Eric Nehrlich, Unrepentant Generalist » Blog Archive » The Design of Business, by Roger Martin

The Design of Business, by Roger Martin

Posted: January 19, 2010 at 8:25 pm in design, management, nonfiction

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I’m not sure where I heard about this book, but the subtitle, “Why Design Thinking is the Next Competitive Advantage”, pretty much sold me on at least checking it out, since I’m interested in both design and management. So I got it from the library and read it.

Martin frames business as operating in a “knowledge funnel”, which starts with a mystery, gets refined to a heuristic, and is instituted into an algorithm. He uses McDonald’s as an example of the knowledge funnel.

  • A mystery is a new niche or new problem that is not handled by existing solutions. People wander around in the mystery trying things to see if they can figure out something that might work. In the case of McDonald’s, the McDonald brothers were trying to figure out how a restaurant should work in a mobile car culture.

  • Once a partial solution has been found, it becomes a heuristic or rule-of-thumb. The heuristic is a frame that provides a useful way of thinking about the mystery that makes its solution tractable. It doesn’t guarantee results, but generates working solutions more often than not. The McDonald’s brothers created the idea of fast food as we know it, with reduced menu options, standardized cooking, and the drive-thru instead of the drive-in. But it was still dependent on the implementation at each new restaurant.
  • Once a heuristic has shown the way, the drive for efficiency begins, where the uncertainties of the heuristic are mapped out such that every element can be institutionalized as an algorithm. Once an algorithm exists, it can be standardized such that anybody can run it, or even automated by a computer. Ray Kroc bought the McDonald’s chain and compiled explicit instructions for every aspect of running a franchise, from how long to cook hamburgers, how often to clean the bathrooms, and even how to choose a new location.

The knowledge funnel is a nice little metaphor, but it is not a particularly new way of looking at things. Or maybe that’s just my overactive relational mind making connections everywhere, as I think that the knowledge funnel could be seen as another form of Latour’s Collective process or Moore’s Chasm.

Martin did articulate well how a company is often started around finding a heuristic to solve a mystery, and then spends the rest of its existence refining that heuristic into ever more efficient algorithms. But if the company isn’t careful, another company will find a new mystery that disrupts the original company’s business model (aka the innovator’s dilemma).

One of the reasons that companies get trapped into refining efficiency is that tackling mysteries is scary. Once a company is into the refining heuristic stage, decisions can be made analytically. Refinements can be tested to see if they are more efficient and reliable, so that cold, hard data removes the subjectivity of the heuristic.

Tackling new mysteries requires a leap away from the safety of data and reliability. Martin suggests that “validity” is a better way to think about such problems than reliability – a valid solution that works some of the time is more valuable than a less valid solution that works every time.

The rest of the book describes several case studies of companies that have successfully made the leap to “design thinking”, where attacking the next mystery is valued as much as refining the existing solution. His examples included:

  • P&G, which realized that it was better at the heuristic and algorithm phases of the knowledge funnel, so it set the goal of sourcing “half its product innovation from outside the company” to take advantage of its development engine.

  • RIM, the makers of Blackberry – I liked the description that the founders “realized RIM’s strengths lay in designing, building and marketing communications devices for busy people” which is a good mission statement since it is completely technology-independent
  • Herman Miller, the makers of the Aeron chair – where the CEO emphasized the independence of design to the point where he said “You never ask the sales force what they think of a design. Their job is to sell it.”

One suggestion I liked for companies to avoid ossifying around an existing algorithm was for companies to use a project oriented structure:

“In companies organized around ongoing, permanent tasks, roles are rigidly defined, with clear responsibilities and economic incentives linked tightly to those individual responsibilities. This structure discourages all but senior staff from seeing the big picture… to move along the knowledge funnel is by definition a project; it is a finite effort to move something from mystery to heuristic or from heuristic to algorithm. And such projects demand a business organized accordingly, with ad hoc teams and clearly delimited goals.

In other words, when your entire job is defined around a function, you will not welcome others who are trying to disrupt the status quo, even if that’s the right thing for the company. But if everybody works in a project-oriented mode as they do at design firms like Ideo, they will work towards finishing the current project, and moving onto the next.

Overall, this was a quick read with a few good anecdotes and a useful metaphor, but it’s not a book that I see myself buying for my permanent collection.

P.S. Using the cheat code of doing a book review for a blog post, since they don’t require as much thought. We’ll see how long I can keep this up.

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