In this paper, I discuss how using a Design Thinking approach in an organization’s business transformation can translate into success. A consultancy deck was created as the end product, summarising a plan that can help achieve an organisation’s “Inner Game Goals”, activating change from within.
This paper was written as part of Hyper Island’s part time MA in Digital Management, Business Transformation module.
Digital technologies are altering and reinventing industries and economies all around us, in operation and production, supply chains and entire value systems. The disruptive nature of digital technologies meant that the speed at which innovation happens will prove to be a critical point for tradition companies, where the potential to be disrupted is currently at an all time high.
Design thinking integrates human, technology and business to create business success. In digital transformations, this human-centred approach allows the business a view through the eyes of the customer, employee, C-suite, supplier or partner, to co-create and execute a radical vision for the future.
What is digital transformation?
If a traditional business transformation meant the whole scale restructuring of a company’s operating model, and touches everything from infrastructure, human resource, to front line sales and marketing, then digital transformation refers to the use of digital technology, people and processes in all the above areas to radically change the value creation process for this business. (Boulton, 2018) Digital strategy and business strategy can no longer exist as separate entities.
Strategy / business model
• New value creation
• Enter new markets
• Maintain competitiveness
• Gathering of data
• Develop customer relationships
• Develop new partnerships
• Increase efficiency / automation
• Cost reduction
• Reduce dependency on supply / distributors
• Data sharing
• Work-life balance
• Quick lines of communication
• More productive and efficient
• Rapid innovation and adaptiveness
• Greater work participation
The adoption of artificial intelligence is expected to soar in the next few years in businesses. Machine learning can help “automate a task or set of tasks, or analyze a data set to provide either a decision or a set of actionable insights that support a human’s decision process.” (Fauscette, 2018) In the case of an insurance company, unstructured data from customers can be analysed in real time, enabling more personalised offerings, more attractive pricing models, and access to (financial, health, business) advice consumers are seeking online. The customer is then the driver of new value creation in the business. Taking an eco-system view of the market facilitates growth and experimentation, and allows the company in break into new markets: in the health industry, insurance companies can partner with gyms, clinics and travel agencies to provide a holistic package for a consumer’s wellbeing, looking beyond the usual risk mitigation. (Catlin, T., Lorenz, J.-T., Nandan, J., Sharma, S., & Waschto, A, 2018)
Within the organisation, the use of machines learning might be leveraged by multiple employees who need to comb through large amount of data during the claims process. Algorithms can accurately identify the patterns of fraud and report them, significantly reducing processing times and administrative costs, freeing up the workload of employees.
While technology is only the foundation of digital transformation, one can use upcoming trends as a compass to navigate and predict impact to their industry in the coming years: for 2019 and beyond, Internet of Things (IoT), multi-cloud technology, augmented analytics would be technology to watch.
Digital transformation is not without its challenges. Many businesses have started the process of transforming itself, in a bid to future-proof itself. However, only 26% of companies have succeeded at digital transformations (McKinsey, 2015).
• Low barriers of entry by competitors
• New competitors from outside industry
• Dependency on technology product suppliers
• Capital investments, regulatory requirements not faced by disruptors
• GDPR, ethics, security and privacy risks
In a 2015 survey by IMD-Cisco, more than 900 executives across twelve industries found that up to 25% of disruptions will come from outside their industry, with start-ups making up 25–50% of likely disruptions.
Disruptors like startups are not bogged down by regulations or capital margins. Since smaller players are more agile, and bring with them a culture of experimentation and quick innovations, they are unencumbered with the need to provide value through the same channels.
Europe’s General Data Protection Regulation meant that “informed customers will start to see which companies truly care about protecting their data, and which companies really don’t.” (Newman, D., 2018) Companies have to hold themselves accountable in their quest to collect and share user data, and strive to develop and use products or IoT devices with security in mind. (Coldewey, D., 2019)
Internal (infrastructure & culture)
• Lack of company-wide digital transformation strategy
• No common view of customers
• High costs of continual learning and product development
• Lack of buy-in from employees
• Lack of expertise
• Organization structure not ready for agility, experimentation and risk-taking
• No true ownership and integration of data
• Lack of urgency and action
Transformations fail when “companies struggle to connect digital strategy to their business” (Bughin, J., Catlin, T., Hirt, M., & Willmott, P., 2018) , and lack consensus of what digital transformation really means. Without setting up a clear set of digital initiatives and timeline of execution, employees have no clarity as to how they can contribute to the overall goal.
