Posted by: Erich Joachimsthaler Over the course of the last several years, three different camps of value creation have emerged in the management literature. The first one argues that there should be more emphasis on developing analytical capabilities. It is analytical thinking that will drive success for businesses. Numerous popular books have been published on the matter: Competing on Analytics, Winning with Analytics, Super Crunchers and The Numerati are some titles.
The second camp consists of protagonists of intuitive thinking – the art of knowing without reasoning. They argue that managers need to rely on their intuition, gut feelings and instincts. Malcolm Gladwell’s book Blink is one representative book that has popularized this idea.
The third camp has been extremely trendy over the last seven years and consists of those who defend the idea of design thinking. According to a recent book by Roger Martin, The Design of Business, design thinking is about a balance of analytical mastery and intuitive originality in a dynamic interplay.
Each of these three camps or schools of thought has a large powerful number of constituents that vouch, promote and evangelize its value. Behind the analytical thinking camp are software and hardware companies, information and data providers, analytical firms from market research and econometric consulting firms. There is already a name for the future company that “gets it” by this school of thought. It is called the Intelligent Enterprise, a company that uses advanced analytics for optimized performance. The more companies invest in analytics, the more these companies directly benefit in terms of demand for their services.
Behind the second and third camps are agencies and design firms, some including powerful links to business schools or academia in general. Ad agencies don’t just do ads anymore, they apply creativity to create innovations and consumer connections, design firms don’t just design anymore, they help companies to innovate and achieve disruptive innovation and growth. There are several dozens of firms starting with IDEO which seem to be at the center of this movement, judging from the size of the firms, the number of design awards the industry gives itself, and from the number of books, case studies or articles that Harvard Business School has published about how IDEO works.
So, where is the beef in all this thinking about different schools of thought? I have my personal prediction. First, there will be a rich and continued dialogue about the value of these different schools of thought over the next years to come. This is so because it serves well the established ecosystem of proponents and supporters. We are in the midst of an information and data explosion, innovations pile on innovations and it will be extremely difficult to manage data or to design anything really new and disruptive in anyway. There are also plenty of outlets to publish the occasional success and express points of views. Each school of thought has their conferences to attend to, some are large national conferences. Each school has their own magazines and journals to review the latest research on why the proposed thinking matters. The major national business press have weighted into the discussion as well so it will be top of mind for everyone. There will be a continued and vigorous debate about the pros and cons for each school of thought in blogs, discussion forums and communities.
Second, there will be many that will hold their particular views about one camp or school ever more fiercely. This tendency is known as the psychological phenomenon called: motivated reasoning which suggests that when facts get in the way of our beliefs, our brains are marvelously adept at dispensing with the facts. Behind this little theory is research that shows that when we contemplate contradictions from the opposite view of a matter, the rational centers of our brains are active, but contradictions from our own view or matter set off a different reaction: the emotional centers light up and levels of feel-good dopamine surge.
So, with our rational faculties muted, evidence that shows that design thinking really does not contribute much does not register among those favoring design thinking, and equally evidence that shows that analytical thinking does not contribute is rejected by those that advocate that school of thought. Research shows that people sometimes use marvelous logic to get around the facts.
Third, many will come to the most logical conclusion and midpoint which suggests that each of these schools of thoughts contributes value and it just depends on the situation or company. Roger Martin, the dean of a business school, in his recent book already has drawn this conclusion while professing to be an ardent proponent of the design school of thought. Roger Martin cites many examples in his book which hint to the answer to the question: Where is the beef?
Take Google which is by many considered the ultimate company that applies analytical thinking by inventing repeatable algorithms of search and more. Google is not an analytical thinking firm, though! Roger Martin cited a conversation with Google CEO Eric Schmidt who suggests that parts of Google looks like a normal company (sales, marketing, operations) but the parts that defines what the customer sees and experiences (software coding and engineering) feels more like a design shop, free from top-down control.
Take Procter & Gamble. Clearly the tenure of AG Lafley has been a huge success. He introduced design thinking at P&G and helped the company achieve an amazingly long run of profitable growth across its brands. But too much of thinking about design can cause companies like P & G to focus too much on getting ever more affluent consumers to trade up to its new and improved “designed” brands while missing out on other huge growth opportunities – the next billion as the new CEO of P&G, Bob McDonald says. The next billion is not just a design opportunity but first and foremost something that is discovered by the analytical mind through information, data and logic.
