Designed strategies How to improve strategy with design thinking.
And what are the first steps?
Table of contents 1. STRATEGY + DESIGN THINKING
= STRONGER STRATEGY
4. STRATEGIC INSIGHT
5. DESIGNED STRATEGY
7. SUMMARY
Strategy + design thinking = stronger strategy Design thinking,
with its human-centric, multidisciplinary and iterative approach,
has filtered into business development and new business venturing.
It’s rapidly becoming the de facto method when launching new
concepts and implementing company vision. Meanwhile, strategy
formulation and strategic thinking have remained largely unchanged
over the last few decades. Is it time for strategy to catch
up?
This guide will highlight the gap between traditional strategy and
design thinking, explain why you need to integrate the two, and
offer some simple steps you can take to enable your organization to
adopt designed strategies.
Ready to enrich your strategy with a touch of design thinking? Then
read on.
1.
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Strategy baseline 2.
For any organization, having a strategy, a grand plan, is
essential. Alongside vision and mission, it outlines an
organization’s reason to exist by equipping teams and individuals
with a common direction. Modern-day strategies have come a long way
from their origins in ancient warfare. The relentless pace of
business environment places increasing pressure on modern
strategies, requiring us to find new ways of viewing
strategy.
These elements are well-known factors of a succesfull strategy. But
why do so many strategies fail? Common strategy failures can be
divided into following two groups.
Why an organization needs a strategy:* • Gives direction •
Concentrates efforts • Coordinates actions • Defines an
organization • Gives sense of control • To be taken seriously in
front of others
Source: Mintzberg, H. (1987b) The Strategy Concept II: Another Look
at Why Organizations Need Strategies. California Management Review
30 (1): 25-32.* 4
Common pitfalls and challenges of strategy Internal alignment is
missing
Interpretation failure An organization has a well-defined strategy
at a high-level but a failure to interpret the strategy leads to
misalignment during execution.
Transformation failure An organization may acknowledge that a
market is changing - but the needed actions aren’t taken. A famous
example is Kodak’s unwillingness to realign their business model
around digital photography.
External alignment is missing
Misunderstanding context An organization carries out sensemaking
about the context it is operating in. If the context is
misunderstood, strategy is not aligned with reality. The risk of
misunderstanding increases when strategy inputs are limited or an
organization’s attention is focused poorly.
Unpredictable change An organization can be unprepared to predict
or notice changes in market. The change can be so radical that the
organization failed to notice it or the feedback system that would
highlight the change to an organization was not in place.
The outline is typically very similar: Strategy sets a goal for an
organization to reach and it plots a path to get there, with some
room for error. Multiple interpretations and changes happen over
time. When these small steps accumulate, original intent is
eventually lost.
Risks of these failures increase when strategic planning and
implementation are done in a traditional, linear way. Set-in-stone
plans rarely survive encounters with messy reality.
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3.
When design thinking is integrated with strategy, following
activities become necessary:
• Strategic and cultural customer insight • Strategy exploration
and experimentation • Strategy piloting and scaling •
Scenario-based, agile strategizing
Design thinking and strategic management The shift in this century
from engineering-driven products to experience focused services has
been heavily influenced by design thinking (sometimes called
human-centered design or HCD).
The applications of design thinking extend far beyond the creation
of products and services. It can be implemented across experiences,
platforms, strategies, and many more fields. And it’s not just for
designers.
The essentials of design thinking
• Design thinking is customer-centric and therefore human-centric •
Working iteratively and exploratively • Using hypotheses and
prototypes • Working and thinking visually • Giving form and
concretizing • Holistic: values and makes use of multiple
viewpoints and skillsets • Abductive, i.e. creative and combinatory
thinking
Design thinking enables people who aren’t designers to use a range
of creative tools to address challenges.
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Insights required for modern strategy
Strategy is never defined in a vacuum. It requires a comprehensive
overview of all the necessary angles. Whenever corners are cut, the
risk of misalignment grows. For a comprehensive strategy, you
need:
• An understanding of past and present strategic choices: how did
we come to where we are?
• A good grasp of internal factors (such as competences and key
processes) as well as external forces (such as competitive
position, market, technological developments and regulation).
