Designing Convergence/Divergence

Tim Leberecht DESIGNING CONVERGENCE/DIVERGENCE Tim Leberecht - Die Macht des Design, Berlin April 21, 2008

ABOUT FROG DESIGN

We are a strategic-creative consulting firm. We bring a unique combination of strategic and creative talent to help companies evolve, expand, and envision their business. Our rigorous yet unorthodox approach yields breakthrough innovation and a sustainable competitive edge.

Aricent is the world’s leading independent communications and contract development firm.

frog is an independently operated division of Aricent.

Aricent was founded 15 years ago as Hughes Electronics and is owned by KKR and Sequoia Capital.

The world’s first end-to-end innovation partnership, reaching from early-stage strategy to full product development and deployment. +

GLOBAL NETWORK frog design studios 400 people / 32 nationalities / 39 years of global experience Shanghai Milan Stuttgart New York Austin Seattle San Francisco San Jose

WHAT WE DO

EVOLVE

We help our clients reinvigorate existing assets with newly-designed offerings better tailored to the needs of the industry, company, and consumer.

EXPAND

We help our clients identify key business opportunities and create additional products, services, and strategies for expansion into new markets.

ENVISION

We help our clients reinvent themselves, calling upon intensive research and creative facilitation to expose new strategic directions and untapped business potential.

We imagine the ideal – and make it real. frog’s integrated process of strategy and design helps Fortune 500 companies evolve, expand, and envision their businesses.

CLIENTS DEVICES MEDIA SERVICES ENABLERS

1. DESIGN IS DEAD

“ Design, structurally seen, is absolutely void of usefulness.”

“ I do feel ashamed for this…”

“ I do feel ashamed for this…” ZEIT: Monsieur Starck, you have designed everything, from toothbrush to spaceship. What do humans really need? Philippe Starck: The ability to love. Love is the most wonderful invention of mankind. And then, one needs intelligence. Mankind, as opposed to animals, has managed to create a civilization based on intelligence. For this reason, no human can afford to not work on their intelligence. And humour, humour is important. ZEIT: Can you think of anything else? P.S.: A pillow maybe, and a good matress. ZEIT: So why, then, have you become an industrial designer in the first place? P.S.: That is an interesting question. And I haven’t found an answer to it for myself yet. Look, I have designed so many things without ever really being interested in them. Maybe all these years were necessary for me to ultimatively recognize that we, after all, don’t need anything. We always have too much. ZEIT: So all the things you have created — unnecessary? P.S.: Everything I have created is absolutely unnecessary.

2. DESIGN THINKING SMELLS BAD

“ The problems that exist in the world today cannot be solved by the level of thinking that created them.”

ALBERT EINSTEIN

A whole new mind

Design hubris?

"As we look beyond housing solutions to urban poverty, good design is enjoying a second coming as the cure for what ails us." "'Design thinking describes a moment in the pursuit of social good that hardly ever arrives: when all the hearts are in the right place, all opinions have been brought into line and all that needs to happen is the change itself. If the model has intellectual benefits, it's doubtful they outweigh the deficiencies of ignoring the long process by which consensus is built -- a.k.a. politics.” ALIX RULE The revolution will not be designed

Good = good?

Power to the amateurs “ Open it up and it will design itself.” Norman Lewis

Crowdsourcing

Outsourcing

3. THE EXPERIENCE IS THE PRODUCT

Stop designing products! “ When you start with the idea of making a thing, you're artificially limiting what you can deliver. The reason that many of these exemplar's forward-thinking product design succeed is explicitly because they don't design products. Products are realized only as necessary artifacts to address customer needs. What Flickr, Kodak, Apple, and Target all realize is that the experience is the product we deliver, and the only thing that our customers care about.” PETER MERHOLZ – Adaptive Path

CUSTOMER JOURNEY

4. THE PRODUCT IS THE PRODUCT

BUT WHAT EXACTLY IS A PRODUCT?

5. DESIGN INNOVATION

Innovation is Hot

NEW CATEGORIES

NEW TECHNOLOGIES

NEW BUSINESS MODELS

NEW CREATIVE DESIGN

NEW PRODUCTION PROCESSES

NEW PARTNER ECOSYSTEMS

NEW SERVICES

NEW RETAIL EXPERIENCES

NEW MARKETING AND COMMERCIALIZATION

Design is Hot

Not all design is innovation. But innovation always needs design. Design = Innovation?

