The Business of Design Thinking

A guide to implementing design transformation

Apr 16, 2019

One of my life principles is:

Always understand the ‘why’.

Friedrich Nietzsche succinctly said:

He who has a why to live can bear any how.

Design thinking is a method and set of frameworks that facilitate solving problems from first principles*. Design thinking encourages learning, experimentation, and solutions that are based on knowledge.

Design thinking is made up of 3 things that are well-acknowledged and a 4th that gets less recognition:

People: what do they need?
Technology: what can it do for people?
Business: how can 1 & 2 support the success of a company?
Time: devoting time to researching, synthesizing, designing, prototyping, testing, failing, and succeeding is critical.

The Design Management Institute has been measuring the value of design-centric organizations vs. the S&P Index since 2013. During a 10-year span, the Design Management Institute documented a 228% increase in share price* for design-centric companies. Design thinking leads to results.

Obsess About Your Guest

In ecommerce/retail users are sometimes called guests. So when you read guest think user, and while you’re thinking user when reading guest let’s all think person.

Design thinking supports people and makes their jobs to be done easier.

With influence from an article by* Nir Eyal, I believe most organizations can be grouped into 3 categories:

1. No Guest Focus

2. Guest Focused

3. Guest Obsessed

Companies with no focus expect their users to be elastic. These organizations design based on what they think their users need. In turn, their customers must adapt to the assumptions these companies have made.

A large percentage of design-driven companies are guest focused. It’s not a bad place to be and takes a lot of effort to transcend. These organizations use data to understand what their users want and identify unmet needs.

The pinnacle is to be guest obsessed. Inventing the future, designing and delivering things users didn’t even know they needed — and if these solutions were ever taken away, your customers would be distressed. For example, imagine Netflix took away the “Skip Intro” feature.

On one extreme there are companies with no focus that simply copy their competition to limit their investment in design. This strategy makes it hard for users to love these organizations.

On the other end, guest obsessed companies are creating new things, which means less competition.

And of course, if you’re a guest obsessed company that is inventing the future your work will be hard to copy. These new experiences will delight your customers and higher margins will follow.

Build The Right Team

Once an organization has made the decision to embrace design and obsess about its customers, it needs the right team.

A few years ago I had the pleasure of hearing Michael Tasooji speak. He shared the 3 steps he follows to build great teams:

Mr. Tasooji’s message resonated deeply with me. At the time, I was building teams in the reverse order. I was starting with people who were amazing at what they did, and if I’m being honest, I wasn’t experienced enough to think about the concept of a shared philosophy.

Lately, I’ve been relating the construction and coordination of effective teams to physics. Specifically the transformation of inertia to momentum to velocity. Starting with people who share your philosophy ensures that initial inertia translates to velocity.

This illustration is influenced by Greg McKeown’s book Essentialism*.

In my experience (influenced by “INSPIRED: How to Create Tech Products Customers Love*” by Marty Cagan), a team set up to succeed consists of the following:

If you recall the definition of design thinking stated above, the above team has people, technology, and business well represented.

Building teams is challenging, finding the right people, learning who’s good at what, what lights them up … it’s amazing. I love building world-class teams. The following from Jim Collins’ “Good To Great*” has stuck with me:

World-class teams are made of experts turned big-picture generalists, constant learners, and collaborative co-creators. These people are not common so figuring out your team, who should be there, who may not be right — it’s the hard part but once you have the right people you can then have confidence in your mission.

Ask The Right Questions

There are many great frameworks to ensure your organization is asking the right questions. Identifying first principles and “The 5 Whys” referenced earlier are very effective options.

McKinsey & Company goes in-depth on the topic of questioning the core of your business in Introducing The Next-Generation Operating Model*.

Organizations need to be asking BIG questions. Asking these questions often, assessing the answers, and asking customers as well as internal stakeholders. By ensuring all relevant parties are consulted organizations can limit their blindspots.

As you can see with questions like “How do we link guest experience to operational improvements?” embedding design at the core of your organization will enable maximum impact.

Make Space For Design Thinking

There are many tools in the design thinking toolbox:

Choosing the most effective framework for the problem is essential

If the only tool you have is hammer, you tend to see every problem as a nail

Design sprints are an effective way to assemble a cross-functional team and focus on your guest. I’ve been using the following modified design sprint timeline with effective results:

The group should consist of 5–6 people and a facilitator. Everyone has to be in the same space for 3 days and committed to being present (not distracted) while involved. 2 days are spent distancing the group from “solutions thinking” to identifying what matters, with a focus on the user.

Tip: prior to day 01 of the design sprint meet with key stakeholders and/or executive leadership to align on the problem space to focus on.

I love the way Blair Enns words this question, it humanizes the discussion about the ideal future-state of the product/service/experience. “What’s happened that’s made us so happy?” will elicit emotional (qualitative) as well as factual (quantitative) responses.

After about 45 minutes of mind-mapped conversation, a long-term goal will materialize. I describe the long-term goal as more proverb than a paragraph, think:

Where there’s smoke there’s fire

An effective long-term goal says a lot with few words.

Once a long-term goal is agreed upon, the group can start listing everything needed to achieve it. This typically happens linearly from current-state to future-state.

As Charlie Munger says, “invert, invert, INVERT!” Inversion is an excellent mental model for identifying fail points. Start from the future-state, remember all the things you identified that made you so happy, and work your way back to current-state. List anything that would cause your initiative to fail.

If you’re lucky, what has to be true can be overlaid sequentially with what would cause us to fail and a start of a road map of things to do and watch out for is developed.

