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Single Cycle Degree Programme in Economia aziendale - Economics and Management

Final Thesis

The Evolution Of DesignThinking

From the design of objects to the design of processesinside the business frm.

Supervisor

Ch. Prof. Francesco Zirpoli

Graduand

Edoardo SteccaMatriculation Number 848179

Academic Year 2015 / 2016

- Introduction:

Design, once confined to product development, over the years has evolved and has become progressive-

ly central to organizational strategy, culture, and innovation. As it moved further away from the world

of products, its tools have been reshaped and adapted into a completely new discipline: design thinking,

which is no longer regarded as a physical process, but instead as a way of thinking.

This evolution has brought forth many different results in multiple areas of study, my aim in this study

is to explore, in general, the main differences existing between the “classical” concept of design, ap-

plied mainly to physical objects, and design thinking, along with its possible applications to various orga-

nizational levels, taking into considerations the specific business environment in which these organiza-

tions are operating.Next, I will analyze more in depth the change this new way of thinking implies for business organiza-

tions in terms of organizational structure, strategy and culture and I will make a comparison, from the

point of view of the ability to foster flexibility and innovation, between this new organizational model

and those already developed and implemented by existing manufacturing and service organizations. An important thematic in this context will also be discussed: increasingly manufacturing companies

and professional service firms are creating many products, services and processes which are technologi-

cally complex. Complex new designs usually struggle to gain acceptance by the individuals supposed to

deal with them. A possible solution to this problematic will be presented, taking into consideration also

the various challenges business firms face on the path towards this kind of organizational change.

In the final section, three case studies will be considered, with the aim to provide practical support to

the previous, more theoretical points. The first one is about how Intercorp Group managed to create,

develop and maintain a culture based on innovation in Peru, implementing a peculiar approach deriv-

ing directly from the newborn discipline of design thinking. The second case study explains how Sam-

sung Electronics became a “design powerhouse” itself, by gradually recognizing that, in order to be-

come a top performing brand, it needed to develop a very particular organizational culture. The final

case studies focuses on a slightly different matter: how design thinking can be turned into strategy, as

PepsiCo’s CEO did with her company.

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The main reason which prompted me to deal with this particular (and quite complex) topic is that I

strongly believe that business companies, which in the last two decades are facing dramatic changes in

their business environment (e.g. extensive global competition, reduction of the product life cycles aris-

ing from technological innovation and the need to meet increasingly discriminating customer demands,

to name just a few factors), need to rethink the way they actually do business. If they intend to survive

and to improve their performance in an era characterized by uncertainty and instability, they absolute-

ly need to work to develop specific design-centric cultures which, given their intrinsic tendency towards

flexibility and innovation, will enable them to cope in an efficient and effective way with their current

and future challenges.

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Chapter I.

- A chaotic background.First of all in order to provide an accurate analysis of the concept of design thinking, along with its effects

on the organizational structure, culture and environment it is essential to clarify what the word “de-

sign” actually means, and that, as we will soon discover, is not a trivial task.

Usually when people reflect about design, the first thing they unconsciously visualize is a physical ob-

ject: a modern house with a huge swimming pool, elegant and incredibly expensive furniture, a chair,

an armchair, IKEA, a modern artwork in a museum, etc. There is a sort of mysterious aura surrounding the concept of design, it is both everyday and yet spe-

cial (Lawson 2004, 7), which contributes to make it even more elusive and difficult to analyze. The fact

is that we are so deeply influenced by the way design is presented by many different sources such as

television, internet, commercial ads and magazines, that we do not distinguish instinctively the activity

of designers with the objects they manage to create, which is only the end result of a very peculiar and

often very complex process. Design eludes every tentative to be reduced, while remaining a surprisingly flexible activity: no exact

definition of design or various branches of professionalized practice, for example industrial or graphic

design, adequately covers the diversity of ideas and methods collected together under that label. In-

deed design continues to expand in its meaning and connections (Buchanan, 1992): it is an expansive

multi-disciplinary domain subdivided into specialized fields of products, fashion, architecture, graphics

and sound, to name just a few of them.

Even if it is clear what the physical manifestation of a designer’s work actually is: the end product—

could be just everything—, it remains to be explained what designers are in the eyes of the general

public, what they do, how they do it and whether they really know something more than ordinary peo-

ple.

To make things even more complex and confusing, it is now commonplace to use the words design think-

ing to describe this design process itself along with its practices and the same concept is being used by a

lot of different actors in very different contexts, as companies, businesses and a myriad of other profes-

sions increasingly clamor to leverage it as an advantage in the marketplace.

Thus it is clear that achieving a general, collective insight on what design is or on how the design

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process works, is a strikingly hard task. Therefore it is required that our analysis is based on a flexible

yet solid framework, if we intend to distinguish effectively design and its process from the new doctrine

of design thinking.

- A general definition.Keeping in mind that this is not a thesis on Design nor on Design Management, our first step towards

the formulation of such a framework consists in providing a generally accepted definition of design.

Indeed spending too much words in trying to give a thorough definition would be rather inappropriate,

as it would be to explain in detail the process of design itself, given the fact that we need only to clarify

the general concepts to be able, later on, to focus on the application of “design thinking” to the busi-

ness field. Said that, we could simply stick to a general and academic definition of design: “A plan or

drawing produced to show the look and function or workings of a building, garment, or other object before it is

made” (Oxford Dictionary), while stressing its veiled tendency towards the idea of invention and innova-

tion, since it is said that design is an activity which takes place before the concrete creation of any sort

of object, which could be non-existent in reality yet. It follows that the design process is nothing but the

set of activities and tasks which are sequentially implemented by the designer in order to provide that

plan or drawing of an object before it is made. This might seem way too simplistic, but considering our

objectives it is enough to understand clearly the various sections of this analysis. Having defined design

and its process, the next step is to explain the reason why it is such a broad and confused concept.An accurate, useful framework to picture how extensively design affects contemporary life and to bet-

ter understand what we mean when we use that term in a huge number of different contexts, is that

one presented by Richard Buchanan in “Design Issues”, 1992, which considers the four broad areas in

which design is explored by designers working in many different, specific sectors.

The first area of interest is the design of symbolic and visual communication, which includes the traditional

activities of graphic designers, such as advertising, magazines production, illustration, which has ex-

panded into communication through photography, film, computer display and television. The second area regards the design of material objects, which includes traditional concern for the form

and visual appearance of everyday products. Also this area has expanded further into a more elaborat-

ed interpretation of the physical, psychological social and cultural relationship between products and

human beings (Buchanan, 1992). Moreover it is evolving into an exploration of the various issues of

combination in which form and visual appearance must imply a deeper, integrative argument that links

arts, engineering, but also natural and human sciences. The third area, the design of activities and organized services, includes the traditional management concern

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for logistics, activities focused on combining physical resources, instrumentalities, and human beings in

efficient sequences and schedules to reach specific objectives (Buchanan, 1992). It is interesting to no-

tice that this area too has progressively expanded into a strong concern for logical decision making and

strategic planning and it is rapidly evolving into an exploration of how better design thinking can con-

tribute to achieving an organic flow of experience in concrete situations, making these experiences more

intelligent, meaningful and satisfying. The fourth area is the design of complex systems or environments for living, working, playing and learning, which,

in the business environment in particular, is strongly linked, in many interesting aspects, to the third

area presented above. This last area includes the traditional concerns of systems engineering, architec-

ture and urban planning or the functional analysis of the building blocks of very complex structures

and their subsequent progressive integration in hierarchies. However it is more and more concerned

with exploring the role of design in sustaining, developing, and integrating human beings into broader

ecological and cultural environments, shaping them when desirable and possible or adapting to them

when necessary.