Transformations also struggle when companies failed to take into consideration the skillset of their workforce, expecting employees to easily adopt new technologies into their work processes (Kane, 2017) Typically, organisations spend money, time and energy implementing the next chat bot or software they deem would target their most acute pain point, but failed to place similar emphasis on building its human capital.
How does a company succeed in digital transformation?
A look at the landscape of business and academia-derived digital transformation frameworks (Nwaiwu, F., 2018) revealed that there is no-one-size-fits-all model to serve all digital transformation journeys. The high speed of digital disruption calls for agility to be adopted in the transformation process, and might require some businesses to combine a multitude of models depending on their industry.
Some frameworks are adept at diagnosing the current state of the company to provide a roadmap of transformation needs (Digitization Piano, Business Maturity model). Others, like the McKinsey 7s or IMD-Cisco’s Digital Orchestra, assess the company in a more holistic manner, believing that the alignment of a company’s strategy, engagement, organisation and operations would be the winning factor in a transformation.
A digital transformation must first start off with a clear direction, with understanding of where value can be created for the organisation to succeed. The Business Model Canvas, along with the Value Proposition Canvas can help to “describe, design, challenge, and pivot” where the organisation is heading. (Strategyzer | Business Model Canvas)
Beyond having clear diagnosis and a vision for digital transformation, studies and surveys (Anon, 2015) (Baculard, L.-P., Colombani, L., Flam, V., Lancry, O., & Spaulding, E., 2018) have shown that successful transformations happen in companies that take an action-oriented approach to the delivery process, driving up the success rate of digital transformation to up to 79%. Steps to contextualize, monitor and measure digital transformation is crucial, as are steps to engage, communicate and instil autonomy in employees. In fact, a critical point to transformation success is communicating change empathetically with employees (Beatty, C. A.,2015), as many find the idea of digital transformation daunting: Would their jobs be taken away with the input of technology, or would their skillset be able to catch up to the pace of change? Repeatedly gathering employee insights internally (Gale, M., & Aarons, C., 2018) (Sanchez, P., 2019) would ensure that employees are heard, informed and motivated.
Most crucially, technology affects customer expectations and experience as well. Customers decide what they want, and when and how they want a product delivered to them. It is no longer up to businesses to push products and services onto the consumer. A business strategy can no longer focus on how where to compete and how to compete, but must also look externally to one of the largest drivers of business model change: its customers.
To this point, the “human” aspect of digital transformation, both internally and externally, is critical in its success, and sometimes not emphasised by the above frameworks or models. I propose that in leveraging designing thinking and expanding design methodologies into building business model and strategy, and most importantly, execution, a business would be able to drive breakthroughs internally in organisational management and culture, to design innovative products, services and experiences.
To sum it up, while it might be difficult to control external forces, organisations can improve their “inner game” to increase their competitive edge and eventually, succeed in transforming themselves.
What is design thinking?
Design has come a long way from being what non-designers would understand as determining the aesthetics of products, to now being seen as a model for change in service, systems and organisations. Design can be fundamental to businesses in helping them innovate and define strategy. (Micheli, P., 2014)
Tim Brown of IDEO, who first coined the term, describes design thinking as “a human-centred approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.”
The design thinking process consists of these elements, used in an iterative manner:
• Empathy for users’ unmet needs
• Defining the problem
• Ideating solutions
• Measuring success
At the heart of it, design thinking emphasises empathy, experimentation, agility and collaboration with multi-disciplinary units and across silos to ensure that people, technology and business needs are balanced.
Design thinking is not just for designers: an organization infused with a design-driven culture, and putting the customer first can drive innovation and success, and find themselves at a competitive advantage in this digital age. (The power of design thinking, 2016) (Design driven innovation, 2008)
How can design drive digital transformations?
