He had a product he really liked and some hints that consumers might respond well to it. But until he really got it into the hands of consumers, until he launched iTunes and shipped out the iPods, he couldn’t have known for sure that it would work.
The main reason why companies are not able to come up with new products or services, seems to be that a successful company does not want to focus on new technologies or ideas away from its core money making operations…
Companies get trapped into doing what they are good at. Continuing to hone and refine, to exploit what they already do, produces reliable results and looks a lot more straightforward that exploring new problems. Exploration is hard, with potential dead-ends and frustrations. Exploitation is predictable. So it is very seductive.
The problem is, exploitation has diminishing returns. And by focusing a company on what it already does, it puts that company at risk of missing new opportunities and avoiding disasters that come from big changes in its environment. The folks at GM were focused on doing what they had always done and were almost destroyed by changes they didn’t see coming. They had lots of past data to suggest that they should keep making pick-ups and SUVs through 2008. But the world changed, and they just missed it.
Would it be fair to suggest that companies that do hit pay dirt through innovation are plain lucky given that most corporations do not see the future coming?
Some companies — the one-hit wonders of innovation — may be lucky. But I don’t know. Think about big innovation companies that succeed in producing new products again and again over time — Procter & Gamble (P&G) or Research in Motion (which makes the Blackberry phones). I don’t think either of these companies is lucky per se. I think both companies have created a space for design thinking that enables them to do both — to exploit their current products and businesses while exploring possibilities for the future. Truly great companies work really hard at seeing the future coming.
Would you say as companies become bigger it becomes difficult for them to practice design thinking and as a result they become less innovative?
I wouldn’t say it is a question of size. Instead, I’d say that as companies develop heuristics and algorithms that seem to work, they can be trapped by them. As knowledge advances, information and judgment are paired away. This presents a tremendous gain in efficiency — there is less information to consider and shift through — but it means that you leaving a lot out. And what you leave out can come back to haunt you.
Think of McDonald’s again. McDonald’s grew exponentially exploiting its algorithm with burgers, fries, and shakes. But by the 1990s, it had lost touch with its consumers and what they wanted in the way of fast food; its original solution to that mystery had grown stale with time. The company’s management was so busy running its algorithm that it missed the evidence that many consumers wanted fast food with different or healthier options. Many other chains from Taco Bell to Subway explored the mystery of what those consumers wanted, and their solutions drove McDonald’s into a tailspin.
There are multiple paths out of virtually any mystery. McDonald’s chose one route out of the mystery and drove it to an algorithm. But when it settled at that algorithm, it gave its rivals an opening to develop alternative solutions to the mystery. Subway, for example, retained the quick-service component, but replaced burgers and fries with submarine sandwiches and fresh, healthy ingredients.
How can they hope to break though this block?
It’s possible to incorporate processes, structures and norms that promote design thinking into a company. But it takes substantial work. For a company like P&G, it took the CEO to say it was one of his most important tasks — a part of his planned legacy — to jumpstart it. And then, it took a number of years to really bring design into the lifeblood of the company.
Bringing design thinking into an organisation can happen in big and small ways. P&G’s former CEO A G Lafley did both. He created an important design organisation within P&G, which was tasked with spreading the gospel internally. But he also signalled a shift away from the primacy of exploitation and a balance with exploration in much smaller ways.
For instance, he changed the process for annual strategic reviews. Traditionally, each category president had come to his or her review with a thick deck of slides and a single right answer for the coming year, including all the data and proof needed to back it up. The goal was sign off by senior management, plain and simple. The strategies needed to be airtight, so risky creative leaps and intuitive insights were out of the question.
Lafley recognised that this process was a recipe for focusing on the past instead of the future and so devised a new process.
Presidents were told to submit their slide decks two weeks before the meeting. Lafley would read the materials and issue a short list of questions that he wanted to discuss. The meeting, he emphasised, would be a discussion, not a presentation.
Presidents were allowed to bring only three more pieces of paper—charts, graphs, notes — to the meeting. Only by more or less forcing category managers to toss around ideas with senior management in this way, he reasoned, could they become comfortable with the logical leaps of mind needed to generate new ideas.
It was a shock to the system, but before long the category presidents embraced it. They were invigorated by the chance to engage in dialogue about what could be rather than what was. Freed from the demand to come up with the single right answer and prove it, they started to work out bigger bets with the corporate team.
Would you say a company like Google is the a good example of a big company which successfully follows design thinking?
I haven’t studied Google extensively, but it looks to me like design is very much a part of their culture. The 20% policy — where engineers get to spend one day a week working on the problems that interest them — strikes me a really smart way to get employees engaged in moving knowledge ahead. My bet is that some of Google’s most successful ideas come out of that policy.
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