Having subdivided the concept of design in its four main areas, we can identify clearly the two areas

which interest us most: the second and the third ones, which deal with design of material objects and

design of activities and organized services respectively. The reason for this restriction is that these two

broad areas include those activities which are far more relevant to a manufacturing or service organiza-

tion: a business company has to deal with all those major issues arising from the design of new prod-

ucts, which it is going to produce and later on sell to its customers, but also from the design of its own

activities, its internal structures and the entire network of relationships tying together both internal and

external agents.

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Chapter II.

- What is design thinking?

Now that we have general idea of what design is and also what its meaning is in the various and quite

different contexts, we should proceed in introducing the central element of our analysis: design thinking.

Given the fact that its significance is still matter of a huge debate, I will not go on about presenting the

various points of view on the subject and rather try to give the clearest and most direct explanation

possible.

Design thinking, as presented in brief in the introduction of our analysis, is regarded as a “new” way of

thinking: in general it could be said that it is nothing more and nothing less than the application of the

specific design attitude, its forma mentis, together with all the processes embedded in it, to a variety of

different subjects, activities and processes.

As this new topic gained more and more appeal, in the last decades it has gradually being associated to

the concepts of innovation, creativity, experimentation, flexibility, just to name a few, all characteristics

which are now considered almost essential to any organization operating actively in the market. It is not casual the fact that this new way of doing things, this new attitude, is almost automatically re-

lated to both efficiency and success in many areas of interest. People and firms are always keeping an

eye on the environment surrounding them and as they perceive an increase in the level uncertainty and

risk, or just a slight air of change, which can be detected in particular during these last years, they

gradually realize that the traditional best practices, those that worked so well in the past, those that al-

lowed a certain degree of stability and growth, might not be enough to deal with the new challenges

that the future might present.

Design thinking, in this context, seems to be able to provide a feeble hint of the kinds of methodologies

and approaches needed to come up with the right solutions and answers to possible critical issues and

doubtful questions.In this sense design thinking could assume also the meaning of change, a change which is not casual, as

we have just seen, but it seems to be caused by a compelling search for certainty by both common folk

in their everyday activities and also by people belonging to any organized, structured whole, in their

(often) more complex and articulated tasks.

Let’s now try to restrict further our focus on this new discipline to adjust it to the context which inter-

ests us most: the business organization.

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- Design Thinking: what does it look like inside the organizational bound-

aries?

We are finally able to discuss how design thinking actually works inside a business company, which is

the main subject of this study. A pretty accurate piece written by Tim Brown for the business magazine

Harvard Business Review, in 2008, is really on point in describing this step. This article’s title makes one big claim: design thinking can actually transform the way a company de-

velops its various products, its services, its processes and even its strategy itself and this, as we will soon

discover, is not that far from reality.

Let’s start with a concrete and quite common example: Thomas Edison is the creator of the light bulb

and he was that observant to erect an entire industry around this invention. Even if this small object is

his “core” creation, Edison’s actual brilliance was his ability to recognize that the bulb was useless per

se, without the proper system of electric power generation and transmission to exploit fully its enor-

mous potential. Therefore he did not stop to the bulb, instead he built the entire system it needed to

work properly. Edison’s genius thus laid in his ability to conceive a fully developed marketplace, not just

a single part of it. He was actually able to predict how people would want to use his invention, and he

engineered everything towards that insight.

In general it could be said that Edison gave an impressive consideration (for those years) to user’s needs

and preferences. This approach, together with what has been previously said about the ability to pre-

dict how an entire branch of industry might develop, is an example of what is now called design thinking:

a methodology that imbues the full spectrum of innovation activities with a human-centered design ethos

(Brown, 2008). In this sense innovation is supported by a deep and complete understanding of what people might want

and actually need in their everyday life, what products they use often, but also what products they dis-

like, they are not able to use properly because too complex or not “user-friendly”.

Another big change was the way activities were carried out by Edison and his colleagues: they relied on

a peculiar team-based approach, which created an unique and prosper organizational climate fostering

cooperation, exchange of opinions while also allowing the members to tinker, experiment or improvise.

The underlying intention was to create a system which encouraged experimenters to always learn

something new from each step of the processes undertaken. Innovation, as Brown claims, is hard work;

Edison made it a profession that blended art, crafts, science, business sharpness, and an astute under-

standing of customers and markets.

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Design thinking approach is directly related to this way of doing things, it is nothing but a discipline

that exploits the particular designer’s sensibility and various methods he or she adopts, to match peo-

ple’s needs and wants with what is actually feasible, technologically speaking, and what a viable business

strategy can convert into customer value and potential market opportunities. As such design thinking is

regarded as powerful tool for business organizations given the fact that it is a potential source of differ-

entiation and competitive advantage, if applied wittingly to multiple phases of the value-creation chain.

- Under the surface: how Design Thinking happens inside the organization:

It is not a task to be taken lightly, the implementation of this new set of methodologies and approaches

by business firms. Given the fact that they face different challenges depending on the kind of industry

in which they are operating, the same set of strategies and methodologies might be just fine for a spe-

cific organization, while resulting useless or even catastrophic for another. Design thinking can be

adapted in different ways to very different contexts, but it is not a synonymous of efficiency and suc-

cessful results in all the currently existing business environments. Said that, let’s have a closer look at

how design thinking actually takes place inside the organization. First of all it is quite clear that design thinking does not just come out of the blue, but instead it arises

on the first hand from certain behavioral patterns characteristic of specific individuals. Eventually De-

sign Thinking might affects deeply the way people behave in many different contexts, but it all starts

from certain individuals’ personality factors. This does not mean that to be design thinkers people need

to dress in a more eccentric, colorful way, but instead some more important and subtler personality as-

pects are indispensable, which are the building blocks for the formation of that flexible mentality char-

acteristic of design thinking. These factors are empathy, integrative thinking, optimism, experimentalism and a

strong tendency to collaborate.

The first one, empathy, allows individuals to observe the reality from different perspectives— those of

other team members, clients, end-users and customers for example. In this way these individuals devel-

op the so called “people first” approach, which allows design thinkers to imagine solutions that are in-

herently desirable, meeting both explicit and implicit needs and wants.

Integrative thinking, the second one, allows these people to come up with innovative solutions to prob-

lems, suggesting still undiscovered ways to solve issues. This is a particularly useful tool which also dra-

matically improves these individuals’ ability to evaluate and select different alternatives. The third factor is optimism: design thinkers instinctively assume that no matter how challenging the

constraints of a given problem are, at least one potential solution is better than the existing alternatives. The fourth factor, experimentalism, assumes that significant innovations do not come from incremental

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tweaks. Design thinkers know that and pose the right questions to the matters at hand, while exploring

the constraints to which the alternatives are subjected in order to come up with new ways and thus dis-

cover entirely new directions.

The last factor is collaboration, which alone got ahead of the classic myth of the “lone creative genius”.

Given the increasing complexity of products, services and systems in general, the chance to achieve

successful results dramatically increases when there is the right degree of enthusiastic, interdisciplinary

collaboration inside a team of experts. Interdisciplinary here is a key factor since the best design

thinkers do not simply work along side disciplines: they actually have significant experience and exper-

tise in more than one.

Of course it must be said that possessing these peculiar traits does not have direct effects on any of the

various organizational processes per se: if the organization itself does not consider them to be relevant

and decisive somehow it is unlikely that any change will occur. It is important to notice that, to become

success factors which contribute to the creation of any kind of competitive edge, the proper organiza-

tional culture and structure must be present, otherwise these characteristics will not be exploited in the

correct way and, in the worst scenario, they will be the cause of frustration, misunderstanding and, in

the end, many resignations. We will discuss more accurately what type of organizational framework

design thinking requires in due time, for now let’s simply consider that it is a delicate passage, that one

that goes from people potentially winning (in the marketplace) traits to the rational exploitation of

those traits in the value creating activities.