WHERE DOES THE NEED FOR INNOVATION BEGIN?

FROM STANDARD BUSINESS CHALLENGES… Margin Erosion “ We operate in a mature industry with a mature product portfolio and our margins are beginning to disappear.” Internal Churn “ Our new ideas are stuck in the mud of internal planning and review cycles.” Competition “ New competitors are moving into our space and we need to do something to defend our market position.” Adjacent Markets “ We see opportunities in adjacent markets (new segments, geographies, etc.) but we don’t know where and how to start.” Mining IP “ We have so much IP but we cannot convert it into products that resonate with consumers.” Time to Market “ Our linear product development process doesn’t allow for nimbleness and trial and error.” Customer Insight “ Our product ideas are driven by science and engineering but fail to recognize latent or unarticulated customer needs.” Sustainability “ We got lucky once or twice. How do we repeat our market success year after year?”

… TO SPECIFIC INNOVATION CHALLENGES DRIVERS: Demand for Compelling Experiences Higher Ecosystem Dependence Industry Convergence (Mediatization) Demand for More Customization HIGH Creative Challenge Strategic Challenge LOW LOW HIGH

… TO SPECIFIC INNOVATION CHALLENGES DRIVERS: Demand for Compelling Experiences Higher Ecosystem Dependence Industry Convergence (Mediaization) Demand for More Customization DRIVERS: Increased Customer Touchpoints Need for Aligned Touchpoints Multiple Technology Platforms Global Delivery Challenges HIGH Creative Challenge Strategic Challenge LOW LOW HIGH

TYPES OF SOLUTIONS ANALYTIC HORSEPOWER EXPERIENCE REALIZATION EXECUTIONAL FOCUS RAW CREATIVITY HIGH Creative Challenge Strategic Challenge LOW LOW HIGH

TYPES OF SOLUTIONS ANALYTIC HORSEPOWER EXPERIENCE REALIZATION EXECUTIONAL FOCUS RAW CREATIVITY Oil & Gas Utilities Logistics Advertising Hospitality Telecom Digital Media & Entertainment FMCG Industrial Manufacturers Consumer Software Film Retailers Consumer Electronics HIGH Creative Challenge Strategic Challenge LOW LOW HIGH

INNOVATION CATEGORIES Short -Term Advantage Sustain product life with incremental enhancements and consumer benefits. Since product categories exist, sustaining products are easily accepted by the market. On the other hand profitability can diminish quickly due to ease of imitation . These products are low risk bets with a high probability of short term returns. Near-Term Advantage Create new products within an existing product category that leverage high value benefits for consumers. The greater benefits of the product and the fact that it is within a know category drives rapid short-term growth. These product are higher risks bets with higher yet diminishing returns. Long-Term Advantage Innovate new to the world products that lead the creation of new markets or industries. Market acceptance may be slower to gain as multiple industry standards compete for dominance. These products are a long term investment with high potential returns over the long term. Other benefits include market dominance & strong competitive position . years $ 0 1 2 3 years $ years $ 4 5 Industry Level Innovation Competitive Advantage : 5-7 years Category Level Innovations Competitive Advantage: 3-5 years Product Level Innovation Competitive Advantage: 1-3 years ^ Sustaining (Evolve) Breakout (Expand) Disruptive (Envision) Go/No-Go (Director Level) Go/No-Go (VP/SVP Level) Go/No-Go (CEO/Board Level) 6 7 0 1 2 3 4 5 6 7 ^ ^ 0 1 2 3 4 5 6 7

THREE TYPES OF INNOVATION Successful innovation is more about behavior than about individual ideas, and it is more social than personal . It’s not knowledge that produces growth, but instead, insight -- into opportunities for discontinuous innovation. Innovation as Process Innovation as Capability Innovation as Culture

INNOVATION AS PROCESS Innovation is a dynamic process which requires companies to go from a fragment of an idea to a holistic design concept. This process must navigate the complexities of the business system to see innovations make it to market successfully . Cycles of ideation, refinement, and validation are needed to build alignment and ensure market success. Innovation as Process PERFORMANCE

INNOVATION AS CAPABILITY Can something as effervescent as innovation be systemized? While innovation will always be a mixture of serendipity, genius, and sheer bloody-mindedness, we believe that non-linear innovation can be fostered, celebrated, and rewarded. We recognize the need for multiple inputs, and believe there are key components for building innovation as a capability. Each of these has an essential role to play. Innovation as Capability ENABLEMENT

INNOVATION AS CULTURE Whenever organizations try to create new product and service offerings at a profit, culture matters . Organization imperatives powerfully shape “innovative behavior” of the enterprise. Understands both anecdotally and empirically the cultural patterns that shape innovation processes . An innovative idea is just as much the product of culture as it is a process or capability. Innovation as Culture VALUES

The dilemma with innovation

“ We don’t have an innovation process.

