6 - Leading the Design-Thinking Organization
The chapter opens with a history of Cirque du Soliel, which began with a street performer who sought to organize various independent performers into a troupe. Some of them had been circus performers, but the work had been distasteful, unrewarding, and unstable.
The problems of the circus, aside from growing public distaste with animal cruelty, is that performances had no structure: there was no common theme, but a procession of disconnected spectacles, and the appeal of the circus was generally to an unsophisticated audience: children and the working classes.
The notion of Cirque du Soliel was to create a higher form of entertainment, as sophisticated as theater, ballet, and opera, by bringing together acrobats and similar performers into a show in which there was a theme or a plot, and to stage this in a setting that took its cues from surrealist art.
It's noted that the founder was not a business professional, and was in fact a high-school dropout who simply had a compelling idea. He had no proof and had done no market research. But what started as a sow in a single theater in 1990 blossomed into an entertainment phenomenon - with touring companies and long-run state performances in venues around the world. By 2007, Cirque di Soliel had become a $600 million business with 4,000 employees.
Resisting Reliability
A company generally begins with an innovative culture: it is a new undertaking established to pursue a vision that is unprecedented, and thus has no established procedure or historical performance. But as it grows and becomes more complex, managers are hired to oversee specific parts or functions of the business.
These managers create rules govern the activities of their unit and define the way their unit interacts with others. At best, these rules begin with an observation of what is effective or necessary. At worst, they begin with speculation of what might be so. But in time, these rules become rituals, perpetuated with little regard for whether they are functional.
With in a very short time, the performance of the firm becomes self-referential. As soon as they fall into a routine, the metrics by which business units are measured becomes based on that routine, and plans for the future are limited to repeating what was done in the past, with equal or greater efficiency.
At this point, the company has become focused on maintaining business as usual and optimizing performance. It is no longer entrepreneurial, and does not seek growth by doing new things but merely becoming better at doing existing things. Any proposal of change is compared against past performance, and assumed to be less efficient.
The root of the problem is expectations: the owners of to the business (chiefly, investors) assumes that what the firm is already doing will be necessary and valuable in perpetuity. These expectations are communicated to employees, who are rewarded based on their ability to make this dream of perpetuity come true.
This incentive to stasis begins at the top, with the selection of a CEO who has a stellar record of reliability, and this trickles down through the ranks as all employees of the firm are encouraged to support business as usual and defend against change, on the assumption that the existing activities will always be valuable. And so long as the firm generates sufficient profit to keep the investors happy, it does not deviate from business as usual.
The activities of a company give rise to its culture: the values it seeks to preserve in its daily operations reflect the desire to remain faithful to its operations, often without considering whether they are faithful to its purpose. Behavioral norms are created that extol the value of tradition and perpetuity, and defend against deviation and innovation. Anyone who proposes a change in direction will be harshly punished.
The only thing that has the power to overcome inertia is the realization that current operations are not sustainable. Typically, the closer an employee or business unit is to the customer, the sooner they will realize the need for change - and conversely, the further an employee or unit is from the customer, the slower they will be to recognize the threat.
Functions such as finance, information technology, and human resources are furthest from the customer, while functions such as sales and service are the closest. And thus it can be seen that sales and service are advocates of change, and of doing whatever is necessary to remain relevant to the customer. Meanwhile, the other departments are advocates of tradition and consistency, in spite of the fact that these qualities are of no value to the customer and sometimes quite indifferent to the customer.
It follows, then, that sales will be the first to recognize when customers are rejecting products, and must communicate that information back through channels. But rather than embrace the change, the supporting units resist it. "Business as usual" is the mantra that kills innovation. And the supposed need to be consistent stops exploration of anything different.
All of this fails to recognize that customers give revenue to the firm for providing value, not for being traditional or consistent.
Paths out of Inertia
If an organization does not strike a balance between maintenance and innovation, its long-run sustainability is questionable. So long as the market demands the product it presently provides and so long as suppliers provide what is presently necessary, it can be profitable - but any change in the environment may be detrimental. If the firm is unprepared to change promptly, it will lag behind competitors that do. If the firm is unwilling to change at all, it will become obsolete.
