Design Thinking and Business Design

 

Blog 2

As stated in my first blog post Innovation is the first entrepreneurship course that I have ever taken and wow does it pack a punch. This course has literally pushed me to reboot my mind in order to be able to push out any preconceived notions that I had once had in regards to the innovation process and what it takes to become a successful entrepreneur in this crazy constantly changing world.  As technology continues to develop and people have access to more and more pools of varied information the needs of consumers have evolved and so with it a transition from an information to a design economy has been made. In order to guarantee success in this new economy new ways of thinking must be developed such as design thinking and the individual consumer must become the main focus instead of compiled data on different demographics. From my experience I have found that the most ideal method for achieving success and avoiding the many pitfalls that most entrepreneurs and many established businesses are now facing is by following the design innovation process.

The design innovation process is comprised of a very detailed five-step process that aids in the development of new products and services that don’t just function to solve the perceived problems or needs of consumers, but also create actual value and meaning.

Design Innovation Process;

  1. Research
  2. Analysis
  3. Prototyping
  4. Competitive Research
  5. Concept testing

It is important to note that throughout each step of the design innovation process, design thinking is being utilized.

 Research

Design thinking allows entrepreneurs and businesses to avoid the categorization of customers and benefit from innovation and novelty. The two most important aspects that make up design thinking include abductive and t-shaped thinking. An example of abductive thinking is the use of ethnography, which brings about a better understanding of people through first hand observations, connecting what people say to what they actually do. “Ethnographers generate understandings of culture through representation of what we call an emic perspective, or what might be described as the “‘insider’s point of view.”(Hoey 2008)

While working on my product and service innovation projects with my group one of the most useful tools we implemented for conducting research were in-depth interviews, another form of ethnography. It should also be noted that prior to conducting our research we had determined a specific context or setting to focus on and only observed people in that context setting.

T-shaped thinking utilizes a concept developed by Roberto Verghanti where customers are looked upon as individual humans rather than clustered segments. Thus, a t-shaped thinker infuses analytical thinking, empathy, intuition, and of course experimentation. Design thinking also pushes for a balance to be found between traditional business practices and design, because they both provide certain aspects in the formula for success. A formula that the company Apple seems to have taken a healthy dose of as it stands to be the poster child for design thinking.

Design thinkers don’t just look to observe people but also the context surrounding them that defines them as people and influences their daily lives. They are not interested in utilizing evaluative methods like surveys and questionnaires, so they instead implement generative methods like observational shadowing.

Analysis

Once all data is gathered by implementing some of the aforementioned research methods the data should be applied to series of different frame works.

Frameworks;

Card Sorting Exercise (done before any other framework is utilized)

  • Customer Journey Map
  • Persona Framework
  • Timeline (Daily Schedule)
  • 2X2 Matrix
  • Venn Diagram
  • Analysis Journey Map

Utilizing these frameworks helped make the information gathered during the resource process easier to understand. The main purpose of the frameworks is to filter the information and derive from it values, aspirations, attitudes and experiences that enable us to generate a point of view (POV) that depicts the real need/problem of the people observed.

Prototyping

Upon establishment of the POV, the brainstorming of possible products/services is done and once a viable solution is agreed upon designers can begin developing prototypes.

“The reason for prototyping is experimentation—the act of creating forces you to ask questions and make choices…a prototype is just an embodiment of your idea. Prototyping quickly and cheaply also allows you to keep multiple concepts alive longer.”(Kelley 2013)

In addition, the use of prototypes also aids in observing people’s real life experience and interaction with the product.

Competitive Research

Regardless of the feedback you receive from your prototyping, it is important to understand where your product stands in the market in comparison to other productions that may provide a similar functionality, benefit, or service.

Concept Testing

However, for many start up companies where funding is not available for the production of a physical prototype, the process of concept testing can be used. During concept testing a description of the product and service is given to potential customers and their feedback is recorded.

