Business Design Thinking and Doing PDF

Angèle M. Beausoleil BUSINESS DESIGN THINKING AND DOING Frameworks, Strategies and Techniques for Sustainable Innovation Business Design Thinking and Doing Angèle M. Beausoleil Business Design Thinking and Doing Frameworks, Strategies and Techniques for Sustainable Innovation Angèle M. Beausoleil University of Toronto Toronto, ON, Canada ISBN 978-3-030-86488-0 ISBN 978-3-030-86489-7 (eBook) https://doi.org/10.1007/978-3-030-86489-7 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland V To the curious and inquisitive ones, keep questioning the status quo. Preface Good design is good for everyone. It serves a purpose and communicates that purpose effectively. Through form, function and simplicity, design expresses beauty and efficiency. Good design also builds trust, value and profits. Organizations deserve good design. Business leaders are now demanding it. In today’s uncertain economic climate, business schools are increasingly ex- pected to prepare future leaders to navigate unforeseen crises, embrace new knowledge systems and manage teams and their firms towards prosperity. At the same time, many organizations continue to struggle with their innovation man- dates, hobbled by a mix of pragmatism, fear and arrogance. With significant in- vestments in current systems and structures, they resist change. Why invest in new ways of working and profiting? The curse of that past success is that they lack the courage to retool their human and technological systems to adapt to uncertain socio-economic conditions. And crucially, they both lack the curiosity to learn how their customer needs are changing, and from the best practices of those in adjacent sectors. Innovation processes inherently require continuous reinvention. This dilemma can be solved by: 1. first understanding how innovation actually happens 2. observing and identifying key issues relating to market needs and 3. strategically designing an improved, integrated and multidisciplinary approach that can be sustained over time. This textbook introduces Business Design as an emergent and important ped- agogy and practice to enable a mindset and skillset that integrates business think- ing with design doing.It’s a recipe that draws on courage to deliver what custom- ers actually need, and what stakeholders and shareholders want. Authored and crafted by a design practitioner turned innovation scholar and pedagogue, this book is a guide of sorts that integrates over 25 years of business design and innovation leadership practice with over 10 years of innovation liter- acy research and teaching. It aims to instruct and inspire the next generation of innovation designers, managers and leaders. Building upon personal and proven design industry practices and innovation development processes,1 this book introduces, explains and provides visual mod- els, frameworks, strategies and case examples of Business Design—an agile ap- proach to design-driven innovation. Business Design is a way of thinking and working that applies human-centred design to improving or transforming busi- ness activities. It draws upon social science, design, marketing and strategy to 1 Rogers et al. (2014). Diffusion of innovations (pp. 432–448). Routledge. Preface VII . Fig. 1 Diagram of textbook chapters and Business Design Method steps as modules create business value, from innovative new products, services and processes, to creative strategies and business models. The Business Design method (BDM) simplifies the innovation develop- ment process into four steps or actions: start, find, frame and solve. The BDM is primarily a competency-building framework for design-driven innovation. The BDM’s steps, techniques and exercises nudge one’s orientation towards more re- sponsible and responsive innovation. The four-step Business Design method is unpacked, verified through a complement of mini-case examples, and packaged into critical learning blocks leading to insightful decision-making and sustained value creation. Designed for both instructors and students, this ‘actionable book’ offers key learning objectives for each chapter, warm up and associated exercises, case exam- ples and worksheets. It offers a suite of prompts and templates for active learn- ing, discussion and practice. Its modular design is flexible and adaptable for both linear and topic-based teaching and facilitating. Each chapter is a self-contained module that offers key topics that can be introduced as single subjects, or can be combined with other chapters, to suit your unique instructional needs. For ex- ample, if you are focused on new product development, you might begin with 7 Chapter 5 or BDM step 3 (i.e. integration) and explore how best to integ- rate your new product concept into existing systems using design-driven busi- ness frameworks, and then skip back to the 7 Chapter 3 or BDM step 1 (i.e. in- itiation) to craft an updated product design brief. Choose your own adventure (and direction) (. Fig. 1). This book embodies the principles of project-based learning. Similar to work- place initiatives, project-based learning (PBL) aids students (as active project par- ticipants) to develop deep content knowledge as well as critical thinking, collab- oration, creativity and communication skills. Project-based courses are designed to guide students to learn by doing. A challenge brief is offered as the ‘project’ which serves as a real-world problem that requires further articulation and ulti- mately, solving. Similar to a capstone or practicum course, students demonstrate their knowledge and skills by creating a prototype or proposed solution to a real audience (company and/or customer). The project (or course unit) is team based, however individuals are expected to contribute equally to its completion. Note: for industry trainers, the project is replaced by a real and urgent business problem. For instructors or trainers, this book reflects the double-loop learning educational concept,2 which involves teaching learners of all types, to think more 2 Argyris. (1977). Double loop learning in organizations. Harvard Business Review, 55(5), 115–125. VIII Preface deeply about their own assumptions and beliefs prior to engaging in the de- sign or redesign of organizational products, structures, strategies and policies. If you’re applying this book as a curricular course unit, the chapters offer a sequen- tial breakdown of the process of innovation to move from initiation to imple- mentation guided by a proposed ‘project’. If you’re training in-house managers or teams, the four stage and four-step sequence provides facilitators a structured pathway for innovation development, professional collaboration and workplace application to a real business challenge. Throughout the book, students and par- ticipants are encouraged to build awareness of their personal thinking and de- cision-making style and how to adapt it to participate effectively in the exciting, albeit challenging, innovation process. It’s the place where business and design meet. If referencing this book for short, modular-based training programmes, each chapter offers specific topics for discussions along with techniques for prac- tice, and it’s designed as self-contained modules. As a comprehensive guidebook, notebook, workbook and reference book, the use of doodles, markings and sketches is strongly encouraged. Make it your per- sonal navigation guide through the challenging and complex innovation develop- ment journey. Each chapter (as module) invites reflection. It’s designed to grant the reader permission to pause, reflect and appreciate how an innovation project gets in- itiated, what and who is investigated, why, what and how the process involves end-users and internal stakeholders, and when the new offer (product or service) is brought to market. At the end of each chapter the reader is prompted to reflect on the section topics, as well as their own and/or companies’ innovation journey and processes. By the end of this book, readers will have gained an innovation and design literacy required to better navigate the volatile, uncertain, complex and ambiguous (aka VUCA) world in which we currently work and live. Below is a brief outline of each chapter. 7 Chapter 1 introduces the building blocks of innovation: how it’s defined, what it means and how it works. Influential ideologies, conditions and factors are outlined. A simple four-stage design-driven innovation development model acts as the critical framework for understanding how it happens, how some or- ganizations have failed and why others have succeeded. This chapter outlines and explains each stage: (1) initiation, (2) investigation, (3) integration and (4) implementation. Short business cases are provided throughout. 7 Chapter 2 introduces the origin, practice and discipline of Business De- sign, and the four-step Business Design Method (BDM). The BDM is an agile, integrative and rigorous approach to navigating the four stages of innova- tion. This method guides learners to design, participate in and/or manage a de- sign-driven innovation development process or project. This chapter introduces the most common business-oriented design practices, and unpacks each of the four BDM steps: (1) Start, (2) Find, (3) Frame and (4) Solve. Each step is pre- sented in an optimized sequence through 7 Chapters 3, 4, 5 and 6. 7 Chapter 3 launches the first stage of the innovation process (Initiation) and the first step of the Business Design Method (Step 1: Start). This chapter is divided into two parts that can be delivered as two sequential classes or two Preface IX distinct and separate modules. Part I introduces key mindsets and competencies associated with each innovation stage and business design step. Part II kick- starts the project-based learning experience, through a challenge brief and inno- vation design brief. Because innovation, unlike invention, is a team sport, team mapping and forming techniques are provided along with case examples. A pro- posed challenge brief is offered as an outline for a course or workplace training programme. 7 Chapter 4 outlines the second stage of the innovation process (Investiga- tion) and the second step of the Business Design Method (Step 2: Find). This chapter is divided into two parts which can be delivered as two sequential clas- ses or as two distinct and separate modules. Part I introduces need finding, de- sign research principles and data collection methods. Part II introduces thick data sorting and analysis techniques to arrive at key insights. Both sections build upon the Innovation Design Brief. Observational or field research and em- pathy interviews are explained with the focus on human, culture and context understanding and narrative data (thick data) collection. 