Date: January 25th, 2007

Harsh Jawharkar

University of Chicago –Graduate School of Business

Design Thinking for Business Strategy

2January 2007

Background

� Management Consultant – A.T. Kearney

� Previously …

• IDEO – Service Innovation & Human Factors

• HSBC – Consumer Insights & Experience Modeling

• Sapient – User Experience Modeling

• IPM – Management Consulting

� Interests –

• Service and product innovation models

• Business strategies driven by a design-thinking mindset

Harsh Jawharkar (GSB ’06) http://www.linkedin.com/in/harsh

3January 2007

Innovation … Buzzword, Fad, or Bellwether?

innovation

Main Entry: in·no·va·tionPronunciation: "i-n&-'vA-sh&n

Function: noun

1 : the introduction of something new

2 : a new idea, method, or device : NOVELTY

Thesaurus:something (as a device) created for the first time through the use of the imagination

-- see INVENTION

buzzword

Main Entry: buzz·wordPronunciation: 'b&z-"w&rd

Function: noun

1 : an important-sounding usually technical word or phrase often of little meaning used chiefly to impress laymen

2 : a voguish word or phrase -- called also buzz phrase

Thesaurus:stock phrases that have become nonsense through endless repetition

-- see hokum, nonsense, bunk

Source: Merriam-Webster Online, thefreedictionary

Innovation is a process … not an approach

4January 2007

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

5January 2007

Innovation is catalyzed by an opportunity to close the gap

� Left BrainSequentialRationalAnalyticalObjectiveLooks at parts

� Right BrainIntuitiveHolisticSynthesizingSubjectiveLooks at wholes

� Skillsets

• Linear

• Data driven

• Outcome oriented

• Focused on the ‘end’

� Skillsets

• Empathic

• Observation driven

• Experience oriented

• Focused on the ‘journey’

OPPORTUNITY

6January 2007

Design thinking is an attitude, an approach – a mindset

Inside Out – Traditional Mindset Outside In – Design Mindset

Consumers

Front-line Personnel

Operations

Sales & Marketing

Customer Service

C – Level

Consumers

Front-line Personnel

Operations

Sales & Marketing

Customer Service

C – Level

A design mindset is critical to successfully solving or creating

7January 2007

Design firms currently occupy a less demanding space on the value chain, thereby decreasing their leverage in corporate boardrooms

ValueStimuli Ideate Conceptualize Validate Operationalize

• Stimuli derived from:

• Existing business offerings

• Perceived demand for offerings

• Market dynamics

• Competitive forces

• Ideation requires:

• Suspension of disbelief

• Ability to cross-pollinate

• Faith in disruptive technologies

• Conceptualization requires:

• Observation & Empathy

• Identifying heuristics

• Experiential modeling

• Visualizing a story or scenarios

• Validation requires:

• Prototyping the offerings

• Metrics and measurability

• Assessment of capabilities and competitive forces

• Operationlization requires:

• A data driven approach

• Tactical and organizational mindset

• Attitudes geared towards measurable outcomes

Design Firms

Management Consulting Firms

People

$$$

Change Management

8January 2007

Design firms are attempting to develop operational capabilities

IDEO

Design Focus

Business Focus

Source: Jess McMullin, bplusd.org

McKinsey

A.T. Kearney

BCGBain

Booz Allen

Monitor

Strategos

Mercer

frog

ZIBA Continuum

Cheskin

Method

Smart Design Jump

Herbst Lazar Bell

Astro

Lunar

Sapient

razorfish

Organic

Agency.com

Fitch

Desired Skill-set and

PositioningSonicRim

9January 2007

What can design-thinking do for you?

10January 2007

What else can design-thinking do for you?

11January 2007

Elements of design thinking

� Observation

� Empathy

� Ideation

� Conceptualization (Storytelling, Modeling)

� Prototyping

� Being T-Shaped

12January 2007

Observation

Ethnographic Techniques

• EthnographyObserving people in their natural environments

• Behavioral MappingPhotographing people within a space, such as a hospital waiting room, over two or three days.

