The Design of Business Flashcards
(16 cards)
2 models for value creation:
- _______ - rigorous, repeated analytical processes, maintain status quo. Judgment, bias, variation are the enemies.
- ________ - know without reasoning, originality, invention
►This book reconciles (balance) the 2 models of thought because both are necessary but not sufficient for optimal performance.
►Roger Martin calls the combination of the two __________.
- Analytical Thinking : deductive & inductive logic
- Intuitive Thinking
- Design Thinking: abductive logic
What are the 3 stages of the Knowledge Funnel?
- Mystery - questions, intuitions, why…
- Heuristics - bring intuitions to language. Prompts to think or act in a particular way, e.g., look in the rearview mirror before passing. No guarantee that using heuristics produces a certain result. They don’t guarantee success.
- Algorithm - explicit, step-by-step procedure for solving a problem. Certified production processes. Guarantee to produce a particular result. Simplify, structuralize, and codify heuristics to the degree that anyone can deploy it with equal efficiency.
McDonald brothers and Ray Kroc
McDonald brothers - heuristics - they discovered a way to create value from their understanding of the new culture which was eating on the go and restaurant quick-service.
Ray Kroc - algorithm - He converted McDonald brothers’ heuristics to algorithm.
- Companies should balance __________ (invention of business) and _________ (administration of business).
- But many companies fall into the trap of choosing either exploration or exploitation, rather than balancing both. They encourage _____thinking. They don’t like _______ thinking.
- They only do exploitation of ________knowledge.
- Characteristics of exploration and exploitation. (pp. 20).
- exploration; exploitation
- analytical thinking; intuitive thinking.
- existing
- Characteristics of exploration and exploitation. (pp. 20).
Proof comes only if the heuristic is tried and found to be helpful in producing the desired, or valid, result. The same holds for turning the heuristic into an algorithm. Neither of these steps into new knowledge can be proved in advance; all are validated – or not – through the passage of time.
Roger Martin promotes abductive reasoning. Not deductive nor inductive reasoning.
Most companies prefer reliability over validity. Most of them are reliability-biased. The business world is dominated by reliability.
CEOs must learn to think of themselves as the organization’s balancing force – the promoter of both exploitation and exploration, of both administration and invention, of both analytical thinking and intuitive thinking (abductive reasoning).
To become a design thinker, you must develop the stance, tools, and experiences that facilitate design thinking.
- Stance 立场 is your view of the world and your role in it.
- Tools are the models that you use to understand your world and organize your thinking.
- Experiences help to build and develop your skills and sensitivities over time.
The design thinker, in the words of novelist, is a “first-class noticer.”
- Rather than being cowed by a reliability-oriented world and becoming a prisoner of it, the design thinker develops a stance (view) that puts a priority on seeking validity and making advances in knowledge.
- Design thinkers develop tools for honing & refining the status quo as well as tools for moving knowledge forward to the next stage.
- The goal of reliability is to produce consistent, predictable outcomes.
- The goal of validity, on the other hand, is to produce outcomes that meet a desired objective. A valid system produces a result that is shown, through the passage of time, to be correct.
- Reliability turns out to be the main limiter of success. Validity, which at first seems to be the enemy of reliability, creates a winning advantage.
- A business that is overweighted toward reliability fails to balance its pursuit of reliability with the equally important pursuit of validity, leaving it ill-positioned to solve mysteries and move knowledge along the funnel.
- The business that fails to balance reliability and validity will find itself flat-footed when rivals advance knowledge through the funnel.
- Why do so many businesses tilt toward reliability?
The short answer is that the modes of reasoning that produce reliable outcomes are familiar to business people from long exposure and experience.
The mode reasoning that produces valid outcomes is unfamiliar that it is often seen as no reasoning at all.
- In most large business organizations, 3 forces converge to enshrine reliability and marginalize validity:
- the demand that an idea be proved before it is implemented
- an aversion to bias (the attempt to eliminate bias)
- the constraints of time (the pressure of time)
►The demand for proof is the most powerful of those forces
- The reliability seeker uses anlaytical thinking draw on past experience to predict the future. Thus, it is no accident that the future predicted through analytical methods closely resembles the past, differing in degree but not in kind.
- The validity seeker, unlike the reliability seeker, treats past predictive successes as hypotheses to be carefully tested before using them to generate predictions that are expected to be valid.
- Making Room for Validity:
Both reliability and validity are important for an organization. Without V an organization has little chance of moving knowledge across the funnel.
Without R, an organization will struggle to exploit the rewards of its advances.
The optimal approach to V and R is not to choose but to seek a balance of both. (See figure 2-1, pp. 54)
- The precise method for balancing V and R will vary from situation to situation and from organization to organization.
