How Design Thinking Will Reshape Business Model Innovation

Added on by Alex Osterwalder & Yves Pigneur.

In this post we'll explain how a technique made famous by architects like Frank Gehry can transform the way leaders can solve business problems in today's rapid and dynamic business environment. 

Today’s leaders are challenged with making important decisions in a rapid and highly dynamic business environment. These decisions will be crucial to the survival of the existing business model, while also to the search and discovery of future growth engines.

But the current process where leaders narrow down possibilities and choose from the best existing alternative is broken. It results in a business culture that values refining and polishing an untested idea that does little to reduce risk or uncertainty.

We want to revisit an approach borrowed from the architectural world known as design thinking. Design thinking is a technique that encourages the creation of alternatives and opens up new possibilities around problem solving. Rather than refining the first idea, design thinking enables architects to generate multiple prototypes--iterative models of a concept or assumption for testing and learning. The technique is famously used by world-renowned architect Frank Gehry as analyzed and emphasized by Richard Boland and his colleagues at Case Western. It’s also been championed by thinkers like Roger Martin, the former dean of the Rotman School of Management at the University of Toronto. What we’ve done is to apply design thinking to the search and validation of value propositions and business models.

We believe that if more businesses adopted design thinking to solve problems, leaders will be better prepared to discover hidden elements and ambiguities around an idea; uncover faulty assumptions before executing an untested idea; and in turn, make smarter choices for the business.

Companies can embrace the mindset of design thinking--where options are designed, rather than refined--by adopting the following five principles from the architectural world:

1. Feel comfortable in a liquid state.

Design thinkers are trained to find “what could be”. They are trained to be comfortable with uncertainty and to eliminate that uncertainty via constant learning throughout the process.

Decisions makers inside large companies are trained to find solutions in a set world, and to decide a single plan that will be executed. So it’s no surprise that they’d be uncomfortable with the idea of prototyping, failing, learning, and iterating. It’s a liquid state that’s hard to deal with, and it’s just not hardwired into the current culture.

To achieve this liquid state, you have to be comfortable with solutions that emerge throughout the design process. That also means getting your team to present early and rough solutions which you’ll throw away and iterate on again. You have to recognise that the solutions you finally implement will look radically different from what was initially prototyped and tested.

Let’s say you run a 3-day workshop and you might think you’ve found a solution. The reality is that the solution will only emerge as you prototype, test, and then analyse your findings to understand what needs to happen next. What do you throw away? What do you design to try again or to evolve? You have to accept that your original ideas may look nothing like your final state. Trust the design process and let it guide you. And as architects remind us: don’t fall in love with your first idea.

2. Embrace a beginner's mindset.

Architects like Frank Gehry start each project on a clean slate. If Gehry approached every new idea by strictly relying on previous designs, then all of his buildings would likely end up looking the same. But what about experience, doesn’t that matter? Yes. Gehry accumulates knowledge from project to project that assists his thinking around new design ideas. You need knowledge and a fresh mindset to go hand-in-hand. It’s not one or the other.

One way to start in a beginner’s mindset is to question the fundamental assumptions underlying your business idea. By questioning these fundamental assumptions you end up uncovering elements that nobody else might be thinking about.

Companies like Uber and Airbnb didn’t just design another taxi or hotel business. Both companies questioned the need to own assets like cars or real estate; and in turn, both have become highly valued services in industries like transport and travel. Bharti Airtel, the Indian telecom giant, questioned the need for communications companies to own infrastructure (which can be a costly undertaking). Instead they designed a model that allowed them to use the network of other organisations in order to grow their own.

Consider external avenues that can bring new perspective to your business challenges, and broaden your reach to new audiences. Question everything, especially the assumptions, and never take anything for granted.

3. Adopt the right tools.

Prototyping is the practice of building quick, inexpensive, and rough study models to learn about the desirability, feasibility, and viability of alternative solutions. All of Gehry’s building designs start out as rough sketches that are then crumpled up and tossed out to start over again.

