Design of Business: Why Design Thinking is the Next Competitive Advantage

by Roger L. Martin

To acknowledge that algorithms have their limitation is not to disparage their very real business value. When a business has sufficiently honed its heuristic knowledge and moved it along the knowledge funnel to an algorithm, costs fall and efficiency increases, to the benefit of the organization and its stakeholders. But an organization that defines itself as being primarily or exclusively in the business of running algorithms is taking a high risk, even though highly reliable processes are supposed to eliminate uncertainty. What organizations dedicated to running reliable algorithms often fail to realize is that while they reduce the risk of small variations in their businesses, they increase the risk of cataclysmic events that occur when the future no longer resembles the past and the algorithm is no longer relevant or useful.

A business that is overweighted toward reliability will erect organizational structures, processes, and norms that drive out the pursuit of valid answers to new questions. It fails to balance its pursuit of reliability with the equally important pursuit of validity, leaving it ill-positioned to solve mysteries and move knowledge along the funnel. Such organizations inevitably come to see maintenance of the status quo as an end in itself, short-circuiting their ability to design and redesign themselves continuously.

By implicitly or explicitly focusing on reliability only, organizations deny themselves the immense value that can be unleashed by balancing reliability and validity in a design-thinking organization and expose themselves to the risk of being outflanked by a new entrant. The business that fails to balance reliability and validity will find itself flat-footed when rivals advance knowledge through the funnel.

But why do so many businesses have such a pronounced tilt toward reliability if that tilt does not serve their long-term interest? The short answer is that the modes of reasoning that produce reliable outcomes are familiar to businesspeople from long exposure and experience. The mode of reasoning that produces valid outcomes is sufficiently unfamiliar that it is often seen as no reasoning at all.

In most large business organizations, three forces converge to enshrine reliability and marginalize validity: the demand that an idea be proved before it is implemented, an aversion to bias, and the constraints of time.

Traditionally, a disproportionate number of CEOs have risen through the finance function, where ensuring consistency, control, and predictability are the heart of the task.

The inclination toward reliability is stronger in some parts of the company than others. Typically, the farther the area is from the customer, the greater the reliability bias.

Staff functions like finance, information technology, and human resources are farthest away from the customer, while line functions like sales or manufacturing are closer. Left to their own devices, staff functions can and do run roughshod over validity.

salesperson is the first to know when customers lose their taste for a product or service that has reliably and consistently sold well in the past. Sales will be the first function to argue for a valid proposition, because the reliable one no longer sells.

“Walmart’s strategy is in many ways more simple than ours,” Ulrich said in 2008. “It’s more about price and more about mass quantities. It’s a hell of a competition, but ours is more dependent on innovation, on design, and on quality.” 7

How can the rest of us—who don’t have the ability to reimagine the structures, processes, and norms of the entire organization—do our best to act as design thinkers on our own jobs, even in a culture that seems designed to stamp out all traces of the balance between validity and reliability?

we often take our stance for granted, completely ignoring its impact on our actions and the outcomes they create. We chafe against unsatisfactory outcomes, but rarely go back to explicitly examine how our stance contributed to those outcomes.

If instead you see yourself as a people person, skilled at getting consumers to open up about their needs and desires, you will be inclined to build tools for in-home visits and accumulate experiences talking to consumers.

True skill, it is important to note, does not merely produce the reliable result; it reliably produces the desired result.

taking the stance of the design thinker leads us to strike a balance between validity and reliability by explicitly seeking out validity, not by eliminating reliability altogether.

The first move in that direction may be as simple as reminding yourself, again and again until it becomes second nature: “My job is to balance reliability with validity.”

The key tools of design thinkers are observation, imagination, and configuration. This troika of tools follows consistently from the design-thinking stance.

Now, any phone manufacturer would love to know which five things matter most to young users. But to ask for a ranked list from phone users would be to ask them to do the designers’ jobs for them. Users can and do conceptualize their feelings about their handhelds, but rarely in the form of a top-five list. That list is for the designer to compile—and only after diving deep into the user experience.

The final tool of the design thinker is configuration—translating the idea into an activity system that will produce the desired business outcome. This is essentially the design of a business that will bring the abductively created insight to fruition.

To be a better design thinker, consciously use your experiences to deepen your mastery and nurture your originality.

Integrative thinking is the metaskill of being able to face two (or more) opposing ideas or models and instead of choosing one versus the other, to generate a creative resolution of the tension in the form of a better model, which contains elements of each model but is superior to each (or all).

Design thinking is the application of integrative thinking to the task of resolving the conflict between reliability and validity, between exploitation and exploration, and between analytical thinking and intuitive thinking.

Mastery, whose markers are organization, planning, focus, and repetition, requires repeated experiences in a particular domain. Because masters in their domain have seen particular phenomena before and know what they mean, they don’t have to interpret every sensation or input from scratch as a novice would.