7 Chapter 5 introduces the third stage of the innovation process (Integra- tion) and the third step of the Business Design Method (Step 3: Frame). This chapter is divided into two parts that can be delivered as two sequential classes or as two distinct and separate modules. Part I introduces problem framing and reframing. Part II offers ways of translating insightful problems into novel and relevant ideas and rough prototypes. 7 Chapter 6 outlines the fourth and final stage of the innovation process (Implementation) and the fourth step of the Business Design Method (Step 4: Solve). This chapter is also divided into two parts that can be delivered as two sequential classes or as two distinct and separate modules. Part I outlines fi- nal prototyping and evaluation strategies. Part II introduces storytelling, p ilot implementation plan development and performance measures design. Story- based frameworks are introduced throughout the chapter and serve as the most effective approach to stakeholder-buy in of new strategies, products, services, plans and measures. Of note, the outputs (as artifacts) generated from each step (from 7 Chapters 3 to 6) serve as important building blocks and communicate elements for the implementation plan. 7 Chapter 7 makes an explicit case for reflective practice and introspection. Although each chapter ends with a series of question prompts for instructors to ask, and/or for students to reflect upon, this chapter outlines why reflection is important for innovation participants, managers and leaders.It offers a suite of reflection techniques for individuals and teams to pause and reconsider each stage and step of their learning journey, before proceeding to the next, or retur- ning to the previous one. 7 Chapter 8 offers a comprehensive set of templates and worksheets refe- renced from each chapter. The Appendix section offers examples of completed worksheets as reference for both instructors and students (or participants). This work was crafted by a designer, manager, strategist, educator and inno- vator. It embodies multidisciplinary theories, practices, methods, techniques and voices. It offers an alternative perspective from other business and innovation X Preface management books as it exposes the failures of over-investing in technologies and profit-first myopia. It offers evidence and strategies that demonstrate the why and how of investing in our human and social systems as a means of delivering im- pactful success and sustained prosperity. As a professor at an elite business school, it’s my responsibility to educate and inspire students and future leaders to develop an evolved world view. I strive to act as an example of how you can thrive by earning the permission to question stale management frameworks that focus on trade-offs instead of tensions. I’m also here to provide guidance on gaining new perspective or view into how deci- sions are made, and insights into human needs. In response to an unprecedented era of global pandemics and disruptive sup- ply chains, management education must redesign its offerings to include both tra- ditional frameworks and more innovative, empathic and enabling methods of leadership. If implemented, business design, as a type of design leadership, may enable large and small firms to redesign their value systems and support their transition to new economies. In uncertain contexts, climates and conditions, inno- vation participants and managers can all benefit from thinking and acting more like business designers. This textbook is designed for educators—university professors and corporate facilitators. It is a starting point to your journey of thinking and doing, learning and teaching others, the ways of business design.I hope it proves to be informa- tive, instructional and transformative. I encourage you to use it as reference book or source for case examples and techniques for innovation management and strat- egy courses. “Business Design is like therapy for your business”—Starbucks executive Angèle M. Beausoleil Toronto, Canada XI Acknowledgements It takes a team to design anything of consequence, and make good design available to everyone. I've been fortunate to have the opportunity to teach and learn from a lot of peo- ple over the past 25 years. This section is to acknowledge their influence, inspiration and contribution to my work. A big thanks goes to my husband who read my early drafts, offered important ed- its and reduced my use of jargon. You continue to be my biggest champion. Un merci pour mon fils Olivier, mon cadeau le plus précieux; mes parents et ma famille pour vos enseignements et conseils. Thank you Anjana Dattani, Andrew Seepersad and Fifile Nguyễn, my team at the Rotman Business Design Initiative. Thank you Michelle Hopgood and Elizabeth Phillips, my creative collaborators and co-communication designers. Thank you to my mentors, Moura Quayle, Sara Beckman, Stefan Miesek, Daved Barry, Nathan Shedroff, Darren Dahl, David Vogt, Brian Fisher and Thomas Kemple. Thank you to my advisors and colleagues, David Soberman, Delaine Hamp- ton, Chris Ferguson, Emma Aiken-Klar, Richard Blundell, Alex Ryan, Susan Gor- bet, Jennifer Nachshen, Judy Mellet, Ken Corts, Stephanie Hodnett, Joanne Goveas, Julie Minielly, and Kate Applin from the Rotman School of Management. Thank you to Jonas Kronlund, David Schmidt and Alan Faljic and the members of the global Business Designers community of practice group. Thank you to my friends and early collaborators: Marcelo Bravo, Mary Con- nolly, Kari Marken, Federico Goroztieta, Karin Watson, Prem Gill and Sang Mah. Thank you to my students from the Rotman School of Management at the Uni- versity of Toronto, the Sauder School of Business at the University of British Co- lumbia, and the Haas School of Business at the University of California, Berkeley. Thank you to my creative muses Joel Gregorio, Alexander Manu, Michael Seven, Bruce Mau, John Couch, Tim Galles and Greg Judelman. Thanks also to Palgrave MacMillan and Springer for publishing this book and for the Bauhaus design-inspired cover. A special thank you to the founders, educators, students and practitioners of Bauhaus design. As a designer, the importance of the art form of communicating anything is paramount. I strive for a minimalist design that is understandable, yet provokes. In a complex and complicated world, we need more simplicity. Simplic- ity that is smart, not dumb. Simplicity that strips away excess, over-engineering and technological abundance, to arrive at the basics. The basic forms and shapes are used in new ways to help you navigate the fundamentals of innovation. The reflective prompts demand that you immerse yourself in the full range of materials and tech- XII Acknowledgements niques available, and learn by doing. The flexible structure is intentionally adaptive to a linear, circular or bi-directional experience. The strategies and frameworks aim to advocate new ways of approaching multi-faceted problems. These are Bauhaus design principles. XIII Contents 1 Introduction to Design-Driven Innovation............................... 1 1.1 Introduction................................................................ 2 1.1.1 Warm Up Exercise: Word Association............................................ 2 1.2 Defining and Demystifying Innovation....................................... 3 1.2.1 Discussion Exercise: Objects and Actions—Innovation as You See It................ 4 1.3 Key Influences and Orientations............................................. 4 1.4 Critical Factors and Skills.................................................... 5 1.5 Innovation Development: Past and Present.................................. 6 1.5.1 Case Map Example: Blockbuster and Netflix...................................... 8 1.6 Organizations: To Design or Not to Design................................... 10 1.6.1 Former Innovators: RIP........................................................ 11 1.6.2 Resilient Innovators: Survivors.................................................. 11 1.7 Summary and Reflection..................................................... 12 2 Introduction to Business Design.......................................... 15 2.1 Introduction................................................................ 16 2.1.1 Warm Up Exercise: Design an Object.......................................... 16 2.2 What Is Business Design?.................................................... 17 2.2.1 Discussion Exercise: Designed Innovation..................................... 19 2.3 Designing Change and Managing Innovation................................ 21 2.4 Business Design Method: Four Steps to Design-Driven Innovation............ 23 2.5 Chapter 2: Summary and Reflection.......................................... 26 References.................................................................. 27 3 Business Design Method Step 1: Start.................................... 29 3.1 Introduction................................................................ 30 3.1.1 Warm Up Exercise: Story of Me................................................ 30 3.1.2 Part I: Initiating Innovation by Design......................................... 31 3.1.2.1 Human-Centred Design Mindsets............................................. 32 3.1.3 Innovation Teams and Participant Types...................................... 34 3.1.4 Chapter 3: Part I—Summary and Reflection.................................... 38 3.2 Part II: Initiating a Business Design Challenge................................ 39 3.2.1 Warm Up Exercise: Pass the Message.......................................... 39 3.2.2 Innovations Team Forming................................................... 42 3.2.2.1 Exercise: Personal SWOT...................................................... 43 3.2.2.2 Exercise: Team SWOT......................................................... 43 3.2.3 Team Forming and Innovation Design Brief Crafting........................... 44 3.2.4 Chapter 3: Part II—Summary and Reflection................................... 47 4 Business Design Method Step 2: Find.................................... 49 4.1 Introduction................................................................ 50 4.1.1 Warm Up Exercise: Trading Card.............................................. 50 XIV Contents 4.1.2 Part I: Need Finding as Qualitative Research Method........................... 51 4.1.2.1 Generating Insights from Need Finding....................................... 