How a Feedback Loop Can Fuel a Culture of Innovation and Collaboration

Blog: The Tibco Blog

Reading Time: 3 minutes

Feedback loops surround us everywhere. Feedback loops are a defining characteristic of any intelligent system, whether that’s a person, a group, or a company: An external stimulus provokes a required change to a situation. To determine the best way to react, we may test different options, measure the kind of impact they had, share that feedback for analysis, then proceed with an action that has been optimized based on the process. When all these steps work together, systems can best adapt to ever-changing internal and external circumstances and create an environment where innovative new ideas can be put into action to achieve stronger desired outcomes — sometimes completely outside the realm of what was originally conceived.

One organization that has achieved tangible success and sustained innovation through sophisticated feedback loops is the Mercedes-AMG Petronas Formula One (F1) Team, specifically in its car design with regards to aerodynamic, hydraulic, and dynamometric testing. Through tight-knit collaboration, advanced analytics, and an obsessive desire for improvement, the team is able to optimize its testing time of various car components per FIA regulations in order to create the best race car possible. The more tests the team performs, the more they can measure what’s going right, what’s not, and share that with the broader team to analyze and optimize performance. In F1, monumental improvements are measured by the millisecond, so optimizing the performance of the car is crucial to better outcomes.

How can your business benefit from a feedback loop, even if you’re not a world-renowned motorsport team?

The method the Mercedes-AMG Petronas F1 team uses to test aerodynamic components can easily be translated to other industries: applying speed of learning, quickly analyzing data, and deriving insights to make more informed decisions. Whether you’re optimizing engine performance, product performance, or sales performance; businesses can benefit by taking a closer look at various aspects of their organizations to identify areas for significant improvements, whether it’s reinventing the way their business is done, overhauling their infrastructure and related processes to achieve operational excellence or increasing intimacy with their customer base.

Reinventing the Insurance Business

Insurance provider AA Ireland took the idea of a feedback loop and applied it to the pricing of its services. The company implemented dynamic pricing that uses analytics and machine learning to collect and listen to feedback from the market and change pricing based on that. The feedback loop of dynamic pricing enables insurance providers to rapidly react to market conditions. They can change prices automatically by pricing based on customer attributes like payments, claims, and driving record; policy acceptance/rejection rates; sales campaigns, and digital marketing initiatives. And doing so leads to an increase in customer conversion, reduces churn rates, and attracts new and desirable customers with targeted premium pricing.

Optimizing Operational Processes for Better, Faster Decisions

The implementation of a feedback loop can also enable organizations to innovate with the latest emerging technologies. Invitalia, an agency of the Italian Ministry of Economy and Finance, looked to the feedback loop in process mining technology to improve its business processes across purchasing, fund management, and service desk support. As a result, the agency reduced time and costs by identifying and removing process bottlenecks, ensuring consistent company policy compliance, and improving the performance of fund approval processes.

Understanding Customers Better, In Order to Serve Them Better

Probiotic drink company Yakult implemented a feedback loop using advanced analytics to identify the elements in its marketing mix that were driving a spike in growth, despite more competition entering the space. Applying this knowledge to future marketing budget decisions fueled additional growth. While the company has a limited product line, it was able to gain a competitive advantage by understanding the market better than its competitors.

As you can see, feedback loops come in a variety of forms and don’t only apply to manufacturers. Those in any department in a company and any industry can use feedback loops to foster a culture of collaboration and innovation.
Learn how Mercedes-AMG Petronas F1 handles data to extract insights from aerodynamic, dynamometer, and hydraulic testing to assess and improve the reliability of components for a competitive advantage. Contact us to learn how we can help your organization build a feedback loop that can help reinvent your business, improve your operational efficiency, and bring you closer to your customers.