- The Design Thinking Process:Taking for granted, for now, that the previously presented personality traits are recognized as valuable

factors and individuals are allowed to apply them in their various activities, we can notice a certain pat-

tern of action taking shape in the various approaches and methodologies they progressively develop.

The so called Design Thinking Process, which arises as result, is effectively presented in the previously

mentioned Brown’s article, from Harvard Business Review, as it is described as a very peculiar process

made up of three interconnected and non-sequential “areas”. The aspect that makes it so unique is that, as the author explains, the process of design is best described

metaphorically as a system of spaces rather than a predefined series of orderly steps. These spaces sep-

arate different kinds of related activities that together form the “continuum of innovation”. As the pic-

ture below graphically explains, this process might appear slightly chaotic at first sight and for good

reason: design thinking does not evolve in a linear way, indeed its process’s architecture actually differs

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deeply from the “linear, milestone-based processes typical of other kinds of business activities” (Brown,

2008). Anyway design projects must ultimately get through three large spaces, which we are going to

describe right now. The first one represents “Inspiration”, which gathers together all those circum-

stances that motivate the search for solutions, be they a problem, an opportunity, or both. The second

region is “Ideation” which involves all those processes of generating, developing and testing ideas that

may lead possible solutions. Finally, the last space represents “Implementation”, which ties everything

together and organize the whole thing properly for the charting of a path to market.

Together these three “spaces” form an unique process which allows, when put into practice properly, an

unequalled degree of flexibility and robust push towards innovation for many different kinds of busi-

ness activities, thanks to its human-centered focus and the imbedded iterative cycles of prototyping,

testing and refinement.

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Chapter III.

- The Evolution: from design of material objects to design thinking inside the

firm:

We have seen how Design Thinking is developed inside a business organization as a way of thinking

first, with the help of specific personality traits and a favorable, creative environment, and then as a

complete process, as those traits are progressively applied and adapted to different organizational activ-

ities. But design has not taken up the same role throughout the history of business firms. For many

years, it has always been regarded as a downstream step in the whole process of product development:

designers did not play any role in the early stages of it, rather they did only come along in the end,

putting a beautiful wrapper around the whole idea. Thus the task of designers was mainly to stimulate the market properly, by making new products and

technologies aesthetically attractive and therefore more desirable to the firms’ various customers or by

enhancing brand perception using smart, evocative advertising and communication strategies.

Things started to change in the second half of the twentieth century, as soon as design was recognized

to be an always increasing, valuable competitive asset, to be exploited thoroughly in the marketplace,

but still it did not gain the proper relevance and was kept as a secondary step. Later on, it achieved full recognition as a source of a solid competitive advantage, as business firms

paid more and more attention to its customers needs and wants. Its task now was not to make an al-

ready completely formed and developed idea look attractive to customers’ eyes, but instead it shifted

progressively to create completely new ideas which are more adequate to meet consumers’ needs and

desires.

However, this constant attention paid to customers needs and wants by business firms caused by the

increasingly discriminating customers’ demand was not the only reason for the rise of design as a pow-

erful and competitive tool to be exploited in a multitude of different stages of the creation process. An-

other, equally important factor was the shift of developed economies from industrial manufacturing to

knowledge work and service delivery, which on one hand highlighted the potential of innovative ideas

and processes, while allowing an expansion of the range of their possible applications on the other.

Summing up, design inside the business companies started up as an activity which, initially, only aug-

mented the already fully developed characteristics of a product or an object, but it gradually gained

more and more recognition as value creating step and also as competitive asset to be fully integrated

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into the various stages of the whole process of creation, from invention to product delivery to the firm’s

customers. As business organizations developed from manufacturing to knowledge work and service delivery, com-

plex new design of products and systems were progressively devised. This shift also pointed out the pos-

sibility that the traditional organizational designs (and frameworks in general) could be in trouble while

facing a completely different set of tasks. As the complexity of the design process increases, new obsta-

cles arise: the acceptance of the “design artifact” itself, which could either be a product, a service, user

experience, strategy or complex systems, and also the various challenges embedded in this new type of

business, for example the acceptance of ambiguity, the embrace of risk, or the rejection of expecta-

tions.

Let’s analyze more in depth the path to change business firms need to undertake because of the in-

crease in complexity of their designs and how design thinking might suggest the right way to follow,

integrating into the discussion also the related concepts coming from the discipline of Organizational

Theory.

- The problem: how complex new products and systems require a deep change

inside the organization.As design’s role became more and more decisive in the success of different commercial goods (and con-

sequently of those firms producing them) companies started to adopt it in many more contexts. As its

applications increased, Design Thinking proved to be a useful tool not only to those activities involved

in the ideation, creation and development of products, but also to those involved in the development of

corporate strategies and systems. In this specific context we stumble upon a very interesting problemat-

ic, which is the main subject of this section: as business organizations keep on developing during their

respective life cycles, their inner and outer environments, as Simons would call them, change too, usually

dramatically increasing in complexity. This change is due to both their natural, so to speak, growth in

their industry, but also to the previously mentioned shift of the developed economies from manufactur-

ing to knowledge work and service delivery. An in-depth analysis of the causes and effects of that

macroeconomic change would definitely get us off-topic, thus in this study I will not go on about it, and

rather focus on its direct consequences which are strictly related to the subject matter of this work.

As business organizations become progressively complex, also the designs they develop, be they for

products, or entire systems, change in the same way. The question is whether the individuals who are

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designated to deal with these transformations in their activities, are going to accept the situation and

adapt positively to it, or simply reject it. The idea is that new products, entirely new systems, approaches or methodologies often require the

firms, and consequently the individuals inside, to change their established business models and behav-

iors. As one could expect, they encounter stiff resistance from the intended beneficiaries and from the

people who have to deliver or operate those innovations.

For clarity sake, let’s first describe briefly these established business models, to be able to recognize

swiftly which ones are more likely than others to adapt to change and why. This is the starting point

that will serve us as solid theoretical basis where to build the entire reasoning, in order to come up with

a possible solution to our problem.

- Organizational Theory: a matter of fit.As organization grows in complexity, it is necessary to decide how to control and coordinate the activi-

ties that are required for the organization to create value in its industry. This is not a simple task of

course and since each firm is unique, there is not a single solution which leads to good results in differ-

ent contexts. To understand why different business models are created and adopted in different situa-

tions, it is important to have clear in mind the notion of fit, together with the so called Contingency

Approach to organizational design.

The concept of fit was studied thoroughly by the two organizational design scholars Laurence and

Lorsch, who investigated how companies in different industries differentiate and integrate their struc-

tures, which consists of the “set of implicit and explicit institutional roles and policies designed to pro-

vide a common ground where various roles and responsibilities are delegated, controlled and coordi-

nated”, (Investopedia) to fit the characteristics of the industry environment in which they compete.

They found that the type of organizational structure (notice that here structure and model are used as

synonymous) chosen by a business firm is deeply influenced by the characteristics of the environment:

when, for example, it is perceived as complex, unstable and uncertain, organizations tends to be more

effective (in creating value) if they are less formalized, more decentralized and flexible, thus in that spe-

cific situation a firm is probably going to adopt the architecture which will operate in the best way pos-

sible (i.e. a rather flexible, decentralized structure). It is obvious then, that a poor degree of fit between

the organization and the environment will lead to failure, whereas a close fir between the two is more

likely to lead to success.

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The Contingency Approach to organizational design is a sort of corollary to the notion of fit, this is a

specific management approach by which the design of an organization’s structure is carefully tailored

to the sources of uncertainty the firm faces.

Together these two concepts on one hand determine which type of business model is more adequate to

allow the organization to survive and grow in the industry in which it competes, while on the other they

provide a possible concise explanation of the reason why organizations in different industries choose

different business models and, as the environment change, they progressively transform their designs to

better adapt to it.