Now that the product or service has gone through all the necessary steps of the design innovation process, before it can be introduced to the public it has to be fitted with an appropriate business model. In an attempt to align with the new design economy that is now upon us the way in which an innovative business model is designed should be through the implementation of the business model canvas.(Greenwald, 2012) The business model canvas is made up of 9 separate parts;

  • Key Partners
  • Key Activities
  • Key Resources
  • Revenue Streams
  • Value Proposition
  • Cost Structure
  • Customer Relationships
  • Channels
  • Customer Segments

Once you have established an innovative business model, it is important to try and secure the protection of the intellectual property that gives your product/service its competitive advantage. Depending on the product or service you are offering you can secure your intellectual property by obtaining patents, copyrights, and trademarks. The security of having these protections on your product or service will also be a factor of attraction when it comes time to find sources of funding to launch your actual business.  As your venture continues to progress it goes needs to pass through 5 phases:

  1. Idea
  2. Feasibility
  3. Verification
  4. Demonstration
  5. Commercialization

The time it takes to pass through these phases can take up to a number of years and as the venture continues to progress through each stage additional cash needed increases. On the bright side with each passing phase uncertainty of failure decreases along with risk. However, during these phases a lot of ventures will realize that they will never obtain the goal of commercialization.

photo 2

 Citations

Hoey, Brian. “What Is Ethnography?” BrianHoey. N.p., 2008. Web. 23 Nov. 2013.http://www.brianhoey.com/General%20Site/general_defn-ethnography.htm

Verganti, Roberto. (2009) “Design Driven Innovation: Changing the Rules of Competition by Radically Innovating What Things Mean.      http://www.designdriveninnovation.com/book.html

Institute, Batten. “Designing For Growth – Apple Does It, So Can You.” Forbes. Forbes Magazine, 01 May 2012. Web. 23 Nov. 2013. http://www.forbes.com/sites/darden/2012/05/01/designing-for-growth-apple-does-it-so-can-you/

Kelley, Tom, and David Kelley. “Why Designers Should Never Go to a Meeting Without a Prototype.” Slate Magazine. N.p., n.d. Web. 23 Nov. 2013.http://www.slate.com/blogs/the_eye/2013/10/23/the_importance_of_prototyping_creative_confidence_by_tom_and_david_kelley.html

Greenwald, T. (2012, Jan.). Business Model Canvas: A Simple Tool For Designing Innovative Business Models.http://www.forbes.com/sites/tedgreenwald/2012/01/31/business-model-canvas-a-simple-tool-for-designing-innovative-business-models/

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Module 1

Aside

It was about two months ago, while sitting at my desk at an accounting firm calculating the net asset value of a clients portfolio when I had the realization that that was not what I wanted to be doing for the rest of my life. Confined to a small desk working in a mundane work environment that brought about no creative stimulation. So, in turn I made the conscious decision to drop accounting as my second major and ultimately dual major in Finance and Entrepreneurship, with the end goal of bringing about an innovation of my own. I chose Entrepreneurship because I believe it will serve as a great creative outlet to balance out the more dry topics and work that accompany the field of Finance.

Interestingly enough this Innovation course is the first Entrepreneurship class that I have ever taken and I found it to be quite fitting that one of the first topics we discussed was on how the human mind works to prevent and also enable creativity.  The human brain works as a 4 step process by first filtering everything through our senses, next processing the information using categorization, followed by storing select attributes of the processed information, and finally acting upon the information. During this process the mind makes perceptual shortcuts based off of past experiences resulting in the human ability to make quick judgments and predictions. However, the downfall of these shortcuts is that they limit creativity as the mind gets used to routine ways of thinking.

However, not all is lost, creativity can be brought about by seeking out novel experiences that excite the brain. Berns’ (2008) explains how the human mind is naturally lazy and does not like to waste energy. He goes on to explain, “The best way to provoke the imagination is to seek out environments you have no experience with. They may have nothing to do with your area of expertise.” Coincidentally, that is exactly what I did when I switched majors from Accounting to Entrepreneurship.

So a person may ask, why creativity is important? My answer would be, because it makes things interesting and most importantly brings about innovation and invention. Commonly viewed to be one in the same innovation and invention stand as two very distinct entities. Invention has a narrow focus and can be defined as the finding or creating of a new pattern, composite of material, device, or process. In comparison, innovation is much broader and can be defined in two ways:

1) Market Application of a new invention:

2) Market application of existing inventions through the creation of new processes

In an article by Tom Gratsky (2012) entitled “The Difference Between ‘Invention’ and ‘Innovation’ the relationship between invention and innovation is expressed in an interesting way: “If invention is a pebble tossed in the pond, innovation is the rippling effect that pebble causes.” This makes for very good imagery, but to set the record straight innovation does not require invention. However, when used in accordance with one another invention can make a great contribution to innovation.