Design isn’t just about making things beautiful; it’s also about making things work beautifully. Design is about moving knowledge along the funnel. At RIM (Research in Motion), desgin is about desin thinking.
RIM took its first big mystery - how to provide wireless email to corporate users - and drove it to a heuristic - the first primitive BlackBerry. RIM then drove that heuristic to an algorithm, serving corporate customers around the world. It achieved massive sacle and efficiency as it drove through the knowledge funnel. But it didn’t stop there.
- Tim Brown of IDEO defined design thinking as:
A discipline that uses sensibility and methods to match people’s needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity.
- Some abductive thinkers fail to heed Brown’s requirement that the design must be matched to what is technologically feasible, launching products that do not yet have supporting technology.
- Other abductive thinkers fail to address Brown’s second requirement: that the innovation must make business sense.
- The design-thinking organization applies the designer’s most crucial tool to the problems of business. That tool is abductive reasoning.
- Deductive logic is the logic of what must be. Reasons from the general to the specific.
- Inductive logic is the logic of what is operative. Reasons from the specific to the general.
- A reasoning toolbox that holds only deduction and induction incomplete.
- Peirce concluded that the true first step of reasoning was not observation but wondering. Peirce named his form of reasoning “abductive logic.”
- So the prescription is not to embrace abduction to the exclusion of deduction and induction, nor is it to bet the farm on loose abductive inferences. Rather, it is to strive for balance.
- Embracing abduction as the coequal of deduction and induction is in the interest of every corporation that wants to prosper from design thinking, and every person who wants to be a design thinker.
Thinking abductively to drive into a mystery is part of the culture at RIM. Rather than mystery, Lazaridis prefers the term “paradox.” In order to advance knowledge, the design thinker has to get comfortable delving into the mystery, trying to see new things or to see things in a new way.
- What makes RIM exceptional is that its leaders make a conscious and overt effort to rebalance the organization against the natural tilt toward reliability, actively pushing knowledge down the funnel.
- RIM’s success demonstrates how validity need not undermine reliability. By embracing both design thinking and abductive thinking, RIM amplifies and extends the strength of reliability, creating a competitive advantage greater and more lasting than validity or reliability alone.
- RIM’s basis of advantage is its speed of movement through the knowledge funnel, which produces perpetual advantage in both cost and innovation.
The cost dynamics of activities as a firm moves through the knowledge funnel from mystery to heuristic to algorithm: as knowledge moves through the funnel, costs fall.
- Delving into mysteries is the most expensive activity along the knowledge funnel, because you literally don’t know what you’re doing. When first encountering a mystery, design thinkers have to look at everything, because they don’t yet know what to leave out.
- The high cost explains why so much research into mysteries is conducted in universities, government-funded labs, and other not-for-profit entities. It doen’t conform to any particular schedule, budget cycle, or planning document.
- The analysis of cost dynamics seems to imply that the most profitable course of any company that solves a mystery is to drive it to a heuristic and then to an algorithm so tight it turns to code. Then it should give up on design thinking and run that code forever. But this approach is shortsighted. A company can choose to redeploy its design thinkers. By putting them to work on new mysteries, the company defends its current position and goes on the offensive, like RIM’s Lazaridis, who has continually reinvented both products and strategy by tackling new mysteries and revisiting heuristics and algorithms that grew out of answers to older mysteries.
- Algorithm is more efficient than a heuristic. Algorithms can be run by less experienced and less expensive personnel than can heuristics. Computer code is the digital end point of the algorithm stage. It is the most efficient expression of an algorithm.
Roadblocks to design thinking in an organization:
- The main roadblock is the corporate tendency to settle at the current stage in the knowledge funnel. Companies often let mysteries remain mysteries, declaring them unsolvable.
- Another costly impediment is the widespread corporate tendency to leave heuristics in the hands of highly paid executives or specialists with knowledge, turf, and paychecks to defend. If they were to advance the heuristic in their heads to the algorithm stage, the company could break the specialist’s information monopoly and hand the job to a less costly employee. To them, design thinking might well be seen as a threat to be beaten back.
- Another common corporate error is to settle at the algorithm stage without refining that algorithm to computer code (the end point of algorithm). Some algorithms sit unrecognized and unexploited becuase they’re run by people, not computers. But the impetus for that work is coming from the supply side, from outside software vendors who perceive what their clients do not: they’re using costly labor to run algorithms that could easily be pushed to code.
- Some companies cling to one stage of the knwoledge funnel, and they waste opportunities to become more efficient in delivering what they’re currently delivering (continued on the back).
Roadblocks to design thinking in an organization:
- The design thinking organization, incontrast, reaps the benefit of efficiency as it pushes activities through the knowledge funnel and frees up time and capital to tackle the next knowledge advancement challenge.
