How design thinking opens new frontiers

for strategy development

Jeanne Liedtka and Saul Kaplan

ecently, working in consultation with the senior team of a multinational transportation Jeanne Liedtka, UTC

R company, an entire day was dedicated to answering one question: “Why didn’t you
invent Uber?” What capabilities did Uber produce that this company – a multi-
Professor of Business,
Darden School of Business,
University of Virginia,
billion-dollar global corporation with ground transportation, airport services and mass transit
Charlottesville (JML3S@
system businesses – couldn’t have created? Uber discovered a job that wasn’t getting done virginia.edu) is a leader of the
and created a new business model to do it. In contrast, this global corporation, because of design thinking approach to
the way its leaders looked at and operated their business, was unable to see frontiers innovation and author of
beyond its existing business model. Designing for Growth: A
Design Thinking Tool Kit for
The adaptability to create organizational futures that transform existing business
Managers, with Tim Ogilvie,
models is not in the DNA of most organizations. But the problem is not just (Columbia University Press,
transformation – significant opportunities to leverage the existing business model are 2011). Saul Kaplan (saul@bif.
missed as well. Design thinking practices and tools that identify novel innovation is) is the founder and Chief
opportunities can help on both fronts. Catalyst of the Business
Innovation Factory (BIF) in
Researchers, consultants and practitioners working at the intersection of strategy
Providence, Rhode Island
development and design understand that each has a different job to do in the and author of The Business
process of generating renewal, innovation and growth. Increasingly practitioners Model Innovation Factory
are learning about powerful ways they can work together, with design mindsets (Wiley, 2012).
and practices improving the strategy development process in multiple ways (see
Exhibit 1).
Some of these new mindsets and practices involve how companies
identify and frame opportunities, others include how innovators imagine,
prototype and test new strategies, and then manage them as a portfolio.
Still others offer new ways to engage and enable employees to form
emotional connections to new strategies. By integrating design
practices into strategy development, practitioners can produce both
incremental improvement in the performance of today’s business model
and open opportunities to completely transform it.
Five areas where strategy practitioners can benefit from design
practices[1]:

1. How you see opportunity.

2. Learn in action.

3. Manage a portfolio of bets.

4. Make change happen.

5. Transform the business model.

DOI 10.1108/SL-01-2019-0007 VOL. 47 NO. 2 2019, pp. 3-10, Emerald Publishing Limited, ISSN 1087-8572 j STRATEGY & LEADERSHIP j PAGE 3
 “Increasingly practitioners are learning about powerful ways
they can work together, with design mindsets and practices
improving the strategy development process in multiple
ways.”

1. Seeing opportunity: design practices help businesses look in new places

Successful strategy starts with imagining new opportunities. Too often, strategy development
processes view the opportunity horizon only through the lens of a company’s current portfolio of
products and services. The first design practice worth integrating into strategy development is
human-centered design (HCD), with its tools that explore multiple pathways for growth through
the experience of customers, the perspectives of “uncommon” partners, and the untapped local
intelligence of employees.[2]
Customer focus. Human-centered design offers companies a problem solving
approach focused on empathy, possibility and iteration, all important when the goal is
creating compelling new offerings. Design tools like ethnographic interviewing and
observation, customer journey mapping and job-to-be-done immerse strategists in
their customers’ lives and foster the identification of deeper insights about how to
create value for them, paving the way for differentiated new value propositions.
Shifting the lens through which potential innovators see opportunity from that of the
organization to that of the customer, and focusing on understanding the job
customers are hiring us to do, provides a different window into opportunity
identification than traditional market research.
Rather than gathering “big data” to specify what features to put into a product, or how to
market it, HCD uses the experiences of end users and their current pain points as a starting
point from which to construct and deliver a new and better future. And by imaging possibilities
first, design thinking generates enthusiasm and alignment for more creative solutions that often
get lost in constraint-driven thinking. Of course, tools like data analytics and competitor
analysis can also be important additions to the mix, but the driving force in human-centered
design opportunity identification remains the same: helping customers get their jobs done.
Surprisingly to skeptics, this focus on today’s pain points has proved capable of surfacing more
than just incremental ideas.[3] In fact it provides the essential foundation for business model
transformation. What is important is that design efforts are directed at understanding what
customers need, rather than asking them what they want. Understanding the job customers are
trying to do and the problem they have doing it allows strategists to craft a new potential offering
and shape a value proposition that creates greater value than existing alternatives.
This route to improvement in customer experiences and outcomes is often tied to
reframing the problem itself, another contribution of human-centered design to
broadening the opportunity horizon, improving strategy development and inspiring
better ideas for creating customer and business value. Design practices encourage
strategists to reconsider the questions they are asking. This is especially powerful in the
context of strategy, where committing resources to asking the wrong question often
carries the greatest strategic risk.
Another source of inspiration that design thinking offers is the advice to look for new ideas in
unexpected places, along with tools like co-creation to maximize the possibility of success.
Often, the best value-creating ideas live in the unexplored market spaces off limits to
corporate experiments. Design thinking achieves a more diverse set of perspectives by
inviting “uncommon” voices into the strategic conversation. Seeking interactions with