• Consumer JourneyKeeping track of all the interactions a consumer has with a product, service, or space.

• Camera JournalsAsking consumers to keep visual diaries of their activities and impressions relating to a product.

• StorytellingPrompting people to tell personal stories about their consumer experiences.

13January 2007

Empathy

1. Moderately protected

2. Easily accessible

3. Staging area for major objects

1 2 3

Simulated - this is not a test participant's desk

14January 2007

Ideation

Brainstorming

• Defer judgment

• Build on the ideas of others

• Encourage wild ideas

• Go for quantity.100 ideas in 60 minutes

• Be visual

• Stay focused

• One conversation

15January 2007

Conceptualization (Building a Behavioral Model)

Deposit Checks

Review Statements

Pay Bills Transfer Funds

Shop for Deposit Products

Shop for Credit Cards

Shop for Loans & LoC's

Apply for Deposit Products

Apply for Credit Cards

Apply for Loans & LoC's

Shop for Service products

Apply for Service products

HIGH

Deposit Checks

Review Statements

Pay Bills Transfer Funds

Shop for Deposit Products

Shop for Credit Cards

Shop for Loans & LoC's

Apply for Deposit Products

Apply for Credit Cards Apply for

Loans & LoC's

Shop for Service products

Apply for Service products

RETAIL

The Bridge

Entrepreneurs are credit hungry and

this is the point of reference they

seek in terms of business legitimacy

and sustainability.

Sometimes Online & Often Offline Mostly Offline Almost Always Offline

Need to transform into

online conducive activities

COMMERCIAL

LOWTime to Make DecisionsNeed to Validate Decision

The Need for :Need to Protect Privacy (Security)Level of Complexity & Paperwork

Clear Path & ChoicesSimple PresentationUsable Experience

Entrepreneurs

inherit behaviors

from their

Personal Banking

experiences

ENVIRONMENTS

Checking

Savings

Credit Card

Line of Credit

Loan

Insurance

Retirement

Employee Benefit

Low Touch High Touch

Commodity Differentiated

Fast Decision Slow Decision

CORE PRODUCT BUNDLE GROWTH

PRODUCT BUNDLE

Price Parity Negotiable

Infancy Adolescence Maturity

16January 2007

Prototyping (Test and Validate)

OR

But which way is up ? Is that a button or not?

0, 1, 2, 5, 6, 8, 9 - all digits look identical upside down

Most people were unable to identify how to hold the device.

17January 2007

Being T-Shaped

Source: Creative Generalist blog, Steve Hardy

Thinking Linking Doing

� Observing

� Empathizing

� Divergent thinking

� Brainstorming

� Matchmaking

� Cross-pollinating

� Synthesizing

� Facilitating

� Executing

� Implementing

� Specializing

18January 2007

Design-thinking Frameworks

USERS

ACTIVITIESare goal directed sets of actions-things which people want to accomplish

OBJECTS

are building blocks of the environment, key elements sometimes put to complex or unintended uses, changing their function, meaning and context

ENVIRONMENTS

include the entire arena where activities take place

INTERACTIONS

are between a person and someone or something else, and are the building blocks of activities

Source: 1. User Insight Tool, Vijay Kumar2. Ethnography in the field of design, Christina Wasson

ALTERNATIVES:

� POEMS –

• People

• Objects

• Environments

• Messages

• Services

� Experiential Framework1:

• Physical (e.g. small vs. big)

• Cognitive (e.g. understandable vs. confusing)

• Social (e.g. informal vs. formal)

• Cultural (e.g. acceptable vs. problematic, or shared vs. conflict)

• Emotional (e.g. bored vs. engaged, or anxious vs. calm)

19January 2007

Anatomy of a design firm

� About IDEO

• Pronounced “Eye-dee-oh”

