Webinar-Design Thinking - With Polls

Strategic Innovation:
The Power of Design Thinking in Business

Stanford Strategic Decision and Risk Management Certificate Program
2011 by Stanford Strategic Decision and Risk Management. All rights reserved.
Page 1
Meet Todays Speakers
Bill Burnett
Consulting Assistant Professor
of Mechanical Engineering, Design Group
Executive Director, Stanford Design
Program
Carl Spetzler
Paul Marca
CEO, Strategic Decisions Group

Program Director, Stanford SDRM
Deputy Director, Stanford

Center for Professional
Development
cspetzler@sdg.com
pmarca@stanford.edu
wburnett@stanford.edu
scpd-sdrm@stanford.edu
1-866-234-3380
http://strategicdecisions.stanford.edu
Page 2
71% of business leaders rank innovation as a Top 3

priority and are more satisfied with the financial return.
Where does innovation rank among your

companys strategic priorities?
Are you satisfied with the financial return

on your investments in innovation?
100%
100%
Top
priority
Top 3
priority
Top 10
Priority
Not a
Priority
23%
25%
26%
43%
39%
26%
26%
8%
10%
6%
2008
2009
2010
Yes
43%
No
57%
52%
55%
48%
45%
2009
2010
45%
23%
or Dont
Know
2008
Source: Innovation 2010, BCG Senior Management Survey

Page 3
Poll: How satisfied is your organization with the

financial return on your investments in innovation?
Very satisfied
9% (18)
Somewhat satisfied
54% (104)
Somewhat dissatisfied
Very dissatisfied
30% (57)
7% (13)
Page 4
Strategic Innovation
1.
When is Innovation Strategic?
2.
Design Thinking as a Business Tool
3.
A Better Model: Innovation with Value Discipline
4.
Learning More
Page 5
Strategic usually means affecting shareholder value.

1946 2011 DJI Average
Different needs in different times
Page 6
1946 1966
1982 - 2000
Formulaic growth strategies

Page 7
1966 1980
2001 2011
Innovate to survive and transform without adding

permanent cost structure.
Page 8
In business and in life you innovate to change or you

die. There are many reasons why that is true
Business life cycle transitions
Disruptive events internal or external
Business model shifts
A proactive decision to change strategic direction due to

opportunity or threat
Merger or acquisition
Page 9
There are three fundamentally different stages in

strategic management.
Leadership
Directional
Decisions
Choose
Choosethe
theroad
road
Operations
Management
Change
Implementation
Make
Makethe
theturn
turn
Run
Runbetter
betterand
and
faster
fasterthan
thanthe
the
competition
competition
Management
Page 10
Strategic innovation focuses on directional decisions

and big change.
Leadership
Directional
Decisions
Choose
Choosethe
theroad
road
Strategic
Innovation
Operations
Management
Change
Implementation
Make
Makethe
theturn
turn
Run
Runbetter
betterand
and
faster
fasterthan
thanthe
the
competition
competition
Management
Page 11
Strategic Innovation is
Creative
Significant
Real
Page 12
1.
2.
3.
4.
Learning More
Page 13
Design Thinking and Innovation
Source: Stanford d.school
Page 14
Design Thinking is both a Culture and a Big Idea.
The most successful businesses in the years to

come will balance analytical mastery and intuitive
originality in a dynamic interplay that I call DESIGN
THINKING. Design thinking is the form of thought
that enables forward movement of knowledge, and
the firms that master it will gain a nearly
inexhaustible, long-term business advantage.
Roger Martin, dean of the Rotman School of
Management in The Design of Business
Business Week, June, 2006
Business Week, April, 2010
TIME, June, 2009
Harvard Business Review,

December, 2009
Fast Company,
September, 2010
The Economist,
February, 2010
Page 15
The focus on design thinking is being led by

universities and design firms.
the d.school at Stanford
University of Toronto
Illinois Institute of Technology
Design firms are becoming

strategy firms
IDEO,
point>Forward,
Doblin, and others
Page 16
Design Thinking Explained
Problem Finding + Problem Solving = Competitive Advantage

A new approach to problem finding
The highest leverage is found in re-framing problems
A dynamic approach to problem solving
Works well on poorly bounded problem
A new perspective on value
An empathy-based, human-centered process focused on user
needs
Page 17
How is it different?
Engineering Thinking Solves its way forward

