HEATHER FRASER on the Design Thinking mindset

ASK ANY LEADER TODAY, and they will tell you that innovation is a top priority for their enterprise. In the words of Cisco’s John Chambers: “Disrupt yourself, or be disrupted.”

To quote from Pwc’s 2017 CEO Survey report, innovation is the most direct path to keeping an organization’s offerings fresh and disrupting the status quo. And as that report notes, innovation thrives when exploration is stimulated, rather than suppressed. Enter Design Thinking — today’s popular route to exploring new human-centered offerings.

The concept of Design Thinking is not new — and it wasn’t invented by design firms. Pioneers like Herbert Simon, Robert Mckim and Brian Lawson explored this topic as early as 1969. In the last two decades, Design Thinking has been resurgent, popularized by thought leaders like [former Rotman School Dean] Roger Martin, who advocate Design Thinking as a source of competitive advantage.

At its best, Design Thinking can help you find creative solutions to virtually any problem; at its worst, it becomes the ‘fast food of innovation’. Millions of dollars are being spent on design ‘boot camps’ and simplified playbooks. While this approach can produce a surge of ideas, in too many cases, no one knows what to do with the blizzard of ideas, and they are left on the shelf — or in an abandoned pile of sticky notes.

Those who commit to a deeper integration of Design Thinking into their way of working have realized its true value. For example, Procter & Gamble has integrated this approach into its problem solving company-wide, with hundreds of qualified Design Thinkers throughout the organization applying it to every challenge imaginable. And Intuit has established an extensive network of in-house ‘Catalysts’ to ignite new ideas and integrate them into its disciplined system for ongoing exploration and experimentation.

These companies demonstrate how a commitment to embedding Design Thinking into the way people think and work can create a sustainable enterprise-wide capacity for human-centered exploration and innovation. But Design Thinking is not enough on its own. Beyond its generative and experimental aspects, an enterprise needs to be able to turn ideas into business activity. I call this the discipline of Business Design — the integration of Design Thinking with business acumen. Three core principles can help to balance the widespread appetite for Design Thinking with some more fundamental business considerations.

PRINCIPLE 1: BUILD A BUSINESS CASE

Translating ideas into strategy, running measured experiments and rigorously integrating data into your decisionmaking are critical to making business sense of big ideas, and building confidence in investments. Let’s examine each in turn.

TRANSLATE IDEAS INTO STRATEGY. All of the creativity that goes into the generation of ideas will be wasted if there is no strategy to deliver and scale new ideas in a sustainable way. Companies like Apple and Nike have embraced innovation across the enterprise for decades — in their strategy, systems and culture at large — and this has been a critical driver of their success.

Put simply, new possibilities are more likely to be realized if they are strategically aligned with your enterprise’s purpose and goals. In fact, really big ideas can actually become your strategy, whereas ideas that don’t fit with your trajectory will likely be orphaned. Designing a strategy for a new idea entails mapping out where it reinforces your over-arching strategy, and knowing what it will take to scale big ideas — the capabilities you will need to invest in, the measured experiments you will need to run and the management systems you will need to deliver the ideas to the marketplace.

RUN MEASURED EXPERIMENTS. Innovation is not risky; not innovating is the greater risk. The role of experiments is to mitigate risk and learn, while gathering evidence to build confidence in your build-out. We see a lot of popular press about embracing failure; but is failure really an option? In the worst case, a tolerance for failure can undermine discipline, and the importance of staying the course in a measured way. In my experience, the smartest companies put an emphasis on learning rather than failing. For example, Intuit’s systematic approach to experimentation links early ideas to market implementation: teams generate ideas and put them through a disciplined process of measuring and advancing experiments through NPS [Net Promoter Score] scoring.

Additionally, while Nespresso created a worldwide phenomenon with its unique and proprietary coffee sys- tem and inspired vision, it didn’t get there overnight. Over many years, it managed risk through hundreds of learning experiments — from simply putting 100 machines on display in a local retailer, to bootstrapping its early at-home expansion through Club Member referrals, to experimenting with early café prototypes. All of these experiments informed their decisions and measured scale-ups along the way to global success — with over 250 stores around the world, billions in revenue and over 10 million Club Members.

BE RIGOROUS IN DATA-GATHERING. Of course, there can be no ‘proof ’ for new-to-the-world ideas, but innovation champions must continuously search for reasons to believe. That begins with how you frame the size of the opportunity and ascertain customer opportunities (in terms of unmet needs and satisfaction gaps), through to running a series of measured experiments, prototyping alternate business models and running financial scenarios to optimize your choices. You will need compelling facts to justify investing in big ideas. The good news is, most organizations today have lots of customer, operational and marketplace data at their fingertips.

There are also many ways to validate qualitative research and ascertain customer appeal. For example, you might conduct need-finding research to build a case for the prioritization of investments based on what matters most to your stakeholders.

PRINCIPLE 2: ENGAGE THE RIGHT PEOPLE

At some point in the pursuit of innovation, someone will ask: Who is going to make this happen? A deliberate engagement strategy will determine the extent of internal ownership and support you can cultivate, the speed at which ideas work their way through your internal systems and ultimately, which ideas make their way to market. There are many stakeholders to consider: the CEO, CFO, business unit leaders, development team members across functions, and even external stakeholders who can be important influencers and enablers. The time to consider how and when to involve these important players is at the start of your journey.

As you craft your engagement strategy, there are three important areas to consider.

The ‘front line’ in any organization can bring in critical insights that inform new opportunities.