• When considering future strategies, it’s essential to understand
your customers, not only on the tactical level of services but on a
strategic, cultural level.
Appropriate customer insights will guide you to an understanding of
future trajectories in the market.
Strategic insight
4.
What to understand: we need a comprehensive view to support
strategy work
Strategy
Understanding context
Tools to generate insight
Business and market analyses are well-defined and heavily utilized
tools feeding strategic planning. Modern-day, designed strategies
require a thorough customer understanding to make accurate
decisions. Big, thick and wide data provide complementary
perspectives - and not only about customers.
• Big data tells you the numbers you need to get the baseline set -
for example, how is your business running at the moment or from
which segment your customers come from. But it won’t tell you the
reasons why things happened. Rather, it raises questions that need
to be answered.
• Thick data grants you a deep understanding of your customers’
daily lives and practices. It gives insight into sources of
customer value, what needs customers have and what services would
meet those needs (and which ones don’t).
• Wide data allows access to the bigger picture - it shows you how
the world is changing and how you can prepare for this. Most
importantly it tells you how your customers are reacting to these
changes, giving you space to plan and stay ahead of the
curve.
Thick and wide data work best when created simultaneously and fed
with questions arising from quantitative data analysis.
Concurrently, using quantitative methods to validate the findings
of qualitative research creates a self-enhancing loop. Different
data sources generate new questions and understanding that are
answered through other types of data.
Tools to understand: we need a broad set tools and perspectives to
create unique insights
BIG DATA
TOOLS
machine learning
THICK DATA
Interview and observation tools, naturally occurring
data, pre-tasks and cognitive exercises, business insight
and modeling
WIDE DATA
experimentation
Strategic customer insight is different from user research
Customer centricity is a broad topic where the focus of our
attention is on customers. However, while we look at the same
direction - customers of our business - we look for different
phenomena and insight.
• For UI/UX design we conduct traditional user research. Here the
focus is on understanding people as users of a service and the aim
is to guide and inspire design iterations.
• For new business and service creation we need to identify
problems worth solving and sources of customer value. Here we are
focused on understanding people and the context they are in.
• For strategy and future vision we need to understand culture and
phenomena. This guides us in shaping vision, planning future
direction and acting on major decisions.
In all of these areas we have a strong human focus and can apply
thinking and frameworks from different fields of human and social
sciences.
UX / UI DESIGN AND OPTIMIZATION
Focus on: understanding people as users of a service
Aim: ‘fuel for design’ and design iterations
STRATEGY AND FUTURE VISION
Aim: vision, direction, major decisions
NEW BUSINESS AND SERVICE CREATION
Focus on: understanding people and context
Aim: identifying problem worth solving and customer value
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5. Designed strategy Creating scenario-based strategies with a
design thinking toolbox
Whereas traditional strategic thought is based on a linear
selection of a single strategy, scenario-based strategy is about
having the competence and confidence to continually make new
strategic choices, adapt to these changes, and effectively
implement them as a series of actions. Design mindset and tools
support scenario-based strategy by:
• Identifying key assumptions: High impact levers are pinpointed in
order to understand the basis of planned actions
• Driving strategy with scenarios: Hypotheses are used as tools to
test different strategic directions
• Path for strategy validation: Nothing is set in stone; major
assumptions are tested • and validated before moving forward
Design-driven strategy process
So how to get started in your organization? In our experience, a
design-driven strategy process is a four-phased, iterative pattern
of analysis and activities:
Phase 1 Insight
This phase forms the basis of your actions and is composed of
insightful information. This will usually consist of:
• Company history: past decisions, key competences and resources,
operations
• Contextual understanding: competitive position, market situation,
regulation, technological development
• Customer insight: culture, values, motives, needs,
differences
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Phase 2 Exploration and interpretation
This work usually overlaps with insight gathering. We start pulling
things together, making sense of what we know and creating new
questions on the go.
Inspiration is one of the key results of this phase: what are the
possibilities in front of us? These are usually created by pulling
together seemingly non-connected insights into creative
combinations and documented in the form of strategy themes or
strategy hypotheses.
