Once a company hits a winning formula, it tries to exploit it to the fullest. And therein lies the trap. “The problem is, exploitation has diminishing returns. And by focusing on what it already does, the company puts itself at risk of missing new opportunities and avoiding disasters that come from big changes in the environment. The folks at General Motors were focused on doing what they had always done and were almost destroyed by the changes they didn’t see coming. They had lots of past data to suggest they should keep making pick-ups and SUVs through 2008. But the world changed, and they just missed it,” says Roger Martin, a professor of strategic management and the Dean of Rotman School of Management at the University of Toronto. Martin, who recently authored The Design of Business— Why Design Thinking is the Next Competitive Advantage, spoke with Vivek Kaul recently about his concepts. Excerpts:
What is design thinking?
I describe design thinking as productively balancing analytical thinking and intuitive thinking to advance knowledge. Analytical thinking has tremendous sway in the business world today. In this way of thinking, the path to value creation lies in rigorous, quantitative analysis — to declare truths and certainties about the world. Judgment, bias and variation are eliminated at all costs.
The opposing school of thought embraces the primacy of originality, creativity andinnovation. In this model, the creative instinct—the unanalysed flash of insight — is the source of true innovation. Both approaches have significant drawbacks. It’s impossible to generate any new ideas using only analysis. And innovation without rigour is scattershot and unharnessed. So, it is in the combination of the two ways of thinking — blending analysis and intuition as a great designer does — that the real power lies.
Why do you say design thinking is the next competitive advantage?
This goes back to the way in which knowledge advances. In my view, there is a pattern to it.
We begin with a mystery, in which we don’t really know anything at all but have a perplexing question we wish to answer. We spend time pondering and trying to make sense of that mystery until someone, somewhere is able to make some headway, devising a way of thinking about that mystery that brings it down to size and makes it manageable. They develop a way of thinking about the problem — a heuristic (or experience-based techniques that
help in problem-solving, learning and discovery) or rule of thumb — that cuts out some of the mystery and enables us to think and act with some level of assurance. Then, again over time, that heuristic is honed and refined.
Finally, through some enterprising person pushes that heuristic ahead to become a well-defined rule for understanding the problem — cutting down the heuristic to become an algorithm (or a precise set of rule/s specifying how to solve a problem) that produces a reliable answer. That’s the pattern — mystery, heuristic, algorithm.
Can you give an example?
Consider an example of McDonald’s I use inthe book. When the McDonald brothers started out with a few drive-in restaurants in California, they were staring into a mystery. In the new post-war, baby-boom culture in America, what experience would customers want when they went out to eat? After time and some trial-and-error, McDonald’s developed a successful heuristic — a loose notion of a new type of restaurant — the quick service restaurant with a limited menu and a service window rather than a drive-in. And using that heuristic, they were successful in a fairly modest way.
Then along comes Ray Kroc, who looked at that McDonald’s heuristic and saw the potential for something much greater. He bought out the brothers and set out to turn the loose heuristic into a precise algorithm. He built a business model in which every burger was exactly the same, every employee was trained in exactly the same way, all locations were planned, designed and executed in exactly the same way. He cut out enough complexity that the chain could grow from a handful of southern California outlets to the largest restaurant chain in the world, creating a new category — the fast-food restaurant.
Because so many companies get stuck in one knowledge stage, honing and refining the heuristics and algorithms they already have, I believe that enormous benefits will accrue to the
companies who are able to advance knowledge from one stage to the next. It will separate the really great companies from the rest, and allow them to maintain a long-term competitive advantage.
And the way to move from one stage to the next is design thinking.
A point that you make throughout your book is that it is not possible to prove any new idea in advance. Can you elaborate on this?
Absolutely. The problem here is the way in which we define proof. In business, proof means rigorous data derived from analysis of the past. For a new idea, there is no past data — no rich pool to analyse, no general rule to apply. Typically, new ideas come from hints of changes in our environment that can’t yet be quantified or from anomalous bits of data that don’t fit with our general understanding.
At Apple, Steve Jobs could not have proven in advance that the iPod would be successful.
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