In all, this means that it is neither one school of thought nor the other school of thought that creates most value. It is also not about just mixing organizations with people from different schools of thoughts. As Roger Martin hints at in his book: the value for companies comes from the right interplay!
So, how we do we decide then how to lead our companies and structure our organizations? The answer is simple: a company must still go through the age-old and familiar analytical thought process and ask itself some key questions of strategy: what really matters to customers? How can my company compete and create a sustainable advantage in those dimensions that really matters to customers? Somehow, analytically, intuitively or through design thinking, Google has decided it should and can add value by what the customer sees and experiences. Apple has decided that it can do the same by creating new devices that help consumers manage their lives.
Third, a company needs to choose. Strategy is all about trade-offs. This drives the choice of balance between analytical, intuitive or design thinking. So, beware, unlike what many vigorously say and evangelize today, this does not mean that one should democratize design thinking or analytical thinking to everybody in the organization, the beef is to configure a company that is in some parts thinks like a design firm, and in the other parts thinks and acts like an analytical firm.
So, for the most part, not much will change in the future because if you walk in any company today, you will always find different parts of the company operating more distinctly on one school of thought than another. The decision really comes down to the decision of what parts of the company needs to be reinforced, given a chosen competitive advantage, with the right people, processes, tools and systems. The decision becomes where and how to create the capabilities to strengthen and reinforce the competitive advantage. All that’s not new, though!!
Finally, as the CEO or board of a company, the simple answer to where is the beef is: appreciate and leverage the power of all three schools of thought. After all, Jonathan Ive’s design brilliance created the iMac and the iPod but it was Steve Job’s leadership to “see” the value (analytical thinking) of these new designs and bet the company and its future success of them (guts, instinct and intuition). The same can be said for other successes of innovation and growth.
The second camp consists of protagonists of intuitive thinking – the art of knowing without reasoning. They argue that managers need to rely on their intuition, gut feelings and instincts. Malcolm Gladwell’s book Blink is one representative book that has popularized this idea.
The third camp has been extremely trendy over the last seven years and consists of those who defend the idea of design thinking. According to a recent book by Roger Martin, The Design of Business, design thinking is about a balance of analytical mastery and intuitive originality in a dynamic interplay.
Each of these three camps or schools of thought has a large powerful number of constituents that vouch, promote and evangelize its value. Behind the analytical thinking camp are software and hardware companies, information and data providers, analytical firms from market research and econometric consulting firms. There is already a name for the future company that “gets it” by this school of thought. It is called the Intelligent Enterprise, a company that uses advanced analytics for optimized performance. The more companies invest in analytics, the more these companies directly benefit in terms of demand for their services.
Behind the second and third camps are agencies and design firms, some including powerful links to business schools or academia in general. Ad agencies don’t just do ads anymore, they apply creativity to create innovations and consumer connections, design firms don’t just design anymore, they help companies to innovate and achieve disruptive innovation and growth. There are several dozens of firms starting with IDEO which seem to be at the center of this movement, judging from the size of the firms, the number of design awards the industry gives itself, and from the number of books, case studies or articles that Harvard Business School has published about how IDEO works.
So, where is the beef in all this thinking about different schools of thought? I have my personal prediction. First, there will be a rich and continued dialogue about the value of these different schools of thought over the next years to come. This is so because it serves well the established ecosystem of proponents and supporters. We are in the midst of an information and data explosion, innovations pile on innovations and it will be extremely difficult to manage data or to design anything really new and disruptive in anyway. There are also plenty of outlets to publish the occasional success and express points of views. Each school of thought has their conferences to attend to, some are large national conferences. Each school has their own magazines and journals to review the latest research on why the proposed thinking matters. The major national business press have weighted into the discussion as well so it will be top of mind for everyone. There will be a continued and vigorous debate about the pros and cons for each school of thought in blogs, discussion forums and communities.