Much have been said about applying design to business strategy, and its success in creating new business models, opportunities and organisational change. (Fraser, H. M. A., 2007)(Berman, S. J., 2012)(Design driven innovation, 2008)
Adapting strategy to consumer needs
In a recent study by McKinsey about the business value of design (Sheppard, B., Sarrazin, H., Kouyoumjian, G., & Dore, F., 2018), it was determined that there is a strong correlation between a company’s design maturity and its business performance, with 32% higher revenue growth over a five year period, and therefore higher returns to shareholders. Putting customers at the forefront of business, and producing products, services and experiences that are meaningful and exceed user expectations across an ecosystem, is proving to be a winning strategy. This strategy can be adaptable and fluid, and design thinking can help refine it as it is being executed. (The power of design thinking, 2016)
Empathy for the customer’s needs also calls for looking into one of the top concerns of the consumer in this digitised world: security and privacy risks. Companies can build trust and loyalty in their consumers when they take these concerns into consideration, and build products and services that get informed consent for use of customer data, and give customers “ongoing control over their data”. (Kolke, T., 2016)
Driving value-based innovation and culture
Embracing experimentation and prototyping, especially with new technologies and ways of working, can drive a company’s flexibility and ability in innovating as quickly as the environment calls for, thus giving it a sustainable competitive advantage. It allows a business to anticipate technology trends in their industry and beyond, and be prepared to surmount challenges by incoming competitors. Experimentation also helps to build a learning culture, where teams are allowed to fail and learn quickly, driving up the pace for refinement and bringing products to market. (The power of design thinking, 2016)
The process of prototyping can also be applied to the organisation’s business model. Studies have shown that “business model change are amongst the most sustainable form of innovation”. (Wrigley, C., Bucolo, S., & Straker, K., 2016) The Business Model Canvas, prototyped in five meta-models (customer led, cost driven, resource led, partnership led and price led), provides a starting point for reluctant stakeholders to explore and discuss beyond the status quo for their industry. This prototyping and testing process should be iterative and ongoing, ensuring that the business responses to market conditions and environments.
Company-wide buy-in is crucial to the success of any digital transformation. Design tools like contextual inquiry, and subsequently customer journey mapping can allow every one to be in charge of their customers’ needs, pain points, and behaviours, allowing for a company-wide understanding that these aspects are important in solving complex problems.
Stakeholder and company-wide alignment
Making strategy tangible is equally important in that it ”allows everyone across the organization to understand the real meaning of your strategy by knowing what success will look like when its achieved” (Holloway, M., 2009) Conveying strategy or new business models though prototyping creates a shared vision. It invites discussion, alignment and understanding, allowing for quicker buy-in especially when said prototype has been built with multi-disciplinary units throughout the company. (Walker, E., 2018)
Organisation change and communication
Design thinking can also be used to activate change, agility and collaboration in the organisation, bridging the gap between technology implementation and human. Keeping the employee at the heart of transformation is key to successful execution of any transformation plan. Empathy towards the employees’ fear, struggles and hopes for digital change sets up the company to understand the kind of skillset training, leadership, and cultural mindset they can help foster in their organisation to drive transformation. As well, after determining the degree of influence each kind of stakeholder has, and understanding what makes them tick, the organisation can plan communication that is in the appropriate medium and tone (rational, emotional or both). C-level empathy communicates to employees that their words and motivations are heard, and opens up a culture of feedback and learning. (Kolko, J., 2015)
The FLOW-Agile framework is “an adaptation of the Agile framework designed to enable small teams to accomplish rapid iterations of customer-focused projects in a networked system.” Combining this framework with the experimental aspect of design thinking ensures that everyone in the company can constantly redesign and co-create their own work processes. This combined framework also seeks to improve velocity and adaptability of the organisation, and improves social interaction within the company. (Shaughnessy, H., 2018)
Design thinking is a process that can put the customer at the forefront of business, thereby transforming the way a business competes and creates value. Design has played a vital role in the success of some the world’s leading companies, and was the key driver of innovation and cultural change in many.
However, the approach is not without its limitations. Design thinking will not work in a business, for instance if it is not first driven by leadership and embedded in the C-suite. The performance of transformation will also be undermined if design is not integrated in a cross-functional manner within the organisation, with only a chosen few seen as the “innovators”.
Organisations that use design as an activator increase their likelihood of transforming internally to an agile, innovative culture, that can rapidly respond and create new value to address customer needs and expectations.
Thank you for reading! I welcome critique, collaborations or a nice chat at LinkedIn 😁