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Design thinking as an approach to strategy

Despite better access to data on the customers, companies are lacking customer insight and struggle to manage the increasing complexity. They work with structures that no longer fit into a global and digitised environment with changing demands, and consequently companies must reinvent themselves. Thus, companies need business processes to reduce and manage complexity as well as new ways of approaching product and service design and the way they do strategy.

Design thinking offers an approach to managing the increased complexity while simultaneously applying a human-centric creative process, to build meaningful and effective solutions. Which – strange as it may sound – is not always the case when companies design products, plan their strategy or do business in general. Often, companies look at what is technologically feasible or economically viable before they look at what the customers need or want. They get so focused on running and optimising their own business from an inside-out perspective that, along the way, they lose track of their customers’ continuously developing needs. A dynamic that can leave them with a theoretically great offering which the company has spent a great deal of time on developing and fine-tuning, but which no one really wants or needs anymore.

Design thinking starts with the customer’s needs and brings together what is desirable from a human point of view with what is technologically feasible and economically viable. This will help create insights into the unmet needs of the target audience and very likely also lead to innovation. After all, if the customer does not see the value of your offering, it no longer matters much if it works technically, or if it (in theory) would be a great business model for you.

Source: IDEO

Design thinking is about finding the right balance between analytical and intuitive thinking

When trying to design for the future, the experience often is, that we rely too much on analytical thinking, which merely refines current knowledge and provides small improvements to the status quo, as we focus on existing and replicable data. This increases the reliability of the underlying solutions within the strategic choices but lacks real-life and end-customer validation.

The foundation of analytical thinking comes from:

  • Inductive reasoning
  • Deductive reasoning

The opposing school of thought – intuitive thinking – is built around creativity. The idea is to increase the validityof a given option, where value is achieved as a prediction of something that will turn out to be true in the future.

In this approach, we focus on knowing without reasoning and exploring new knowledge and what might be. Intuitive thinking is unreliable, not replicable and unquantifiable, which companies often experience as too risky or unpredictable and thereby incompatible with their current business model.

The foundation of intuitive thinking comes from:

  • The art of knowing without reasoning
  • The world of inventing what to come

As neither analysis nor intuition alone is enough, design thinking tries to reconcile the two models of thought.

“The design thinker can add abductive logic to the reasoning repertoire[…]. And rather than being confined to the knowing without reasoning of intuitive thinking, the design thinker uses an explicit form of logic and a process that, while less certain and clear than analytical thinking, has promise for producing advances with greater consistency and replicability than pure intuition”.

Roger Martin

Applying design thinking to strategy creation

Typically, design thinking is associated with product and service design. However, it can be applied to strategy creation as well, by reverse engineering your strategic options. Strategic issues at all levels of the company can be resolved using the same general decision-making process and applying design thinking:

Solving the right and relevant issues and making sure that the designed options will solve the issue (desirability) is the critical starting point of this process. When understanding and later framing the strategic issues, it is important to keep the purpose of the company and its guiding aspirations in mind. Why does this company exist, and how do we help our customers? Also, you need to understand if this is really a strategic issue or if it is more of a tactical or operational issue.

1: Framing and designing strategic options – how might we …

Framing the right strategic issues is about asking the question “What should be” rather than “What is”, hence starting with the intuitive thinking driven by desirability, e.g. what would be desirable from a human point of view in the future. What could be a future customer need? The key is to experiment with different ideas using the “What should be” question. At this stage, you do not know if it is a good or a bad idea/strategic option yet.

A straight-forward way of translating your issue into an actionable opportunity is by constructing a “How might we” question. By constructing the question using HMW-questions, you avoid some of the typical pitfalls of the language for creating innovation. Often people tend to ask “How can we do this” or “How should we do this”, adding a judgement to the idea straight away e.g ”Can we do this?”. “Should we do this?”. When substituting with “might”, you allow people to be more creative. Moreover, the “how” assumes that there is a customer need – it provides creative confidence. The “might” says that we should test the strategic options as they might – or might not – work. Both results are valuable learnings that we can use to refine the strategy. The “we” means that we are going to do it in cross-functional teams, and that we build on each other’s ideas.

2: Developing your solution – prototyping and testing

Once the strategic options are formulated, value proposition prototypes should be designed, which can be tested and validated with customers (both internal and external) through a “build, measure, learn” iteration process, refining and reducing the strategic options. A value proposition is a promise of value to be delivered (products, services, strategy concept) and a belief that this will create superior value to customer(s) segment(s). Value propositions require an understanding of features and differentiators derived from customer insight into what drives perceived value for the customer. Hence, the iteration process is extremely valuable because it allows you to refine your strategic options and test them before you make the final strategic choice.

The best innovation teams prototype a lot – and early. It needs to be fast. There are many great ways of prototyping and validating ideas depending on the type of project (service or product design vs strategy creation), and here are a few selected methods:

  • Value proposition/business model
  • Storyboards
  • Product commercial/pre-order website
  • Paper/cardboard model
  • 3D printing

3: Specify conditions and barriers to choice – what needs to be true

The key is to specify the conditions that need to hold true for each option to be a good choice for the company. The purpose is to create an understanding of the critical conditions, which potentially could be barriers to choice – in the sense that if the condition is not true, we should not continue with this option. Moving towards a choice being made is where the analytical thinking is brought into design thinking in a strategy process. First, key barriers/assumptions related to “What needs to be true” for each of the prototyped options are to be identified and analysed. Then, looking at the results, barriers and/or assumptions should be consolidated and prioritised based on their importance and uncertainty so that a choice can be made in the end.

4: Engaging the organisation – implementing the solution

Once the strategy has been chosen, it should be cascaded through the organisation so that the choice materialises at multiple levels. This is important in order to engage the organisation in creating the best possible conditions for successfully executing the strategy. An easy way to engage the organisation is to involve employees early in the process, e.g. via cross-functional teams in the prototyping phase, and to start executing early by testing the prototypes.

Principles of working with design thinking in strategy creation:

When working with design thinking, the overall principles of 1) Customer-centric design, 2) “Build, measure, learn” iterations and 3) Cross-functional teams are vital. When applying design thinking to strategy, you can add the following principles to the approach:

CREATE FOCUS TO MAXIMISE IMPACT

Focus strategy efforts on a few highly critical issues that have the power to make or break the future of the company.

FRAMING TO SPOT NEW OPPORTUNITIES

Allow enough time for thinking both creatively and customer-oriented to see new possibilities, markets, customer needs etc. that you can build your strategy on.

ANALYSE KEY ASSUMPTIONS TO TEST THE LOGIC OF A CHOICE

Ensure that all choices are made, with the competent knowledge of internal and external stakeholders, based on validated information about critical assumptions that must hold true.

ENGAGE TO ENSURE IMPLEMENTATION

Engage the company leadership and project team and organisation as many phases as possible to co-create and establish ownership and strategy capabilities.

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