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If you google “CEO strategy”, you’ll get about 128 million results. Seem like a lot? Google “CEO design”. You’ll get 259 million – over twice as many. Now, I can’t go back 10 years and do the same search, but we do know that design is a CEO agenda item right now. Some might thank Steve Jobs for that. His unrelenting focus on designing amazing experiences, products, and software interfaces not only seeded the smartphone revolution and the app economy, it also helped put $215BN on the Apple balance sheet.
The role of design in business extends beyond Apple. Take the Teehan + Lax UX Fund. In 2006, Teehan and Lax, founders of a design agency of the same name, had a hypothesis: Companies that focus on delivering great user experiences will see it reflected in their stock price. They decided to bet their money on the hypothesis, allocating a notional $50,000 in companies that met their design criteria. Things played out pretty well for the UX Fund over the last decade:
Teehan-Lax UX Fund
Design is also no longer the preserve of the consumer internet. Industrial giants like GE have made user experience design and design thinking central to their reinvention strategies. In 2012, GE partnered with frog to stand up a user experience design capability in San Ramon, CA. By making complex systems simpler to design and to use, GE’s UX Center of Excellence significantly decreased time to market while improving the experience of applications across healthcare, energy, and infrastructure.
Design has also played a pivotal role in IBM’s transformation, as evidenced by our global network of iX studios, and the thought leadership of IBM Design. Our IBM Design Thinking framework, with a focus on business outcomes, and the iconic Who, What, Wow of our Hills, helps us focus on capturing a moment of delight or removing friction from an experience. Combined, this has marked a shift from selling solutions to working with clients to envisage future states and business outcomes that IBM solutions can then deliver. This for me is Business by Design.
Experience is also at the heart of IBM’s approach to Digital ReinventionTM. A company can either define itself by the products or services it delivers or the customer experiences and business outcomes it delivers. If you’re going to successfully build a business by design, you need to be experience-led.
I like to trace the heritage around experience design back to Theodore Levitt and his seminal 1960 HBR article, “Marketing Myopia”. In it, he berates the film industry and the railway industry for having too narrow a view of their business. The film companies saw themselves as creators of films, rather than purveyors of entertainment. Railway operators thought in terms of trains, not transportation – and thus missed out on the profits of developing highways. Levitt argued that companies need to spend more time understanding what customers want or need and what their experiences are, instead of just producing goods and services.
Saul Berman often lays the same guilty verdict at the feet of the music and newspaper industries. The former saw themselves as record labels and not music providers – Steve Jobs took them to the cleaners. Facebook saw the opportunity to be a platform provider of information, including news. The newspaper industry was too locked into the factors of production (print presses) and distribution (newspaper delivery) to be able to move fast enough.
Whereas in classical economics we are told that ownership of the factors of production and distribution can be a barrier to entry, in the new economy they have become a barrier to action. So this is the double challenge / opportunity for building a business by design: first, help our clients see their value from the experience of the customer, and second, help them execute at the speed of a start-up with asset light models and agile methods.
KONE, the world’s largest manufacturers of elevators and escalators, is a good example of an IBM client that has philosophically moved from being an elevator, escalator and moving walkway company to a people flow company. They envisioned an opportunity to deliver new value to their clients and end customers by deploying IoT technology. In this video, Pierre Liautaud, Executive Vice President at KONE, discusses creating the next evolution of cognitive buildings in partnership with IBM.
Hindsight is 2020. The lessons we can learn about the role of design is that you are able to deliver value by understanding what a customer wants to do (not what they have to do). And in my mind, the best way to discover what a customer really wants, and therefore values, is through design thinking.
Design thinking leads us to highly qualitative observational research, in which we embed ourselves in the life of the customer, or oil rig engineer, or maintenance worker, or wealth fund manager. We work to understand a day in the life – insight more valuable than even a focus group, which after all only focuses on your product or service. Only by understanding the full lifecycle of their interactions can we discover opportunities to deliver value, which drives top line revenue growth, reduces cost to service, ultimately expands EBITDA, and over time adds cash to the balance sheet and a premium to a share price.
But design alone won’t be enough to create new businesses and new value for customers.
Check out my next post to learn more.