Second, there will be many that will hold their particular views about one camp or school ever more fiercely. This tendency is known as the psychological phenomenon called: motivated reasoning which suggests that when facts get in the way of our beliefs, our brains are marvelously adept at dispensing with the facts. Behind this little theory is research that shows that when we contemplate contradictions from the opposite view of a matter, the rational centers of our brains are active, but contradictions from our own view or matter set off a different reaction: the emotional centers light up and levels of feel-good dopamine surge.
So, with our rational faculties muted, evidence that shows that design thinking really does not contribute much does not register among those favoring design thinking, and equally evidence that shows that analytical thinking does not contribute is rejected by those that advocate that school of thought. Research shows that people sometimes use marvelous logic to get around the facts.
Third, many will come to the most logical conclusion and midpoint which suggests that each of these schools of thoughts contributes value and it just depends on the situation or company. Roger Martin, the dean of a business school, in his recent book already has drawn this conclusion while professing to be an ardent proponent of the design school of thought. Roger Martin cites many examples in his book which hint to the answer to the question: Where is the beef?
Take Google which is by many considered the ultimate company that applies analytical thinking by inventing repeatable algorithms of search and more. Google is not an analytical thinking firm, though! Roger Martin cited a conversation with Google CEO Eric Schmidt who suggests that parts of Google looks like a normal company (sales, marketing, operations) but the parts that defines what the customer sees and experiences (software coding and engineering) feels more like a design shop, free from top-down control.
Take Procter & Gamble. Clearly the tenure of AG Lafley has been a huge success. He introduced design thinking at P&G and helped the company achieve an amazingly long run of profitable growth across its brands. But too much of thinking about design can cause companies like P & G to focus too much on getting ever more affluent consumers to trade up to its new and improved “designed” brands while missing out on other huge growth opportunities – the next billion as the new CEO of P&G, Bob McDonald says. The next billion is not just a design opportunity but first and foremost something that is discovered by the analytical mind through information, data and logic.
In all, this means that it is neither one school of thought nor the other school of thought that creates most value. It is also not about just mixing organizations with people from different schools of thoughts. As Roger Martin hints at in his book: the value for companies comes from the right interplay!
So, how we do we decide then how to lead our companies and structure our organizations? The answer is simple: a company must still go through the age-old and familiar analytical thought process and ask itself some key questions of strategy: what really matters to customers? How can my company compete and create a sustainable advantage in those dimensions that really matters to customers? Somehow, analytically, intuitively or through design thinking, Google has decided it should and can add value by what the customer sees and experiences. Apple has decided that it can do the same by creating new devices that help consumers manage their lives.
Third, a company needs to choose. Strategy is all about trade-offs. This drives the choice of balance between analytical, intuitive or design thinking. So, beware, unlike what many vigorously say and evangelize today, this does not mean that one should democratize design thinking or analytical thinking to everybody in the organization, the beef is to configure a company that is in some parts thinks like a design firm, and in the other parts thinks and acts like an analytical firm.
So, for the most part, not much will change in the future because if you walk in any company today, you will always find different parts of the company operating more distinctly on one school of thought than another. The decision really comes down to the decision of what parts of the company needs to be reinforced, given a chosen competitive advantage, with the right people, processes, tools and systems. The decision becomes where and how to create the capabilities to strengthen and reinforce the competitive advantage. All that’s not new, though!!
Finally, as the CEO or board of a company, the simple answer to where is the beef is: appreciate and leverage the power of all three schools of thought. After all, Jonathan Ive’s design brilliance created the iMac and the iPod but it was Steve Job’s leadership to “see” the value (analytical thinking) of these new designs and bet the company and its future success of them (guts, instinct and intuition). The same can be said for other successes of innovation and growth.
Jean-Noel Kapferer & Vincent Bastien,
Michael S. Malone,
John Hagel III & John Seely Brown,
Matthew S. Olson & Derek Van Bever,
Rita McGrath & Ian MacMillan,
John Gerzema & Ed Lebar,
Mark J. Penn,
Neale Martin,
Rob Walker,
6 comments:
I believe proponents of the analytic school of thought as well as design thinking would agree with the objective truth of numbers, however organizations need to remain competitive in the diverse world economy. Design thinking allows organizations to address a wider argument beyond the balance sheet, data and logic.