Some contexts don’t reward the repetition, structuring, and planning that are the hallmarks of mastery. Those nonstandard contexts require the creation of a new approach or solution; they require originality. Originality demands a willingness to experiment, spontaneity in response to a novel situation, flexibility to change directions as information dictates, and responsiveness to opportunities as they present themselves, even if they’re unexpected.

Rooted as it is in experimentation, originality openly courts failure. It’s important to become comfortable with the processes of trial and error and iterative prototyping, or you’ll be tempted to focus on the less risky mode of mastery, to the exclusion of originality.

Mastery without originality becomes rote. The master who never tries to think in novel ways keeps seeing the same thing the same way. In this manner, mastery without originality becomes a cul-de-sac. By the same token, originality without mastery ...

Successful design thinkers—at any level of the organization—will devote time and practice to mastering the specific tools and skills associated with their role. They will strive to understand how things work within their system. But, at the same time, they will consciously and explicitly seek out opportunities to try new things and test their boundaries. Just as reliability pushes out validity, an overemphasis on mastery can obliterate considerations of originality. Make a continuing, conscious effort to counteract this tendency by nurturing your originality, even in the...

Since the business world is a reliability-oriented place, in the bulk of organizations most of your colleagues will be reliability-driven analytical thinkers. But the organization also needs validity-driven people to keep the organization from stagnating through overexploitation and underexploration. The problem is that validity-driven people make the reliability-driven folks profoundly nervous. And the reliability-driven folks depress the heck out of the validity-driven folks.

if you want to be a designer of business and an effective rather than frustrated design thinker, you need to become skilled at working productively with reliability-driven analytical thinkers who dominate the hierarchy and the validity-driven intuitive thinkers who are often brought in to “get the organization out of the box.” Otherwise, nothing will get done except that you and those on the two extremes will annoy each other.

There are five things that the design thinker needs to do to be more effective with colleagues at the extremes of the reliability and validity spectrum: (1) reframe extreme views as a creative challenge; (2) empathize with your colleagues on the extremes; (3) learn to speak the languages of both reliability and validity; (4) put unfamilia...

Design thinkers generally love nothing more than a tricky and complicated design challenge. They welcome constraints, which help them define the challenge and push their ideas in unexpected directions. They enjoy the opportunity to advance knowledge to the next stage of the knowledge funnel. However, faced with colleagues at the extremes of reliability or validity, design thinkers often take an unproductive approach. They are inclined to dismiss their analytical colleagues as squares and philistines who can’t appreciate what needs to be done and their intuitive colleagues as flighty and impractical folks who threaten organizational order.

The only way to design a compelling solution is to really understand the user. It’s almost impossible to design something compelling for someone you don’t respect or wish to understand.

In contrast, the effective design thinker empathizes with colleagues who exist at the extremes of analysis and intuition, seeking to achieve deep understanding of their positions and uncover the greatest range of options for a compelling solution. What are the colleague’s greatest hopes? What keeps him or her up at night worrying? What are the minimum acceptable conditions for the colleague to embrace a design solution? How much risk is the colleague willing to absorb? The design thinker can answer these questions with either empathy or disdain.

My mistake was to speak to the CEO in the language of validity, which practically invited him to reject my argument out of hand. Had I had more empathy with my client and understood the language of reliability, I might have responded to his query using an illustrative example. I might have said, “None of our domestic competitors have done this. But a variant of this approach has been used by some of the best-performing European private banks for some time. It isn’t exactly the same, but it bears important similarities. And recall, our bank has succeeded in the past when it has taken an idea from outside our home market and introduced it here.” Bridging the language gap will not eliminate the apparent risk of an idea, but it presents the unfamiliar in a familiar, reliability-oriented framework. An analogy or story helps reliability-driven colleagues see that you are not substantiating your argument based exclusively on future events but in part on past events.

When dealing with intuitive thinkers, on the other hand, design thinkers need to stretch to bite off a piece that is big enough to give innovation a chance. They have to listen to an argument from their validity-seeking colleagues that they will have to realize some significant portion of the whole to know whether the design will in fact work.

In many respects, the advice for getting along is quite generic: appreciate the legitimate differences; empathize; seek to communicate on their terms, not yours, using tools with which they would be familiar; and stretch out of your comfort zone toward those of others. Getting along has never been and will never be rocket science. But the world is full of conflicts, including the uneasy relationship between intuitive thinkers and analytical thinkers, between the forces of validity and reliability.

Developing your design-thinking capabilities is a continuous exercise in balance. The exploration of valid solutions will find its counterweight in the ability to exploit those solutions efficiently. The inner-directed work of developing your stance, tools, and experiences as a design thinker will be integrated with the outer-directed work of communicating and collaborating with colleagues who tilt strongly toward reliability (or, less often, validity). The exciting pursuit of solutions to wicked problems will alternate with the sober calculation of the business value of solving the problem.