55 4.1.2.2 Case Examples: How Have Organizations Used Need Finding?.................. 56 4.1.3 Key Design Research Methods: Observational Research and Empathy Interviews................................................................... 58 4.1.4 Creating a Lean Field Research Plan........................................... 59 4.1.4.1 Preparing for Field-Based Research........................................... 60 4.1.4.2 Empathy Interviews.......................................................... 62 4.1.5 Part I: Summary and Reflection............................................... 64 4.2 Part II: Thick Data Collection and Analysis.................................... 64 4.2.1 Warm Up Exercise: Items Sorting.............................................. 65 4.2.2 Thick Data Analysis........................................................... 65 4.2.3 Data Sorting: Sift, Sort and Label.............................................. 66 4.2.4 From Analysis to Synthesis................................................... 68 4.2.4.1 Exercise: Insight Statements.................................................. 68 4.2.4.2 Exercise: Problem Statement (with Insight).................................... 69 4.2.5 Design Critique Session = Feedback Loop..................................... 70 4.2.6 Part II: Summary and Reflection............................................... 71 5 Business Design Method Step 3: Frame.................................. 73 5.1 Introduction................................................................ 74 5.1.1 Warm Up Exercise: Alternative Uses........................................... 74 5.1.2 Part I: Framing the Right Problem to Solve..................................... 75 5.1.3 Framing Personas from Insights and Problem Statements...................... 76 5.1.3.1 Exercise: Empathy Map....................................................... 77 5.1.3.2 Exercise: Personas............................................................ 77 5.1.4 Framing Problems and Questions for Ideation................................. 78 5.1.4.1 Exercise: How Might We Question............................................. 78 5.1.5 Design Critique Session = Feedback Loop..................................... 79 5.1.6 Part I: Summary and Reflection............................................... 80 5.2 Part II: Framing Ideas, Analogies and Prototypes............................. 80 5.2.1 Warm Up Exercise: Analogy Maker............................................ 81 5.2.2 Creative Framing and Ideation................................................ 81 5.2.2.1 Generating Ideas Using Metaphors and Analogies............................. 83 5.2.2.2 Exercise: Rapid Ideation...................................................... 83 5.2.3 Framing Prototypes from Ideas............................................... 85 5.2.3.1 Exercise: Rapid Prototyping................................................... 86 5.2.3.2 Exercise: Journey Map........................................................ 86 5.2.4 Design Critique Session = Feedback Loop..................................... 87 5.2.5 Part II: Summary and Reflection............................................... 88 6 Business Design Method Step 4: Solve................................... 89 6.1 Introduction................................................................ 90 6.1.1 Warm Up Exercise: Paper Airplanes........................................... 90 6.1.2 Solving the Right Problem Through Prototyping............................... 91 6.1.3 Evaluating Problems Through Prototypes..................................... 94 Contents XV 6.1.4 Evaluation Strategies for Prototypal Solutions................................. 95 6.1.5 Part I: Summary and Reflection............................................... 100 6.2 Part II: Solving Through Implementation..................................... 100 6.2.1 Warm Up Exercise: Story Madlib.............................................. 100 6.2.2 Storytelling.................................................................. 101 6.2.2.1 Exercise: Three-Act Story..................................................... 104 6.2.3 Designing a Pilot Implementation Plan........................................ 104 6.2.3.1 Wayfinding: Designing Better Plans and Pathways............................. 106 6.2.4 Designing Performance Measures............................................. 108 6.2.5 Part II: Review and Reflection................................................. 115 7 Reflective Practice and Design............................................ 117 7.1 Introduction................................................................ 118 7.1.1 Warm Up Exercise: Success Paths............................................. 118 7.2 Reflection Is the Most Impactful Strategy.................................... 119 7.2.1 Teaching, Learning and Assessing Reflective Practice.......................... 124 7.2.1.1 Exercise: Reflection Paper.................................................... 126 7.2.1.2 Exercise: Journaling.......................................................... 127 7.2.1.3 Exercise: One-Minute Paper................................................... 127 7.2.1.4 Exercise: Free Writing........................................................ 127 7.2.1.5 Exercise: Free Drawing....................................................... 127 7.2.2 Reflecting on Business Management Tools.................................... 128 7.2.3 Reflecting on the Business Design Learning Journey........................... 131 7.2.3.1 Exercise: 360 Reflection and Evaluation........................................ 131 7.2.3.2 Exercise: Personal Learning Journey Map...................................... 132 8 Templates and Worksheets................................................ 135 8.1 Introduction................................................................ 136 8.2 Chapter 1: Templates and Worksheets........................................ 137 8.3 Chapter 2: Templates and Worksheets........................................ 140 8.4 Chapter 3: BDM Step 1: START Templates and Worksheets.................... 142 8.5 Chapter 4: BDM Step 2: FIND Templates and Worksheets..................... 154 8.6 Chapter 5: BDM Step 3: FRAME Templates.................................... 168 8.7 Chapter 6: BDM Step 4: SOLVE Templates..................................... 179 8.8 Chapter 7: Reflection Templates............................................. 191 Supplementary Information Appendix.................................................................... 198 Glossary..................................................................... 209 Index........................................................................ 219 Abbreviations BD Business Design KPIs Key Performance Indicators BDM Business Design Method PBL Project-based Learning CPMs Contemporary Performance PDP Pre, During, Post Measures POEMS People, Objects, Environments, HMW How Might We Messages, Services IPMs Innovation Performance POV Point of View Measures XVII List of Figures Fig. 1.1 Traditional two-stage innovation development process................ 6 Fig. 1.2 Design-driven innovation development process across four stages....... 7 Fig. 1.3 The design-driven innovation development process with prompting questions.................................................... 8 Fig. 1.4 Comparative case mapping model illustrating traditional vs design-driven innovation...................................... 9 Fig. 1.5 Case mapping framework to analyze innovation-focused business cases................................................. 10 Fig. 2.1 The Business Design Method steps alignment with design-driven innovation stages.............................................. 24 Fig. 2.2 Visual model of BDM steps with list of key outputs.................. 25 Fig. 3.1 BDM steps and associated participant types........................ 36 Fig. 3.2 Divergent and convergent thinking modes and strategies.............. 37 Fig. 3.3 Visual model of the BDM, highlighting how the outputs of divergent thinking are analyzed through convergent thinking to produce key outputs along the innovation journey.............................. 38 Fig. 6.1 Visual model of the three interrelated traits of designed innovations..... 97 Fig. 6.2 Sample three-act story structure.................................. 103 Fig. 6.3 Sample BMPN chart of a pilot implementation plan................. 107 Fig. 6.4 List of key outputs and artefacts from each BDM step................ 108 Fig. 8.1 Word association template/worksheet.............................. 138 Fig. 8.2 Case mapping template/worksheet................................ 139 Fig. 8.3 Design and object template/worksheet............................. 140 Fig. 8.4 Personal thinking map template/worksheet......................... 141 Fig. 8.5 Story of me template/worksheet.................................. 143 Fig. 8.6 Pass the message template/worksheet.............................. 144 Fig. 8.7 Challenge brief template/worksheet (page 1 of 2).................... 145 Fig. 8.8 Challenge brief template/worksheet (page 2 of 2).................... 146 Fig. 8.9 Personal SWOT template/worksheet............................... 147 Fig. 8.10 Team SWOT template/worksheet................................. 148 Fig. 8.11 Innovation design brief template/worksheet (page 1 of 2).............. 149 Fig. 8.12 Innovation design brief template/worksheet (page 2 of 2).............. 150 Fig. 8.13 Stakeholder map (internal) template/worksheet...................... 151 Fig. 8.14 Stakeholder map (external) template/worksheet...................... 152 Fig. 8.15 Five whys analysis template/worksheet............................. 153 Fig. 8.16 Trading card template/worksheet................................. 155 Fig. 8.17 Lean field research plan template/worksheet (page 1 of 2).............. 156 Fig. 8.18 Lean research plan template/worksheet (page 2 of 2).................. 157 Fig. 8.19 PDP framework template/worksheet.............................. 158 Fig. 8.20 POEMS framework template/worksheet........................... 159 Fig. 8.21 Empathy interview script template/worksheet....................... 160 Fig. 8.22 Items sorting template/worksheet................................. 161 XVIII List of Figures Fig. 8.23 Sift.Sort.Label template/worksheet (page 1 of 3)..................... 162 Fig. 8.24 Sift.Sort.Label template/worksheet (page 2 of 3)..................... 163 Fig. 8.25 Sift.Sort.Label template/worksheet (page 3 of 3)..................... 