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 Exhibit 1 How Design Practices Improve Strategy Development

VOL. 47 NO. 2 2019

j STRATEGY & LEADERSHIP j PAGE 5
 uncommon partners who are willing to collaborate without knowing the answer in advance
allows strategists to open up a space that Stuart Kauffmann called “the adjacent possible.”[4]
New opportunities become apparent because of the adjacent possible process; when ideas
collide randomly, new insights are discovered. The best way to accomplish this involves
actively seeking out collaborators who work in different parts of the ecosystem and
encouraging a dialogue among them. Too often during the planning process, strategists
spend their time with the usual suspects in their usual silos – missing the magic that can
happen in the interstitial space between them.[5]
A third place where HCD helps locate new opportunity is through interactions with company
employees. This requires democratizing strategy creation, giving the permission, process
and tools to put opportunity-finding in the hands of employees throughout the organization.
Design practices make the work of innovation accessible to all employees by offering
simple rules and a teachable and scalable tool kit.[6] By using design practices to guide a
widely-participative strategic conversation, business can empower employees to identify
otherwise invisible opportunities.

2. Learning in action: prototyping and experimentation

Once a company has begun identifying new opportunities through the experience of
users, partners and employees, design thinking practices can produce novel insights
using prototyping and testing to specify and refine the capabilities needed for
delivery. But the trick is not to work backwards from today’s capabilities; it is to re-
combine and augment them to create the kind of “next practice”[7] needed to execute
a new offering.
Using design tools to prototype and test new models and their required capabilities –
initially at small scale – enables companies to explore which ideas and models are
worth commercializing and scaling. It’s the fastest way to understand what works and
what doesn’t by engaging with a small number of customers in real time. The foundation
to do this comes from a conceptual design of a new model that articulates how it
creates, delivers and captures value. A compelling conceptual design marries human-
centered insight and idea generation to the important back-end design processes of
prototyping and experimentation. This attention to explicitly translating the learning
from design’s exploratory front-end research into clearly articulated ways to create,
deliver and capture value accomplishes multiple objectives: it sets the stage for
exploring and testing new models in the real world and it enables designers to
determine if their conceptual ideas can survive actual customer contact.
But prototyping a novel offering is challenging. It requires going beyond building a
minimum viable product to designing and testing a minimum viable business model.
Organizations can’t afford to learn late in development that their innovative new ideas
require an entirely different set of capabilities for delivery. So prototypes are not just

“By integrating design practices into strategy development,

practitioners can produce both incremental improvement in
the performance of today’s business model and open
opportunities to completely transform it.”

