Roger Martin, Dean of the Rotman School Of Management, University of Toronto, recently released his new book titled, "The Design Of Business - Why Design Thinking Is The Next Competitive Advantage." This book does an excellent job of articulating why innovation in corporations seems to be incredibly difficult and how Design Thinking must co-exist with analytical thinking to lead a business into new opportunities and business growth.
Businesses are organized to be a factory, whether they are product or service- focused. Their objective is to maximize efficiencies and produce the highest profits possible on existing creations. Nearly all of the people hired to join an existing organization have been done so to increase the reliability and consistency of the organization.
Martin writes that the main reason companies find it difficult to realize innovations is that most people in corporations are trained in analytical thinking and focused on reliability and consistency. They are focused on making the "factory" and related processes better, faster, and cheaper to produce existing offerings. Based on this approach, culture and processes become the biggest killers of innovation.
The opposite of reliability is a focus on validity. Martin defines validity as seeking to find the "correct" answer to a complex problem, not the most reliable or predictable, and to find new knowledge that will lead to the development of new markets, new business models, new products, etc. Seeking valid answers to mysteries is the crux of Design Thinking according to the author.
The author's basic proposition is that a "knowledge funnel" exists in all companies which takes a complex problem (a mystery) and drives it down to an algorithm (i..e. a process or formula) that allows the company to maximize profit on existing products or services. The issue that evolves is the people in the company then work to protect the existing, known set of processes and suborn or discontinue the search for new knowledge and finding new customer needs that could be met with new solutions.
The book describes abductive reasoning (i.e. intuitive thinking) and how it needs to balance against inductive and deductive reasoning (i.e. analytical thinking). In order to be a Design Thinking organization, a company needs to balance exploitation of existing offerings and processes against exploration of unmet customer needs in order to both profit from existing intellectual property but also to find new problems to solve that lead to solutions that create new business value.
The goal of reliability is to produce consistent, predictable outcomes by eliminating subjectivity, judgment, and bias. Conversely, the goal of validity is to produce outcomes that meet desired objectives. Over time validity will show that a resulting outcome is correct versus what is consistent.
With a persistent view of the past, business managers look backward to prove something is true or false. Daily work is a series of permanent, continuous tasks to ensure tomorrow is the same as today. The overriding organizational goal is to manage to the highest possible reliability. The key management skills that are built and rewarded are those that achieve reliable outcomes. Finally, rewards and status flow to managers who analyze past results and refine the processes, and senior managers who provide reliable return on investment, revenue and profit.
The author writes that in the long term, a reliability focus fails because of increased risk to cataclysmic events that occur when the future no longer looks like the past and the reliability factors are no longer relevant.
The opposing focus to reliability and decision-making based on past evidence is a future-oriented view. The future is based on "what could possibly be true" and a different set of intuitive and abductive reasoning skill will be needed to make sense of an observation, inferences to the best explanation of unknowns, and wondering why something is occurring. This view is beyond the reach of data from the past.
As managers build their skills and oversee larger and larger operating groups, they will see any move to the future as a threat to their turf.. Their loyalty is to the status quo.
In order to transform the organization to be more future oriented, the author writes that leaders need to think differently about their company's structures, processes, and cultural norms. One key organizational change to be considered is to move the knowledge discovery effort into a project-based structure. Permanent jobs discourage all but most senior people from seeing "big picture" and keep people task-focused on today's issues, with little or no time to focus on the future.
The author defines a set of processes that will give innovation a chance to succeed. These process changes include the way to perceive innovation through new financial planning and reward systems. New processes will need to accommodate exploration and iteration, and reward systems are most meaningful when they are tied directly to company strategy.
At the end of the book, Martin provides guidance on how individuals can develop themselves as design thinkers. In addition to developing a better understanding of one's own personality and working styles, people need a set of tools and experiences to help envision possible future states. The average person finds it very difficult to envision something that does not yet exist.
Tools that are discussed include observation, imagination and configuration. These tools will help a person recognize patterns that others do not see; deal with data that is inconsistent with and does not fit current models; iteration and prototyping; and translating ideas into activity systems that will produce the desired business outcome.
Finally, Martin offers suggestions for working effectively with analytical thinkers. He states there are five key elements to working with analytically focused, historically oriented people:
1. Reframe extreme views as a creative challenge (find creative ways to help others see your valid approach).
2. Empathize with colleagues on the extremes (respect them as a user, their hopes, wishes, worries, drivers).
3. Speak the language of reliability and validity (for reliability, use analogies and use the past as proof. This approach is less threatening, less risky. For validity people, encourage sharing of data and reasoning but not conclusions. They don't want to feel hemmed-in by preconceived notions).
4. Put unfamiliar concepts in familiar terms.
5. When it comes to proof, use size to your advantage (for reliability people, have them bite off small pieces of change. For validity people you need a piece big enough to show the innovation can succeed by developing the right-sized experiment).
In conclusion, this book does not talk about tools and methods of discovery, creativity or prototyping, but rather it defines the type of thinking required to support and balance the requirements of both exploration of future opportunities and exploitation of existing knowledge. This type of thinking, referred to as Design Thinking, is key to advancing new knowledge, new solutions, and increased business value.
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