164 Fig. 8.26 Insight statements template/worksheet............................. 165 Fig. 8.27 Problem statement template/worksheet............................ 166 Fig. 8.28 Problem statement feedback sheet template/worksheet................ 167 Fig. 8.29 Alternative uses template/worksheet............................... 169 Fig. 8.30 Empathy map template/worksheet................................ 170 Fig. 8.31 Persona template/worksheet..................................... 171 Fig. 8.32 How Might We template/worksheet............................... 172 Fig. 8.33 How Might We feedback sheet template/worksheet................... 173 Fig. 8.34 Analogy maker template/worksheet............................... 174 Fig. 8.35 Rapid ideation template/worksheet................................ 175 Fig. 8.36 Rapid prototyping template/worksheet............................. 176 Fig. 8.37 Journey map template/worksheet................................. 177 Fig. 8.38 Rapid prototypes feedback sheet template/worksheet................. 178 Fig. 8.39 Paper aeroplanes template/worksheet.............................. 180 Fig. 8.40 Storyboarding template/worksheet (page 1 of 3)..................... 181 Fig. 8.41 Storyboarding template/worksheet (page 2 of 3)..................... 182 Fig. 8.42 Storyboarding template/worksheet (page 3 of 3)..................... 183 Fig. 8.43 Service blueprint template/worksheet.............................. 184 Fig. 8.44 Three traits framework template/worksheet......................... 185 Fig. 8.45 Five factors analysis template/worksheet........................... 186 Fig. 8.46 Story Madlib template/worksheet................................. 187 Fig. 8.47 Three-act template/worksheet.................................... 188 Fig. 8.48 Pilot implementation plan template/worksheet...................... 189 Fig. 8.49 Three-factors measurement framework template/worksheet............ 190 Fig. 8.50 Success paths template/worksheet................................. 192 Fig. 8.51 Reflection paper template/worksheet (page 1 of 2).................... 193 Fig. 8.52 Reflection paper template/worksheet (page 2 of 2).................... 194 Fig. 8.53 Personal learning journey map template/worksheet................... 195 Fig. A.1 Challenge Brief example for curricular use (page 1 of 2)............... 199 Fig. A.2 Challenge Brief example for curricular use (page 2 of 2)............... 200 Fig. A.3 Innovation Design Brief example for curricular use (page 1 of 2)........ 201 Fig. A.4 Innovation Design Brief example for curricular use (page 2 of 2)........ 202 Fig. A.5 Stakeholder Map (Internal) example for curricular use (page 1 of 2)..... 203 Fig. A.6 Stakeholder Map (External) example for curricular use (page 2 of 2)..... 204 Fig. A.7 Lean Research Plan example for curricular use (page 1 of 2)........... 205 Fig. A.8 Lean Research Plan example for curricular use (page 2 of 2)........... 206 Fig. A.9 Persona (Customer) example for curricular use...................... 207 XIX List of Tables Table 1.1 Deceased companies........................................... 11 Table 1.2 Resilient and surviving innovative companies (as of 2021)............. 12 Table 3.1 Mindsets for design-driven innovation............................. 33 Table 3.2 Key competency measures for learning assessment................... 35 Table 4.1 Quantitative and qualitative research—comparative summary.......... 52 Table 4.2 Comparative summary: big data versus thick data................... 54 Table 4.3 Traditional needs analysis vs. need finding......................... 55 Table 4.4 Comparing needs and problems.................................. 66 Table 4.5 Problem hypothesis and problem statement examples................. 69 Table 5.1 Idea generation examples: problems, metaphors and analogies......... 83 Table 6.1 Prototype categories........................................... 93 Table 6.2 Problem-based Alpha prototype development techniques............. 96 Table 6.3 Three traits framework for discussion............................. 98 Table 6.4 Three traits decision-making framework (Y = 1/N = 0)................ 98 Table 6.5 Prototypal solution adoption evaluation: five factors analysis.......... 99 Table 6.6 KPIs vs CPMs: sample performance metrics and measures............ 109 Table 6.7 Innovation performance measures and the three-factors framework..... 110 Table 7.1 Reflective practice frameworks (adapted for this textbook)............ 121 Table 7.2 Bain’s 5Rs of reflection framework............................... 125 Table 7.3 Reflective practice rubric example (applying Bain’s 5Rs model)......... 128 Table 8.1 Chapter-based templates/worksheets list........................... 136 1 1 Introduction to Design- Driven Innovation Supplementary Information The online version contains supplementary material available at (7 https://doi.org/10.1007/978-3-030-86489-7_1). © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 A. Beausoleil, Business Design Thinking and Doing, https://doi.org/10.1007/978-3-030-86489-7_1 2 Chapter 1 · Introduction to Design-Driven Innovation 1 Learning Objectives At the end of this chapter, readers will be able to: 5 Identify the key influences and orientations for innovation. 5 Identify the critical factors and skills for sustainable growth. 5 Identify the four stages of innovation. 1.1 Introduction This chapter introduces the building blocks of innovation: what it is, what it means and how it works. Influential ideologies, conditions and factors are out- lined. A simple four-stage design-driven innovation development model acts as the critical framework for understanding how innovation happens, why some organi- zations have failed and why others succeeded. This chapter outlines and explains each stage: (1) initiation, (2) investigation, (3) integration and (4) implementation. Mini-business cases are provided to prompt further discussion and reflection. 1.1.1 Warm Up Exercise: Word Association Warm ups prepare students to engage in the exploration of new topics or tech- niques. Similar to fitness or sport-based warm ups, individuals engage in a quick and gentle introduction to a topic and become more comfortable and confident with its relevance and broader application. Word Association is an associative thinking technique to generate words or phrases that are perceived to be related. A central word is presented to participants, who quickly generate words that come to their mind. How to: Show a mind-mapping template with the central word being ‘innovation’ (a template is provided in 7 Chapter 8). 5 Use a notebook or have paper and pencil or tablet and stylus available. 5 Generate a set of words or images that you associate with this word. 5 Ask participants to generate at least three words. Duration: 1 minute. Discussion: Ask participants to detect and unpack the patterns with words or im- ages generated from the cohort (classroom or boardroom). Categorize the words into shared meanings. Discuss how one word can present many different and di- verse perspectives and meanings. 1.2 · Defining and Demystifying Innovation 3 1 1.2 Defining and Demystifying Innovation To navigate, manage and ultimately lead an innovation team, project or innovative organization, you need to understand how others define and interpret ‘innovation’. Innovation is most often associated with successfully bringing a new and im- proved product or services to market, resulting in consumer adoption and with it, profits. However, people confuse the what (as in new or improved product, service or application) with the how (as in the process of ideating and bringing the new product to market). Many also confuse invention with innovation. Invention is the precursor to innovation. Invention is the process of exploring a hypothesis or prototyping a new idea, while innovation translates an invention into a solution that is adopted at scale. Innovation is both a noun and a verb. As a noun, it is an idea or object per- ceived as new; a new idea or object adopted by many; or the output of the pro- cess of innovating. Simply stated, innovation often describes the thing perceived as new by the proclaiming party. As a verb, innovation is a structured process of generating, developing and commercializing an idea into a new or improved solu- tion or offer. Why bother with the semantics (or meaning) of innovation? To start with, it’s important you appreciate that without a process, there is no output. The verb trumps the noun. And without an effective innovation process, there is no inno- vation or new and improved product or service, no market adoption, no revenue or impact. It’s also important to understand that at any given time in your teams and organizations, many will be thinking that innovation is a new ‘thing’, while others will be thinking it’s a ‘process’. Unfortunately, most won’t care because it’s not in their job titles or listed in their job descriptions. This lack of understanding of what innovation is, how it occurs and the role that many have in its success needs serious attention. It is costing companies mil- lions of dollars in operations costs, loss of jobs, low return on investment (ROI) or gross domestic product (GDP). Unsuccessful innovations also result in unex- pected consumer waste that impacts our environment, circular supply chain and health. It is exactly this confusion and lack of innovation literacy this module and this book ultimately addresses. To build your innovation literacy, consider describing innovation as something perceived as new, deemed valuable and has been adopted by a market segment. It is the result of a complex process. Innovation’s complex process is due to the fact that it is inherently a communication process that involves all of the activities, de- cisions and outputs from investigating and defining a problem, through to solving a problem, developing a solution and proposing it to the intended market. It in- volves on ongoing dialogue with customers and stakeholders, integrates the pro- cess of invention, the final output of experiments and prototypes, and the pack- aging and delivery of new ideas to the market. This process is rife with uncer- tainty and risk and requires curiosity, courage and insight. 4 Chapter 1 · Introduction to Design-Driven Innovation 1.2.1 Discussion Exercise: Objects and Actions—Innovation 1 as You See It As a cohort or in table teams, take a moment to think of innovations as objects (or things) as well as innovation as actions (or processes). Use a notebook to generate a list or doodle some quick sketches. 5 Generate examples of real-world innovations as objects, or things. 