Design thinking is a process centered around understanding user needs through methods like observation and interviews to define problems and generate innovative solutions. It is an iterative process involving prototyping ideas and testing them with users to refine solutions. Organizations use design thinking to develop more user-centered products and services that better meet customer needs and reduce risks, which can lead to increased profits and differentiation from competitors. The Stanford design thinking process involves the phases of empathizing, defining, ideating, prototyping, and testing to manage projects with a user-focused approach.