The 4Ps of Innovation and Design Thinking

This has been a crazy week. And worse we missed out flight by 5 min yesterday and ended up spending the afternoon in O’Hare eating really bad food. Here's a photo of us between meetings. I realized I have not posted anything since last week. It is not usual as I always try to do that at least every other day. Here we go, back to our topic of “design thinking” and “innovation”. Both topics are getting popular but least understood in the executive offices.

Diagram: BAH Innovaion Effectiveness Curve

Last year, the BCG innovation study reported that innovation remains a top strategic focus for many companies, with 72% of the 1,070 executives in 63 countries and all major industries ranking it a top-three strategic priority. It demonstrated that innovation does translate into superior long-term stock-market performance: the 25 most innovative companies (as defined by the survey respondents) had a median annualized return of 14.3% from 1996 through 2005, a full 300 basis points better than that of the S&P Global 1200 median. Furthermore, innovators increased median profit margins by an annualized 3.4%points per year over the ten year period, vs. 0.4 % points for the media S&P Global 1200 company. In addition, they maintained revenue growth on pace - 9% per annum - with the index median. They asked the executives why they thought the company was innovative, and summarized the results for the top five. These were the top three:

-          Innovative Culture

-          Deep Customer Understanding and Focus

-          Market Focused

According to the BCG/Business Week 2007 survey, the first 50 of the 1032 responses on the survey believe Apple is the most innovative company in the world. I believe the very first reason gets to the heart of Apple’s ability to innovation—using design thinking to create products/services that meet the unmet needs of consumers. It is not about building a product whether an iPod or iPhone, they were building an ecosystem of innovation. Their ability to “engineer” desire for products no one ever knew that they wanted. Marketing has always been communicating desire, but never about engineering desire. I would argue today’s marketing has to go beyond communications to innovation. Not all marketers are ready for this new job.  Adding emotional value is not something that is taught in MBA schools. While cost control resulting in competitive pricing of products can influence the customer’s motivation for choosing a product, truly successful products sell because they appeal to the emotions and values of the customer. They do not need to be competing objectives, though many companies consider them to be. Rather, a design thinking-driven strategy that couples the two can produce a product that fulfills the rational and emotional expectations of the customer.

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Design thinking is really a new metaphor for business and marketing strategy. It is the best way to develop and engineer desire and embed them into what we sell. Design thinking is being created at the intersection of experience design (product and interactions), business (including marketing and channel) and technology. The questions which institutions should take the lead in promoting it… B-school, D-School or Engineering School? I don’t have an answer for this one.

Many including Bill Buxton is skeptical about the notion that was popularized by Eric von Hippel that lead users can be co-designers of products. He agrees that a key weakness of paper prototypes is their inability to incorporate the actual data that animates our experiences of products and services. One of his examples: MP3 players think in terms of songs, not movements, so if you load one with classical music you’ll find a bunch of duplicate songs called Adagio. In such a case, Bill admits, you’d like to have used a more fully-realized prototype that could have absorbed real data and flushed out these kinds of problems. His point isn’t that you should never deploy heavier design artillery, but rather that you should reserve it for when it’s absolutely necessary. I do not agree with him on this point. I strongly believe design thinking is about applying visualization as an inquiry process that deals with both verbal and non-verbal mediums. The more heavy design artillery we bring in early in the process, the more we can express these non-verbal attributes of design and draw out both users and business implications.

I am not going to make this a long one today as I am a week behind in terms of my day job due to traveling. There are questions about what  are the many elements of innovation and that includes the mix of people and skills. Also what kind of critical skills are needed, here I would tell you design skills are crucial to any innovation effort. What processes are required to support innovation? The answer is to bring design thinking inspired exploratory process early in the business strategy cycle. Many companies fail in their attempts to innovate because they do not have a structured-play apporach in bringing innovaiton to action. I will wrap this up by giving you a framework to think about applying design thinking in business strategy. I called this the “4Ps of Design Thinking for Strategy” and they are as follow:

-          Pattern Recognition

-          Participation

-          Prototyping

-          Possibilities

Enjoy the slides show and I will discuss each of the above in the coming days. I’d like to hear your views on each of those. Happy Thanksgiving!

Comments

[Rory MacDonald]

I wasn't convinced by the Nov 15 post you put up but reserved judgement until you had written more. Slide 33 in the latest deck just slotted everything into place - extremely enlightening.

Looking at the 4 P's, Pattern Recognition is clearly vital in existing business and marketing. I think the difference here is how that pattern is used. Do we use its insight to satisfy demand or generate delight. To suffice or to innovate.

The idea of incorporating emotion is just a great concept. I am sure the could be an equally exciting intersection between design thinking and economics.

Idris, please could you or one of your more learned readers explain to a d-school virgin, is emotion and empathy used for pattern recognition or only to etrapolate more meanfully once the pattern is discovered?

[Bob Jacobson]

Idris,

The problem with conflating so many disparate ideas is that you end up with an infinite number of degrees of freedom, so that any goal you propose is possible but with decreasing likelihood that it actually is attainable.

Your presentation is an interesting synthesis of many ideas, but for me the notion of "engineering desire" is a bridge too far. Knowing as little as we do about desire, presuming to be able to engineer it may lead marketers in pursuit of a Holy Grail -- or possibly, a wild goose chase.

The more concrete processes, like employing pattern recognition, are smaller visions but easier to attain. Even "design thinking," inflated as that term has become, may be losing utility even as it becomes more widely applied.

[Jason Jana]

Idris
I am particularly interested and it is the first time I came across the idea of 'engineering desire'. As head of a global product development group our work is often about making functional objects desirable. Not designing products and let our marketing team to create desirability through packaging deisgn and marketing communications. I am interested to hear more of your thoughts on this. Thanks

[André Galhardo]

Pattern Recognition, Participation, Prototyping, Possibilities, filling rational and emotional sides etc.

It's clear to me that we're talking about an emerging art movement here.

(Art purists, please don't feel bad. That was just a metaphor.) :)

Our educational system was created to produce workers in high-scale, not artists... and Business schools to produce promising "bosses" for them.

Sir Ken Robinson's TED speech is a classic, i'm sure many people here have seen it.
(If not, http://www.ted.com/index.php/talks/view/id/66 )

Anyway, congratulations for nailing the Design Thinking concept so well, Idris.

[George]

It is interesting that Andre suggested that this is an art movement. More interestingly, if this visual is right, there will be less difference between an artist and a manager. All workers are artists. I really like this. Looking forward to read more here.

[Peter McKay]

Rory asked a great question. I've got one for you too. Customer emotion is becoming more and more important as the market becoming fiercely competitive, how do we updgrae the skills of product designer, usability strategist, brand managers etc to the new skills? Usability strategist only deals with the mechanical side of how a product is being used and product designer focuses on new features, brand managers spend most of their time on marketing and promotion programs, who's job is it?

[Flavio Azevedo]

Really great presentation. Provocative as it should be.

I believe that the concept "desire engineering" is great. But the word "engineering" is passé.

We need artists, like Andre says. Maybe psychologists.

The Engineering Era has prevailed so far.

Now we need emotion specialists.

And we are not here to categorize anymore. We are here to observe and learn, constantly. That´s Design Thinking number 1 rule.

[Ruth Janison]

This is a great presentation. I wish you have it in slide cast or there were a podcast. Fascincating subject and great insights. I would like to learn from you or other readers more about the tools and techniques available for pattern recognition. Many thanks.