5 Generate examples of real-world innovations as actions or processes. Discuss: As a large group or at small table groups Did you list notable innovation-objects such as the telephone, fax machine, televi- sion, internet, smartphone, iTunes platform, etc? Did you list or sketch notable innovation processes such as Stage-Gate, Agile De- velopment or design thinking? Explain the value of surfacing the dependency of innovative outputs with effective innovation development processes and methods. 1.3 Key Influences and Orientations To effectively participate in an innovation process, we must first acknowledge our personal orientation and relationship with innovation. What is your innovation POV? Our individual relationship with innovation likely stems from two influential ideologies from the early twentieth century: tech- no-economics and socio-economic innovation. The most pervasive is the economic orientation, an ideology examined by economist Joseph Schumpeter, who described innovation as ‘creative destruction’. He was referring to how waves of disruptive technologies and tech-driven inno- vation were motivated by human ego and progress. He stated that ‘while an in- vention is merely theoretical, an innovation is an invention that has been put into practice’.1 He would influence scholars and business leaders to study and think that invention is when you take a lot of money and get an idea, while innovation is when you take an idea and make a lot of money with it.2 A societal orientation of innovation, on the other hand, is nicely explained through Gabriel Tarde’s sociological ideology, often cited from his seminal ‘Laws of Imitation’ work. He stated that ‘all new machines are made up of old tools and old procedures, differently arranged’.3 Tarde observed that humans love to imi- tate others and that we continuously evolve and improve our situations into pre- ferred ones, reflecting a more iterative or incremental innovation approach. 1 Schumpeter (1942). Creative destruction. Capitalism, Socialism and Democracy, 825, 82–85. 2 Davila et al. (2012). Making innovation work: How to manage it, measure it, and profit from it. FT Press. 3 Tarde, G. (1903). The laws of imitation. H. Holt. 1.4 · Critical Factors and Skills 5 1 Both Tarde and Schumpeter’s ideologies have shaped our personal philos- ophies, our mindsets and associated behaviours quite profoundly. Gaining an awareness of our influences will aid in developing a literacy and readiness for sus- tained innovative activities, including developing a hybrid socio-economic inno- vation orientation should result in a more resilient and prosperous future for all. Design-driven innovation combines both economic and societal perspec- tives—[USE EMS] with the aim to imagine better or improved products, services, organizations and societies. Reflection Prompt: Take a moment to reflect on your personal orientation. Ask yourself if you relate innovation more to economics, society or a hybrid of the two. 1.4 Critical Factors and Skills To effectively participate in an innovation process, we must also appreciate the critical factors that influence our way of thinking as we introduce a new product or service, strategy or process. These factors have the potential to transform our organizations. Consider the following: 5 Political factors involve trade policy uncertainty and geopolitical tensions that impact supply chains, manufacturing and trade. 5 Economic factors include the what and how of production, and for whom, and navigating the circular economy tensions. 5 Technological factors include the increasing relevance of privacy issues (such as hacking) and the race to set up Big Data and AI teams and databases. 5 Social factors revolve around the likes of growing social unrest (such as riots in Hong Kong, South America and the USA) and global world health issues (which of course includes pandemics). 5 Environmental factors include weather-related disasters, ranging from Carib- bean hurricanes, to fires in Australia and California, to floods and drought in Africa. These factors have a huge impact on business innovation. And they can impact you regardless of whether you’re in a startup, a small medium enterprise, a corpo- ration or public service organization. They also require new and evolved leader- ship skills, particularly in the areas of problem diagnostics, problem solving, com- munications and innovation-readiness. Let’s unpack each skillset: 5 Problem diagnosis skills: To effectively solve problems, you must first learn how to diagnose, define and frame the right problems. This requires critical, reflective and empathic thinking. These skills are radically different from those used by today’s analytical thinkers and by those who tend to over-engineer ap- proaches to human needs. 6 Chapter 1 · Introduction to Design-Driven Innovation 5 Navigating complexity skills: Today’s and tomorrow’s leaders need to develop 1 the ability to deal with complexity and ambiguity and learn to adapt to chang- ing needs of customers, contexts and climates. 5 Communication skills: Those who have the willingness and courage to commu- nicate their thoughts and ask more questions and solicit ideas from their team will prevail. Future-proofing your communication skills starts now, as you will be required to learn how to listen, observe and then translate customer needs into desirable products, services, marketing campaigns and ultimately, innova- tions. 5 Innovation-readiness: Those who are open to new experiences, accept failure as pre-condition for success, quickly adopt new ideas and who have the ability and willingness to adapt to changing situations. Reflection Prompt: Take a moment, and ask yourself: a. What is your innovation orientation? b. How well prepared are you to engage in an innovation initiative? c. How well have you prepared your team, and your company to navigate these factors and forces? Discuss: As a large group or at small table groups. 1.5 Innovation Development: Past and Present Traditionally, the most researched and practiced organizational innovation devel- opment process involves two critical stages: initiation and implementation. The first stage of initiation involves initiating the project based on a problem to be solved; investigating the problem and then deciding to invest in develop- ment of a solution to that problem. It is focused on defining the problem to solve. The second stage of implementation involves developing a new idea into a solution; producing, manufacturing, packaging, marketing and distributing the new solution; and evaluating if the solution solved the intended problem. It is fo- cused on developing and delivering the solution to the assumed problem. Why is this model (. Fig. 1.1) still employed by most companies? It favours one key decision-making event (tight control from the C-suite), who logically use existing operational infrastructures, systems and resources. This approach gener- ally results in incremental innovation or improvements to existing products and services, thus offering executives low risk or seemingly predictable returns.. Fig. 1.1 Traditional two-stage innovation development process 1.5 · Innovation Development: Past and Present 7 1 Unfortunately, as this visual model shows, the traditional innovation process spends little time and effort defining the problem. Instead, most of the effort, time and resources are spent on generating a solution to that problem. It gravely assumes that the problem identified is the right problem to solve. It reflects an un- der-investment in research and investigating the right problem to be solved, and over-investment in development and engineering a solution to solve the assumed problem. Close examination of the traditional model, in part by mapping evi- dence-based research and industry practice models, unearths inefficiencies in such practices. Out of this, a more sustainable innovation process emerged: a de- sign-driven innovation development model. Design-driven innovation is the de- sign, development, delivery and effective management of an innovation that meets the needs of the target-end user or customer. It invests strategically in de- fining the right problem to solve, and results in a designed solution that offers value and meaning for consumers. As a customer-centred design model, it in- volves four-stages initiation, investigation, integration and implementation. 5 The first stage of initiation involves initiating a project based on problem hy- pothesis, creating a project (design) brief and research plan to investigate the assumed problem. 5 The second stage of investigation involves investigating and validating needs associated with the problem hypothesis; researching, collecting and analyzing data; ultimately finding needs and the right problem to solve. 5 The third stage of integration integrates insights and ideas into prototypes, frame and reframe the problem to solve, test prototypes with external and in- ternal stakeholders. 5 The fourth stage is implementation involves designing, testing and implementing final prototypes, and then designing and delivering a solution to the problem; followed by evaluating the solution to determine if the problem is solved or not. This four-stage model’s first two stages focus on defining the right problem to solve. The last two stages focus on designing the right solution. This model (. Fig. 1.2) shows a better balance with investing in defining the right and solvable problem and generating solution prototypes, before investing significant resources in the fi- nal design and delivery of the solution. Each stage demands reflection prior to deci- sion-making, granting permission to both management and innovation teams to de- termine if they should move forward or backward. This process separates research from the traditional R&D, investigating the intended customer’s needs prior to de- fining the problem—which positively impacts the design of a solution that is solving. Fig. 1.2 Design-driven innovation development process across four stages 8 Chapter 1 · Introduction to Design-Driven Innovation 1. Fig. 1.3 The design-driven innovation development process with prompting questions the right problem for the target end-user. The four stages highlight a design-driven innovation process as a best practice. Designing a process for success involves moving from intention (initiation) to inquiry and insight-based problem framing (investigation), to integrating insights into ideation, prototyping and existing production systems (integration); to pack- aging and delivering the solution to a demanding market (implementation). Design-driven innovation aims to facilitate ongoing dialogue with stakehold- ers (internal and external), resulting in insightful and informed decision-making between each stage. The innovation manager or participant is guided with a series of questions to spark discussion and reflection before moving forward or towards action (. Fig. 1.3). For example, the initiation stage prompts the team to ask: What problem are we really trying to solve? For whom, the company or the customer? The inves- tigation stage asks: Who does our customer need? Why does it matter to them and the company? The integration stage asks: How might we solve their problem? And, the implementation stage poses: How will we design and deliver a solution that solves their problem? The questions serve as prompts to surface assumptions, biases and beliefs that may affect the effectiveness of the innovation process. For the manager or project owner, the benefits for a design-driven approach include: 5 Collaborative approach to decision-making. 