It is for this reason that the traditional role of leaders is to provide strategic vision to the organization to predict and prepare for opportunities and threats that arise in the external environment. But leadership has largely been abandoned in favor of management of the day-to-day operations of firms, with no-one watching the horizon.
The problem with this practice should be clear - but what is not clear is how to lift the chins of management to get them to look to the future beyond the current fiscal quarter and fiscal year. And if senior management is not doing so, neither is anyone else in the organization: the myopia is a contagion that spreads through the ranks and paralyzes the entire company.
To avoid this, firms must adopt design thinking, whether by bringing in expertise from outside the organization or growing it from within.
Bringing Design Thinking in from the Outside
Here, Martin describes a few companies' practices instead of describing how this should be done. In one example, a firm hires a consultant to do the design. In a second example, the firm purchases a design firm, but keeps it intact as a subsidiary that is not too rigidly controlled.
(EN: "Hire a consultant" is not a panacea. In my own experience, I find that most often a consulting firm tells a company what it wants to hear - very often interviewing executives and paraphrasing what they say in their reports. This is done because telling a company it's doing things wrong or has the wrong ideas tends to be bad for client retention. And so, the firm does no better for the firm than it could have done for itself - which is to say, its proposals support maintenance over innovation.)
Creating a Design-Thinking Organization from Within
Again, Martin presents a case-study with a few interesting details. (EN: Though what it has to do with building a design-thinking organizations is not at all evident.)
In this instance, he uses discount retailer Target, which realized it could not compete with Walmart playing by the Walmart rule-book. Both Sears and Kmart had attempted to compete by the Walmart rules, and both failed miserably. Kmart was a direct rival, who was unable to match their economies of scale. Sears was once a respected department store, but which debased its value to attempt to compete on price, and also failed.
And so, Target's leadership fostered innovative thinking and discouraged managers from looking to a more successful competitor's practices.
The contrast is significant because Walmart wins on efficiency. It strips its stores to the bare-bones of retail and negotiates aggressively with competitors for bulk discounts, and offers the cheapest goods to its customers.
Target wanted to create an environment in which shoppers didn't feel ashamed of going to its stores, on the notion that affluent shoppers were thrifty but did not want to feel like they were being cheap.
While part of the business focused on bulk-dealing in staple goods (soda and detergent), it also sought to upscale its offerings in housewares, clothing, and appliances - lines in which customers valued quality over price.
(EN: The two are still dueling, but Martin has hit on the grounds for stalemate. Walmart offers cheap merchandise, so a shopper who is primarily motivated to get a low price on items he doesn't care about will go there and maybe add some non-commodity items to his purchase. Target offers slightly better merchandise, so a shopper who is motivated to get quality items will go there and maybe pick up some cheap commodities while he's in the store. Seen that way, the two firms aren't really competing head-to-head.)
The Hybrid Leader
Another case story is trotted out: the shopworn example of Steve Jobs, CEO of Apple computers during its heyday as a design leader in consumer electronics (home computers, portable music players, and cell phones).
It's mentioned that Apple's first departure from the norm was the iMac, an egg-shaped computer that came in candy colors. The idea for this was already on the drawing board when Jobs returned to Apple, and the same designer produced the idea of the iPod, which was the company's next hit product.
Jobs was not a designer, but a champion of design, and was willing to take risks by backing things that were new and different - though he balanced this against reliability, in that the company has never been first to market with a new concept (even it's original graphical user interface was ripped off from another firm), but it recognized trends that went against the grain and followed the tastes of the customer rather than that of engineers.
(EN: Much of this is conjecture, imagining what really went on behind the scenes at a company that is subject to a great deal of myth and legend, but the author's description seems plausible, as Jobs did champion unconventional ideas and was not fearful about taking risks - but evidence is thin for a specific methodology.)