Having fixed these two notions in mind, we can move on presenting the two general macro-architec-

tures from which all the different organizational structures are, more or less, derived. This will allow us

to have a clear understanding of the reasons behind the selection of specific business models by organi-

zations, without having to explain in detail the various structures currently employed in the industry.

The first one is the so called “mechanistic structure”, it is particularly designed to induce people to be-

have in a predictable, accountable way. Decision-making authority is centralized, there is a high degree

of supervision of subordinates, while informations flows mainly in a vertical direction down a clearly

defined hierarchy. Each person is individually specialized, all the various roles and tasks are clearly de-

fined and are mainly coordinated through standardization, formal written rules and procedures. This

kind of models shows many advantages in a rather stable, predictable industry environment, but be-

cause of its rigidity it is unlikely to succeed in a more dynamic, uncertain context. The more vertical,

centralized structures derive directly from this model.

The second architecture is the “organic structure” which is at the opposite end of the organizational

design spectrum form the previous one, given the fact that it fiercely promote flexibility, so people work-

ing inside such an organization initiate change and can adapt quickly to rapidly changing conditions.

Organic structures are rather decentralized so that decision-making authority is distributed throughout

the hierarchy; people assume the authority to make decisions as organizational needs dictate. If in the

previous case we had well determined roles and a high degree of individual specialization, in this mod-

el roles are loosely defined and people continually develop new kinds of job skills to perform continual-

ly changing tasks, resulting in a high degree of joint specialization. As result a high level of integration

between the parties is required to share relevant informations, while coordination is achieved thanks to

a solid arrangement of teams and task forces. This kind of structure shows many advantages in a more

unstable, uncertain and evolving industry environment, given the greater flexibility. These advantages

come to a price however, usually this kind of structures are very complex and difficult to manage and

control, not to mention the huge costs they might imply.

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It is quite clear now which of these two models is best suited for organizations whose industry environ-

ment is starting to change, while uncertainty and instability are on the rise. This considerations takes us

back to our topic of interest, which saw manufacturing and service organizations progressively increas-

ing in complexity, while facing an environment whose stability was starting to shrink. The problem was whether the individuals, who in the end are going to operate the new approaches and

methodologies inside a business firm, are actually going to resist and simply reject change, or will grad-

ually adapt to it.

The fact that we distinguished between two different architectures, mechanistic and organic, helps us

recognizing that these models have very different implications for the way people behave, and in the

end it will determine whether it is more likely that they will adapt to change, instead of resisting it.

Thus, to the question asking which type of business model is actually more suited to our specific con-

text, the answer is that clearly an organic structure encourages the kinds of innovative behaviors that

are considered valuable and desirable from a design thinker’s perspective: teamwork and self-manage-

ment to improve quality, focus on customer service, reduced production cycles, just to name a few.

But this answer is not enough: until now we have seen in general the two “macro” business models

which served us as basis to understand the implications of the change of complex organizational struc-

tures, helping us recognizing which systems are more likely to adapt to it and to support the design

thinking approach; it remains to be seen, as our problematic solicits, how to actually succeed in intro-

ducing complex new designs (of a product or even a system) inside an organization.

- The Solution: Organizational Change as a design challenge.

It is pretty obvious that an organization, which is planning to launch a new product that resembles a

company older offerings and that makes use of almost the same traditional production systems and

approaches, is not really going to face any sort of dramatic changes in its architecture or in the way its

people work, thus the design is not inherently threatening to anyone’s job or to the current power struc-

ture. On the other hand, introducing something which is completely (or in large part) new is often wor-

risome. For example a new product might fail in the market, as the majority of innovations do, which

will translate in costly maneuvers to find a possible solution, given the fact that this new product was

perhaps meant to substitute another version, which meanwhile has been phased out.

In the past we have seen that the designer’s job was only to create a truly great product, while all the

knock-on effects caused by the introduction of that new product were left to others, therefore his re-

sponsibility was rather limited as design was not given strong importance in the preceding planning and

production phases. As design gained more recognition as a potential source of competitive advantage,

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shaking those invisible boundaries which separated the various production stages and those same stages

from the planning phase, we can see that the more complex and less tangible the designed artifacts are,

(by design artifacts we mean those peculiar models used by designers to explore, define and communi-

cate) the less feasible it is for the designer to ignore their potential ripple effects, with the possibility to

affect the business models itself. This means that the introduction of the new artifact, be it a product, a

system, etc. requires design attention as well.

It is at this point that design thinking shows its full potentiality and flexibility as it suggests the possible

solution, which is an already tested way to solve many issues of this kind (as we will see in the Intercorp

Group case study). The trick is to take a step back and carefully ponder which are the challenges im-

plied in this complex artifact: large, tangled designs are intimidating and usually involve an enormous

set of variables which cause many different elements to mutate, collectively powering up the mecha-

nism of change. Predicting every single variable’s behavior is usually too costly in terms of time and

money, or it is simply impossible, thus a possible solution is to approach this large scale change as two

simultaneous and parallel challenges: the design of the artifact in question and the design of the interven-

tion that brings it to life. Thus design is employed both in the ideation of the artifact and in the processes which are implement-

ed to develop it, but also in all the multiple effects and consequences that innovation generates inside

the organizational boundaries, for example a change in some individuals’ roles, tasks, or simply a new

chain of activities. This approach enables us to make use of the peculiar Design Thinking process pre-

sented a few section above, to carefully observe the two challenges and the relation existing between

them, sketch a diagram of the issues they respectively imply, identify organizational resources available,

etc. (for a glimpse of how this process might actually be articulated, figure 1. provides an example of

the sort of questions and reflections possible, inside the three broad areas of inspiration, ideation and im-

plementation).

If the first challenge, the design of the artifact, does not imply any particularly arduous step, the second

one, designing the intervention that brings the new artifact to life, is slightly more difficult to under-

stand in its modus operandi, given that it does not deal directly and exclusively with the artifact, but

instead it consists of all those processes and activities which are progressively implemented to actually

develop it. For this reason it is important to spend a couple of words on it.

Intervention design grew organically out of the cycles of iterative prototyping introduced to the design

process as a way to better understand and predict customers’ reactions to a new artifact (this concepts

should light a bulb). Traditionally, product developers started the process by analyzing the user and cre-

ating a product brief. Next they worked hard to develop a fabulous design, which then the firm

launched in the market. In the design-oriented approach on the other hand, the work to understand

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users is deeper and more ethnographic (human-centered approach) rather quantitative and statistical.

This is the decisive distinction between the old and new approaches, but no matter how deep the cus-

tomer analysis is pushed, in the end designer would not really be able to precisely predict user reaction

to the final product.The turning point seems to be the acceptance, by the designer, of the actual need to reengage with the

users sooner, follow them closely with a very low-resolution prototype to get the precious feedback ear-

lier. Then the idea is to repeat this process in short cycles while constantly improving the product until

the user is delighted with it. It is clear that this iterative rapid-cycle prototyping does not just improve

the artifact, it reveals itself as a successful way to actually obtain the funding and organizational com-

mitment necessary to bring the artifact to life and then to market. A new product almost always requires a bet by management team responsible of accepting its devel-

opment and final distribution, with this kind of methods a whole organization can be more confident

of market success, or at least would be able to predict the possibility of failure in the earlier stages of

the process. Thus designing the intervention plays a crucial role in the success of the introduction of innovation

inside a business organization. This is a possible solution to our problem: as organizations grow in

complexity, followed by the rise of complex new designs, in order to adjust them successfully inside in

the organizational boundaries Design Thinking should be used as that decisive tool in the ideation

stages of the innovation, but also in all those activities related to its development and finalization.