We hire good people.”

A KEY INGREDIENT: DESIGN

Design means more than pure creative product design.

It is a mentality and an approach to problem-solving .

It is a powerful alternative to the dominant management approaches of the past few decades and is an important perspective for leadership to embrace.

In this way, design represents not a technique, but a more fundamental disposition involving:

Focus on the user

Creativity

Interdisciplinary collaboration

Iteration

Evaluation and measurement

Learning

This disposition is applied to both the traditionally strategic and the traditionally creative activities that occur in conceptualization and development of new innovations.

Change is hard. Change is slow. Especially significant, disruptive, discontinuous change. The dilemma with innovation

Design as a catalyst Provoke, translate, transform a person or thing that precipitates an event or change; a person whose talk, enthusiasm, or energy causes others to be more friendly, enthusiastic, or energetic. Something that causes an important event to happen;

Intellectual prototyping

Concept prototyping

Product prototyping

Failure is an option

6. CONVERGENCE

CONVERGENCE Hardware/software Real/virtual Process Platforms & media Disciplines

CONVERGENCE Disciplines Software? Hardware? Phone? PC?

“ Because an iPod’s really just software… it’s in a beautiful box, but it’s software …. And so the big secret…is that Apple views itself as a software company”

TV

PC

Oven

In a convergent world, the system is the product

Accessories

MINI Retail Web Lifestyle

WHAT IS SO INNOVATIVE ABOUT THIS PRODUCT? Hard-drive based portable music players already existed Competitive products had better features and were cheaper Online music stores already existed

WHY THE iPOD STINKS

High price

Limited features

Easy to scratch

Hard to carry

Can’t replace battery

Cumbersome menus

WHY THE iPOD SUCCEEDED

A convergent system that has given Apple a 5+ year competitive edge

THE BIGGER PICTURE

SECOND LIFE

TELEPRESENCE

REAL AND VIRTUAL WORLDS CONVERGED

Cross-over thinking (and doing) Artists Architects Industrial Designer Software Developer Digital Media Designer Business Analyst Strategist Anthroplogist Ethnographer Writer Mechanical Engineer

OLD “LINEAR” PROCESS BUSINESS DESIGN EXPERIENCE DESIGN Two divergent tracks

Stage 1 Gate 1 Stage 2 Gate 2 Stage 4 Gate 4 Stage 3 Gate 3 Stage 5 Gate 5 Initial Screen Second Screen Decision on Business Case Post-development Review Precommercialization Business Analysis Post Implementation Review Ideation Development Preliminary Investigation Detailed Investigation (Build Business Case) Testing & Validation Full Production & Market Launch Stage-Gate Process OLD “LINEAR” PROCESS

Stage 1 Gate 1 Stage 2 Gate 2 Stage 4 Gate 4 Stage 3 Gate 3 Stage 5 Gate 5 Initial Screen Second Screen Decision on Business Case Post-development Review Precommercialization Business Analysis Post Implementation Review Ideation Development Preliminary Investigation Detailed Investigation (Build Business Case) Testing & Validation Full Production & Market Launch

Overly strict gating : Compelling innovations left in the discard pile; moreover, extensive use of lock-step, gated decision-making processes can perpetuate a culture of rigidity and inflexibility

Lack of emphasis on understanding users: The traditional Stage-Gate process brings user perspectives in after Gate 4

Time-to-market: For fast-moving industries in particular, Stage-Gate can be too drawn out

Stage-Gate Process OLD “LINEAR” PROCESS

Stage 1 Gate 1 Stage 2 Gate 2 Stage 4 Gate 4 Stage 3 Gate 3 Stage 5 Gate 5 Initial Screen Second Screen Decision on Business Case Post-development Review Precommercialization Business Analysis Post Implementation Review Ideation Development Preliminary Investigation Detailed Investigation (Build Business Case) Testing & Validation Full Production & Market Launch

Flexible gating: informal evaluation of outliers / non-standard ideas / intangibles

Interdisciplinary perspectives: user and market viewpoints at early stages

Parallelization and compression: iterative business cases and rapid prototyping

1 2 3 1 1 1 2 2 3 Stage-Gate Process WHAT’S MISSING

THE CHALLENGES OF DISCONTINUOUS INNOVATION

KEY QUESTIONS

How do you evaluate innovations when part of their benefit is tied up in intangibles (wow factor, new experiences, emotional impact, novelty effect, intuition)?

How do you generate a business case for innovations that are so novel that behaviors around them don’t exist?

How do you still bring such novel products to market quickly?

THE CHALLENGES OF DISCONTINUOUS INNOVATION

MORE flexible gating : evaluation of intangibles should be made in a formal way

MORE interdisciplinary perspectives : interweave user, market, and technology activities to allow analytical evaluation of new user behaviors

MORE parallelization and compression : business cases and rapid prototyping should start earlier, iterate more frequently, and be used for continuous validation and buy-in

A BETTER WAY

STRATEGIC + CREATIVE CONVERGED

STRATEGIC + CREATIVE CONVERGED discover design deliver

STRATEGIC + CREATIVE CONVERGED discover design deliver Critical points

STRATEGIC + CREATIVE CONVERGED insight design build ! convergence of design with development convergence of insight with design

STRATEGIC + CREATIVE CONVERGED insight build convergence of design with development convergence of insight with design design

Design Analyst Visual Designer Design Technologist Developer Architect Tech Solution Mgr Driving efficiency and quality by creating parallel and massively integrated work-streams STRATEGIC + CREATIVE CONVERGED CONCURRENT WORKFLOW Technology/design

Role matrix Many of the work-streams cross standard discipline boundaries CONCURRENT WORKFLOW

WHY THIS WORKS FOR DISCONTINUOUS INNOVATION

Enables decision-making on the outliers: Decision-making becomes more fluid, based on conventional success metrics, novel experience metrics, and user validation -- all of these are needed to properly evaluate discontinuous innovations

Allows for more accurate business case development : Results in a business case that explicitly measures the new user behaviors that emerge from a discontinuous innovation

Faster time-to-market: Continuous validation and buy-in across stakeholders, partners, and customers who are “bought in” and aligned in different ways

7. DIVERGENCE

Change the rules of competition

Create growth

Decide on level of convergence

DIVERGENCE MATTERS Divergence

Marketing as a Growth Champion Power shift

Marketing as a Growth Champion “ In the old days, brands wanted everybody to pay attention to them. Now brands need to pay attention to everybody else.” [ someone somewhere on the web] Power shift

The atomization of the web The web is a never ending conversation. First came email, then web portals, then search (aggregation), and now the distributed Internet with its myriad atomized blogs, widgets, voice posts, Twitter grams, RSS feeds, and social networking hubs. The World Wide Web is being atomized into thousands of "branded and un-branded micro-networks.” The days of "destination thinking" - the concept of driving as many eyeballs as possible to a central site ("one audience, one time, one venue") - are numbered.

2,600 blogs

> 1,000 inbound links 100,000,000

< 20 incoming links

400,000 blogs > 20 inbound links “ The blogosphere is wild, violent, and nasty, and it can kill you." The long tail of the blogosphere

Power shift Mash-up/hybrid/slash culture Web 2.0, collaborative, social web, amateur web, whatever you want to call it: no longer is content production and distribution the exclusive domain of professional networks and content providers. “ The ants have megaphones,” as Chris Anderson put it, and “the Long Tail” has become very fuzzy. This disrupts traditional marketing paradigms and challenges marketing professionals. The borders between professional and amateur, producer and consumer, are blurring.

Digital footprints Technorati estimates the total number of blogs to be 112.8 million (this does not include all the 72.82 million Chinese blogs as counted by The China Internet Network Information Center) About 8,000 new blogs are created every hour According to a study by Harris Interactive , over two-thirds of adults have watched a video on YouTube over the last year By 2006, 10 million people were listening to podcasts in 2006; by 2010, it's expected to be 50 million people Each day, over 100,000 new videos are posted on leading video sites -> close to 70 videos each minute About 28% of online consumers have tagged a photo, news story or blog post; about 7% of all Internet users tag content every day A new study from Nokia predicts that by 2012 a quarter of all entertainment will be created, edited, and shared within peer groups rather than being generated by traditional media

Digital footprints

Social media

Only 48 seats Designing for divergence A daptive T ransparent O pen M inuscule

Only 48 seats Designing for divergence A daptive T ransparent O pen M inuscule Conversations instead of messages Feedback = creation Customizable Permanent beta

