The process of creating an outstanding balance for your business through design thinking
(based on the book "The Design of Business" by Roger Martin)
Auguste Comte said "know yourself to improve yourself". If you want to have your own business and explore the tool of innovation strategies, first you have to look at what you want to know, define what you want to achieve and as consequence you find out how to get where you want to be.
According to Roger Martin in "The Design of Business" there are three kinds of logic: analytical thinking, intuitive reasoning and design thinking. Analytical thinking (deductive reasoning, inductive reasoning) illustrates a systematic repeated process in which, the logical performance is based on deductive certainties. Intuitive reasoning is the opposite of analytical reasoning where originality and invention take place in an abstract form that often leads to innovative approaches. Design thinking is a term that became used around 2007 through the Roger Martin's book "The Opposable Mind: How Successful Leaders Win Through Integrative Thinking". Later on in 2008, the design thinking methodology gained a more broadened approach through an article from Harvard Business Review written by Tim Brown (IDEO). Design thinking has been used by firms to enhance the innovative knowledge approach, especially if you want your company to create a market advantage.
Martin's book "The Design of Business" demonstrates how organizations can also be deeply emerged into analysis reasoning and develop powerful innovation capacities through design thinking. The model known as knowledge funnel is divided into three main parts: mystery, heuristic and algorithm. Mystery is what drives our discoveries, what is behind the curtain of tangible understandings. What keeps the researcher up all night trying to figure out how certain mechanisms to work or how designers question a service effectiveness. After figuring out what range of the mystery is going to be explored you begin to find not a complete understanding but, a distinct sense of what was previously seen an unresolved wicked problem. The next step is called the heuristic process. Heuristic is a Greek word meaning find or discover. In the case of a company, the research findings from this exploration are clustered into intangible possibilities that, enables opportunities to find and learn future insights. After this triangulation process you begin to simplify and structure the algorithm for this riddle. Martin provides us the example of the McDonalds knowledge funnel where the Kroc brothers notice a mystery: "middle class wanted to eat out-of-home", a heuristic approach: quick service restaurant experience and an algorithm: a system approach to make hamburgers in the fastest and profitable way. Another example of that is not directly involved in companies but can be also a way of going through a knowledge funnel is the mystery of “travel”. Travel has always been a curious process that some people relate to a self-experience exploration. First you get into the unknown courage to see things from another perspective (mystery), then you realize that there's this culture you are very curious about that you want to explore, so you begin to search about the possibilities to understand what it is about. The algorithm for this process would be to systemize your trip with a schedule of time, the places you'll go sightseeing, what you will eat and the overnight establishment.
Intuitive thinking is part of the heuristic process in the knowledge funnel it’s ability to understand something immediately, without the need for conscious reasoning. This way of thinking can also be in the form of an insight, which is the capacity to gain an accurate and deep intuitive understanding of a person or thing.
There are two main terminologies notions that are used in design business approach. Validity and reliability. Reliability is referred to when you have found the offering algorithm from past experiences, you build a more reliable strategy because you can replicated it once you can rely on the knowledge from tangible references. Sharing your marketing profit with the stakeholders than they can rely on your offering. Validity is based on your abductive reasoning from your subject matter leading to a new insight based in a design thinking strategy. This is an intangible approach but it's based on tangible present facts that induct future possibilities. It's not something that stakeholders can predict and overlook, so when it comes to invest on the offering, the business perspective most of the time is rejected because there is no reliability that the offering is going to be profitable. The ideal scenario would be when the offering matches the systematics specifications fulfilling the consumer’s needs. The final outcome is a balance between validity and reliability.
Once you make your offering a tangible and profitable algorithm you can improve your future strategies developing new ways to solve long and short term circumstances. Once you have a reliability-driven process, the company's financial planning can be solved for immediate short term measures. The long term measures have to be based upon the balance between the reliability and validity. There is also the fact that once you structure what is needed for the problem to be solved (short term or long), the process gains speed to resolve it and a reward system is created. The company achieve a high scale of profit and market share value. Martin also refers to organizations relying on reliability-based reasoning and describes three forces that prove that reliability is used more than validity. The first one is preponderance of training in analytical thinking where analytical thinking is present in our society logically and morally superior to abductive logic. The second one is reliability orientation of key stakeholders where directors and capital markets expect earnings to be displayed. In Martin's word: "all that matter is what can be measured". The third one is ease of defending reliability vs. validity. Having empirical data to support your offering makes it believable but also when the situation implies bringing another brand new perspective to the table that has not seen before, the corporate market is not prepared to take it in. Not only did they need training for these design thinking approach but also there has to be an intermediate language between stakeholders and design thinkers.
Most successful firms emerged from an original breakthrough idea. Amazon, Coca-Cola Company and Starbucks are examples of innovative implementation approaches with short term improvements. Amazon found a niche in the virtual buying web world that supplies consumers’ needs in a way that you use as reference for price range (including books, utilities and electronics), feedback from consumers to consumers and most recently, Amazon Prime services, where you have your personal deliveries in less than 24 hours. The Coca-Cola Company has proved many times its effectiveness by branding their core values in immersive publicity approaches, that includes when they saw an opportunity for light coke, also when there was a flavor addition to the product (vanilla and cherry coke) and now going in an organic trend, they made Coca-Cola life (organic sugar). Starbucks not only changed the consumer's behavior of drinking coffee to be an experience but also states a specific language for drinking their coffee. Their offerings involve social causes (how sustainable they are in their process), seasonal packaging and flavor (pumpkin season special, Christmas special red cup) and also their brand extensions such as personalized water bottles and coffee.
On the other hand, there are companies that have been stuck in their own knowledge funnel and have been going in loops causing negative consequences for their brands. Luxury fashion brands such as Michael Kors and Ralph Lauren, have suffered from lack of loyalty due to the fact they over used their algorithm formula. The consumers that were from the beginning related to their brands, no longer do because those brands now can be found anywhere at any price range. As a result, these are companies decreasing their market value and consequently their sales profit.
All in all, Martin along with other design thinkers mentioned above, prove that if you understand and carefully design a business approach balancing reliability with validity through design thinking, you might have a good chance to build an innovative approach with a unique market offering.
Images Credits: Google
Special thanks to: Erica Corso
Brown, Tim, Design Thinking (2008) Harvard Business Review
CNN Money, Michael Kors and Ralph Lauren facing retail problems: http://money.cnn.com/2015/02/05/investing/kors-ralph-lauren-retail-problems/
Martin, Roger (2009) The Design of Business, Harvard Business Press