Setting aside the specific case dealing with the introduction of a new product, this reasoning applies

also to corporate strategy making, for example, a traditional approach is to have the strategist define

the problem, devise the solution, and present it to the executive in charge. Often that same executive

has this type of reactions: either she does not agree with the way the problem has been addressed and

considers other issues as more critical, she might have considered different possibilities, studied other

alternatives or she is not satisfied with the solution provided. The main consequence of this is that win-

ning commitment to strategy tends to be the exception rather than the rule, as strategy represents a

meaningful deviation from the status quo. A possible solution again is the adoption of an iterative in-

teraction in this case with the decision maker. This implies planning more meetings where questions,

approaches, methods and alternative are discussed together. With this approach, the final step of actu-

ally introducing a new strategy becomes almost a formality. The executive who is responsible for its

acceptance has a major role in defining the problem, confirms the possibilities and affirms the analyses,

this in turn will help not to get a harsh, single confrontation, where two opposite visions clashes, with-

out any previous discussion on the matter.

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Chapter IV.

- The Change: the path towards a design-centric culture.

The evolution of design inside the business organization we have previously discussed is a clear sign

that there is a shift under way in large firms: design is put much closer to the centre of the enterprise as

its complexity tighten. We have already seen that this shift has nothing to do with aesthetics, but it’s all

about the application of the principles of design to the way people work. This new approach is in large

part a response to the increase in complexity also of modern technology, not just of modern business.

That complexity takes many different forms: sometimes software is at the centre of a product and

needs to be effectively integrated with the hardware supposed to contain it (itself a difficult task) while

also made intuitive and simple from the user’s point of view (which is, as we have already seen, another

complicated challenge). Sometimes the problem incurred is itself multifaceted and ambivalent, while

the business environment is so volatile that a company must be open to experiment many different

paths, usually pretty distant from one another in terms of resources needed and execution approaches,

if it intends to survive.

The types of complexity business firms face every day are a vast number, what they actually have in

common is that people involved need help in trying making sense of them: they need their interactions

with technologies and other complex systems to be simple, pleasurable, intuitive.It is here that our set of principles collectively known as design thinking —empathy with users, a disci-

pline of iterative prototyping, experimenting, team-working and tolerance of uncertainty, instability

and failure— again seems to be the best tool organizations possess to create those kinds of interactions

and developing a responsive, flexible organizational culture.

Organizational culture is, recurring to an Organizational Theory definition, the set of shared values

and norms that controls organizational members interactions with each other and also with external

agents: suppliers, customers, and other people outside the organizational boundaries. Organizational

culture is shaped by the people inside the firm, by its ethic, by its structure, and has an important role

also determining and controlling the behavior within the organization. In our specific case, a design-

centric culture transcends design as a role, imparting a set of principles to all people who contribute to

bring new ideas to life. This set includes: focus on users’ experience, especially their emotional one, cre-

ate models to examine complex problems, use prototypes to explore potential solutions, tolerate failure

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and exhibit thoughtful restraint.

- Focus on users’ experience, especially their emotional one. To build empathy with its users, a

design centric organization empowers employees to observe behavior and draw conclusions about what

people want and need. Those conditions usually reveal themselves to be rather hard to express in any

quantitative language. Instead, an organization which actually adopts a design thinking approach uses

emotional language (words that concern desires, aspirations, engagement, and experience) to describe

products and users. Teams are formed to allow its members to discuss the emotional resonance of a

specific value proposition, as much they discuss utility and the requirements of various products. A tra-

ditional value proposition is a promise of utility, if u buy a Macbook Pro, Apple promises that you will

get a futuristic top-performance notebook, with a very elegant design and with an extremely intuitive

and powerful operating system. An emotional value proposition is a promise of feeling: if u buy a Mac,

Apple promises that it will be simply an unique experience, it makes you feel important, sophisticated

and rich. In design-centric organizations, emotionally charged language is not denigrated at all as thin,

silly, or biased. Strategic conversation in those companies often revolve around how different business

decisions or market path are going to affect users’ experiences and often the financial returns of that

well-designed, carefully tailored offerings, are only implicitly acknowledged. Anyway the focus on great

experiences is not limited at all to product designers, marketers, and strategists— it deeply shapes every

customer-facing function of the business organization. Also finance is deeply affected, for example it's

only contact with users is through invoices and payment systems which are designed for internal busi-

ness optimization or predetermined “customer requirements”. But those systems are touch points that

shape customer’s impression of the company. In a culture focused on customer experience financial

touch points are designed around users’ needs rather than internal operational efficiencies.

- Create models to examine complex problems. Design thinking, initially used to make physical

objects, is increasingly being applied to complex, intangible issues such as how a customer actually ex-

periences a service. Regardless of the content, design thinkers have the strong tendency to use physical

models, also known as design artifacts, to explore, define and communicate. Those models, primarily dia-

grams and sketches, supplement and in some cases replace spread-sheets, specifications, and other doc-

uments that have come to define the traditional organizational environment. They add a new, flexible

dimension to the exploration of complexity for non-linear thought when tackling non-linear problems.

In other words they are tools for understanding, as they present alternative ways of looking at the prob-

lem.

- Use prototypes to explore potential solutions. In design-centric organizations usually there are

prototypes of almost anything: of new ideas, new products, new services, new models, etc. Whereas

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models and diagrams mainly explore the problem space, prototyping is an activity which explores the

solution space. There are many different kinds of prototypes to meet different needs, but be they digi-

tal, physical or diagrammatic, they still are a way to communicate and discuss ideas. The habit of pub-

licly displaying rough prototypes, gives the impression of an open-minded culture which values explo-

ration and experimentation over rule following. This kind of culture is the one which is most likely to

attract new developers, new customers, while also retaining the old ones, whose interests are constantly

stimulated by innovation. There are several examples that suggests only the act of prototyping to be

able to transform new ideas into something actually valuable, just recall the MIT Media Lab motto

“Demo or die”, since ideas on their own do not have any concrete effect.

- Tolerate failure. With a design-centric culture, failure is not encouraged, but the iterative nature of

the design process recognizes that it’s rare to get things right the first time. When things do not work

out properly and failure is at the doorstep, still there is a possibility to get something positive out of it:

the company might leverage failure as a learning experience, viewing it as a part of the cost of innova-

tion. Employees too play an important role in this step since they must realize that they can and need to

take social risks, without fearing to lose their faces or experiencing punishment.

- Exhibit thoughtful restraint. Many products built on an emotional value proposition are simpler

than many competitors’ offerings. This restraints are caused by preceding thoughtful decisions about

the product’s characteristics: what it should do, and what it should not do. By removing some features

the company’s aim is to offer a clearer, simpler and more direct experience to its customers; they lead

the market with a constrained focus, rather than chasing it with follow-on features.

These principles constitute the main building blocks of that particular design-centric culture which is

evolving slowly inside large organizations. Together they foster innovation, while granting the company

an important degree of flexibility and responsiveness which are necessary to deal with many different

situations arising from an evolving industry environment. It remains to be seen what types of compa-

nies are actually adopting those measures to adapt to this change and what are the main challenges

they are going to face along the way.

- What types of companies are making this Change and what are the chal-

lenges? As large business organizations, such as IBM and GE, recognize the extraordinary levels of complexity

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they must manage both in their software architectures and in their systems, they increasingly consider

Design Thinking as an essential tool to simplify and humanize it. Design is no longer considered an

extra to the various firms’ activities, it really needs to be a core competence. This need is also stressed

by the fact that almost every company has made some steps from product to services, from hardware to

software, or from physical to digital products and this shift has to be followed by a new focus on user

experience and by the adoption of new, flexible processes that can be adjusted to different contexts.

Increasingly companies that choose to compete on innovation rather than efficiency must be able to

define problems artfully and experiment the ways to solutions (a more in depth analysis of this point

will be discussed later in Samsung case study).