OUTSOURCING VS. INSOURCING. There was a time when companies invested heavily in external innovation consultants, but today, that trend is reversing: More and more organizations are building out their internal talent base, with a resulting surge in the hiring of designers of all kinds. For example, IBM now boasts one of the largest design pools in the world. Beyond designers, every organization is filled with people who have insights, imagination and know-how. While external experts can certainly bring big ideas to the table, how they do so in concert with your internal expertise is critical. An engagement strategy that taps into your internal talent will help to boost the odds of big ideas from the outside being realized.

BUILD OWNERSHIP THROUGH INTERNAL ENGAGEMENT. There is no better way to motivate smart people than to engage them in the process of creating a future that they can own. Harnessing the insights and know-how of people across your organization will ensure that they ‘own’ innovative solutions and are able to bring new ideas to life (vs. blocking them). The first edition of my book [ Design Works: How to Tackle Your Toughest Innovation Challenges through Business Design] presented a case study of a redesign of the chemotherapy patient experience at Toronto’s renowned Princess Margaret Hospital. Based on patient need-finding research, a cross-functional team was engaged in reimagining a total transformation of the patient experience. This formed the basis of an inspiring architectural brief, and served as a ‘lighthouse vision’ for a major fundraising campaign. In an environment where there might normally be resistance to change, there was widespread enthusiasm for the concept of progress, with the organization owning the vision and working toward realization through an inclusive process of iteration and build-out.

AVOID ‘TROPHY LABS’. Internal innovation labs and incubators have been set up in corporations all over the world, with great intentions. Unfortunately, they often become ghettoized and ineffective in bringing about enterprise-wide innovation. I am shocked by the number of executives I meet who have either not heard about their own lab or have no idea what is going on there. A recent article in Forbes by Tendayi Viki (“Five Reasons Your Boss was right to Shut Down Your Innovation Lab”) presents an alarming trend on the closing of labs that delivered zero return on investment due to a lack of strategic alignment, focus, link to business innovation and payout. These ‘Trophy Labs’ might look impressive to investors and media, but too often don’t deliver a return, because they don’t connect to the rest of the enterprise and demonstrate a return on investment.

PRINCIPLE 3: CREATE THE CONDITIONS FOR SUCCESS

It takes an entire enterprise to deliver new value. Following are three considerations for creating the conditions for success.

ACTIVATE LEADERSHIP AT ALL LEVELS. Senior leaders guide the enterprise’s purpose, vision and strategy, while the ‘front line’ brings in critical insights that can inform new opportunities. Navigating the path forward requires a disciplined balance of three things: Managing your present business, creating your future, and selectively un-learning the past. I often find that while executive teams are excited by big ideas, they are slightly overwhelmed by what it will take to bring the future to life. They have built a highly successful enterprise, but what is on the horizon might look quite different — particularly in a digital age. That points to the importance of empowering emerging leaders. In my teaching at the Rotman School, I am always inspired by the insights, energy and ambition of our students for creating a new future. As leaders, we have to harness that. The key is to listen to and empower your emerging leaders. They have fresh insights into the future, boundless energy, and they want to make a meaningful impact.

RETHINK SUPPORT SYSTEMS. New ideas need support systems to ensure a path to market. That means designing how people work (organizational teaming and structures), processes (systems to move ideas through to implementation) and measurement (e.g., KPIS). In my days at Procter & Gamble, we had a very sophisticated go-to-market system based on a volume-based manufacturing model. While the beauty of it

was that you could essentially ‘drop an idea into the hopper’ and it would make its way to the market, it also made it difficult to ‘bend’ the system to get through ideas that weren’t all about maximizing capacity. Premium brands like Oil of Olay and service initiatives like Mr. Clean Car Washes and Tide Dry Cleaners called for entirely new systems, structures and measurements of success. Always remember that with new ideas comes a need to rethink your systems and structures.

MEASURE AND BUILD YOUR ENTERPRISE READINESS. While orga- nizations often start their journey by investing in training, dedicated spaces or innovation teams with special projects, they must realize that innovation is an enterprise-wide pursuit: Sustainable innovation requires strategic intent, proper structures and systems and, ultimately, enterprise agility.

With today’s tools, your enterprise’s innovation-readiness is something you can measure, diagnose and act upon. There are a number of profiling tools that gauge how ready an organization is to deliver innovation, including innovation assessment tools, engagement surveys and organizational culture surveys. My colleagues at Vuka Innovation have developed an Innovation Readiness Tool to diagnose how prepared an organization really is from the standpoint of strategy, innovation practices, systems and structures, and culture. However you gauge enterprise readiness, it’s important to take a holistic view of your business strategy, everyday mindset and practices, systems and structures and ultimately, the culture that you aim to cultivate.

In closing

Design Thinking has reignited creativity and reinforced the important human dimension to innovation in many organizations. Exploring, trying new approaches and learning is far more important than trying to be perfect right out of the gate. At the same time, it is helpful to pause and reflect on how your innovation efforts link to your business more explicitly, how to engage your organization more broadly, and how you create the conditions for success.

If you decide to adopt Design Thinking, you will benefit most if you embed it deeply and broadly into your way of working. Moreover, in keeping with the ideology of Business Design, link these efforts more explicitly to your business goals and leverage your analytical prowess into making a compelling business case to enhance the ROI on your investments. Most importantly, it takes an enterprise to deliver innovation: Engage your people as extensively as you can to cultivate ownership, create conditions for success and build momentum for your innovation journey.

Heather M.A. Fraser is the co-founder of Rotman Designworks and Adjunct Professor at the Rotman School of Management, and the founder of Vuka Innovation. She is the author of Design Works: How to Tackle Your Toughest Innovation Challenges Through Business Design (Rotman-utp Publishing 2017, second edition).