As companies experiment with new concepts such as design thinking, we are often asked how to approach innovation, when to use a design sprint, how it relates to the traditional strategy formulation process, does it mean that we should drop previous strategy-making tools?
While I am definitely not a strategy guru, the years of working at McKinsey did provide me a sneak peek into a few examples on how business lines and product strategies are created in industries like banking and telco across Europe. I find this experience extremely useful to bridge the gap between the ‘old way’ and the ‘new, innovative way’, especially when talking to mid and top management.
Design thinking is mindset and processes used to when we discover or validate a problem, or validate a solution concept via a user-centered problem-solving approach. But there is no definite endpoint and hard to time-box the process. That is why design thinking is often challenged due to its non-linear nature, as many find it confusing or ad-hoc. Design thinking argues for deriving the product strategy from customer needs instead of being fixated on internal goals or simply copying what’s already on the market. To put it simply, it makes a case that this is how innovation can be unleashed.
A substantial mindset change of design thinking is that it doesn’t promise a final blueprint but rather a first iteration with answers to the most important questions that can shape the strategy. To get to a detailed product concept with clear value proposition, a validated prototype and a list of backlog features might take multiple design sprints. (If you are unfamiliar with the design sprint concept, check out this post.) E.g., when we were working with a German telco, we have run multiple (around 4-5) design sprints, further and further detailing the product concept before launching the agile development sprints to implement the solution. And even then, in dual-tracks, in parallel with the development sprints, the team ran design sprints to boost and clarify the backlog items. The learnings from the development team were also fed back in to the design sprints. It is critical to clarify this iterative nature for your stakeholders before starting your design sprint, otherwise they might not be satisfied with the outcome. Your “strategy” is never done, it’s constantly shaping and reshaping.
In my opinion, that is why design thinking fits perfectly into a business unit’s or department’s strategy making process. If we simplify strategy, we can capture three key aspects: customers (i.e. market opportunity), competitors (what others are doing, what part of the market is underserved) and the company itself (our strengths and the trade-offs we consciously make). Understanding customers helps with what design thinking calls desirability, understanding the competitive landscape helps with viability, and understanding our capabilities helps with feasibility.
Sounds promising, but how is it possible to integrate this innovative approach into a large company’s strategy making process?
Let’s see a couple of design sprint examples (often referred to the 5-day process developed by Google Ventures to tackle an important, complex problem by a focused effort of a cross-functional team, developing a validated concept and make quick decisions before starting implementation:
- Design sprint aims to provide an 80/20 directional answer to a strategic question (e.g., how can we create a more insightful segmentation that leads to more relevant campaigns) by uncovering key customer insights and testing critical assumptions
- Starting with a short customer and problem discovery (day 1 of the sprint), it enables the business line to take a step back from the daily operations and identify what are the key problems their product needs to solve
- In the idea generation phase (day 2), while activating and exploiting the team’s creative potential, we also review the offering of competitors as well as other industries
- When prioritizing potential ideas (day 3), we bring in the key aspects and decision criteria from the traditional strategy process
o What’s the effort and investment need
o When to expect the initial impact (following the ‘cost of delay’ concept, ideas with smaller potential but shorter time to market might be prioritized)
o How it links to the company’s overall strategic directions, current strategic position and execution strengths
- When designing the concept in more detail (day 4), getting back to the competitive landscape can help us build better propositions
o What the best practices are
o What we should avoid
o How to differentiate ourselves
Are we going to use a totally new methodology when starting with design thinking?
Applying design thinking at corporations is still a new frontier and, in many aspects, it’s in the experimentation phase. What is clear is that design thinking has immense value for strategy formulation, if combined with (not replaced) traditional management techniques:
- Global management consulting firms are injecting design thinking to supplement the battle-tested, hypothesis-driven problem solving method
- Marketing experts are discussing how to best combine quantitative toolkits such as quantified marketing research or A/B testing with design’s qualitative customer discovery and idea validation process
Similarly, cross-functional teams with data scientists and design experts explore the benefits of working together. I.e. data science can discover patterns otherwise impossible to see, while designers can help understand the ‘whys’ behind the patterns. This topic is also touched by this McKinsey article.
So, is it more about operative implementation or more about high-level strategy?
As Design Thinking is a mindset rather than a tool or process, we see huge value applying it in both situations and the line anyway can be blurry. E.g.
- defining “how to make the internal capability building programs more efficient and what initiatives to prioritize” might create a strategic roadmap for the next two years of a 40-member regional training department, can seem relatively tactical for the entire global firm of 20,000 employees. Nevertheless, the fact that a department whose sole focus historically was delivering better trainings is now considering the overall experience and learning journey of employees, and launching initiatives tackling pre- and post-training touchpoints to increase the consciousness of employees, is a rather strategic shift;
- similarly, a telco company’s retail offering squad managing campaigns, rethinking the traditional age, sex and earnings based segmentation model to customer behavior and life-goal triggered decision-making based campaigning to create more impactful advertisements is a severe change in approach;
- or the B2C tool manufacturer who initially wanted to launch an add-on online service business to generate additional revenue streams, realizing that making a profitable business with the proposition might be tricky in the selected space, but the idea might generate a larger impact by building closer ties to its end-users.
How does implementing design thinking at your company go? We would love to hear your stories, insights or struggles around the strategic application of design thinking. Looking forward to hearing from you at hello@educate.business.
Written by Dániel Nőthig, cofounder at edUcate, former McKinsey consultant, Columbia Business School MBA