Preparation is important for a successful design sprint but having the right people committed to making the time, to engage, and be present is paramount. Here are some things that are helpful in advance of a design sprint and a few outputs you can expect:

Deploy, Measure, Iterate

Product designers are regularly comfortable shipping a product, design, feature, etc. much earlier than business stakeholders. We want to get something in our users’ hands, observe and iterate quickly — ensuring our work is human-centred. The above quote from Reid Hoffman may be a bit aggressive for companies outside of Silicon Valley but organizations should listen. It’s common for the business to let perfect get in the way of great and, in the time wasted not getting user feedback, a more sophisticated business is first to market. First to market definitely isn’t everything, as someone once said to me,

It’s better to be first best, than first.

I agree and examples like the iPhone, Netflix, and Casper prove this. To become the first best, an organization needs to adopt the Minimum Valuable Product philosophy. I’m sure many reading this are thinking, “uh oh, typo — it’s minimum viable product not valuable.” It’s not a typo.

Minimum Viable Product means it works but kind of sucks. Design thinking practices result in a small percentage more effort to create a Minimum Valuable Product that users will love.

The well-loved and accepted example of skateboard, bike, car* does the best job communicating the benefit of minimum valuable product design. The goal of most products is to get from A (current-state) to B (future-state). Delivering products that achieve this goal iteratively increases the success rate dramatically. For example, getting from A to B using the first example takes a long time before any information is collected. Organizations taking this approach can’t test or validate their hypotheses until the end because getting from A to B isn’t possible until the final product is completed. In this example, a poor assumption, or even a decent one that has an unexpected outcome, can be very expensive.

The second example shows the value of iterating from skateboard to bike to car. A skateboard can go from A to B while the organization learns from this early product. If the product isn’t meeting guest needs then the team can iterate and design a more effective option based on guest input: a bike. A bike may be all your guest needs and they could be thrilled with the solution. In this case, which is common, there is now time and budget to devote to innovation — inventing the future and building things your guest doesn’t even know they want yet.

Another principle I live by is

Better is always better

Through running businesses and my career in experience design I’ve heard ‘no’ and have been proven wrong a lot. These experiences have developed my emotional intelligence, positively affected my ego, and given me confidence in what I do. As such, I’m always open to a better option.

A/B testing is an excellent way to allow users to signal what ‘better’ looks like to them. Developing hypotheses to disprove (rather than the common error of trying to prove your hypos) and testing into what performs best ensures you’re creating guest obsessed experiences.

In this simple example we’d be testing the colour of a CTA, then the position, and finally if supplementary information has a positive effect on performance. Of course, this is an extremely rudimentary example and I’m sure the data science community is having a good laugh but I’m sure the point is clear.

I first came across the quote

If you can’t measure it, it doesn’t exist

in a TED Talk by Brene Brown*. It’s amazing, as much of Brene Brown’s output tends to be. Determining what should be measured, what an organization can do with the collected data, and setting up the data collection in advance is part of the design process.

As someone who loves qualitative data, I must also share

Not everything that counts can be counted, and not everything that can be counted counts.

Quantitative and qualitative data must be collected and synthesized for a complete understanding of what’s going on. Often what people say and what people do are in conflict and only by using all data sources available, even the mushy qualitative ones, will your team be able to get a complete view of your users and what your organization can do for them.

Design Thinking Is Good For Business

A common complaint about design thinking is that it’s theoretical and nothing gets done. Referencing the list of design-centric companies shared above, there are no companies that are just doing, doing, doing. Apple, Nike, Starbucks, and Herman Miller are all thinking then doing. Companies that come to mind that did not think before doing are Blockbuster, Columbia House, Sears, and Kodak — all no longer in business.

McKinsey & Company tracked 300 publicly listed companies over 5 years and developed a report on The Business Value Of Design*. The following are few results I found interesting.

Known as the McKinsey Design Index (MDI)* the dataset proves that design-centric companies are outperforming their competition in terms of revenue growth by as much as two to one.

Digging into the numbers, it shows that companies ranking in the top quartile, those most embracing design thinking and positioning the concept at the heart of their organizations are achieving the best financial results.

Shareholders are happy as well.

Interestingly, when taking a closer look at Total Revenue Per Share it’s the top quartile of companies that are separating from the pack. This 5% jump proves that focusing on design thinking and integrating design into the core of a business is a key differentiator that leads to financial gain.

InVision conducted a study of over 2000 companies in 77 countries resulting in a report titled The New Frontiers Of Design*. It’s a 40-page must-read. The above stat

Only two-thirds of companies integrate design into every step of product decision making

is astounding. Observe “Design has joint working sessions with key partners” at just 52% and “Employees participate in the design process” at 51% then compare those numbers with the 10-year increase in share value from the Design Management Institute Study* and it points to a huge opportunity. What else can one point to that results in a 228% increase in share value that only 50% of your competition is doing?

Checklist For A Design Thinking Transformation

Design thinking ensures that organizations identify what users value, prioritize their most valuable user journeys, and build the right things.

To recap we defined design thinking as a human-centred approach to innovation. We discussed the 3 categories organizations can be grouped into ranging from no guest focus to guest obsessed. Then we outlined how to build a world-class team. Next, we reviewed the value of asking BIG questions. Then the hard part, making time for design thinking with a quick overview of a design sprint, and digging into formulating a long-term goal. Followed by pointing out how perfection can get in the way of great products your users will love. We ended by grounding this approach in numbers that prove design thinking leads to financial gains.

Digital transformation with a focus on design takes commitment and is highly achievable if you follow the steps: