Design Thinking For Business Strategy

University of Chicago – Graduate School of Business Design Thinking for Business Strategy Date: January 25th, 2007 Harsh Jawharkar

Background Harsh Jawharkar (GSB ’06) http://www.linkedin.com/in/harsh Management Consultant – A.T. Kearney Previously … • IDEO – Service Innovation & Human Factors • HSBC – Consumer Insights & Experience Modeling • Sapient – User Experience Modeling • IPM – Management Consulting Interests – • Service and product innovation models • Business strategies driven by a design-thinking mindset January 2007 2

Innovation … Buzzword, Fad, or Bellwether? innovation buzzword Main Entry: in·no·va·tion Main Entry: buzz·word Pronunciation: "i-n&-'vA-sh&n Pronunciation: 'b&z-"w&rd Function: noun Function: noun 1 : the introduction of something new 1 : an important-sounding usually technical word or phrase often of little meaning used chiefly to 2 : a new idea, method, or device : NOVELTY impress laymen 2 : a voguish word or phrase -- called also buzz phrase Thesaurus: Thesaurus: something (as a device) created for the first time stock phrases that have become nonsense through through the use of the imagination endless repetition -- see INVENTION -- see hokum, nonsense, bunk Innovation is a process … not an approach Source: Merriam-Webster Online, thefreedictionary January 2007 3

The BusinessWeek effect … is it like the Sports Illustrated cover jinx? January 2007 4

Innovation is catalyzed by an opportunity to close the gap Skillsets • Linear • Data driven Left Brain • Outcome oriented Sequential • Focused on the ‘end’ Rational Analytical Objective Looks at parts OPPORTUNITY Right Brain Intuitive Holistic Synthesizing Skillsets Subjective • Empathic Looks at wholes • Observation driven • Experience oriented • Focused on the ‘journey’ January 2007 5

Design thinking is an attitude, an approach – a mindset Inside Out – Traditional Mindset Outside In – Design Mindset Consumers Consumers Front-line Personnel Front-line Personnel Customer Service Customer Service Sales & Marketing Sales & Marketing Operations Operations C – Level C – Level A design mindset is critical to successfully solving or creating January 2007 6

Design firms currently occupy a less demanding space on the value chain, thereby decreasing their leverage in corporate boardrooms Stimuli Ideate Conceptualize Validate Operationalize Value • Stimuli derived • Ideation requires: • Conceptualization • Validation requires: • Operationlization from: requires: requires: • Existing • Suspension of • Observation & • Prototyping the • A data driven business disbelief Empathy offerings approach offerings • Ability to cross- • Identifying • Metrics and • Tactical and • Perceived pollinate heuristics measurability organizational demand for mindset offerings • Faith in • Experiential • Assessment of disruptive modeling capabilities and • Attitudes geared • Market dynamics technologies competitive towards • Visualizing a forces measurable • Competitive story or outcomes forces scenarios Design Firms Management Consulting Firms People $$$ Change Management January 2007 7

Design firms are attempting to develop operational capabilities Design Focus IDEO Astro frog Smart Design Jump Desired Skill-set Method Herbst Lazar Bell ZIBA Continuum and Lunar Positioning Cheskin SonicRim Fitch Strategos Sapient Organic Booz Allen A.T. Kearney razorfish Agency.com Monitor Bain BCG Mercer McKinsey Business Focus Source: Jess McMullin, bplusd.org January 2007 8

What can design-thinking do for you? January 2007 9

What else can design-thinking do for you? January 2007 10

Elements of design thinking Observation Empathy Ideation Conceptualization (Storytelling, Modeling) Prototyping Being T-Shaped January 2007 11

Observation Ethnographic Techniques • Ethnography Observing people in their natural environments • Behavioral Mapping Photographing people within a space, such as a hospital waiting room, over two or three days. • Consumer Journey Keeping track of all the interactions a consumer has with a product, service, or space. • Camera Journals Asking consumers to keep visual diaries of their activities and impressions relating to a product. • Storytelling Prompting people to tell personal stories about their consumer experiences. January 2007 12

Empathy Simulated - this is not a test participant's desk 1 2 3 1. Moderately protected 2. Easily accessible 3. Staging area for major objects January 2007 13

Ideation Brainstorming • Defer judgment • Build on the ideas of others • Encourage wild ideas • Go for quantity. 100 ideas in 60 minutes • Be visual • Stay focused • One conversation January 2007 14

Conceptualization (Building a Behavioral Model) ENVIRONMENTS Sometimes Online & Often Offline Mostly Offline Almost Always Offline RETAIL Shop for Shop for Apply for Shop for Shop for Deposit Review Credit Deposit Deposit The Bridge Loans & Service Checks Statements Entrepreneurs Cards Products Products Entrepreneurs are credit hungry and LoC's products inherit behaviors this is the point of reference they from their seek in terms of business legitimacy Personal Banking Pay Bills Apply for Apply for Apply for and sustainability. Service experiences Transfer Credit Loans & Funds Cards LoC's products Pay Bills Shop for COMMERCIAL Deposit Review Shop for Shop for Shop for Transfer Deposit Checks Statements Credit Cards Loans & Service Funds Products Need to transform into LoC's products online conducive activities Apply for Apply for Credit Cards Apply for Apply for Deposit Loans & Service Products LoC's products Time to Make Need to Protect Privacy Clear Path & Choices LOW The Need for : Simple Presentation HIGH Decisions (Security) Need to Validate Level of Complexity & Usable Experience Decision Paperwork Low Touch Infancy Adolescence Maturity High Touch Commodity Differentiated Fast Decision Slow Decision Price Parity Checking Negotiable CORE Credit Card Insurance PRODUCT Savings BUNDLE GROWTH Line of Credit PRODUCT Retirement BUNDLE Loan Employee Benefit January 2007 15

Prototyping (Test and Validate) OR But which way is up ? Is that a button or not? 0, 1, 2, 5, 6, 8, 9 - all digits look identical upside down Most people were unable to identify how to hold the device. January 2007 16

Being T-Shaped Thinking Linking Doing Observing Matchmaking Executing Empathizing Cross-pollinating Implementing Divergent thinking Synthesizing Specializing Brainstorming Facilitating Source: Creative Generalist blog, Steve Hardy January 2007 17

Design-thinking Frameworks ALTERNATIVES: ACTIVITIES are goal directed sets POEMS – of actions-things which people want to • People accomplish • Objects • Environments • Messages • Services OBJECTS USERS ENVIRONMENTS Experiential Framework1: are building blocks of include the entire • Physical (e.g. small the environment, key arena where vs. big) elements sometimes activities take put to complex or place • Cognitive (e.g. unintended uses, understandable vs. changing their confusing) function, meaning and context • Social (e.g. informal vs. formal) • Cultural (e.g. INTERACTIONS acceptable vs. problematic, or are between a shared vs. conflict) person and someone or something else, • Emotional (e.g. bored and are the building blocks of activities vs. engaged, or anxious vs. calm) Source: 1. User Insight Tool, Vijay Kumar 2. Ethnography in the field of design, Christina Wasson January 2007 18

Anatomy of a design firm About IDEO • Pronounced “Eye-dee-oh” • 500 designers • HQ in Palo Alto • Offices in San Francisco, Chicago, Boston, London, Munich, and Shanghai • CEO – Tim Brown • Cofounders – David Kelley (Stanford) and Bill Moggridge • Notable concepts – – The first mouse – Palm V – Handspring Treo January 2007 19

Environment OFFICE Informal Customizable Stimulating Collaborative January 2007 20

People Eclectic Unusual Diverse Right-brained January 2007 21

Capabilities Product Design Service & Environment Design Human Factors Industrial Design and Engineering Interface Design January 2007 22

Innovation requires going beyond the realm of ‘pushing’ products Wal-mart Toyota X Bank Dunkin Donuts Products X Grocery Store Samsung (Attributes) The Gap Trader Joe’s Volkswagen Target In ‘n Out Burger JetBlue Experiences Zara (Consequences) Commerce Bank Apple Blackberry Whole Foods Harley Davidson Starbucks Lifestyles Google (Values) TiVo IKEA January 2007 23

Windows Mobile vs. the potential iPhone FEATURE SMS Camera Maps Browser Music/Video Email Widgets A collection of features does not ensure successful innovation January 2007 24

Wal-mart vs. Trader Joe’s January 2007 25

Project Examples Large Healthcare Insurer • How do we engage our customers to take ownership of their health? • Is there a mutually beneficial way to reduce healthcare costs? Large consumer goods manufacturer – China strategy • How do we re-launch our car care business in China? • What options can we generate to create services based on our products? Largest service employees union in North America • How do we motivate our base? • Can we reignite the grassroots movement? HSBC Commercial Banking study • Should we develop and launch this idea? • How receptive (or not) will consumers be? • What are the impacts to our brand? January 2007 26

Case in Point – The Gap Background • Opened in the summer of ’69 in San Francisco • More than 3000 stores and $16 B in revenues • Profit margins (6.5%) – half of industry average • Same-store sales are 8% lower (Dec 2005-2006) • Healthy Banana, sinking Navy, wider Gap • Called Goldman Sachs to “explore all options” How would you approach this? • Traditional vs. Design Thinking January 2007 27

Traditional Approach • Pricing pressure • Volumes • Penetration • Purchase frequency Revenues • Transaction size • Transaction value • Product mix • Customer mix & segmentation • Generate hypotheses • Define data requirements • Gather and organize data • Analyze data to identify key issues • Fixed real-estate footprint • Size of stores • Portfolio rationalization Costs (Gap, Banana, Old Navy) • Variable labor costs • Material costs and sourcing strategies January 2007 28

Design-thinking Approach Environments, Interactions, & Objects • How do you plan a trip to The Gap? • Is it scheduled or impulsive? ENVIRONMENTS • What’s the trail between the desire and the purchase? – Is it direct or does it involve browsing? INTERACTIONS OBJECTS – Should it be accelerated or indulged? • How do users interact within the store? – With the merchandise? USERS – With other shoppers, store personnel? – With stimuli (light, sound, sense, smell)? ACTIVITIES Users & Activities • Who wants to shop at The Gap? – Why? • When would you go to The Gap? – Why? • What would trigger a trip? – How? – Who else is involved? – Who influences this desire? Why? January 2007 29

Resources My Google Reader ‘Design’ Feed can be accessed from – • http://harshlogic.blogspot.com Comprised of the following blogs – • Brand Autopsy • Influx Insights • Nussbaum On Design • Putting People First • Seth’s Blog • CPH127 • Core 77 January 2007 30

Design Thinking For Business Strategy

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