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Book review: The Design of Business

The Design of Business: Why Design Thinking is The Next Competitive Advantage

By Roger Martin

Harvard Business Press

$26.95

In the beginning, there’s a mystery. A big question begging to be answered. A wicked problem in need of a solution. An opportunity waiting to be seized.

And then along comes an entrepreneur. The entrepreneur cuts through the complexity, clear cuts the field of possibilities and dreams up an innovative solution. Through inspiration and perspiration, a start-up is born.

Over time and through trial and error, the start-up refines and tweaks a winning formula and settles on a recipe for guaranteed success. The start-up grows.

The start-up becomes a company that’s entirely focused on repeating that winning formula over and over again on a bigger and bigger scale. Business is booming and life is good.

But somewhere out there is another entrepreneur who’s looking at the same mystery and dreaming up a different solution. A different solution with the potential to steal customers, grab market share and give the established company a serious run for its money.

And this is why you and I want to work for design-thinking organizations.  According to author and Rotman School of Management dean Roger Martin, design thinking is about balancing exploration and exploitation and continually reinventing our companies through constant innovation. It’s all about focusing on both ends of what Martin calls the knowledge funnel.

At the top of the funnel is the exploration of a mystery. This is where hunches and intuition lead to breakthrough ideas.

In the middle of the knowledge funnel is a heuristic, or a general rule of thumb that helps wrestle the mystery down to a manageable size.  You choose a path.

At the bottom of the knowledge funnel is an algorithm. This is where the general rule of thumb gets converted into a fixed formula that delivers guaranteed results.

“Very few companies balance exploration and exploitation by continuously looking back up the knowledge funnel to the next salient mystery (or back to the original mystery) and driving across the knowledge funnel, in a steadily cycling process,” says Martin, who argues that focusing on both innovation and efficiency is the winning combination that delivers the most powerful competitive advantage.

Staying at the top of the funnel and exploring mysteries without ever coming up with a money-making algorithm is the reason why nine of out 10 entrepreneurial start-ups crash and burn within the first two years.

And staying at the bottom of the funnel and sticking with the status quo is why established companies lose their innovative spark and get themselves in serious trouble.

Exhibit A is McDonalds. Back in the 1950s, Ray Kroc was selling milkshake mixers in California. His biggest account was with a pair of brothers who ran a small chain of drive-in restaurants. The brothers had come up with a way to serve cheap food fast to a growing middle class of suburban families who loved their cars and the open road.

Business was good. Kroc thought it could be even better. So he bought the chain from the McDonald brothers. Kroc perfected the formula and left nothing to chance. He spelled out exactly how to run every part of the business and grew McDonald’s into a global empire.

“When Kroc converted the heuristic into a precise algorithm, he was able to scale the chain to a size previously unimaginable,” says Martin. “By solving the mystery before its competitors, McDonald’s created an efficiency advantage. By honing and refining the heuristic, it extended the efficiency advantage. By converting that heuristic to algorithm, Kroc drove the efficiency advantage still further ahead of its competitors, creating an enterprise worth billions of dollars – all from one new-style burger joint.”

But then in the 1990s, McDonald’s ran into trouble.  “It had lost touch with its consumers and what they wanted in the way of fast food,” says Martin. “Its original solution to that mystery had grown stale with time.  Many other chains, from Taco Bell to Subway, explored the mystery of what those consumers wanted, and their solutions drove McDonald’s into a tailspin.

“Early on, McDonald’s left health issues by the wayside. Subway made healthy eating the centrepiece of its value proposition. McDonald’s has subsequently made halting progress toward a healthier menu but its struggles point to the difficulty that companies have in doubling back along the knowledge funnel.”

Martin shows how design thinking can keep your organization constantly moving along the knowledge funnel and balancing analytical mastery with intuitive originality. “Design-thinking firms stand apart in their willingness to engage in the task of continuously redesigning their business. Firms that master it will gain a nearly inexhaustible, long-term business advantage.”

Book review: Rework

(If you don't already use it for project management, check out Basecamp. It'll make your life at work so much easier.)

Rework

By Jason Fried and David Heinemeier Hansson

Random House

$26.95

Gary Vaynerchuk runs a wine shop in New Jersey. Gary’s also the star of Wine Library TV.  Every day, upwards of 80,000 “Vayniacs” log on to watch Gary’s video blog. As of earlier this month, Gary had posted just shy of 830 low budget and high energy dispatches from the world of wine.

Wine Library TV aims to reinvent wine tasting for a new generation, breaking down the barriers, stereotypes and misperceptions that prevent people from discovering and exploring the joys of wine. Gary gives the uninitiated masses an unintimidating alternative to conceited sommeliers, snobby wine sellers and mystical conventions. And all from the comfort of their laptops and iPhones.

And when all those people are done watching the latest video, they can buy Gary’s book, join his monthly wine club and order some vino from his Jersey store.

Instead of chasing customers and trying to buy their divided attention with advertising, Gary’s built an audience far beyond the Garden State.  Instead of trying to outspend, outsell and out-sponsor the competition, Gary’s opted to out-teach them.

That’s a very smart move and it’s one the rest of us could replicate, whether we’re running a start-up, a non-profit or one of Hamilton’s anchor institutions. 

 “Teaching probably isn’t something your competitors are even thinking about,” say authors Jason Fried and David Heinemeier Hansson, who are founders of software company 37signals. They’re also contributors to the company’s Signal vs. Noise blog that draws 100,000 viewers every day.