The pursuit of design however is not limited just to large brand-name corporations; the big strategy-

consulting firms are increasingly gearing up for this new approach, often by acquiring leading providers

of design services. This trend suggests that design is becoming vital also for high value corporate con-

sulting.

However this kind of shift is never an easy one as business organizations face several hurdles in the path

towards organizational change such as the acceptance of more ambiguity and risk. On one hand design usually does not conform easily to estimates, therefore it is difficult, if not impossi-

ble, to understand how much value will be delivered through a better experience provided to the user

or to calculate the return on an investment in creativity. This steeply increases the degree of uncertain-

ty the company has to get used to. On the other hand transformative innovation is inherently risky. It

involves inferences and leaps of faith: if something has never been done before, there is actually no way

to guarantee a positive outcome. Insights usually are grasped in flashy instants of inspiration, a fact that

contributes to make them particularly difficult to rationalize and thus defend. It follows that leaders

needs to build an organizational culture that allows people to take chances and move forward without a

thorough, logical understanding of a problem.

While corporate leaders become aware of the power of design, many view design thinking as a possible

solution to many different issues. Designer thus enjoy a new level of strategic influence, through which

they strongly reinforce the impression that design might actually provide that solution executives are

struggling to formulate through different approaches.

Nevertheless, it must be pointed out that design thinking does not provide a solution to every possible

issue, as it does not provide a suitable answer to every possible question. It is true that it helps people

and organizations to cut through complexity, it is great to push innovation inside the business firm

boundaries and it works extremely well for imagining, predicting, sketching possible scenarios of the

future. Anyway it is not the right set of tools for optimizing, streamlining, or otherwise operating a

rather stable business. Furthermore it must be kept in mind that organizational change is a rather slow

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process, and affecting an organization’s culture altogether is itself a very hard and slow task, especially

in large, already well established organizations.

Chapter V.

- CASE STUDIES:

1) The strategy implemented by Intercorp Group in designing a new Peru.

Intercorp Group is one of Peru’s biggest corporations, controlling almost 30 companies across a wide

variety of industries. Carlos Rodriguez-Pastor, the company’s current CEO, inherited the important

bank the company once was directly from his father in 1995. It turned out that Rodriguez-Pastor want-

ed to be more than a banker however, his true ambition was to help to transform Peru’s economy by

building its middle class. He approached this rather complex issue with the dual step methodology we

presented previously in the section “The Solution: Organizational Change as a design challenge” (i.e.

the design of the artifact and the design of the intervention that brings it to life). In his newly renamed

Interbank he saw an opportunity to both create middle-class jobs and cater to middle-class needs.

However, reaching this goal would take the carefully engineered engagement of many stakeholders.

Thus the solution was to actually seed a culture based on innovation which implied many different

steps to be sorted out.The first task was making the bank competitive. For ideas, Rodriguez-Pastor decided to look to the

leading financial marketplace in his hemisphere, the United States. He succeed in persuading an ana-

lyst at a U.S. brokerage house to let him join an investor tour of U.S. banks. Soon he realized, while

gathering and developing insights on his own, that ideas imposed from the top to lower levels never

succeed in creating the proper context suitable to support a social transformation, which instead re-

quires decentralization of power and delegation of responsibility and authority for decision-making.

Therefore he also urged his managers to learn how to develop insights too, so that they could also spot

and seize opportunities for advancing his broader ambitions. Because of his participative approach to

strategy making, Rodriguez-Pastor was able to build a strong, innovative management team that put

the bank on a competitive footing and diversified the company into a range of businesses catering to

the right middle-class needs: supermarket, department stores, pharmacies, and cinemas. By 2015 Inter-

!23

corp Group, which was build around the Interbank, employed some 55,000 people and had projected

revenues of $5 billion. Over the years the CEO kept investing in the education of his management team by sending them to

various programs at top schools and companies while also working with some of those institution in

order to come up with new ideas, systems and approaches. Anyway creating an innovative business

group “simply” targeting the middle-class was just one of the many important steps Rodriguez-Pastor

had planned for Intercorp Group: the next step in his plan for social transformation involved moving it

outside the traditional business domain. Having sorted out the more strictly “financial” step, a new stage delineated: the focus was to boost edu-

cation, which the CEO considered as critical to a thriving middle-class, but Peru was severely lagging in

this sector and unless this situation changed, a positive cycle of productivity and prosperity was unlikely

to emerge. The idea was that Intercorp would have to enter the education business with a strong value

proposition targeted at middle-class parents.

The first necessary step was to prearrange the various stakeholders, who might well reject the idea of a

large business group operating schools for children. The second was to create, in 2007, an award given

to the best teacher in each of the country’s 25 regions. This smart, genuine interest in improving edu-

cation in Peru showed by the company, quickly managed to increase the acceptance of the idea of a

chain of schools owned by Intercorp among the populace. Next, in 2010 the company purchased a small school: San Felipe Neri, a reality with already big plans

of growth, which then could count on Intercorp’s experience in building large-scale businesses. Howev-

er if this reality was to successfully expand, it needed to develop a brand new model. This was achieved

by Intercorp, which brought together managers, teachers and designers to create the new system of

Innova Schools, which would offer excellent education at a price affordable to middle-class families.

Also a huge human-centered design process was introduced: it involved students, teachers, parents,

stakeholders alike, exploring their needs and motivations, involving them in testing approaches and so-

liciting their feedback on classroom layout and interactions. This new school model became so much

appreciated, thanks to various tests designed to carefully study the needs and wants of individuals and

its reputation for innovation, that word of mouth spread, and soon the schools were fully enrolled even

if they did not actually exist yet.

The final step of this literally huge design for change, was to spread services not just to those affluent

parts of the country’s capital, where the middle-class was emerging on its own. The key was to reach

also remote areas, where middle-class was needed as well. The idea there, was to create job opportuni-

ties by expanding Intercorp’s supermarket chain. However this move had several potential collateral

effects: the risk to impoverish local communities since supermarket did not provide well-paid jobs and

also there was the risk to damage the business of local farmers and producers. Thus Intercorp again

took action to prevent these risks by stimulating local production by fostering early engagement with

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local businesses (e.g. the campaign Peru Pasion, undertaken in 2010).

Currently, the local chain Supermercados Peruanos sources 218 products, representing approximately

$1.5 million in annual sales, from local businesses. One of them, Processedora de Alimentos Velasquez,

originally only served a few small grocery shops, whereas now, thanks to the help received to upgrade

its capabilities, supplies three Supermercados stores, generating $40000 in annual sales against the

$6000 of 2010.

Conclusion. Intercorp’s success in boosting the middle class depended, as we have seen, on the

thoughtful design of many artifacts: a leading-edge bank, an innovative school system and business

adapted for frontier towns across Peru. But equally important has been the design of the introduction

of these new artifacts into the status quo. Rodriguez-Pastor carefully mapped out the necessary steps to

engage all the relevant parties in their adoption and in conjunction with well-designed artifacts, these

carefully designed interventions have made the social transformation of Peru a real possibility rather

than an idealistic aspiration.

2) The development of a design-focused culture inside Samsung Electronics. South Korea’s Samsung Electronics was the perfect, traditional manufacturing organization where en-

gineers developed and built products to meet precise price and performance requirements and the de-

signer’s role was just to refine the product to make it look nice. Given the fact that the company mainly

emphasized efficiency and engineering rigor, together with speed, scale and reliability, designers had

little status or influence in the processes and approaches.