• 500 designers

• HQ in Palo Alto

• Offices in San Francisco, Chicago, Boston, London, Munich, and Shanghai

• CEO – Tim Brown

• Cofounders – David Kelley (Stanford) and Bill Moggridge

• Notable concepts –

– The first mouse

– Palm V

– Handspring Treo

20January 2007

Environment

� Informal

� Customizable

� Stimulating

� Collaborative

OFFICE

21January 2007

People

� Eclectic

� Unusual

� Diverse

� Right-brained

22January 2007

Capabilities

� Product Design

� Service & Environment Design

� Human Factors

� Industrial Design and Engineering

� Interface Design

23January 2007

Innovation requires going beyond the realm of ‘pushing’ products

Products(Attributes)

Experiences(Consequences)

Lifestyles(Values)

Wal-mart

X Bank

X Grocery Store

The Gap

Trader Joe’s

Target

JetBlue

Commerce Bank

Apple

Whole Foods

Starbucks

TiVo

Blackberry

Harley Davidson

Google

IKEA

Volkswagen

In ‘n Out Burger

Zara

Toyota

Dunkin Donuts

Samsung

24January 2007

Windows Mobile vs. the potential iPhone

Widgets

Email

Music/Video

Browser

Maps

Camera

SMS

FEATURE

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A collection of features does not ensure successful innovation

25January 2007

Wal-mart vs. Trader Joe’s

26January 2007

Project Examples

� Large Healthcare Insurer

• How do we engage our customers to take ownership of their health?

• Is there a mutually beneficial way to reduce healthcare costs?

� Large consumer goods manufacturer – China strategy

• How do we re-launch our car care business in China?

• What options can we generate to create services based on our products?

� Largest service employees union in North America

• How do we motivate our base?

• Can we reignite the grassroots movement?

� HSBC Commercial Banking study

• Should we develop and launch this idea?

• How receptive (or not) will consumers be?

• What are the impacts to our brand?

27January 2007

Case in Point – The Gap

� Background

• Opened in the summer of ’69 in San Francisco

• More than 3000 stores and $16 B in revenues

• Profit margins (6.5%) – half of industry average

• Same-store sales are 8% lower (Dec 2005-2006)

• Healthy Banana, sinking Navy, wider Gap

• Called Goldman Sachs to “explore all options”

� How would you approach this?

• Traditional vs. Design Thinking

28January 2007

Traditional Approach

Revenues

• Pricing pressure

• Volumes

• Penetration

• Purchase frequency

• Transaction size

• Transaction value

• Product mix

• Customer mix & segmentation

Costs

• Fixed real-estate footprint

• Size of stores

• Portfolio rationalization (Gap, Banana, Old Navy)

• Variable labor costs

• Material costs and sourcing strategies

• Generate hypotheses

• Define data requirements

• Gather and organize data

• Analyze data to identify key issues

29January 2007

Design-thinking Approach

OBJECTS

ENVIRONMENTS

INTERACTIONS

USERS

ACTIVITIES

� Environments, Interactions, & Objects

• How do you plan a trip to The Gap?

• Is it scheduled or impulsive?

• What’s the trail between the desire and the purchase?

– Is it direct or does it involve browsing?

– Should it be accelerated or indulged?

• How do users interact within the store?

– With the merchandise?

– With other shoppers, store personnel?

– With stimuli (light, sound, sense, smell)?

� Users & Activities

• Who wants to shop at The Gap?

– Why?

• When would you go to The Gap?

– Why?

• What would trigger a trip?

– How?

– Who else is involved?

– Who influences this desire? Why?

30January 2007

Resources

� My Google Reader ‘Design’ Feed can be accessed from –

• http://harshlogic.blogspot.com

� Comprised of the following blogs –

• Brand Autopsy

• Influx Insights

• Nussbaum On Design

• Putting People First

• Seth’s Blog

• CPH127

• Core 77