Business Thinking Decides its way forward
Design Thinking Builds its way forward
Page 18
MANUFACTURING
TECHNOLOGY
Engineering Analysis
Mechanical Engineering
Electronics & Mechatronics
Computer Science
Bioengineering
Manufacturing Technology
Manufacturing Strategy & Process
BUSINESS
Business Principles
Finance
Marketing
Market Research
ORGANIZATIONAL BEHAVIOR
DESIGN & INTERACTIVITY
Team Building
Business Strategy
Entrepreneurship
Human-Computer interaction
Visual Thinking
Design for Sustainability
HUMAN VALUES
Source: Stanford d.school
Social Sciences
Need-Finding
Psychology, Anthropology, Sociology
Art / Industrial Design
Page 19
What is Design Thinking in a strategic context?

Design Thinking requires the following to be active:
It becomes part of the firms Culture

Multidisciplinary teams Radical Collaboration
Fluency trained
Semantically aligned
It becomes a Process for problem solving

Experience-based, user-centered research
Prototyping to ask good questions
Iteration is part of the process
It requires Focus to move the needle
See: The Role of Design Thinking in Firms and Management Education
Bruce A. Heiman, San Francisco State University, USA
William R. Burnett, Stanford University, USA

Page 20
Apple under Steve Jobs is an example of a company

that profits from design, and is considered by some to
be the most innovative company in the world.
The World's Most Innovative Companies
2010 Rank*
3-yr. Stock
Returns (%/yr)*
2011 Rank**
3-yr. Stock
Returns (%/yr)
Apple
35%
Apple
36%
Google
10%
Twitter
Private
Microsoft
3%
Facebook
Private
IBM
12%
Nissan
Toyota Motor
-20%
Groupon
Amazon.com
51%
Google
LG Electronics
31%
Dawning
Private
BYD Auto
99%
Netflix
199%
General Electric
-22%
Zynga
Private
10
Sony
-19%
Epocrates
5%
Private
0%
-55% (Feb IPO)
* Business Week and Boston Consulting Group survey

** The Worlds Most Innovative Companies 2011, Fast Company
Page 21
Apple is a role model for design innovation at all

levels.
Platforms
Products
Content
Business Model
Artists
Business Process
& Platforms
Hollywood
Advertisers
Developers
Product & Services
Page 22
Poll: How much has design thinking become a

driver of strategic innovation in your firm?
It is part of our strategic competence.
13% (24)
We have pockets of capability.
We are aware of and introducing design thinking.
We dont know what "design thinking" refers to.
30% (54)
25% (45)
33% (60)
Page 23
1.
2.
3.
4.
Learning More
Page 24
In most organizations, creativity opposes evaluation.

Currently design-innovation often falls into this trap.
Customer
Experience
Shareholder
Value
Spreadsheet
Analysis
Wow
Factor
Applied
Applied
Creativity
Creativity
Value
Value
Discipline
Discipline
NumberCrunching
Excitement
Fuzzy
Bean Counters
Evaluation is a
sword in the hands
of the controllers.
Creativity is a
nice-to-have once
we hit our targets.
Page 25
Organizational hurdles to strategic innovation exist in

many places.
Learning failures
Weak structural
support for
applied creativity
Growth
Opportunities
Processes are
linear, not cyclical
Value
Value
Discipline
Discipline
Applied
Creativity
Value
Guidance
Execution
Excellence
Implementation
failures
Page 26
Page 27
Analytic tools like tornado charts can inform and

direct innovation and design.
Understanding
Understanding of
of the
the range
range
of
impact
can
be
valuable
of impact can be valuable
to
to the
the design
design team
team
Change in NPV: High-End TV Strategy
Product
Product and
and
market
market
characteristics
characteristics
can
can be
be defined
defined
and
valued
and valued
($ millions)
900
Appeal to Market Size
Next-Gen Cost
Display Resolution
TV Cost
New Broadcast Standard
Screen Size
Development Costs
600
300
300
600
0.5x Base
900
2x Base Estimate
None
1.5x Initial Design

Low
High
High
Low
None
Rapid Changes
40
2x Estimates
50
Base Case
TV Replacement Cycle
Slow
Rapid
Distribution Markup
Low
High
Base Case value = ~ $2 Billion
Page 28
The Innovation Competency Model:

