Strategic and Creative - the power of design methods
Sam Pinchen recently graduated with a Bachelor of Business from UTS, majoring in Management and sub-majoring in Finance and Marketing. In his final year he completed an Honours in Management, writing a thesis under the supervision of Dr Jochen Schweitzer focusing on the strategic use of design thinking within Australian companies. In his thesis project Sam investigated the creative and strategic decision making processes within firms that had adopted a design thinking approach to strategic innovation. The study’s objective was to lay the grounds for the development of a management tool that would allow firms to assess the extent to which design thinking capabilities are present.
From a theoretical perspective Sam used the dynamic capability literature to explain how the organizational capacity of design thinking can effectively enable strategic innovation and help an organization adapt to rapidly changing market environments. In his study he utilised qualitative methodologies to develop a deep understanding of strategic organisational processes and was able to confirm key routines and aspects of a the strategic design process, which would qualify as dynamic strategic capabilities and may act as a basis for further scale development and measurement of design thinking capability within firms.
Sam was awarded 1st class honours. Here's a summary of his work ...
It is no secret that Australia’s continued reliance upon a weakening commodities market puts its economy in a treacherous position. As has been recently suggested on The Conversation and elsewhere, Australian industry’s ability to innovate will be the most critical factor for improving the productivity, growth and competitiveness of the Australian economy. However, recent budget cuts may complicate the ability to improve the innovative capacity of the Australian economy. While the 2014 GII rankings suggest Australia is doing well at 17, a significant and continued improvement will be vital to sustaining growth in the Australian economy.
How to innovate remains a pressing concern for executives and managers, who are confronted by increasingly dynamic, globalised environments, and significantly shortened strategic lifecycles. Shortened lifecycles mean ‘just staying in the game’, let alone a ‘sustainable’ competitive advantage, isn’t as achievable simply through the accumulation of new, valuable and inimitable resources alone. Firms are now faced with the difficulty of routinely and strategically adapting and improving their resources to suit changing environmental constraints. But, how organisations can regularly achieve advantage remains a challenging task for organisations.
In the past organisations have attempted to achieve innovation in isolation, but an increasingly globalised society has made competition increasingly formidable and nimble. This has meant that firm’s must now find different methods of dealing with fast paced and agile competition.
In the US and Europe design thinking has been successfully implemented at the strategic level for over a decade. It first emerged with the success of innovation firms like IDEO in the early 2000’s and has since been the driving force behind the innovative capacity of large foreign firms. For instance, P&G, for the better part of a decade, have been utilising design thinking through their Clay Street teams to solve all of P&G’s most complex and pressing business problems. A.G. Lafley in his book The Game-Changer, credits the success of P&G in creating new markets to the abductive design approach to business. Now Australian organisations are also beginning to utilise a design-led approach not just to product and service innovation but business strategy itself.
Design thinking or a design approach, succinctly, represents an integrative approach to strategy, seeking to join thought with action or, more specifically, combining the creative and gut approach to management with the analytical, scientific approach. When the design process is applied at the strategic level, it provides all the necessary routines required to enable organisations to adapt and maintain competitiveness within dynamic environments. As a process this seeks to creatively open the organisation to broader and more diverse perspectives and opportunities, before analytically converging toward feasible, viable and concrete strategic options.
Strategic potential
Organisations that routinely and successfully find ways to adapt to changing market places sense opportunities, develop new business models for these opportunities and then reconfigure the organisation’s physical resources to implement those models. We recently interviewed eight current innovation managers at six different, Australian firms, who are implementing strategic design processes. Through these interviews we developed a deep understanding of their strategic design processes and methodologies, and how these processes integrate creative and analytical methodologies to handle complex business problems, and ultimately define strategies that enable the generation of competitive advantages.
While design thinking processes are by no means linear, we found that the initial phases of a design approach act to sense and shape potential opportunities for the organisation. Early framing and re-framing routines seek to involve diverse organisational stakeholders in the articulation and definition of business scope. In doing so, siloed organisational knowledge is filtered into the strategic design project, enabling the discovery of key issues facing the organisation’s external and internal environments in addition to engendering a broader understanding of the business on a strategic level.
For example, one of the study participants stated that framing tries to get to the real root of what the firm is trying to do and for what purpose. They further elaborated that one firm suggested that their advice to customers was broken and needed improvement. However, after going through the framing process unearthed that advice wasn’t broken, but rather that the communication of advice to make more revenue was the real issue. This shift in focus opened up the process to not just looking at the advice, but broadening the search to include ways to communicate advice.
The strategic design process then typically undertakes customer or “user” research that, while not limited to, particularly focuses on the ethnographic study of the target customers and/or users, and developing a deep understanding of their latent demands. Design practitioners stress that it is vital to take an open and empathic mental approach to this discovering phase so that they can accumulate a large amount of data and immerse themselves within the user perspective.
Once information is accumulated the organisation must be able to shape the large amount of data into a meaningful and actionable opportunity. To do this, design processes go through various forms of data synthesis. Synthesising, through creative and design methods, acts to distil, analyse and shape data into a meaningful new opportunity from which the organisation may achieve competitive advantage. This process can be greatly supported by insights that derive from analysing so called “big data”.
Opening up
From framing and re-framing the scope through to the synthesis of data you see the integrative capacity of the design approach. The process creatively opens up organisations to new information and mindsets, and then analyses data to get an actionable opportunity, e.g. a new market, an unmet need, an underutilised product feature or a new strategic partnership.
The next steps typically include ideating, prototyping and testing. We found that through these phases organisations develop business models capable of seizing the opportunity that was shaped in the previous phases.
Ideating strategic options is an inherently creative and divergent activity in which managers seek to generate many diverse ideas capable of addressing the opportunity. Prototyping and testing involves the development of tangible, solution models, which can be placed in the hands of customers and stakeholders. Through customer interaction and testing of these prototypes, the prototypes enable refinement, validation or disconfirmation of hypothesised business solutions. Further, testing also involves the examination of the viability and feasibility of solutions. Thus, prototyping and testing serve to align customer needs with business needs and capabilities. This demonstrates the integrative capacity of design, moving from diverse idea search to an analytical convergence upon feasibility and viability.
Finally, the strategic design professionals involved in our study revealed that stakeholder engagement throughout and the communication of knowledge gained from each phase were very important facets of the design process. When done well, these aspects serve to facilitate the efficient and effective reconfiguration of the organisation in line with the desired strategic state. This means that design processes incorporate all the necessary routines required to sense new opportunities, develop the business model capable of seizing them, and facilitate the reconfiguration of organisational resources to achieve new business models.
Some Australian firms are beginning to realise the value that design can deliver and have already begun adopting and implementing design initiatives within their organisations. For instance the extreme rate of change in the financial services and banking sector has meant that firms, such as Commonwealth Bank and Westpac, have been utilising design methods for a number of years in order to innovative and remain competitive. Consultancies, such as PwC, Accenture, Deloitte, and recently the Boston Consulting Group have also picked up on the advantages of adding design capabilities to their service range.
Design’s ability to move from creative to analytical management methods combines the historically exclusive styles of management. In doing so, design methods provide organisations with a new way of dealing with complex and ambiguous strategic problems. With the dire need for the Australian economy to move away from its reliance upon investment and commodities, design methods present a way to innovate and reinvigorate other areas of Australia’s economy.