“Most businesses focus on selling or servicing, but teaching never occurs to them,” say the authors. “Teach and you’ll form a bond you just don’t get from traditional marketing tactics. Buying people’s attention with a magazine or online banner ad is one thing. Earning their loyalty by teaching them forms a whole different connection. They’ll trust you more. They’ll respect you more.  Even if they don’t use your product, they can still be your fans.”

When folks like what you have to say, odds are good they’ll also like what you have to sell.  And they’ll buy.

To figure out what to teach, think like those celebrity chefs with hit shows on the Food Network. These culinary rock stars readily share everything they know. They put their recipes in best-selling cookbooks and show off their techniques on cooking shows.

And chefs like Gordon Ramsay aren’t exactly losing sleep, worried sick that you’re going to buy their cookbooks, watch their shows, open restaurant across the street and drive them out of business. That’s because Gordon and his fellow chefs know that recipes and techniques aren’t enough to beat them at their own game. 

“Yet this is what many in the business world think will happen if their competitors learn how they do things,” say the authors. “Get over it. What are your recipes? What’s your cookbook? What can you tell the world about how you operate that’s informative, educational, and promotional?”

Here’s another idea. Give folks a backstage pass to your business. Show them how stuff gets made and how and why you make decisions. Share some secrets. There’s a reason why so many of us watch Dirty Jobs with Mike Rowe. 

“When you build an audience, you don’t have to buy people’s attention – they give it to you. This is a huge advantage. Speak, write, blog, tweet, make videos – whatever. Share information that’s valuable and you’ll slowly but surely build a loyal audience. Then when you need to get the word out, the right people will already be listening.”

There’s a whole lot more jargon free and common sense advice in this cookbook for business. It’s so good I checked out the authors’ company and wound up buying their Basecamp program management software, which goes to show that building an audience is the smart way to win a customer and a raving fan.

Book review: Switch (how to make change happen)

Switch: How to Change Things When Change is Hard

By Chip Heath and Dan Heath

Random House

$32

Could all the agents of change please raise your right hand and repeat after me.

We, the agents of change, do solemnly swear to never again speak of burning platforms.

Whenever there’s talk of change, there’s always someone who suggests finding or creating a burning platform.  I’ve made the suggestion more than once and in the not so distant past.

The thinking goes that a burning platform forces everyone to take notice, take action and embrace the change. The sky is falling, the end is near and change is not optional or up for discussion.

But let’s take a moment and reflect on where this business cliché originated. Back in 1988 on an oil platform out in the North Sea, a gas leak set off an explosion that ripped the rig in two. Survivors of the blast had two choices and both were bad. Plunge 46 metres into a fiery sea and risk drowning or take your chances and probably burn to death on a disintegrating rig.

After being rescued by NATO and the Royal Air Force, a superintendent on the platform told a reporter “it was fry or jump, so I jumped.”

So when agents of change call for a burning platform, they want to scare their coworkers into jumping or frying. Does it actually work?

“To create a burning platform is to paint such a gloomy picture of the current state of things that employees can’t help but jump into the fiery sea,” say authors Chip and Dan Heath. “In short, the ‘burning platform’ is a great, uplifting tale for your people. Team, let’s choose a dangerous plunge into the ocean over getting burned to death! Now get back to work!”

If you need quick, decisive and specific course corrections then whipping up negative emotions like fear and panic might help, say the Heath brothers. But if you need creativity, flexibility and ingenuity to drive a sustainable change that sticks, burning platforms do more harm than good.

“Most of the big problems we encounter in organiations or society are ambiguous and evolving,” say the Heaths. “They don’t look like burning platform situations where we need people to buckle down and execute a hard but well-understood game plan. To solver bigger, more ambigiuous problems, we need to encourage open minds, creativity and hope.”

You’ll get that by evoking positive emotions that broaden and build interest in changing. We get interested. We start investigating. We get involved and we buy in.

According to the Heaths, we’re literally of two minds when it comes to change. There’s our instinctive emotional side and our deliberating and analyzing rational side.

The Heaths borrow from University of Virginia psychologist Jonathan Haidt who says the emotional side is the Elephant and the rational side is the Rider. When the Elephant and Rider disagree on which way to go, the Elephant wins every time even though it’s the Rider in the saddle.

“When change efforts fail, it’s usually the Elephant’s fault, since the kinds of change we want typically involve short-term sacrifices for long-term payoffs,” explain the Heaths. “Changes often fail because the Rider simply can’t keep the Elephant on the road long enough to reach the destination.”

But let’s not be too hard on our inner Elephant, which has enormous strength if you can harness it. Emotion – love and compassion, sympathy and loyalty — is the Elephant’s turf. And it’s that emotion-fuelled energy and drive that gets things done while our inner Rider drifts off into overanalyzing, overthinking and navel gazing.

So good luck with your change initiative if you’re stuck with a reluctant Elephant and a wheel-spinning Rider. The trick is to get both moving together by giving crystal clear directions to the Rider, motivating the Elephant and shaping the path to success.

Like their earlier bestseller Made to Stick, this is a great read and you’ll learn about the power of bright spots (clone what’s working rather than fixate on what’s not), how to script critical moves instead of burying us with abstract big picture talk, shrink the change and at the same time grow your people, and change situations to change people’s behaviour.  Blame the situation and not the people if your change initiative has gone off the rails.

And anyone who says burning platform with a straight face is hereby ordered to spend a weekend with The Switch.