PAGE 6 j STRATEGY & LEADERSHIP j VOL. 47 NO. 2 2019

 “The first design practice worth integrating into strategy
development is human-centered design (HCD), with its tools
that explore multiple pathways for growth through the
experience of customers, the perspectives of “uncommon”
partners, and the untapped local intelligence of employees.”

“dress rehearsals”[8] aimed a premiering a unique idea, but are a way to experience
product delivery and use.

3. Managing a portfolio: design practices focus on attention to new strategies and

offerings as bets
Since the days of the BCG matrix, strategists have benefited from thinking of strategy
development as managing a portfolio of product/market choices, focusing on dimensions like
market growth and share. But this approach to portfolio management rests on a significant
assumption – that organizations actually know the true potential of the individual components
of their growth strategies. But in today’s hyper-dynamic markets companies are actually
managing a set of bets on business growth potential that are hypotheses, not truths. As one
business unit manager, responsible for delivering his SBU’s annual revenue and profit
explained: “I have financial targets to hit, and I pretend to know how I’ll get there. But the truth
is, I’m juggling a lot of different options to achieve those goals, and hoping that enough of
them come through to add up to the right number.”
Traditional dimensions like market share and growth are less helpful in portfolio
management when the goal is to invent markets. For novel offerings, improving the
accuracy of assessments of value and risk mean more than estimating market growth and
predicting share. Design thinking’s hypothesis-driven methodology acknowledges this
uncertainty, and offers tools to help[9]:
䊏 The Bring-Build-Buy map that marries traditional supply chain logic with thinking about
unmet customer needs.
䊏 The potential Value/Risk grid arrays a portfolio of bets along critical dimensions of
uncertainty to help managers construct a unique portfolio of choices according to their
appetite for investment and pay-off.
䊏 Co-creation and prototyping tools help engage partners in conversations
that stay grounded in exploration and iteration and avoid moving into “sell”
mode.

These tools acknowledge the reality that strategy development involves managing an
ongoing portfolio of business model experiments that range from early design concepts, to
active prototypes, to models in the commercialization and scale phase.

4. Making change happen at scale: design practices foster engagement and

alignment
Envisioning strategies – seeing opportunities, testing them at small scale, and
managing them as a portfolio – even testing them and managing them as a portfolio of
bets – can be the easy part: scaling is notoriously more difficult. Commercializing those
that pass the tests requires involving the rest of the organization in a change process.
Such transformation necessitates creating an emotional connection to the new strategy,

VOL. 47 NO. 2 2019 j STRATEGY & LEADERSHIP j PAGE 7

 and design thinking can foster the potent engagement and focused alignment to
accomplish this.
Strategic planning’s track record at building engagement is abysmal, despite untold hours
spent completing templates, populating Excel spreadsheets, and creating Power Points. And
that lack of engagement translates directly into a failure of traditional strategy tools such as
mission statements and SWOT analyses to make any discernible difference in the day-to-day
activities of managers.[10] To succeed, new strategies must feel real and significant, and be
experienced, rather than merely disseminated and discussed. In other words, new strategies
must be more than cognitive; they must be vivid, personally meaningful, and compelling to the
people who execute them.[11]
The design thinking practice of storytelling can be a game changer here. “Facts are
facts, but stories are who we are, how we learn, and what it all means,” explains Alan
Webber, co-founder of Fast Company. Storytelling is often the best way to create
emotional connections to new ideas, innovations and new strategies. Sharing stories is
the way to create a network of passionate supporters that can help spread ideas and
make them a reality. They help strategists do the essential work of giving concrete form
to abstract ideas, translating abstract, high-level prescriptions into particulars that are
clear and meaningful to the people who must change their behavior in order to
implement them. By making the abstract concrete in a believable way, strategic
intention can be linked to the details of daily activities (see box “Strategy as Storytelling
at SAP”).

