Why organisations should incorporate a design-approach at a strategic level for improved financial performance and the ability to address ill-defined problems.
In a Nutshell
Design is more than the look and feel of packaging and appearances.
Companies taking a design-approach at a strategic level outperform the industry benchmarks financially.
A design-approach is uniquely suited to tackling the ill-defined nature of business disruption.
As part of ROHEI's practice of creating learning experiences, we have been designing solutions for our learners. As the pace of change has increased, we have also been helping organisations manage the people side of organisational change.
Having had the privilege of working with design experts to try to understand design's potential for business impact and the mindset around its adoption, two things become very clear:
Many companies are still unfamiliar with design as a practice and its scope and benefits.
The design-approach is particularly suited for organisations wishing to navigate disruption successfully.
Why should organisations take a serious look at how to incorporate a design-approach at a strategic level for their business?
It has proven to improve financial performance
It is uniquely suited to tackle the ill-defined nature of disruption
Taking a design-based approach improves financial performance
Various reports in recent years have concluded that there is a strong correlation between the use of a design approach and financial performance.
Most people think of the look and feel when they hear the word 'Design'. It is most often instinctively associated with whether something is aesthetically pleasing. For those familiar with the work of firms like IDEO and the field of UX, design involves far more than beautiful packaging or attractive appearances.
It's not just what it looks like and feels like. Design is how it works.- STEVE JOBS
Design is at its essence, understanding user needs and creating solutions to meet those needs. It involves obtaining insights and ideas from people across multiple disciplines and diverse backgrounds and emphasises the iterative use of low resource prototyping and testing with users in order to increase the chances of a solution that users would adopt.
The Business Value of Design published in the McKinsey Quarterly Oct 2018 reports total returns to shareholders of high design adoption firms at 21% compared to 12-16% industry benchmarks.
A similar study called Creating Value by Design commissioned by DesignSingapore Council (DSG) observed a 4.8% average increase in profit margin for companies increasing their use of the design approach.
Former PepsiCo CEO Indra Nooyi shared in an interview that "design" was given a voice in nearly every important decision in the company. Under Nooyi's leadership, sales grew by 80% during her tenure.
In an interview with Harvard Business Review, PepsiCo's Chief Design Officer Mauro Porcini shared: "I strongly believe that design and innovation are exactly the same thing. Design is more than the aesthetics and artifacts associated with products; it's a strategic function that focuses on what people want and need and dream of, then crafts experiences across the full brand ecosystem that are meaningful and relevant for customers."
Apart from being able to outperform industry benchmarks, taking a design-approach is compelling because it is uniquely suited for the dynamically changing nature of business today.
Crossing the Red Sea of Transformation
As leaders navigate through a fog of uncertainty, they sometimes find themselves standing at the edge of the proverbial sea of change, looking to take the first step into the waters and hoping that the sea will part for them as it did Charlton Heston in the movie The Ten Commandments. Everyone else following is watching if this will indeed happen as predicted.
Leaders face the pressure of rallying their teams to transform their organisations through changes in legislation, increasing talent mobility, the emergence of disruptive technologies, competition from non-traditional quarters and growing customer expectations. Having the confidence to chart a course can prove to be a challenge. The scenario appears to have very similar characteristics to 'wicked problems'.
Based on his work in the 1960s, Horst Rittel defines wicked problems as "a class of social system problems which are ill-formulated, where the information is confusing, where there are many clients and decision-makers with conflicting values, and where the ramifications of the whole system are thoroughly confusing".
The design-based approach may be the most viable and sustainable response to disruption in an organisations arsenal.
Why is the design-approach ideal in a changing world?
There are certain tenets in the design-approach that make it particularly suitable for helping organisations navigate through disruptive change.
1. Understanding changing consumer and stakeholder needs.
According to Gladly's 2019 Customer Service Expectations Survey, consumers expect more than ever. With access to information and reviews now ubiquitous, customers are now comparing your business to not just your direct competition, but to the best service experience they have ever received from any company or any person.
Customers are now comparing your business to not just your direct competition, but to the best service experience they have ever received from any company or any person. - GLADLY'S 2019 CUSTOMER SERVICE EXPECTATIONS SURVEY
Organisations urgently need to understand the shifts in mindsets in their target audiences and the design-approach is ideal for that. Starting with empathy for the user and seeking to understand underlying needs and desires, the design-approach advocates thoughtful exploration to gain insight.
Researchers use surveys, interviews, first-hand observations. They balance the use of data analytics with intuition and the appreciation of the emotive. These multiple data sources are crucial for organisations to obtain a good read of the audience that they are trying to serve.
2. Cross-discipline innovation to create solutions
In times of change, no one person has the answer. The leader who can best facilitate the active involvement of their teams will have a distinct advantage.
The design-approach encourages the crowdsourcing of ideas from multiple disciplines and departments and across levels of the organisation. The ideas generated from this process can be very robust and unexpected because of the diversity inherent in the cross-functional project teams.
Nike CEO Mark Parker shares during an interview, "I like the fact that we can work with people in other fields to solve those problems."
We’re lifting up rocks to find new solutions to problems, and we’re looking in places that maybe many people aren’t looking. - MARK PARKER, CEO, NIKE
"Working with artists and designers, you get different points of view, and that cross-pollination of creativity to me is really rich. It creates a fertile place for new ideas to start."
3. Adopting a hands-on approach in prototyping and testing
In a time of change, it is difficult to have certainty about the feasibility of solutions. Organisations need to to make the best use of their resources to and maximize the ROI on projects.
Design theorist Jeffrey Conklin said of wicked problems, "The problem is not understood until after the formulation of a solution". Some business problems can only be truly understood when we create attempts at a solution to learn how our target audiences respond to it.
The design-approach emphasizes a hands-on approach to learning by lowering the risk of project failure through testing ideas with low-resolution/low-cost prototypes with actual users.
Project ideas can fail fast and fail cheap as adjustments to the solution to be made early to avoid the waste of limited resources that comes from lengthy product development lifecycles.
This approach requires a willingness on the part of the organisation to learn by iterative attempts, but the benefit would be that the final solution would have already proven acceptance by those it for whom it was designed. It also keeps organisations nimble and open to learning as a response to the dynamic way in which businesses change.