Category: Business Design

I’ve been thinking about why it can be hard to convince managers to trust the wisdom of their teams, allowing work to emerge from a collaborative process instead of dictating the what. The Wisdom of Crowds illustrates the evidence for multiple points of view rather than one, but I think we need more to make it happen, we need to acknowledge managers’ emotional situations too.

Jeffrey Pfeffer, Stanford GSB professor and author of compelling titles such as The Human Equation: Building Profits by Putting People First and The Knowing-Doing Gap: How Smart Companies Turn Knowledge into Action, co-authored a relevant paper in 1997 titled, “Two Psychological Reasons Why Managers Don’t Empower Workers”. From the abstract:

The present study provides evidence for two psychological processes that may help explain managers’ reluctance to use worker empowerment practices such as delegation or self-managing teams:

1. a faith in supervision effect, which reflects the tendency of observers to see work performed under the control of a supervisor as better than identical work done without as much supervision; and
2. a self-enhancement effect, which reflects the tendency of managers to evaluate a work product more highly the more self-involved they are in its production.

So this offers more evidence to convince managers to put their faith in teams. Another approach I like is emphasizing other work the manager could do with the time they’d gain, such as thinking further in time on more or different strategic matters.

Update: WSJ today reports on overcontrolling bosses, upper-management at the extreme. Arthur Freedman, director of organizational development and change at American University says, “At some level of consciousness they don’t believe they know how to handle the demands of the job they’re in. So they revert or regress down one or two levels to the level where they felt comfortable.“

On the front page of the Wall Street Journal today is an article about Bill Gates’ self-education…

At a spartan lakeside cottage, the Microsoft chief isolates himself for a twice-yearly “Think Week,” which he uses to ponder the future of technology, and then propagate those thoughts across the Microsoft empire.

This might work for Microsoft, given how much momentum they have. As long as Windows, Office, and the server software keep bringing in insane amounts of money, pursuing bits of investment here and there based on one person’s judgment can result in some progress in some places.

For other companies, this way of pursuing innovation falls short for many reasons. For example, it doesn’t leverage the experience of the other executives, much less the entire company, in evaluating these ideas (even if the whole company is contributing ideas, they’re all going through one person’s decision gate). The sum of their good ideas isn’t expanded by seeing connections and generating new ideas (except through Bill). And so on.

It also amounts to founder’s syndrome. Carter McNamara describes founder’s syndrome as “primarily an organizational problem — not primarily a problem of the person in the prominent position. …the organization works according to the personality of the founding chief executive.” What is dogma at the top often filters down the management ranks to be accepted practice throughout the organization as they wait for answers from above.

Question: What’s the difference between a management consultant and a used-car salesman?
Answer: A used car salesman knows when he is lying.

The common perception of management consultants is that they’re smart and sometimes necessary, but too detached from the responsibility of running an organization. The Wikipedia entry on management consulting mentions the established stereotype:

Management consultants are often criticized for overuse of buzzwords, reliance on management fads and a failure to develop executable plans that can be followed through. A number of highly critical books about management consulting argue that the mismatch between management consulting advice and the ability of business executives to actually create the change suggested results in substantial damages to existing businesses, see, for example Dangerous Company by James O’Shea.

Consultants who practice business design — or at least my company — want to do things differently.

1. Change by doing means not delivering a giant report and walking away, it means finding what works by experimenting, building prototypical situations and iterating.
2. Avoiding buzzwords is a little easier since business design is not about having domain expertise. But any group of people will naturally form a common language and I’m sure we’ll be no exception (example: for non-American or English speakers of English the word buzzword is unfamiliar).
3. Avoiding management fads is less of an issue when one focuses on a general approach, and has many tools in the toolbox. We add design thinking to the scientific thinking that Arthur D. Little brought to consulting 100 years ago, adding to and integrating with what came. Design thinking is not a fad, it’s a way used by scientists, inventors and designers for hundreds of years.

Migrating the practice of multidisciplinary collaboration from the product design world to the business design world can be tricky. This is especially true if taken to the level of “co-creation” — making everything together as much as is possible. There’s a bit about this in the literature (e.g. Co-Creating Health Services, HR & Management, and Fifth Generation Management), but not a lot.

Take a simple example: creating a document. Co-authoring a document with colleagues is straight-forward enough, but co-authoring it with a client is something else. The consultant is traditionally viewed as the domain expert who descends from on high to present THE DELIVERABLE (the word itself contradicts the idea of co-creation). There’s two points here: One, design thinking doesn’t rely on domain expertise, it relies on ways of doing things, such as collaboration. This allows for a productive pairing of the client’s domain expertise and the business designer’s process expertise. Two, co-creating a document goes against the grain of 100 years of consulting convention, so education is required along the way.

Something as simple as co-creating a document requires carefully balancing the roles of collaborator and trusted advisor. This isn’t your father’s consulting practice.

In the Wall Street Journal today:

• Adelphia is close to a $725 million settlement with the SEC for a corporate looting and accounting scandal
• AIG’s woes continue as two top executives are fired and the CEO has to decide whether to cooperate with the government’s investigation
• The former controller of WorldCom awaits sentencing after his false accounting entries led to a $11 billion fraud and the loss of 17,000 jobs
• A judge in Florida has ruled that Morgan Stanley helped Sunbeam conceal accounting woes that cost one investor $680 million
• Don Imus’s ranch for sick children manged to spend $2.6 million while helping just 100 kids

…and that’s just above the fold, on the front page. And this is the Journal, not the more liberal New York Times. Inside you’ll find Microsoft’s European antitrust sanctions, a flurry of accounting restatements related to auction-rate securities, and Cantor Fitzgerald’s illegal hiring practices. It’s clear the Journal is taking a strong stand on corporate ethics.

