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Design-thinking firms stand apart in their willingness to engage in the task of continuously redesigning their business. They do so with an eye to creating advances in both innovation and efficiency—the combination that produces the most powerful competitive edge.
design thinking
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the value that business leaders place on innovation is reflected in the wealth of resources that they devote to its pursuit. But in all too many cases,
innovation
With determined leadership, they can develop the skills, structures, and processes that generate value by driving valuable insights along the knowledge funnel.
leadership
Algorithms are certified production processes. They guarantee that, in the absence of intervention or complete anomaly, following the sequence of steps they embody will produce a particular result.
organization that creates value across the knowledge funnel—requires two very different activities: moving across the knowledge stages of the funnel from mystery to heuristic and heuristic to algorithm and operating within each knowledge stage of the funnel by honing and refining an existing heuristic or algorithm. We can map these two different activities onto the theories
knowledge funnel
management theorist James March,
book
exploitation will exhaust itself in due course. It can’t keep exploiting the same piece of knowledge forever. If it tries to do so, the cost to the business can be devastating.
expire
funnel, a company can avoid being blindsided, as McDonald’s was by Subway. Only when McDonald’s began to explore new approaches to satisfying the consumers’ changing desires did it start to climb out of its trough.
changing customers
They become design-thinking businesses.
design thinking business
intuitive thinking, the design thinker uses an explicit form of logic and a process that, while less certain and clear than analytical thinking, has promise for producing advances with greater consistency and replicability than pure intuition.
design thinker
design thinker therefore enables the organization to balance exploration and exploitation, invention of business and administration of business, and originality and mastery. Design thinking powers the design of business, the directed
design
movement of a business through the knowledge funnel from mystery to heuristic to algorithm and then the utilization of the resulting efficiencies to tackle the next mystery and the next and the next. The velocity of movement through the knowledge funnel, powered by design thinking, is the most powerful formula for competitive advantage in the twenty-first century.
competitive advantage
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.
The longer-term effect of the capital markets’ preference for remaining at the same knowledge stage is stagnation. At some point, exploitation activities will run out of steam, and the company will be outflanked by competitors taking more exploratory approaches. Earnings will stop growing or even decline, and the analysts will savage the company for its lack of innovation. As James March points out, “An organization that engages exclusively in exploitation will ordinarily suffer from obsolescence.”
Companies that balance exploitation with exploration, reliability with validity, and refinement with innovation will find themselves targets of heavy criticism from analysts. These analysts think they are being constructive. They’re not. They’re discouraging the very activity—moving knowledge through the funnel faster than competitors, driving down costs of current activities, and freeing up time and capital to engage in new activities—that creates enduring competitive advantage.
organization, personal success is achieved by running existing heuristics and algorithms.
Product design, he says, “has to push the envelope to the point where it seems like you’re making a mistake.” He argues that you have to strive to make a leap far beyond what is possible at the moment. “It has to be audacious from a technical point of view,”
RIM took its first big mystery—how to provide wireless e-mail to corporate users—and drove it to a heuristic—the first primitive BlackBerry. RIM then drove that heuristic to an algorithm, serving corporate customers around the world through its carrier partners and its own proprietary network.
By watching his competitors, Lazaridis had learned the danger of resting comfortably on existing heuristics and algorithms. “Motorola lost because it didn’t embrace the future,”
Motorola had stopped thinking like a designer.
Brown of IDEO has written that design thinking is “a discipline that uses the designer’s sensibility and methods to match people’s needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity.”
Deductive logic—the logic of what must be—reasons from the general to the specific.
Inductive logic—the logic of what is operative—reasons from the specific to the general.
Charles Sanders Peirce. Peirce
mind.” New ideas arose when a thinker observed data (or even a single data point) that didn’t fit with the existing model or models.
show, you walk around and you will find a lot of technology for which there is no problem that exists,” he says. “It’s like, ‘Hey, look at this, we’ve got a great solution and there is no problem to solve here.’
failure of abduction. “It had no future,” he argues. “What problem did it solve? What value did it create?
In order to advance knowledge, the design thinker has to get comfortable delving into the mystery, trying to see new things or to see things in a new way.
The design activity is based upon an understanding of the intrinsic principle of a given problem and its solution.
boards of directors really want? Not if they want a vibrant, growing company. A vibrant, growing company makes discoveries that help it get into new businesses or markets, or help it stay ahead of competitors; it continually reinvents itself.
knowledge through the knowledge funnel. In the long run, though, reliability-focused companies grow stagnant and fall prey to new competitors, despite the benefits of incumbency.
business needs to think differently about three elements of its organization: its structures, its processes, and its cultural norms.
On the other hand, running a supply chain, building a forecasting model, and compiling the financials are functions best left to people who work in fixed roles with permanent tasks, people more adept at describing “my responsibilities” than “our responsibilities.”
Google that looks like a normal company (sales, marketing, operations) is run like a normal company, but the part that defines what the customer sees and experiences (software coding and engineering) feels more like a design shop, free from top-down control.
“Constraints are opportunities,” says Sohrab Vossoughi of Ziba Design. “They force you to be creative. They focus your attention and clarify your thinking.”
executives like my quantitatively minded client, there’s something flaky, irresponsible, untidy, and presumptuous about abductive reasoning. Chapter 7 addresses this misconception, which is something most corporations will never do. It will help you develop your own design-thinking capability by viewing your day-to-day work as a seminar in design thinking and in the forces that discourage
they are slow to reward or even recognize achievements in validity and quick to punish shortfalls in reliability. These stern guardians of reliability are stock market analysts and boards of directors. Stock market
validity, and most analysts can measure only reliability. And in the mind of the analyst, all that matters is what can be measured.
committed management team to ignore the games played by analysts, a game whose object is to cram an entire universe of information, not all of it coldly quantitative, into the procrustean bed of an earnings model.
corporate settings, it is much easier to defend analytical thinking and reliability than it is to defend design thinking and validity.
They are not prepared to evaluate an alternative viewpoint that proceeds not from the basis of what was, but what could be. Such a way of thinking appears fuzzy, dreamy, and more suited to an idealistic undergraduate than a seasoned veteran of the real world. But if a corporation is to bring anything new into the world, it will have to cultivate respect for the sort of logical leap that brought the Aeron into a world that had never seen anything like it.
boards, and investors. To overcome those challenges, it needs to build in structures and processes that foster, support, and reward a culture of design thinking.
knotty problem, they want to come to work every day. A tough design challenge could be one of the best retention tools a company today has for its best innovators.”
Organization IN THE EARLY 1980S, in a town near Quebec City, a high-school
Their ethos is to do meaningful work. John Maeda
along all three dimensions: stance, tools, and experiences. It generates a self-reinforcing spiral that values validity and exploration; it develops the stance, tools, and experiences that make a design thinker capable of designing new ways of doing business and new businesses. Rather than perpetuating the past, the design thinker creates the future. “Which project is my favorite?” asks the brilliant Sohrab Vossoughi, founder
that the world they live in substantially favors reliability over validity, consistency over innovation. They also recognize that honing and refining knowledge within the confines of its current stage in the knowledge funnel is what the world most readily permits and consistently rewards—and that exploitation is essential to a well-performing enterprise.
Design is not art; it is about pragmatic compromise rather than perfection.
Behind the apparent chaos is discipline. It just appears as chaos because the calculus is different than that of other disciplines.”
“My job is to balance reliability with validity.”