The turning point was when, in 1996, the chairman of Samsung Group, Lee Kun-Hee, frustrated by

the company’s lack of innovation, realized that if Samsung planned to become a top brand, it absolute-

ly needed to develop specific expertise in design. Therefore he set out to create a design-focused culture

which would actually foster world-class innovation. This task consisted, as we are getting used to, of

many different stages. The initial step of the innovation process began with an in-depth research conducted by multidiscipli-

nary teams, each made up of engineers, designers, marketers, ethnographers, musicians and writers

with the task to discover which were the users’ unmet needs and wants, while also identifying cultural,

technological, and economic trends. After having accumulated relevant informations and having them analyzed in detail, the company suc-

ceed in developing an impressive set of innovative products, such as renewed television styles and de-

sign and the brand new category of smartphones: the Galaxy Note, which involves many functionalities

!25

of both smartphones and tablets.

However, the shift from efficiency-focused practices to an innovation-focused culture without losing an

engineering edge is not a simple matter at all and despite the strong support from the top management,

still designers face constant challenges. The major hurdles consisted in managing a number of tensions, given that usually a design approach

can be quite inconsistent with others. Solving these involved bringing suppliers on board, while per-

suading efficiency-focused managers to buy in to idealized visions of the future, leaving the safe, shiny

bubble of the status quo.The success of the company in making the shift, however, can be identified with a single early decision:

to build design competency in-house rather than import it. Indeed Samsung managed to create an ex-

tremely committed team of designers who had the assignment to find a way to arrange constructively

the tensions which impeded the company to change its culture, adopting the same set of tools they ac-

tually employed while pursuing innovation— empathy, visualization and experimentation in the mar-

ketplace. This team helped to spread the design thinking discipline in many different corporate func-

tions, which in turn facilitated the formulation of a framework for reevaluating products and therefore

allowing the company to adapt to an environment characterized by a dramatic technological change. Developing in-house design expertise allowed designers teams to broaden their perspectives by

strengthening the adoption of a holistic view, increasing their capacity for strategic thinking and tenaci-

ty which enabled them to overcome resistance over the long term.

However it is true that the process of innovation in long and tortuous, even in a company that em-

braces design principles, the reality is that, to ensure that their inventions and creations are developed

as they were originally conceived, designers must take many steps, and in order to do that there is the

need to empathize constantly with different decision makers throughout the process.

A beautiful example of how to overcome resistances from engineers could be when Samsung Mobile’s

creative director wanted to develop a mobile phone without the antenna. Of course convincing the

skeptical engineers to develop such a device was not an easy task, and the creative director understood

that, in order to bring them on board, he needed to consider carefully the issue also from their point of

view. In this way he came up with a new hinge design that created an internal space for a larger and

actually more effective antenna.

Of course tensions could also arise when the traditional managerial mindset, focused to draw on the

past and present to project the future, clashed against the designer’s one, trained to break from the past.

Again if designers aim to convince decision makers to take a chance of their visions, they really need to

take in consideration the others’ point of view, and visualization reveals itself to be quite the powerful

tool in this case. The ideation of the Galaxy Note smartphone is the perfect example to discuss the point. After Sam-

sung Electronics introduced its Galaxy S smartphone and Galaxy Tab tablet, members of the design

!26

team spotted an unmet need in the market: many knowledge workers in Korea and Japan had the habit

to take notes in wallet-size pocket diaries, which neither the four-inch smartphone nor the nine-inch

tablet were able to really substitute. The team realized that a completely new platform was needed,

therefore they developed the concept of a smart diary that featured a pen interface and a medium-size

screen.

Soon a debate about the screen size arose, given that marketers were strongly convinced that no smart-

phone should really be larger than five inch. It was clear that the new size would first of all require

people’s belief about smartphone to undergo a fundamental shift. Thus the designer team prepared a

mock-up of the product demonstrating what eventually became the widely imitated “smart cover”, an

interface that connects the user-experience software to display an interactive screen when the cover is

closed, refraining completely the entire discussion in a rather unexpected new direction.

The mock-up succeeded in making the various parties realize that its shape was really closer to a pocket

diary’s and, when it was thought in that way, the new phone did not looked that big. This shift in per-

ception allowed Samsung to create the “phablet” category, which led the highly successful Galaxy Note

series, while the smart-cover concept was expended to other products as well.

It is rather clear that empathy and visualization are very useful tools to generate internal support for

radical change, but if they are also integrated with rational market experimentalism, it is reasonable to

assume that results are going to get even better. It is not casual the fact that around 2003 onwards,

Samsung’s designers started experimenting new products and ideas directly in the marketplace while

using the market data to build early support. This was the case when designers planned to improve

many Samsung TVs’ aesthetics, as soon as they realized that in most homes, televisions spent more

hours switched off, in other words, much of the time they were really pieces of furniture. Therefore

they intended to smooth the TVs design by hiding the speakers below the screen. This idea was not

really considered brilliant, and encounter stiff resistance by both engineers and managers, worried be-

cause of the eventual loss in audio quality. However, the group, in order to build consensus, urged the

company to experiment the idea (in small scale) in the European market. It turned out that the model

introduced was a big hit, and this idea was eventually supported by both engineers and managers.

Samsung also learned to use marketplace experimentalism to support forward looking design research:

the introduction innovative products (e.g. TV-monitors) stimulated the market and contributed to high-

light new trends which would be swiftly spotted and addressed with another fine-tuned product design.

Conclusion. The huge market success these redesigned products had allowed the company to proper-

ly assess the value of advanced, in-house built design and this resulted in many substantial investments

in deep-future thinking (a concrete example of this is the distinction of four different time horizons for

design). The importance of design in now felt everywhere inside the organization’s many divisions.

!27

Nevertheless, Samsung still faces enormous challenges going forward. It’s approach to design is still

based on hardware mainly, and most of the hardware is based on software. As the digital technology

changes the business landscape the company will have to radically redesign its internal processes. De-

signers are already experimenting with nimble development for software-based user-interface designs

that require frequent, rapid iterations, dramatically reducing the design cycles.

Moreover as technological landscape continues to shift, most of the organization’s executives that seek

advantage through design thinking will need to constantly review their design processes, cultures, deci-

sion-making, communications and strategies.

3) PepsiCo’s CEO turning Design Thinking into strategy.

Just a few years ago many investors were skeptical regarding the future of the company, as most of

them saw Pepsi as a bloated giant whose principal brands were rapidly losing market share. Later on,

however, the company’s performance stabilized, and thereon it experienced a steady growth. This al-

lowed the CEO, Indra Nooyi, to focus more on driving innovation inside her company through design

thinking approaches. In 2012 she made an important move in this direction, bringing on board Mauro

Porcini as Pepsi’s first ever chief design officer, who is one of the main responsible of the adoption of

design thinking in nearly every important decision that the company makes. It is the CEO, however, that fiercely supports on the first hand the adoption of such design methodolo-

gies in order to let design’s attitude penetrate deeply the organizational culture. To her it is critical to

keep an eye on how the customers actually perceive the company’s image, how do they react to the

products proposed to them, again what they really need and want. As the shelves in the supermarkets

get more and more cluttered, it is essential for the company to rethink the innovation process and de-

sign tailored experiences for the final customers. Clearly adopting such a mindset requires many careful

steps, which slowly will succeed in guiding the entire company along the path towards innovation and

flexibility. The steps she planned to actually drive that sort of change inside the company are rather curious and

are definitely worth a more detailed explanation. First of all she required that all her reports to provide pictures (which they took themselves) of anything

that they thought represented a good design inside the company. After six weeks, these pics were to be

returned and discussed together, but only a small number of people actually undertook the task, as

many of them did not really know what “design” was. In this unconventional way Nooyi realized that

people were still convinced that design was only to be applied to physical objects, how the company’s

products appeared in the eyes of the customer. For example, some were convinced that probably the

packaging could be changed into something different. But she knew that was not the solution to the

!28

problem, as changing the color palette of the can aimed just to embellish the product appearances,

leaving the underlying experience and design unaltered. It was clear that the company needed to rede-

fine how design was perceived inside its boundaries, this resulted in the decision to bring a designer in-

side the firm. It turned out that Mauro Porcini was possibly the right person for the job, as he succeed

in solving similar issues in other, big corporations. As soon as he got to work, teams were created, whose

task were to push design through the entire system, from product creation, to packaging and labeling,

to how a product looked on the shelf, to how customers interacted with it.