Phase 3 Co-design
This is where you collaborate with a wider audience inside an
organization. This creates excitement and commitment to the
strategy and also makes critical roadblocks visible. Scenarios are
built and tested based on hypotheses.
Phase 4 Alignment
Once we have tested our major hypotheses, and chosen the initial
path to realize our strategy, it is time to align internally. We
need a shared roadmap, a coherent set of metrics to guide us and
governance structures that allow for timely responses and
adaptation.
We are on the right learning path and can continue forward - as
long as we have feedback loops in place.
Company history
Contextual understanding
Customer insight
Roadmap pilots
Importance of feedback loops
6. In traditional strategy work, an organization moves from
strategy formulation to implementation. However, in designed
strategy the initial set-up phase does not create a set-in-stone
strategy but rather enables and requires the adaptation of the
strategic path based on the feedback gathered. This is where the
importance of feedback loops come in.
These are used to validate the assumptions behind strategy
scenarios. An organization should create mechanisms to enable
feedback loops from different levels of organization. And, most
importantly, ensure they are gathered and summarized at a strategic
level so as to enable strategy shifts. Design thinking enables an
organization to create this hypothesis-driven culture and to
collect feedback to validate assumptions. *
Examples of feedback to collect
• Insight from “the field” - both quantitative and qualitative •
Experiments - with clear KPIs that test your strategy assumptions •
Customer insight • Internal responses on strategic fit
*source: Elsbach & Stigliani: Design Thinking and
Organizational Culture: A Review and Framework for Future Research;
Journal of Management, 2018
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Our model for enabling strategic adaptation
Adapting to designed strategy overnight is not easy. An
organization’s maturity in design thinking plays a big part. Making
the shift requires a new mindset and possibly new capabilities in
the organization. Simplifying and assessing an organization’s
readiness around the following questions is a good starting
point:
• How do we identify and track our strategic assumptions? • Do we
have a strategy experimentation plan? Do we use new service
launches and
strategic initiatives to provide feedback on customers and content?
• Are we prepared for different contingencies? Do we make scenario
plans to prepare
for alternative futures? • Do we have the relevant analytical
competences in place? • Do we iterate strategy as we learn about
our customers and context? • When making strategic changes, how do
we ensure consistency?
HISTORY & PAST
Strategy iteration
Strategy iteration
CONTEXTCUSTOMER INSIGHT
OFFERINGExperiments, feedback
Analytics, feedback
Internalization & interpretation
of strategy
Create your strategy hypotheses and assumptions
Strategy should not be immutable and instantly ready for
implementation. Rather you should identify alternative scenarios to
enable your organization to reach its goal - even if the first one
does not succeed. Creating these scenarios will only succeed if you
have a multidisciplinary team tackling them from different
perspectives.
Where to start: • Take your existing strategy as a starting point -
identify the key
assumptions needed for your strategy to succeed. • Create
alternative assumptions and scenarios that reach the same
objective. Apply “what if” questions to your key assumptions. •
Simplify and visualize scenarios so your organization can easily
follow-up
and understand what you are assuming (and give crucial
feedback!).
Add customer insight into your strategy mix
Designed strategy is not just gathering feedback. One of the core
goals is to bring new insights to strategic thinking. Strategy work
needs an understanding of cultural and customer behavioral changes,
as well as the current needs and habits of customers.
Where to start: • Invest in long-term customer insight research.
Send out experts to collect
cultural insight, do ethnographic research and sketch the shift
that is happening around you.
• Utilize your current customer insight from areas such as concept
testing and examine whether some strategic insight can be
harvested.
Explore and experiment
Designers are used to testing hypotheses and turning the unviable
ones down as they go along. Adopting this practice at a strategic
level requires an organization to identify experiments that test
their most critical strategic assumptions - and to be prepared to
change direction if the signs say so. Iterative working is the key
– not full-scale implementation.
Where to start: • Identify ways to test your key assumptions - can
you test them
experimentally or by following up actions in adjacent markets? •
Set aside time for sensemaking and observations based on your
newly-gained learnings. • Document your findings and share them
transparently throughout .
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