The solutions are less easy to identify. Surfaces causes cited have been:

• Uncreative approaches to revenue targets
• Failure of leaders to send the right message
• Lack of incentives for people to actively do the right thing, e.g. report unethical behavior of co-workers
• Cover-your-ass solutions like policies and handbooks that “The Office” so rightly lampoons
• Employee anxiety caused by occasional and disruptive change, e.g. mergers
• Allowing some dishonesty, which in turn breeds more dishonesty

I think ethics needs to be baked-in to an organization’s DNA. I think it needs to be a constraint that is always followed, in the form of customer representation on projects and a service-not-office style of working. I think the human-centered approaches inherent in customer research, empathetic designers and design thinkers in general are needed, and companies are feeling enough pain to change.

I’ve started collecting quotes and references to get an overview of who’s saying what about design thinking as applied to business. The idea is still young and in development; it seems we’re only now reaching the conversation stage that leads to differing points of view.

An example:

We should not underestimate the crucial importance of leadership and design joining forces. Our global future depends on it. We will either design our way through the deadly challenges of this century, or we won’t make it. For our institutions – in truth, for our civilization – to survive and prosper, we must solve extremely complex problems and cope with many bewildering dilemmas. We cannot assume that, following our present path, we will simply evolve toward a better world. But we can design that better world. That is why designers need to become leaders, and why leaders need to become designers.
—Richard Farson, Management by Design, 2000

Carol Hymowitz of the Wall Street Journal has been investigating aggressive revenue targets and the effects on employees, summed up by this quote from Roger King from Lloyd’s TSB Bank:

In over 30 years as a banker, I have seen the toll that the relentless pressure to turn in ever better quarterly and annual numbers has … on business and personal ethics, too.

I believe this is an area where design thinking can play a helpful role, refocusing attention away from Sales as the way to generate sales, and giving managers more creative methods for improving business. The numbers myopia — which I believe is typical of traditional management consulting — is illustrated by Cecily Franklin, formerly a manager at Consolidated Natural Gas and a vice president at Mellon Bank:

It is only possible, or safe, to lose weight slowly. … There comes a point when the goal is to STOP losing weight and work on maintaining it. It would be possible, though dangerous, to turn weight loss into a pure numbers game. By amputating an arm, one would clearly see numerical results, but one would also suddenly find it more difficult to do almost everything. And if a new ‘stretch’ goal arises, then another and another body part may need to be removed in order to replicate — notice I didn’t say sustain — those results. In the end, one would lose the capacity to function altogether.”

A beautiful aspect of design thinking is human-centeredness. A good business design solution would not consist of “push the problem down to the individual and let personal financial panic solve the problem.” Management needs the more creative solutions that design thinking can bring.

Recently I was telling an insurance industry executive about Tonik, an affiliate of Blue Cross of California that only offers health insurance to “the young invincibles” — people in their 20’s. At first glance he thought this was niche marketing, nothing new. But Tonik is different, it’s a whole new subsidiary that created new products tailored to their audience. The marketing is important to initially lure prospects in, but relevant products, easy-to-understand forms, and online-based service are more likely to convert prospects to long-term customers. They’re offering more by going beyond marketing-as-facade.

Viewing Tonik as a business rather than a product line (or niche marketing) helps us understand its implications. I think Tonik qualifies as a disruptive attack in the insurance industry, because:

1. It focuses on a low-margin audience other companies are ignoring
2. Through self-service and use of the Internet they keep their costs down
3. As this audience gets older they will naturally look to Tonik for expanded coverage

I don’t think marketing as traditionally understood would be enough to create Tonik, it requires business design skills:

• Traditional disciplines like marketing aren’t holistic enough to address the entire challenge
• Abductive thinking is needed to create something new and better
• There is no discrete problem statement in this projects; tools are needed to prioritize and synthesize variables in the environment, like integrating creative product potential with financial potential

If we take the term Business Design literally — the designing of businesses — we get a sense of the scope of the challenges at hand. Design thinking excels at dealing with “wicked” problems that are complex and ill-defined, requiring abductive and integrative thinking to address the creation of whole businesses.

My colleagues and I realized recently that although designers are (obviously) a primary source of the design thinking at the heart of business design, the proposition that only designers possess the thinking skills required is a little arrogant and even a little separatist. In fact, the most interesting writing on the subject thus far has come from the academic community.

Edward de Bono has argued that our present situation — relying on judgment thinking — began as a matter of ignorance…

Most people, in business and elsewhere, have done very well on judgment thinking. Such people are rarely aware of the need for ‘design thinking’. They find it difficult to conceive that there is a whole other aspect of thinking that is different from judgment thinking. It is not that such people are complacent. It is simply that they do not know that there is another aspect to thinking.

As design thinking enters the business world, I’ll be interested to see the proportion of designers to managers involved.

At the Information Architecture Summit there was a strong thread of interest in business and management (my hypothesis for this centers on two trends: the population bell curve places many IAs at an age where they are rapidly moving into management for the first time, and as a discipline IAs have already invented many of the technical skills they need to get that job done). In this environment many were interested in my new-ish company — Management Innovation Group — and appreciated our approach. Our chats started early and ended late and I heard many helpful ideas and skepticism, especially from the wise and thoughtful Jess McMullin. That’s going to fuel many of my future posts here; you’ve been warned.

The approach has been termed Business Design, though that framing of it isn’t entirely satisfactory. My working definition is The application of design thinking to business strategy and operations. I’ll talk more about what I mean by design thinking in future posts, but for now the best description I know is Jeanne Liedtka’s essay Strategy as Design in the Rotman design issue (.pdf), required reading on the subject.