designed strategies
TRANSCRIPT
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.
3
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.
5
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.
6
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
9
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
10
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
12
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 .
14
We create impact that lasts by combining tech, data and human insight. Solita is a community of highly and widely skilled experts geared for impact and customer value. We do what matters to build the future with our clients by delivering high-quality solutions to real problems.
Our unique service portfolio seamlessly combines expertise from strategic consulting to service design, software development, analytics and data science, cloud and integration services. Founded in 1996, Solita is a fast growing community of over 1,000 professionals in Finland, Sweden, Denmark, Estonia, Belgium and Germany.
solita.fi/en
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.
3
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.
5
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.
6
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
9
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
10
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
12
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 .
14
We create impact that lasts by combining tech, data and human insight. Solita is a community of highly and widely skilled experts geared for impact and customer value. We do what matters to build the future with our clients by delivering high-quality solutions to real problems.
Our unique service portfolio seamlessly combines expertise from strategic consulting to service design, software development, analytics and data science, cloud and integration services. Founded in 1996, Solita is a fast growing community of over 1,000 professionals in Finland, Sweden, Denmark, Estonia, Belgium and Germany.
solita.fi/en