinance institutions have raised the living standards of those with access to it very little in the long term. Would a lottery prize be an incentive for practicing safer sexual behavior in Rwanda, resulting in lower HIV rates? Would consultancy firms have an impact on Mexican SMEs? Answers were found. Why doesn't business take advantage of it?
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