5 Customer or user-informed insights. 5 Multiple decision points for stakeholder engagement and buy-in. 5 Strategic integration of person-led, low-tech techniques with existing pro- cesses. 5 A combined fluid and adaptive approach with a structured system. 5 Stage-based costs projections for effective budget management. 1.5.1 Case Map Example: Blockbuster and Netflix A case map is a diagram that visually illustrates the relationships between key con- cepts, inputs and outputs of a case study. Case mapping is a technique to visually reconstruct and analyze relevant information from a case study. It guides individu- 1.5 · Innovation Development: Past and Present 9 1. Fig. 1.4 Comparative case mapping model illustrating traditional vs design-driven innovation als and teams to think analytically and visually, aiding in the exploration and sur- facing of key problems, issues, decisions and actions within a case. The case map below (. Fig. 1.4) highlights the key innovation-related decisions made by Block- buster and Netflix over their corporate lifecycles. This case mapping has been created to highlight the different strategies and deci- sions involving innovation activities between two companies operating in similar territory. It examines and summarizes how Blockbuster and Netflix each offered different services to the same customers, enabling the customers to decide the vic- tor. Blockbuster, founded in 1985 in Texas, was a brick-and-mortar retail chain who once led the North American and global video rental industry, then filed for bankruptcy in 2010. Blockbuster grew into a successful company by initially offer- ing VHS video rental customers a choice of movies, albeit limited to physical retail locations for selection, pick-up and drop-off. Their business model combined rev- enues from rentals and from late fees—charging the same customer for withhold- ing future sales of the video or DVD. Throughout the nineties, Blockbuster would make shareholder-focused corporate decisions over customer preferences by offer- ing only Blu-Ray over HD-DVD titles, restricting rentals to physical retail loca- tions only (including a limited partnership with Walmart), and ultimately declining an alternative strategy for rentals-by-mail and web-based services from a couple of guys who had just founded Netflix. Blockbuster filed for bankruptcy in 2010. Netflix launched in 1997 from California, with a simple rent-by-mail service for customers to order and return the new CD-ROM video formats (Blu-Ray and HD- DVD) from the comfort of their home, and without late fees. Their online subscrip- tion service pilot proved successful, aiding them to secure a $30 million investment to scale their services across the US. Netflix pivoted their business model from post-delivered DVDs to a complete online subscription service. The company then dropped their monthly fee and introduced an annual flat fee for limitless access to internet-based streamed movies. With thousands of subscribers, they built an al- gorithm to identity film genre, consumer preference and choice, and introduced a ‘smart’ recommendation feature. From 2002 to 2013, Netflix grew to serve over $36 10 Chapter 1 · Introduction to Design-Driven Innovation 1 million subscribers across the USA and internationally. In 2019, Netflix4 operated in over 190 countries, offering the largest subscription-based online streaming ser- vice—a library of long and short-form films and television series—while emerging as a producer and distributor of in-house, original content. Blockbuster originally succeeded with a business model focused on delivering enter- tainment to people’s homes. Blockbuster maintained its original business model and delayed responding to changing customer needs and disruptive technologies. Netf- lix continued to pivot and redesign their business model, offering what customers desired and profits to shareholders. Netflix is one example of design-driven innova- tion—a strategic approach to generate sustainable and desirable products or services. Reflection Prompt: Are you able to discern and diagnose the different stages of inno- vation in this mini-case? Discussion: What are your interpretation of the decisions made by both Blockbuster and Netflix? To analyze additional innovation development focused business cases (or work- place case studies), consider using or referencing the case mapping framework. It provides a set of guiding questions for each stage (. Fig. 1.5). A templated work- sheet is provided in 7 Chapter 8.. Fig. 1.5 Case mapping framework to analyze innovation-focused business cases 1.6 Organizations: To Design or Not to Design We now have a better understanding of what innovation means, along with the influences on its practice, and factors and skills critical to successful participation. Let’s examine a few examples of companies that failed to innovate sustainably, and compare their experiences to those of companies that are currently thriving. 4 Randolph (2019). That will never work: The birth of Netflix and the amazing life of an idea. Little, Brown. 1.6 · Organizations: To Design or Not to Design 11 1. Table 1.1 Deceased companies Company (operating years) Simplified description of demise Pan Am (1927–1991) Overinvested in business model, mismanagement British Home Stores (BHS) (1928–2016) Traditional book store that stagnated into unprof- itable community tea shop Polaroid (1937–2001) Unable to anticipate impact from digital cameras Toys R Us (1948–2017) Signed 10-yr deal with Amazon, no in-house e-commerce Tower Records (1960–2004) Disrupted by music piracy, iTunes and streaming Parmalat (1961–2003) Dairy food manufacturer to fraudulent financial model Borders (1971–2011) Too late to offer online books, too much debt Compaq (1982–2002) Lost pricing war with PC makers Blockbuster (1985–2010) Unable to transition towards a digital model Pets.com (1998–2000) Lacked integrated e-commerce and warehouse management systems 1.6.1 Former Innovators: RIP This table outlines a sample of organizations no longer operating (. Table 1.1), and offers simplified reasons for their demise, to illustrate their innovation chal- lenges. What can we learn from these once, now fallen innovators? These companies fell into the ‘success trap’ by exploiting their (historically successful) business ac- tivities. They neglected to explore evolving customer needs to enhance their long- term viability. 1.6.2 Resilient Innovators: Survivors. Table 1.2 outlines a sample of existing companies (2021) that are positioned to survive and thrive through the global pandemic and beyond: Why have they succeeded? What is their secret formula? The innovation devel- opment patterns from these companies suggest they share some common prac- tices in their paths to success: 5 They have all managed to evolve their original business models to meet evolv- ing customer needs. 5 They combine design with engineering. 5 They created a culture of experimentation. 12 Chapter 1 · Introduction to Design-Driven Innovation. Table 1.2 Resilient and surviving innovative companies (as of 2021) 1 Company (founding year) Evolution (from > to) Nintendo (1889– > from local playing cards to global at-home entertainment products Nokia (1865– > from paper mill to manufacturer to telecom services Microsoft (1975– > from software to cloud and team-based tools as service Alibaba Group (1999– > from B2B online marketplace to C2C platform Tesla (2003– > from R&D to clean energy product manufacturer Shopify (2004– > from platform to powering global online pop-ups Big Hit Entertainment (2005– > from music management to music fan generator Beyond Meat (2009– > from single retail provider to global plant-based meat manufacturer Snap/Snapchat (2011– > from social messaging to content publisher White Claw (2016– > from Mike’s Hard Lemonade to crafted low calorie seltzers These companies are examples of sustainable innovation in practice. Designing and redesigning your business in response to what your market needs is crucial for survival and sustained competitive advantage. ‘Sustainable innovation’ in this book is defined as an approach to innovation development that is designed to be maintained, sustained and supported over many cycles or years. 1.7 Summary and Reflection Innovation is both a process and an output. It is important to have the right pro- cess that generates desirable goods or services that are deemed innovative and are adopted widely. The traditional innovation development model puts most of the time, effort and money in developing the solution, and less on understanding and framing the right problem to solve. In response to this rigid, solution-focused ap- proach, a design-driven innovation model is proposed. The contemporary four- stage design-driven innovation model has emerged as a sustainable approach that balances time, effort and resources to find the right problem for your organization to solve, focused on a target customer or end-user. Students: Reflect on topics presented and answer the following: 5 How do you define innovation? 5 What are the key influences and orientations for innovation? 5 What are the critical factors and skills for sustainable business growth? 5 What are the four stages of design-driven innovation? Introduction to Design-Driven Innovation 13 1 Reflect on your own process and/or your companies’ innovation process. Take a few minutes to quickly sketch out how a project gets initiated, what and who is inves- tigated and why, what and how the process involves end-users and internal stake- holders. Also reflect on the how and when the new offer (product or service) being brought to market. From that quick ‘memory check’, compare your process to the four stages: are they similar or different? Identify gaps, ask how you might retool. 