An Effective Value Driven Innovation Cycle
Value Creation
Opportunities
Respects & leverages
the practical nature
of business analysis
1
Respects &
nurtures the
open-ended
nature of
creativity
Applied
Applied
Creativity
Creativity
Cycle builds
learnings and
buy-in
Value
Value
Significance
Significance
Value Guidance
Page 29
The New Yorker Collection 1986 Frank Modell from cartoonbank.com. All Rights Reserved.
Page 30
Innovation Competency Model
Value Creation
Opportunities
Applied
Creativity Reinforcing
Cycle
Value
Guidance
Value
Value
Discipline
Discipline
4
Execution
Excellence
Page 31
GE under Jeff Immelt has the four elements working

together.
2.
2. The
The strategic
strategic value
value
discipline
discipline has
has been
been
deeply
deeply embedded
embedded in
in GE
GE
for
some
time.
for some time.
1.
1. Growth
Growth is
is driven
driven with
with
imagination
imagination
breakthroughs
breakthroughs and
and
dreaming
dreaming sessions.
sessions.
Value Creation
Opportunities
Applied
Creativity Reinforcing
Cycle
Value
Guidance
3.
3. ItIt is
is aa cycle
cycle in
in which
which
everyone
everyone has
has to
to
participate.
participate.
Value
Value
Discipline
Discipline
4
Execution
Excellence
4.
4. Execution
Execution discipline
discipline is
is intense,
intense,
with
with adequate
adequate funding
funding and
and the
the
best
people
being
assigned
best people being assigned to
to
deliver
on
the
innovation
deliver on the innovation
initiatives.
initiatives.
Page 32
It takes time and real commitment from the top.
When
When II got
got the
the job,
job, II knew
knew II wanted
wanted the
the company
company to
to be
be more
more
innovative,
more
global,
and
more
focused
on
the
customers.
innovative, more global, and more focused on the customers.
But
But itit does
does take
take aa year
year or
or two
two or
or three
three to
to really
really put
put ideas
ideas into
into
initiatives
initiatives and
and get
get the
the team
team aligned.
aligned.
The
The big
big difference
difference is
is that
that the
the business
business leaders
leaders have
have no
no choices
choices
here.
here. Nobody
Nobody is
is allowed
allowed not
not to
to play.
play. Nobody
Nobody can
can say,
say, I'm
I'm going
going
to
to sit
sit this
this one
one out.
out. That's
That's the
the way
way you
you drive
drive change.
change.
When
When we
we have
have an
an idea
idea factory
factory like
like IDEO
IDEO talk
talk to
to us
us about
about
innovation,
its
my
job
to
translate
what
they
say
into
innovation, its my job to translate what they say into GE.
GE. That
That
means
putting
it
in
terms
of
process
and
metrics.
means putting it in terms of process and metrics.
Sources: July 2005 interview of Jeff Immelt by Fast Company. June 2006 interview in HBR
Page 33
Poll: What is the benefit of establishing a creativityvalue cycle in your organization?
Little or no increase in shareholder value
10-20% increase in shareholder value
3% (6)
14% (28)
33% (69)
More than 100% increase in shareholder value
38% (79)
12% (24)
Page 34
1.
2.
3.
4.
Learning More
Page 35
In the 2.5-day course, we cover the three main

components of strategic innovation.
Creative
Day 2
Day 1
Learn Design Tools
and Process
INSTRUCTORS:
Significant
Real
Day 3
Apply Design Thinking to Identify Organizational

Business Issues
Requirements
Bill Burnett, Executive Director, Stanford Design Program

Carl Spetzler, CEO, Strategic Decisions Group
Cynthia Benjamin, Director Innovation, IMS Health
Page 36
Stanford Center for Professional Development

Stanford University
Curriculum and Research
Academic
Programs
Professional
Education
Meeting
Degrees, Certificates,
Individualeducation
Courses
needs of technology
professionals, managers and executives
to meet your education and schedule requirements
Page 37
Graduate Areas of Study

Graduate
Areas of Study
Aeronautics and Astronautics
Electrical Engineering
Biomedical Informatics
Management Science and

Engineering
Chemical Engineering
Civil and Environmental
Engineering
Computer Science
Materials Science and

Engineering
Mechanical Engineering
Statistics
Page 38
Professional/Executive Programs
Strategic Decision & Risk Management