Only 48 seats Designing for divergence A daptive T ransparent O pen M inuscule Conversations instead of messages Feedback = creation Customizable Permanent beta The more you share, the more you will receive Everything is visible to everyone Authenticity

Only 48 seats A daptive T ransparent O pen M inuscule Conversations instead of messages Feedback = creation Customizable Permanent beta Easy to use Easy to co-create/hack Easy to share The more you share, the more you will receive Everything is visible to everyone Authenticity Designing for divergence

Only 48 seats Designing for divergence A daptive T ransparent O pen M inuscule Conversations instead of messages Feedback = creation Customizable Permanent beta Easy to use Easy to co-create/hack Easy to share Content Distribution Timing The more you share, the more you will receive Everything is visible to everyone Authenticity

8. BUSINESS AND DESIGNERS

“ Design is too important to be left to designers.” Raymond Loewy

The clash HARTMUT ESSLINGER

sketching rendering model making manufacturing support In 1969 this was what we did for our customers

Building Alignment Go-To-Market Plan Roadmap Business Plan Customer Segmentation and Targeting Value Proposition Business Concept Value Chain Analysis Revenue and Cost Modelling Business and Market Modelling Alternative Generation Industry Dynamics Market Sizing Competitor Segmentation Competitive Differentiation Project Framing Strategic Imperatives Product Definition Roadmap Planning Trend Research Competitive Research Engineering Teardown Retail Audit Shadowing Ethnography Concept Testing This is what we do today Diaries Creative Facilitation Surveys Expert Analysis Mental Modelling Conceptual Foundation Design Libraries Contextual Validation Usability Testing Visual Studies Workflow Modelling Wireframe Renderings Site Map Information Architecture Task Models Object Models Usability Think Alouds Cognitive Walkthroughs Heuristic Evaluations Visual Simulations Systems Design Sketching Affinity Diagrams Card Sorts Contextual Inquiry Anthropometrics

LOGIC EMOTION An old mind set Logical Sequential Rational Analytical Objective Strategic Parts-oriented Random Parallel Intuitive Synthesizing Subjective Creative Holistic

Manager vs. Designer

Manager vs. Designer Strives to keep bad things from happening Strives to make good things happen.

Design leadership Warren Bennis’ principles of leadership The manager administers; the leader innovates. The manager maintains; the leader develops. The manager accepts reality; the leader investigates it. The manager focuses on systems and structures; the leader focuses on people. The manager relies on control; the leader inspires trust. The manager has a short-range view; the leader has a long-range perspective. The manager asks how and when; the leader asks what and why. The manager has his or her eye always on the bottom line; the leader has his or her eye on the horizon. The manager imitates; the leader originates. The manager accepts the status quo; the leader challenges it. The manager is the classic good soldier; the leader is his or her own person. The manager does the thing right; the leader does the right thing.

Design leadership Creating an argument for change through strategic conversations Design’s challenge: often left out Designer’s challenge: Establish, perpetuate, communicate relationships Design leader’s challenge: Generate excitement and provide inspiration -

A designer as CEO? Sure, why not. But it’s still a long way to go. Leadership is about empowering others. Designers are still too busy claiming more power for themselves.

Design will only grow up…. … if it transforms the management systems that constrain innovation.

9. CASE STUDIES

Seagate Branded Solutions Taking a B2B component manufacturer into the consumer electronics space

Customer research Understanding User Segments

THE CHALLENGE Research review

Synthesis & ideation Translating Insights Into Ideas

DEFINING THE DNA OF A LIFESTYLE BRAND Convergent thinking

Understanding the Future Landscape Brand positioning

Defining the DNA of a Lifestyle Brand Design language system

Glow from the core

Perceived as ultra-thin

Modern yet timeless

Product & Platform Planning Roadmapping

Design development

10. WRAP-UP

Convergence and Divergence and require the ability to understand and conceive complex systems. Design is good at this.

THE REALLY BIG INTEGRATION Software Hardware Virtual worlds Real world Online Store Marketing messages Media Usability Out-of-the-box Business requirements Design creative Technology Culture Concurrent workflow Consumer insights Market research Desktop Mobile WWW Living room CONVERGENCE Consumer conversations Blogs Social media Outliers Outliers Crowdsourcing Outsourcing New markets Disruptive technology Hyper-personalization Business requirements D I V E N C E