Initially it was really important to define what a good design was for the company to guarantee a clear

and shared perspective. Thus a new definition of a well designed product was adopted: a product that a

person falls in love with, or simply hates. A product that provokes a reaction, one a person wants to en-

gage with in the future. However, this was not limited to the product appearances (e.g. the packaging).

The company needed to rethink the entire experience it wanted its customers to live, from product

conception to the post-product experience.

Pepsi Spire is just one of many results of this new arrangement. It is a touchscreen fountain machine

which purposefully enrich the consumer-machine interaction. Instead to provide just buttons and com-

binations of favors, it invites the consumer to interact with it, it tracks what people buy so that, in the

future, when they swipe their IDs, the machine reminds them the flavor combinations already tried,

while suggesting new ones. Also it displays beautiful, high definition shots of the product, so when dif-

ferent ingredients are selected the consumer can observe the flavor being added, thus experiencing the

infusion of the flavor rather than merely hit a button and wait for the finished product.Of course design culture and innovation did not only involve paying more attention to user experience,

along the way the organizational strategy, structure, processes and activity chains underwent re-

arrangement. In the past, the company relied on a high degree of decentralization, which in a stable,

growing industry was its strength. This however did not work that well when things became volatile

globally, as uncertainty and instability increased, coordination and flexibility became top priorities and

a new balance had to be found. The change Pepsi undertook was actually rather explosive, as the CEO

gave its employees and managers from 24 to 36 months to positively adapt to it, whereas those who did

not intend to change at all were kindly asked to free their positions. Moreover, as design thinking is usu-

ally associated with rapid product prototyping, testing and launching, the company also experimented

this new business model in different applications. One example of these is when Pepsi launched early

the new cucumber-flavored version of its beverage in Japan, which is going to be tested for about three

months and either it works or the company will pull it out and pass to the next product.

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Conclusion. Once again design thinking proved to be a critical tool to stimulate cultural change in-

side large organizations. In the PepsiCo's case, the CEO, Indra Nooyi, was able to translate it into strat-

egy thanks also to the decisive intervention of the designer Mauro Porcini. The idea was to redefine the

internal concept of design, in order to focus the attention on the user experience while introducing a

fresh wave of innovation inside the firm boundaries. As Nooyi noticed, “there is a fine line between

innovation and design. Ideally, design leads to innovation and innovation demands design”. This sort

of relationship must be kept in mind when large business companies plan to undertake big organiza-

tional change, since carefully formulated designs are increasingly becoming essential for the effective

introduction of innovation in their systems and for the development of a competitive edge which is

rather difficult for competitors to imitate. PepsiCo is only getting started though, organizational change

is a slow process and innovation accounted for 9% of the company’s last year revenues. Indra Nooyi is

planning to raise that percentage, noticing that the marketplace is rapidly getting more creative. To

reach this goal, however, the company must be willing to tolerate more failure and shorter cycles of

adaptation.

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- Epilogue.

In this study, first of all, we made clear what design is and why it is such an abused and confused term.

Its definition gave us the opportunity to distinguish the classical concept from the new-born discipline

of Design Thinking. Sometimes different actors in many context mistakenly use the two notions as syn-

onymous. However, the differences between the two are profound, even if design still remains, in a way,

the essential prerequisite for the implementation of Design Thinking’s approaches and methodologies.

Next we discussed what this new discipline is all about, providing a generally accepted definition and

progressively narrowing our focus towards the organizational context. We have seen that this new atti-

tude requires specific personality traits owned by employees of any organization and discovered that, in

order to be correctly developed, there must be a proper climate of openness and flexibility. By increas-

ingly applying Design Thinking to different organizational value-creating activities, we noticed that

business firms gradually recognized its full potential as a strong source of differentiation providing the

basis for a solid competitive edge. Then we analyzed the evolution pattern of design inside the business

organization, explaining the passage from the design of material object to the design of processes. In

this context we also provided a solution to the problem of organizational change, a shift caused both by

the growth of the organization and its tentatives to keep a close fit with its industry environment. In the

end we have discussed the steps towards a formulation of a design-centric organizational culture to-

gether with the challenge they imply.

From this perspective, Design Thinking seems to be a must-have set of tools that provides unexpected

and refined solutions to many problems any business organization, even any individual, might stumble

upon. I am strongly convinced of its power and effectiveness, but I am even more certain of the abso-

lute necessity of understanding its limits.

To me, there are four basic, but vital questions companies (and individuals) need to answer and con-

stantly be aware of, even before considering Design Thinking at all. The questions are the following:

1) Who are we? The classic concept “know yourself ” is used and abused, but in this context in partic-

ular if an organization does not have a precise and concrete picture of itself and its boundaries, to-

gether with its internal and external environments, it will not be able to select the tools that it really

needs to create value.

2) What do we do? Again a question that seems rather simple, but if one really starts reflecting upon

it, he or she will definitely find it difficult to come up with one single, precise answer. As organizations

manage an enormous number of activities and tasks, it is important to have fixed in mind what the

business company is really meant to do as a whole.

3) How do we do it? Design Thinking is flexible and quite adaptable to multiple arrangements, but to

adopt it and to exploit its full potentiality, a company has to know crystal-clear how its various value-

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creating activities are actually carried out, to be able then to point out precisely those stages which

could be improved. 4) How competitors do it? This is one is even more academic than the previous questions, however it

never hurts to refresh such a notion. Benchmarking is a key tool if used wisely, as competitors might

provide useful insights and know-how hints about a specific industry.

Once an organization finds a concise answer to the questions above, it will be able to assess whether the

adoption of Design Thinking, with its peculiar approaches and methodologies, is actually going to gen-

erate any value. Then the final steps the company needs to carefully manage would be first to identify

those potential activities which are likely to improve by employing innovative approaches and second

how to actually put them in action.

To conclude, as we have seen in our case studies, Design Thinking shows many interesting results both

in terms of productivity and efficiency, but it has also rather important implications on the way behav-

iors change inside the organizational boundaries. Of course I will not deal with this subject in this

study, as it would increase dramatically the weight and the complexity of this quite general analysis. I

would rather leave it to a possible future work, focusing in particular on a specific problematic very sig-

nificant to me: how design thinking might be exploited to effectively decentralize power and responsi-

bility to foster the formulation of a critical mindset in the workforce at every organizational level to

eradicate the exploding “living for the week-end” dangerous trend.

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- Bibliography.

Harvard Business Review, “Design Thinking” by Tim Brown, 2008.

Harvard Business Review, “Design for Action” by Tim Brown and Roger Martin, “Design Thinking Comes of Age” by

Jon Kolko, 2015.

Harvard Business Review “How Samsung Became a Design Powerhouse” by Youngjin Yoo and Kyungmook Kim, “How

Indra Nooyi Turned Design Thinking into Strategy” interview by Adi Ignatius, 2015.

“The Sciences of the Artificial” by Herbert A. Simon, Third Edition, 1996.

“Wicked Problems in Design Thinking” by Richard Buchanan, 1992.

“Design Thinking for Non-Design Communities” by Robyn Ann Richardson, 2013.

“What Designers Know” by Bryan Lawson, Architectural Press, 2004.

“Foundations of Strategy” by Robert M. Grant and Judith Jordan, Second Edition, 2015.

“Organizational Theory, Design and Change” by Gareth R. Jones, Seventh Edition, 2013.

“Management Accounting, For Business” by Colin Drury, Fifth Edition, 2015.

“Organizational Structure Defined” from investopedia.com.

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