15 2 Introduction to Business Design Supplementary Information The online version contains supplementary material available at (7 https://doi.org/10.1007/978-3-030-86489-7_2). © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 A. Beausoleil, Business Design Thinking and Doing, https://doi.org/10.1007/978-3-030-86489-7_2 16 Chapter 2 · Introduction to Business Design Learning Objectives At the end of this chapter, readers will be able to: 2 5 Describe the value of design for business 5 Identify the principles and practices of human-centred design 5 Identify the four steps of the Business Design Method 2.1 Introduction This chapter introduces the origin, practice and discipline of Business Design, and the four-step Business Design Method (BDM) as an agile, integrative and rig- orous approach to navigating the four stages of innovation. This method guides learners to design, participate in, and collaboratively manage a design-driven in- novation development process or project. The most common design practices in business innovation are explained, and the four BDM steps are unpacked: (1) Start; (2) Find; (3) Frame) and (4) Solve. Each step is presented in an optimized sequence from Chapters 3, 4, 5 to 6. 2.1.1 Warm Up Exercise: Design an Object Warm ups prepare students to engage in the exploration of new topics or tech- niques. Similar to fitness or sport-based warm ups, individuals engage in a quick and gentle introduction to a topic and become more comfortable and confident with its relevance and broader application. Design an Object is a design thinking exercise practiced at IBM which involves two prompts that elicit two different yet meaningful outcomes. One focuses on the func- tional needs associated with an object, the other focuses on the emotional needs of the object’s end-user. How to: Take a sheet of paper/pen or tablet/stylus and draw a line in the centre to create two panels or sections. – The first panel states ‘Design a vase (as object)’ as a prompt – Ask participants to generate words and sketches that come to mind. – The second panel states ‘Design a better way for people to enjoy flowers (ob- ject of vase)’ as a prompt – Ask participants to generate new or unexpected responses that come to mind. Duration: 3 minutes (1.5 min per panel). Discussion: Explore the power of reframing a question to develop empathy for the people using the object and/or seeking a desirable and designed experience. Discuss functional and emotional needs. 2.2 · What Is Business Design? 17 2 2.2 What Is Business Design? Design has become increasingly the crucial ingredient for businesses competing for a share of today’s global, fast-paced and uncertain marketplace. Better de- signed products and services attract customers. Well-designed organizations at- tract and retain top talent. Design-driven leaders craft their companies and cul- tures based on the logic of design’s appeal and a designer’s approach. Welcome to Business Design. Business design is a modern construct, making its first appearance in ac- ademic and industry literature in the early 1990s. It was first described by sys- tems engineer J.L. Dietz in 1993 as the modeling, design, engineering and re-en- gineering of a firm.1 Dietz’s research focused on informational and technological mechanisms that facilitated organizational structures. Management consultant Adrian Slywotzky, in his 1996 book ‘Value Migration’, offered a straightforward definition of business design as encompassing all activities involving the design of a profitable business. As a respected author, he guided business leaders to con- sider critical questions to inform their business design, such as asking about the customer, their firm’s unique value proposition, profit model and strategic con- trol, and how all of these elements work together. He stated the discipline of bu- siness design is to take exactly the same approach to designing the business as one takes to designing a great product—bringing new value to the customer from con- cept to product, and then to market, profitably. He also offered Google as an ex- ample of a firm practicing business design and redesign, obsessed with constant improvement based on the customer’s need to find and rank information. Goog- le’s approach has resulted in the invention of AdSense and AdWords services, and a new business design (for internet browsers) with a sustainable competitive advantage.2 As a phrase, business design implies the integration of business (as organiza- tion) with design (as to make or mark), or the act of designing or redesigning an organization. From a multidisciplinary research literature review, business design is described as organizing and actively engaging in new value creation, using de- sign-related principles and practices, resulting in sustained competitive advantage. Hence, business design is the practice of design-driven innovation. In practice, Business Design (BD) is generally understood as a way of thinking and working that applies human-centred design to improving or transforming busi- ness activities. Its combinatory approach draws upon management and social sci- ence, design, strategy and marketing to create business value—from innovative new products, services and processes, to sustainable business models. As a discipline, we define Business Design as an approach that integrates management frameworks, anthropological methods and design principles to solve organizational challenges. It offers a structured methodology to orient organiza- 1 Dietz (1993). Business modelling for business redesign. Faculty of Economics, Limburg University. 2 Slywotzky (1997). Value migration: How to think several moves ahead of the competition. Long Range Planning, 2(30), 314. 18 Chapter 2 · Introduction to Business Design tions to recognize that the marketplace and customers are evolving, and to evolve their business processes and models accordingly. Its purpose is to align leaders and their teams to reframe business problems, prototype solutions and deliver 2 what customers need, and stakeholders want—resulting in sustainable business operations. A senior executive with a global corporation described Business De- sign as ‘it’s like therapy for your business’. Human-centred design (HCD) involves a dynamic and reflective process of observing humans to understand their needs, wants and motivations, and propos- ing a desired state or outcome. Human-centred design is defined as an approach to designing platforms, products and services, that model end-user behaviour, and are intuitive, desirable and commercially viable. The aim of HCD is to develop empathy for others in order to make insightful decisions and take impactful ac- tion. The key principles of HCD include: 5 Focus on understanding people 5 Focus on solving problems for people 5 Understand that human systems are interconnected (platforms and planet) 5 Be iterative and generative 5 Always be seeking feedback 5 Test prototypes 5 Learn, do, refine and repeat Business Design (BD) employs HCD methods that involve customer understand- ing delivered through ethnographic methods when spreadsheets and big data ana- lytical tools are insufficient. More accurately, yet less commonly stated is how BD applies a holistic form of HCD or stakeholder-centred design approach to business innovation. Stakeholder-centred design (SCD) is an approach to designing plat- forms, products and services, that model both end-user and ecosystem member behaviours, and are desirable, and commercially feasible and viable. As an emergent discipline, BD is introduced (or trained) and practiced horizon- tally and vertically across organizations. It involves cross-functional teams that span marketing, strategy, HR, product design and development, finance and operations. It involves both internal and external stakeholders (i.e. customers or end-users) and is fo- cused on the effective management of the design, development and delivery of an in- novative solution. Examples of its diverse practices include: strategic design, business model design, employee experience design, service design and customer experience de- sign. The following integrate the needs of both internal & external stakeholders: 5 Strategic Design applies design principles and practices to guide strategy de- velopment and implementation towards innovative outcomes that benefit both people and organizations. Strategic design involves systems thinking and con- siders user needs and business goals when designing a strategy. 5 Business Model Design involves the designing or redesigning of an organiza- tion’s or division’s business model to create value and prosper. Business Model Design involves business planning frameworks and business model maps to articulate the source of future value and a proposed distinctive value proposi- tion to remain competitive. 2.2 · What Is Business Design? 19 2 5 Employee Experience Design (EXD) applies design methods to designing pro- grammes and experiences that employees desire. EXD involves employee-cen- tred activities (as internal customers) to research, map, prototype and develop new or improved interactions between employee and employer. 5 Service Design applies design principles and methods to service planning, de- velopment and implementation that benefit both users and organizations. Ser- vice design involves both internal and external (customer facing) activities to map, prototype and propose an improved or new external service and/or inter- nal process. 5 Customer Experience Design (CXD) applies marketing principles and design methods to designing product/service experiences that customers desire and firms profit from. CXD involves customer-centred activities to research, map, prototype and market new or improved interactions between end-users (as customers) and your organization. As an overarching approach to navigate and manage design-driven innovation, business design orients organizations to recognize that the market place, consumer segments and customers are evolving, and that business models and strategies must evolve accordingly. As users (or customers) continue to leave for competitor offerings, organizations need to rediscover who their customers are. For organiza- tions to survive, let alone thrive, they will need to effectively embrace a business design approach to connect with customers, understand their unmet needs and find effective yet profitable ways to make their lives and jobs better. If the organi- zation doesn’t adapt, they will continue the slow and inevitable decline towards ban- kruptcy or irrelevance. 