Exhibit 2 Linking design tools to strategic challenges

Strategic challenge Relevant design tools

Seeing Opportunity Ethnographic discovery tools like journey mapping and JTBD uncover latent
needs that lead to differentiated offerings
Co-creation tools that emphasize dialogue across diverse perspectives
allow uncommon partners to work together to identify grey space
opportunities
‘‘Simple rules’’ provided by design processes ensure coherence and quality
control while decentralizing opportunity identification
Learning in Action Design criteria take the learning from exploratory research and distil into a
succinct and shared list of key attributes that the ideal solution should have,
curating must haves and aligning teams
Assumption surfacing draws attention to the critical make or break
assumptions behind a new strategy, allowing testing in segments
Prototyping uses low fidelity visualizations to make abstract ideas concrete
and tangible, encouraging more accurate feedback
Design of experiments moves testing quickly into the real world and uses fast
cheap cycles of learning to iterate quickly to improved strategies and
solutions
Managing a portfolio Bring-Build-Buy tool marries traditional supply chain logic with thinking about
unmet customer needs
Value/Risk Grid helps manage a portfolio of bets by arraying new strategies
along the dimensions of potential value creation impact and risks associated
with realization
Scaling Storytelling flips the focus to the user’s experience, rather than focusing on
what the organization is going to do and invites emotional connection to new
strategies
Metaphor offers a fresh perspective by using familiar concepts to help create
and define new and unfamiliar ones
Transforming Value Chain Analysis constructs a new business model from the bottom up,
bolting analysis of organizational capabilities onto the ideal customer
experience

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 Strategy as Storytelling at SAP

SAP, a global leader in enterprise software, used storytelling as part of a strategic

planning process that aimed to confront potentially disruptive changes in their industry.
The company melded the design practice of storytelling with traditional approaches to
strategy in order to compose and communicate new strategies, making them shared,
meaningful, and tangible for employees at all levels of the organization. Carefully
constructed stories brought home the strategic imperative they faced at varying levels
of detail – from the high-level warning of the potential obsolescence of SAP’s core
capabilities to the plight of a salesperson responding to a customer’s pricing request.
From executive dashboard to salesperson’s inbox, the connections were illuminated.
The stories not only engaged; they clarified, allowing people at different level to better
understand the specifics of how the new strategy impacted their roles and activities.

5. Moving from tweaks to transformation: design practice and disruption

The highest and best use of design thinking may be helping strategists imagine, design,
prototype and commercialize entirely new business models. In the main, the skill sets required for
human-centered incremental innovation and disruptive strategy development are similar. This is
because the capability set design thinking offers – the focus on customers’ job-to-be-done, the
ability to prototype and experiment, to manage a portfolio of bets, and to foster engagement and
alignment – can provide what successful growth, whether incremental or disruptive, demands.
Integrating design thinking practices into corporate strategy development can add value both
incrementally – by protecting and building on today’s business model – as well as radically –
by helping mitigate the threat of being disrupted. It offers useful tools that help organizations
better manage five key aspects of strategy development: seeing opportunity, learning in
action, managing a portfolio of bets, scaling changes and transforming business models
(see Exhibit 2).

Getting started
To effectively integrate design practices into the strategy development process, consider
these suggestions:

1. Broaden the conversation: Perhaps the easiest place to start is by creating a

collision between some of your strategists and designers. But select those
individuals with care. Look for volunteers with listening and explaining skills, not
reluctant conscripts.
2. Rigorously build literacy in basic design practices throughout the organization: Design
skills are teachable and scalable. Online approaches deliver inexpensive, just-in-time
experiential learning that allows employees to apply basic design practices to solving
real problems in their own world. Leading firms include design thinking in their core
leadership training. Be aware that the quality of training is a major determinant of how
much value the new tools contribute.

3. Think beyond training: However you choose to proceed, consider mindset changes
that encourage active use of the tools, once learned. These include learning the
patience to invest in front-end exploration of a problem before rushing to solutions,
allowing the autonomy and resources to experiment and tolerating mistakes.
4. Don’t be afraid to start small: One attractive feature of design is its willingness to start
small. Nimble design champions, with little funding, can accomplish significant impact
without waiting for permission.