Brilliant post!
As always, there is no silver bullet. Success in business, as in life, is about picking a goal and/or direction, and then making the hard decisions that this implies. I keep on coming back to John Kay's idea of "obliquity" (http://searchcrm.techtarget.com/definition/obliquity), which seems to become increasingly relevant with every passing year.
Business (as in life) is a team sport. Have clear goals, surround yourself with good people, and have the courage to pursue your dreams.
r.
PEG
I agree on the "wider argument" I believe Alan Kay once's said: Perspective is worth 80 IQ points! And I like that phrase a lot. Design thinking can contribute a lot and at our company, we learn this every day when we go in a conference room and discuss an issue.
I will pick up on John Kay.
Just came across a great blog at HBR by Peter Merholz who distinguishes between Business Thinking and Design Thinking with rich list of commentary. There is also a rich commentary list of contributors and settles the score.
I always like a bit of controversy as long as it raises some thoughts and issues but what the discussion in HBR curiously does not address is the question of action: what am I now supposed to do inside a company, other than starting to appreciate design -- how to I configure my organization? What function benefits, accounting, marketing, strategy? Should I have a separate function like P+G has done? Should I populate my company with a point of view from the outside by establishing retainer relationships with two or three design houses?
How do I make it happen? What do I as a leader have to do personally?
In all, the questions are: as a leader what becomes by intellectual agenda? my professional agenda? my personal agenda?
Erich
Mars' approach to developing their hugely successful Customized M&Ms applies the three approaches you write about.
The M&M's R&D team first applied intuitive thinking, as they thought up the idea without any data other than their own intuition and imaginations.
Secondly, they applied design thinking through testing their first prototype of the product with all of Mars' employees and using this information to develop the optimal pricing model, product size etc.
Finally, they launched the product and continue to apply analytical thinking to track results.
This highly dynamic way of approaching new product development was encouraged by Mars through their "Pioneer Week" initiative, which encouraged internal teams to think of new product ideas and bypass traditional consumer testing (i.e. highly analytical thinking) at the outset.
Here's a great article that details this further:
http://www.businessweek.com/innovate/content/dec2009/id20091217_120646.htm
Georgina Miller
Congratulations Erich for the post. It summarises quite well current trends on strategy. From my point of view, it is clear that any of the three schools provides significant value. The point is that depending on which sector the company fights, it will have to rely more on one particular line of strategy or another. It is not the same to sell screwdrivers than cool-electronic-gadgets ... our customers will be looking for different features on these products, sometimes satisfied with a design-regarding features, sometimes satisfied only with figures. Related the impact on the organization, I think the point is more or less the same. You have to choose your structure depending on the weight that design or analytics represent to you. At this point however, I find myself to be very closed to the design thinking. As time goes by, new "great" products, "disruptive" ideas, "cool" business models are what make the real difference. What are they? Just ideas. So .. how to get these ideas? I think that inside any company there is a good amount of knowledge being wasted, and the design companies -and any corp. with strong creative activity- are well used to explote this knowledge. Trying to summarise, I would dare to say that analytic-based strategies are closer to tactic than strategy instead. Design or "guts" are those that really can help to make the big changes ... and to obtain the best results with these schools you need to spread these ways-of-thinking through all your organization. Seed and then harvest.
Just one question Erich: Which is in your opinion the role that branding plays here?
Regards!
Igor Romero
The Role of Branding? All these schools of thoughts are useful but when you think about it, there is only one way to really leverage the power of the three schools. And that is to build brands. When you build brands, you take subjective perceptions, thoughts, feelings, experiences and insights discovered through analytics, design or sheer intuition and create an objective reality. This objective reality is something that has a cash value.
We bring the power of the three schools together and create something that is enduring, tangible, and creates meaning in people's life. There is a legal framework for protecting brands, there is financial framework for valuating brands, there are principles and processes for managing brands as an asset.
I don't know an asset of a firm that benefits more directly from the three schools of thoughts.
When it comes to branding, imagination is more important than knowledge, as Einstein said. So, there is more than just analytical thinking that matters. Put in another way: logic is not enough. If all it took was logic, no one would drive without seat belts.
Erich
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