Why would you build a prototype that won’t be used? They’re objects that allow you to collect user or customer insights and feedback, not what you’re actually going to build. Remember: prototyping is an exploration exercise.

Businesses can learn a lot from this approach because it encourages teams to start with a rough idea, toss it out, and start over again. What’s important is that each rough prototype allows your teams to develop different perspectives. Gehry has never strayed from this approach because a simple sketch or model visualizes an idea that can be discussed among a team, but it’s not intended to explain or determine how the idea will work. The sketches allow the team to react to something concrete.

In the business world, a napkin sketch can help teams to quickly formulate ideas that can be discussed. At Strategyzer, we designed tools like the Business Model Canvas and Value Proposition Canvas to provide a shared language for communicating complex topics and making them tangible. Your mockups could be rough Minimum Viable Products (MVPs) like landing pages, new product features, or the customer journey.

4. Start with low fidelity prototypes.

Rather than trying to fight for the right solution from the start, your team can instead design low fidelity prototypes and Minimum Viable Products (MVPs) to explore several alternatives quickly. Low fidelity ideas can be thrown away easily, but refined ideas can discourage teams from changing course or abandoning a concept that won’t work (especially if they’ve fallen in love with the initial idea).

Gehry’s team is known for using wooden block models on topographical maps to test different building shapes and volumes against surrounding landscapes. If an idea for a building design doesn’t fit the landscape they are dealing with, the team has to explore an alternative design. With new knowledge from each low fidelity prototype, the team is able to design new shapes that are eventually evolved into conceptual design models that can fit the terrain.  

Try it out. Get your teams to create three radically different alternatives for a given problem. Rather than trying to fight for the right solution and refining, why not make three rough prototypes for the solutions in 20-minute sessions to see what your teams uncover. One example could be challenging your teams to give away the company’s value proposition for free. Another radical challenge could be to have them sell the company’s value proposition for $1 million. What do they have to do differently to achieve a solution?

The Business Model Canvas, Value Proposition Canvas, and the Minimum Viable Product concept from the Lean Startup principles encourages teams to design quick and rough prototypes that can be tested on customers immediately for fast feedback and learning.

5. Use Computer Aided Design (CAD) to push boundaries.

The use of digital tools has revolutionised the architectural world. Computer Aided Design (CAD) software allows architects like Gehry to try out things that simply weren’t possible before through other design thinking processes.

The business world has limited access to CAD software for strategy and innovation. That’s what we’re trying to do at Strategyzer: to allow teams to sketch out multiple models of their value propositions and business models, and to simulate “what could be”. To stress test assumptions and build a toolbox for quick experimentation that encourages cheap failure and learning. Add to that the ability to collaborate with team members globally, which allows companies to integrate a lot more feedback and knowledge throughout the business design process.

The myth of the genius designer.

There’s this myth that great designers have a rare genius. Yes, there’s some reality to that myth, but a lot of what makes a genius designer is his or her process. Good design thinking isn’t about ideas magically falling from the sky, it’s about adhering to a process. The same has to be said about business model innovation; it’s not magic, it’s a systematic process.

Leaders are responsible for designing just as much as an architect might be. The difference is that leaders design organisational culture, processes, and even new businesses. Today’s process of decision making is less about picking the best choice. It’s more about creating the right options which is the hard part. There are no simple answers and solutions. We have to design options and then decide based on constant prototyping, iteration, and learning.

The points I’ve outlined here aren’t just for design geniuses. These are processes that can be taught and mastered by anyone. Design masters like Frank Gehry were taught these principles in school and then improved on them through his work. In fact, on projects where budgets are as large as $500 million, Gehry allocates up to 20% of the expenses purely for learning and searching for alternatives. We encourage business leaders to carve out a slice of their project budgets to search for “what could be”.