VOL. 47 NO. 2 2019 j STRATEGY & LEADERSHIP j PAGE 9

 Notes
1. For detailed examples of the use of design thinking methods in strategy development, please see
Jeanne Liedtka and Eli MacLaren, “How Children’s Health System of Texas is Improving Health
Care with Design” (Harvard Business Review blog November 7, 2018) and Paul Brest, Paul, Nadia
Roumani, and Jason Bade, “Problem Solving, Human-Centered Design, and Strategic Processes.”
(Stanford Center on Philanthropy and Civil Society, 2015): 1-32.
2. Recent research makes a compelling case that a pre-occupation with rationality and deliberative
thinking in strategy development results in a failure to recognize opportunities associated with
emotions and moods. Healey and Hodgkinson examine the ways in which traditional “cold
cognition” strategic tools and approaches like scenario planning can impede, rather than foster the
development of strategic sensing. See M. and G. Hodgkinson, “Making Strategy Hot” California
Management Review 59, no.3 (2017):109-134.
3. In our own research at Darden, we see many cases of this at work, in both the social sector (see
Design Thinking for the Greater Good: Innovation in the Social Sector, New York: Columbia
Business Press, 2017) and the business sector (see Problem Solving with Design Thinking, New
York: Columbia Business Press, 2014).
4. Complexity theorist Stuart Kauffman explained the idea of the adjacent possible in his seminal
work, At Home in the Universe – The Search for the Laws of Self-Organization and Complexity,
(London, Oxford University Press, 1999). The idea has been extended into a variety of field
including, for instance, analysis of big data. See www.wired.com/insights/2014/12/the-adjacent-
possible-of-big-data/
5. For 14 years the Business Innovation Factory (BIF) has hosted an annual Collaborative Innovation
Summit designed to enable random collisions of unusual suspects (a RCUS). Attended by
innovators representing silos, sectors and disciplines from around the world, it uses storytelling to
help participants find patterns and connections.
6. In Simple Rules: How to Thrive in a Complex World, (Houghton Mifflin Harcourt, 2015), D. Sull and
K. Eisenhardt argue that in complex, changing circumstances, using simple rules rather than
intricate plans, is the way to tame complexity.
7. Exploring best practices is valuable but limiting. We like to explore “next practices” that offer
insights about how to recombine existing capabilities to find new ways to deliver value. For more
information, see https://medium.com/bif-speak/next-practices-vs-best-practices-97e35098d40c
8. See M. Shrage, “Serious Play: How the World’s Best Companies Simulate to Innovate” (Boston,
Harvard Business Press, 1999).
9. For further details on these, and related, tools, see V. Kumar, “101 design methods: A structured
approach for driving innovation in your organization” (New York, John Wiley & Sons, 2012);
J. Liedtka, T. Ogilvie and R. Brozenske, “The Designing for Growth Field Book: A Step-by-Step
Project Guide, 2nd Edition (New York: Columbia Business Press, 2019).
10. For examples of much discussed problems with strategy development, see H. Mintzberg, H., 1994.
“The fall and rise of strategic planning,” Harvard business review, 72(1), pp.107-114; R. Martin,
2014. “The big lie of strategic planning,” Harvard business review, 92(1/2), pp. 3-8; M. Mankins and
R. Steele, 2006. “Stop making plans; start making decisions,” Harvard business review, 84(1),
p. 76; T. Andersen, 2000. “Strategic planning, autonomous actions and corporate
performance,” Long range planning, 33(2), pp.184-200.
11. For further details, see J. Liedtka, “Beyond Strategic Thinking: Strategy as Experienced and
Embodied,” Ch.9 in Disruptive Business, (editor, Alexander Manu), Gower Publishing, 2010;
J. Liedtka, “Is Your Strategy a Duck?” Journal of Business Strategy, 2006, 27(5): 32-37.

Corresponding author
Jeanne Liedtka can be contacted at: [email protected]

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