At the moment, one of my main goals before I graduate is to be able to take the different aspects of Finance and Entrepreneurship that I like and mash them into one great innovative idea. After reading Greg Stevens and James Burley’s (n.d) article entitled “3000 raw ideas= 1 commercial success!” I was informed of the “significant odds would-be innovators currently face while attempting to produce one substantially new commercially successful industrial product”. The odds stated as the title of the article (3000:1) although seemingly daunting can in fact be reduced through business model innovation and the integration of different innovations.

The Aravind Eye Care System (AECS) is a great example of an organization that has overcome the odds by incorporating a number of different innovations. These innovations include the utilization of a hybrid business model (business that has both for profit and non-profit divisions) making the business completely self-sustainable, implementing an assembly line model for cataract surgeries resulting in a higher volume of patients helped, and price differentiation in which customers regardless of their economic status have to option of paying or not paying for treatment received. The more general type of innovation that AECS has brought about over the course of 37 years is disruptive innovation (an innovation that creates a new market and goes on to disrupt an existing market).  Disruption serves as a great source for competitive advantage.

Before innovation can be accomplished, its progression throughout history has to be analyzed in order to understand the type of innovation that the market place calls for today . In Kurt Buyse (2012) articled entitled “5 Generations of Innovation Models” the author provides readers with “British sociologist Roy Rothwell’s historic overview of industrial innovation management in the Western world from the 1950’s onwards”.

The five generations of innovation management are provided below:

1g: Tech push (50-60’s)

2g: Market/Demand Pull (60’s-70’s)

3g: Coupling of R&D and marketing (70’-80’s)

4g: Integrated business processes (80’s-90’s)

5g: Systems integration or Networking (90’s and onward)

Of all these generations of innovation I believe the most important ones to expand on are tech push (1G) and market pull (2G). The technology push brought about radical change and put a great emphasis on pushing new inventions through research and development. The problem that arose from this was that these inventions were created without taking consumer needs into consideration and in turn did not conform to the market. As a result the process of market pull was introduced, bringing about change in a more incremental fashion. Market pull unlike market push put an emphasis on learning and understanding the needs of consumers in order to deliver a product or service that functioned as a solution to those needs.

Four generations later, now the time has come for a new era of innovation to make an impact on the lives of both businesses and consumers. This new generation of innovation (G6) is referred to as design driven innovation. In an article by Robert Verganti,(2009) entitled “Design Driven Innovation: Changing the Rules of Competition by Radically Innovating What Things Mean” design innovation is defined as “a radical innovation of meaning”. He explains how consumers give meaning to the products and services they use and provides examples of businesses today that have changed their main focus from simple product development based on needs to the development of new meanings. These newfound meanings can bring about the creation of whole markets that produce sustainable, profit generating products and services.

As I look to bring about innovation of my own by combining different aspects of Finance and Entrepreneurship it is beneficial that I know the many different underlying aspects behind innovation. Starting with its difference from invention, the importance of seeking novelty to promote creativity, how to reduce the 3000:1 industry odds aspiring innovators face, and its progression over a span 5 generations that has resulted in the new concept of innovation through creating meaning.

Works Cited

Berns, Gregory. (2008), Neuroscience Sheds New Light on Creativity. http://www.fastcompany.com/1007044/neuroscience-sheds-new-light-creativity

Buyse, Kurt. (2012). Five Generations of Innovation Models. http://strategicongr.wordpress.com/2012/09/29/rothwells-generations-innovation-models/

Grasty, Tom. (2012). Retrieved from http://www.pbs.org/idealab/2012/03/the-difference-between-invention-and-innovation086/

Stevens, Greg A. Burley, James. (n.d). 3,000 raw ideas = 1 commercial success!. Research Technology Management. May/June97, Vol. 40 Issue 3, p16. 12p. 7 Charts, 2 Graphs.

Verganti, Roberto. (2009) “Design Driven Innovation: Changing the Rules of Competition by Radically Innovating What Things Mean.        http://www.designdriveninnovation.com/book.html