2.2.1 Discussion Exercise: Designed Innovation Take a moment and think of examples of designed innovations that span strategic design, business model design, employee experience design, service design and cus- tomer experience design. Use a notebook to generate a list. – Generate examples of real-world strategic innovations – Generate examples of real-world business model innovations – Generate examples of real-world EXD innovations – Generate examples of real-world service design innovations – Generate examples of real-world CXD innovations Discuss: As a large group (cohort) or at small table groups ask: – What are the similarities between the designed innovations? – What are the differences between the design innovations – What role does human-centred design (HCD) play? Explain the value of integrating HCD principles into innovation development pro- cesses, for different types of business designs or outputs. 20 Chapter 2 · Introduction to Business Design Business Design and Design Thinking: A Literature Review Synopsis As an emergent discipline, Business Design scholars and practitioners suggest it in- 2 volves the re-engineering or redesigning of the organization in response to mar- ket changes and customer needs (Dietz 1993; Talwar 1993; Kilov and Simmonds 1996; Slywotzky 1997; Sia 2000). Some propose that Business Design is a frame- work comprising a firm’s structures, cultures and sources of capital (Denning 1996; Baroudi and Lucas 1994; Osterwalder, Pigneur and Tucci 2005; etc.) or even its DNA (Turner 2000). As a modern management practice, Business Design is in- herent in business model design, combining a firm’s logic and processes in creat- ing and commercializing value (Osterwalder et al. 2005; etc.) or a strategic compet- itive advantage (Slywotzky 1997; Martin 2009; Fraser 2012). At business schools, it is associated with design thinking (Martin 2005; Dunne and Martin 2006; Martin 2009; Brown 2009; Liedtka and Ogilvie 2011; Kelley and Kelley 2013; Dunne 2018; Fraser 2012) and described as a human-centred approach to innovation (Beausoleil 2018). As a design management practice, Business Design is associated with sys- tems thinking (Van Ackere et al. 1993; Kumar et al. 2009; Caisse and Montreuil 2014; Gharajedaghi 2011), strategic design (Manzini 1999; Manzini and Vezzoli 2003; Stevens and Moultrie 2011; Liedtka et al. 2007; Quayle 2017), service design (Faber et al. 2003; Mager 2008; Reason et al. 2015; de Rouw and Johnson 2017) and customer experience design (Berry et al. 2002; Lockwood 2010; Oswald 2016). Practicing business designers offer business design as an activity that uses design methodologies, a design mindset and business tools to solve business challenges (Faljic 2019). From the management discourse on business design, most authors discuss the need for organizations to welcome new ‘designs’ to adapt, survive and prosper. It ap- pears the combinatory power of business with design has driven an exponential rise in business design-related discourse, particularly with the concept of design think- ing. Design thinking commonly refers to a creative problem-solving approach that draws from the designer’s toolkit to integrate the needs of users with the require- ments for business success (Kelley 2006; Brown 2009). Originating from Stanford University’s engineering school and associated with pro- fessors Robert McKim, Rolf Faste and David Kelley in the 1980s and 1990s, de- sign thinking was introduced as a way of incorporating end-users (known as hu- man-centered design) into traditional engineering processes (Oxman 2017). Published research articles focused on design thinking are extensive and span engi- neering, science, design, education, sociology and management journals. Most management scholars encourage firms to adopt design thinking approaches to increase customer understanding and therefore a competitive advantage (Owen 2005; Beckman and Barry 2007; Dunne and Martin 2006; Martin 2009; Ungaretti et al. 2009; Esslinger 2009; Liedtka and Ogilvie 2011; Lockwood 2010; Matthews et al. 2011; Martin and Euchner 2012). A few argue it lacks a clear definition, rig- orous theoretical frameworks and effective practice (Kimbell 2011; Panda 2016; Iskander 2018; Ersoy 2018). 2.3 · Designing Change and Managing Innovation 21 2 This book introduces business design as a distinct construct and practice from de- sign thinking, noting three key differences: 5 first, its origin is with organizational redesign; 5 second, it integrates both customer and stakeholder needs (rather than custom- ers or end-users only) and, 5 third, its focus is on both the management of innovation work, and engineering or product/service design. The steady increase of published articles and scholarship in the domain of de- sign-oriented and design-driven innovation studies suggests it is an emerging disci- pline in management education and more precisely in innovation management. Reflection Prompt: Take a moment and reflect on the value of design to customers and companies. Do you consider these trade-offs or tensions? Discussion: Ask students (or participants) to consider your professional experience in designing a service or experience, and your personal experience of being a customer or end-user. What are their similarities and differences with the expe- riences? 2.3 Designing Change and Managing Innovation Any action involving the design or redesign of a process, product or business model requires innovation management. Therefore, business design is aligned with organizational change, product improvement and the ‘management of in- novation’ perspective inside firms.3 Innovation scholars have subtly introduced the need for business design when highlighting the four main problems that inno- vation creates for managers: human, process, structural and strategic problems. They suggest the role of senior management teams is to effectively manage in- novation inside a firm with the intent to improve business performance and firm competitiveness. They provide compelling evidence for the need to equip senior managers and future leaders (e.g. MBAs) with innovation management methods, frameworks and mindsets that integrate business design.4 Business Design triggers a new typology of key design actions and owners that intersect with core business functions and involve design-as-process activities 3 Cunningham and Walsh (2019), Disciplinary perspectives on innovation: Management, Founda- tions and Trends® in Entrepreneurship: Vol. 15, No. 3–4, pp. 391–430. 4 Damanpour (1991). Organizational innovation: A meta-analysis of effects of determinants and moderators. Academy of Management Journal, 34(3), 555–590. Shoham and Fiegenbaum (2002). Competitive determinants of organizational risk-taking attitude: The role of strategy reference points. Management Decision, 40(2), 127–141. Van de Ven (2017). The innovation journey: You can’t control it, but you can learn to maneuver it. Innovation, 19(1), 39–42. 22 Chapter 2 · Introduction to Business Design (methods) across an organization, in contrast to design-as-artifact (things). Exam- ples of design-as-process activities and their common associated roles comprise: 2 5 What are we designing? (R&D, Sales, Marketing, HR, Management and Fi- nance) 5 Who are we designing for? (Marketing and HR = customer facing) 5 Why are we designing? (Strategy and CEO) 5 How will we design it? (Production/Operations and Finance) 5 How will we know if we succeeded? (Management and Finance) These core roles all engage in innovation-related activities. They drive, manage and participate in the improvement, reinvention and transformation of processes, structures, products and systems (aka organizational change). Innovation is synonymous with change. Introducing a new idea or technology is one thing (it actually is invention). Introducing a new idea or technology that is adopted by many, is change (aka innovation). Design-driven innovation involves thoughtful planning and execution of an idea, proposal or technology with the intent to design change. Business Design denotes an intended or designerly ap- proach to craft and embed change in an organization. There are four basic types of designed business innovations relating to what the firm’s leaders believe re- quires changing and improvement: 5 Product/Service: changing what you do or offer (e.g. mobile phone) 5 Position/Market: changing who consumes it (e.g. new user) 5 Process: changing how you do it (e.g. Lean, Six Sigma, etc.) 5 Paradigm: changing why it matters and what value it creates (e.g. platform (iTunes) and organizational culture (flat or decentralized) Business examples for each type of design-driven innovation include: Product Design Example: OXO, founded in 1990 in NYC by Sam Farber, is a manufacturer of kitchen utensils and housewares. Farber, an industrial designer and entrepreneur, observed his wife struggling to hold her potato peeler due to her arthritis, and questioned why ordinary kitchen tools hurt, instead of help, the home cook. Sam prototyped, tested and launched a Good Grip series of inclu- sive-design cooking tools that could benefit all people (with or without arthri- tis). OXO has grown to offer over 1,000 Good Grips products designed to delight end-users.5 Position/Market Design Example: Umpqua Bank is a commercial bank based in Oregon. Umpqua was founded in 1953 by a group of timber industry workers seeking a way for their employees to cash their payroll checks. Over the years, the bank has redesigned their product, service and retail strategies to meet the needs of both the citizens and businesses located near their branches. They shifted their 5 OXO Corporation (2021) Behind the scenes. Retrieved May 2021 from 7 https://www.oxo.com/ blog/behind-the-scenes/behind-design-oxos-iconic-good-grips-handles. 2.4 · Business Design Method: Four Steps to Design-Driven Innovation 23 2 focus from convenience and speed, to connecting with the locals (people) who value community prosperity as much as their own. They offer a café and commu- nity resource centre and exemplify the concept of ‘slow banking’. Their business design approach has resulted in sustained growth for them and their clients, from their early start of $120M to $8B in 2019.6 Process Design Example: Slack Technologies, founded in 2009 in Canada, started as a gaming company that had developed an internal process, application and platform for collaborative and remote-based teams. Although the game failed, their internal com

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