In the second part of our CRO: In Graphs series, we’re going to turn our attention to the Strategic Output Model. As with the majority of theories or principles, this model is used across a variety of different industries and certainly isn’t unique to Conversion Rate Optimisation, but it is nonetheless a useful tool in steering your CRO programme.
To effectively run any programme (be it CRO or otherwise), it is vital to balance the needs and expectations of the wider business with the priorities set by those directly running the programme; no programme is an island, nor is it guaranteed to remain funded if it doesn’t deliver. As such, using models to help rationalise programme decision-making within the wider business context is essential to ensuring longevity and business value.
The Basic Relationship
The basic matrix of the Strategic Output Model looks like this:
Understanding that every business decision is a balance between risk and reward is a good place to start. In addition, recognising that, for the most part, there is a positive correlation between risk and reward, will also stand you in good stead. If a project is worth taking on (i.e. has a good reward score), then it usually comes at a certain level of risk (i.e. costs associated, investment required etc.):
So how does this apply to Conversion Rate Optimisation?
The Business Context: Internal Balancing
Conversion Rate Optimisation programmes are themselves an investment, and therefore a risk; the rewards are generally seen as generating additional revenue and/or improving user experience (and therefore retention rates), but should tests have the reverse impact of their original hypotheses, these metrics can of course go in the opposite direction.
So whenever you’re setting up a new CRO programme, or indeed joining an existing programme, it’s always useful to ascertain what the default risk position of the business is – this then enables you to anchor your CRO programme in the right position at the outset. At a very basic level, there are ostensibly three main risk positions:
Risk-averse: regardless of the possible reward, the business is likely to steer away from risk; the larger the business, generally the more commonplace this position is; this places the business predominantly in the bottom-left quadrant of the model
Challenger: regardless of the possible reward, the business prides itself on making bold moves – this is often how they came to be successful in the first place, and therefore there is a senior management-led drive to be innovative; this places the business predominantly in the top-right quadrant, but bottom-right ideas wouldn’t necessarily be discounted either
Positive correlation: the possible reward must equal or exceed the likely risk; this places the business firmly along the line of correlation
Understanding the business context in which your CRO programme operates is essential to ensuring you can conduct Internal Balancing. Internal Balancing is the means by which you put forward ideas that are in-keeping with the business’ overall outlook on risk and therefore ensure that the output of your CRO programme is maintained. Failure to consider that outlook is a sure-fire way to see a total lack of tests being run; if the business considers your ideas too risky, or indeed too safe, then you don’t receive the sign-off you require and you’ll end up grinding the team into the ground.
The Team Context: Test Prioritisation
Once you understand the area in the Model your business is most likely to operate in, the next step is to look at how you can structure your programme prioritisation. If we take the example of the risk-averse business, you can essentially insert a micro-version of the same model into the bottom-left quadrant to visualise to your CRO team where you need to operate at this time:
Using this model will help the team to plot where each of their ideas sits within the wider business view and should give them a rough idea as to whether those ideas are likely to achieve the buy-in necessary to turn them into genuine tests. Alongside that, it also provides a team-centred prioritisation matrix by which they can decide which ideas to push for most, and which might best be rethought before taking them upwards.
If you assume that the overall business matrix is scored from 1-10 on both risk and reward, a business operating in the risk-averse area is unlikely to agree to a test that is above a 5 in the risk score, regardless of the potential reward score. If you then combine this with a traffic-light-style system such as the below, you can easily identify that tests that are ready for sign-off (green), those that might need to some risk adjustment and/or senior sponsor to gain traction (amber) and those that probably need a wide rethink before being pushed out to the wider business (red).
The Future Context: Pushing Boundaries
Thus far, these examples have all assumed that your CRO programme is either just starting out, or this model is just being implemented. That is of course fine to begin with, but for any model to remain relevant, it has to evolve with the programme as well.
So how can the Strategic Output Model be used to help you to move forwards?
Well the first thing that is does is to help you establish the boundaries within which your CRO programme needs to operate. And assuming that your ideas are good and you make positive progress on delivering business value, it will then help you to start pushing against those boundaries but in a measured fashion.
Before we look at how the model can help you to achieve the growth and reach of your CRO programme however, it worth stressing that you should only start trying to shift your boundaries if you are being successful. Even though it can be difficult to find success when you feel as though you are being hampered by wider scepticism about CRO, you will likely meet with stronger resistance if you don’t have a track record of proven value behind you.
Being armed with that strong track record will then enable you to set goals for your CRO team that help you to move your programme forwards. As an example, the risk-averse business should be looking to use the strength of previous results to reinforce why a greater level of risk can now be taken; because those results actually show that the risk is not perhaps as great as once feared!
For the team, the new model will likely look something like this:
The green shaded area denotes a previously-untouchable risk area where the team should now be looking to pitch some ideas with the longer-term view of continually shifting that area to the right; but should there be some less positive results to come, it may need to slide for a time whilst the confidence is built up again.
As we’ve seen the Strategic Output Model can be used in many forms, both inside and outside of the CRO team. It enables the wider business to see that you understand the strategic direction they want to take. It enables the CRO team to genuinely consider the balance they need to strike between risk and reward, which is a valuable thing to know regardless of where else they may go in future.
But possibly more important than either of those is that the Model demonstrates to those outside of the CRO team that things are running to a structure. And not just one that you as the Team Leader or CRO Manager dictated, but one that takes into consideration the business within which you are operating.
Sometimes just having a model at all is enough to convince your superiors, but with this one you can actually use it for practical purposes too, not just as a flashy quarterly meeting slide!