Advanced Project Management
Global Entrepreneurial Leadership
Accelerating Technology Leadership
Leading Corporate Entrepreneurship
Financial Engineering
Advanced Computer Security
Page 39
Unique University/Industry Collaboration
Directed by Professor Ron Howard, Management Science and Engineering
Developed in partnership between SCPD and Strategic Decisions Group
Available online, at Stanford, and at work
Meets the career-long education needs of professionals, managers, and executives
Page 40
Strategic Decision and Risk Management
Managing Risk
in Healthcare
Organizations
Strategic
Innovation
& Design
Thinking
Modeling
for Strategic
Insight
NEW!
ValueDriven
Enterprise
Risk Management
Decision
Quality
Decision
Analysis
Collaborative
DecisionMaking and
Negotiation
NEW!
Earning the Certificate

Complete 2 required courses and 4 electives.
Strategic
Portfolio
Decisions
Biases in
DecisionMaking
Leading
Strategic
DecisionMaking
Converting
Strategy into
Action
Advanced
Project
Management
Program
Additional Electives:
Advanced Decision Analysis
Ethical Decision-Making
Decision Quality Practicum
Page 41
2011 Schedule
SEPTEMBER
Decision Quality
Collaborative DecisionMaking & Negotiation
AT STANFORD
& Design Thinking
Decision Analysis
Converting Strategy
into Action
DECEMBER
Decision Quality
IN HOUSTON*
Leading Strategic
Decision-Making
Pricing for on-campus

courses (per course):
Regular price: $2,600
Early registration price:
$2,340 (December
early registration ends
October 17)
For more information:
Patty Harris, Customer
Relationship Manager
+1.866.234.3380
+1.650.475.4490
*Houston program offered in collaboration with the Center for Lifelong Engineering Education,
University of Texas at Austin.
http://strategicdecisions.stanford.edu/texas
Page 42
To contact one of todays speakers:
Bill Burnett
Carl Spetzler
Paul Marca
wburnett@stanford.edu
cspetzler@sdg.com
pmarca@stanford.edu
1-866-234-3380
Page 43
Please Join Us for Our Next Webinar
Decision Quality
The Art and Science of Good Decision-Making
October 19, 2011
910 a.m. PDT
Page 44

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Strategic Innovation:

The Power of Design Thinking in Business

Meet Todays Speakers

CEO, Strategic Decisions Group

Deputy Director, Stanford

71% of business leaders rank innovation as a Top 3

Where does innovation rank among your

Are you satisfied with the financial return

Source: Innovation 2010, BCG Senior Management Survey

Poll: How satisfied is your organization with the

When is Innovation Strategic?

Design Thinking as a Business Tool

A Better Model: Innovation with Value Discipline

Strategic usually means affecting shareholder value.

Different needs in different times

Formulaic growth strategies

Innovate to survive and transform without adding

In business and in life you innovate to change or you

Business life cycle transitions

Disruptive events internal or external

Business model shifts

A proactive decision to change strategic direction due to

There are three fundamentally different stages in

Strategic innovation focuses on directional decisions

When is Innovation Strategic?

Design Thinking as a Business Tool

A Better Model: Innovation with Value Discipline

Design Thinking and Innovation

Source: Stanford d.school

Design Thinking is both a Culture and a Big Idea.

The most successful businesses in the years to

Business Week, April, 2010

TIME, June, 2009

Harvard Business Review,

The focus on design thinking is being led by

Illinois Institute of Technology

Design firms are becoming

Design Thinking Explained

Problem Finding + Problem Solving = Competitive Advantage

Engineering Thinking Solves its way forward

Source: Stanford d.school

What is Design Thinking in a strategic context?

It becomes part of the firms Culture

It becomes a Process for problem solving

It requires Focus to move the needle

See: The Role of Design Thinking in Firms and Management Education

Bruce A. Heiman, San Francisco State University, USA

William R. Burnett, Stanford University, USA

Apple under Steve Jobs is an example of a company

-55% (Feb IPO)

* Business Week and Boston Consulting Group survey

Apple is a role model for design innovation at all

Product & Services

Poll: How much has design thinking become a

It is part of our strategic competence.

We have pockets of capability.

We are aware of and introducing design thinking.

We dont know what "design thinking" refers to.

When is Innovation Strategic?

Design Thinking as a Business Tool

A Better Model: Innovation with Value Discipline

In most organizations, creativity opposes evaluation.

Organizational hurdles to strategic innovation exist in