Friedrichshafen, June 14, 2010

Paper »Change Management«

Becoming the ambidextrous organization Design Thinking as a Methodology for nurturing Innovation Culture?
Jan Schmiedgen Matriculation Number 9200251 (2nd Semester)

Saved at: Speedtröte:Users:schmiedgenj:Desktop:change management - RANK.doc

Paper »Change Management«

Table of Contents
1! Introduction ....................................................................... 3! 2! A short Review on Change, Culture and Innovation ............ 6! 3! Method .............................................................................. 9! 4! Findings ............................................................................10! 5! Conclusion ........................................................................16! 6! References .........................................................................19! 7! Appendix ..........................................................................23!

Declaration of Authorship I certify that the work presented here is, to the best of my knowledge and belief, original and the result of my own investigations, except as acknowledged, and has not been submitted, either in part or whole, at this or any other University.

Jan Schmiedgen, June 14, 2010

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Introduction
„We can't solve problems by using the same kind of thinking we used when we created them.“
Albert Einstein

The corporate world nowadays is facing many challenges. Many of those minor or major developments and megatrends1 are well known to all of us, some less. Nevertheless we are all – consciously or unconsciously – aware of the fact that there are many irreversible transitions on their way, that will influence our environment and therefore the way we do business. As markets change and old power relations shift, huge value migration processes (Slywotzky, 1996) will challenge the current status-quo of many organizations. That is why an ongoing discussion within scholars and practitioners tries to find out ways how to overcome those demanding issues. One very strained term within that lively dispute is »innovation«. But all to often one has to be under the impression, that it is demanded over and over, but no one really knows how to develop an universal, holistic and practical approach that can really make it happen – especially in existing inertial organizations. Although the body of research is very voluminous, critics state that the current management and change management literature offers rather mechanical methodologies and tools showing what to do (in terms of theory-driven suggestions like »freeze / unfreeze« or the like) without explaining how to do it and what should exactly be done (Brown, 2009; Martin, 2009b; Nicolai, 2010; Riel, 2009; Sniukas, 2007). That’s why a vast amount of practitioners2, more and more scholars3 and even governmental organizations4 are beginning to either make known, or explore a methodology that – as they think – could bridge the gap between rather mechanical tools and methods and the realization of successful change towards innovation. This methodology is called design thinking.

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To just instance some changes, that sooner or later will call for disruptive changes one could mention demographic change, healthsystem issues, technological convergence, knowledge bases economies and the reinforced emergence of business ecosystems as well as new pattern of consumption in our western hemispheres. But also – or even more important – the exponential growing indivdualization needs in developed but also developing countries, globalisation with its multifariously effects on cultural diversity, new mobility and most important the global climate change are comprehensable examples. e.g. Bruce Nussbaum (Businessweek), A. G. Lafley (CEO Procter&Gamble), Daniel Pink (Author), Tim Brown (IDEO), David Kelley (IDEO) etc. e.g. Henry Mintzberg, Roger Martin, Karl Weick, Fred Collopy, Gary Hamel, Lucy Kimbell etc. e.g. the Design Council in the UK or Design som utvecklingskraft (Design as development force) in Sweden etc.

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EXCURSUS »DESIGN THINKING«

The scientific exploration of design thinking outside of the design community is still in its beginning. Therefore the discourse currently lacks one agreed upon definition, although the discussion roots can be often found in Heribert Simons book »The Science of the Artificial«1. Dunne & Martin (2006) described design thinking as the way designers think, regarding their mental processes and the typical nature of design work: project-based work flows around »wicked« problems. The term wicked problem was first coined by Rittel & Webber (1973) and describes those tasks, that are difficult or seemingly impossible to solve, because their nature typically is messy, contradictory, aggressive and confounding2. They „are ill-defined and unique in their causes, character, and solution“ (Chuchman in Riel, 2009, p. 94) and involve many factors, stakeholders and decision makers with often conflicting values. Moreover a resolution of one aspect is likely to reveal or create other problems, due to complex interdependencies. Therefore approaching wicked problems requires to understand the nature of the problem itself, first. That’s why designers have not only developed special methods to address problems, but also a certain »questioning attitude« that permanently reframes their tasks at hand, what evidentially enables them to innovate very efficient and effective (Boland Jr. & Collopy, 2004; Brown, 2008, 2009; Dunne & Martin, 2006; Liedtka, 2004; Martin, 2009b; Oster, 2008; Shove, Watons, Ingram, & Hand, 2007). Practitioners like Tim Brown (CEO if IDEO, one of the worlds leading innovation consultancies) therefore describe design thinking as “a discipline that uses the designer’s 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” (Brown, 2008, p. 86). For the scientific purpose of this paper I prefer the current definition of Roger Martin (Dean of the Rotman School of Management, Toronto), that integrates designerly thinking modes in the definition: „Integrative thinking is the metaskill of being able to face two (or more) opposing ideas or models and instead of choosing one versus the other, to generate a creative resolution of the tension in the form of a better model, which contains elements of each model but is superior to each (or all). Design thinking is the application of integrative thinking to the task of resolving the conflict between reliability and validity, between exploitation and exploration, and between analytical thinking and intuitive thinking. Both ways require a balance of mastery and originality” (Martin, 2009b, p. 62).

Typical design thinking (learning) processes – be it for products, services or whole business systems – pass iteratively through several stages of problem formulation, observations, problem definition and redefinitions as well as ideation and prototyping phases up to the point of implementation. Their description can, and will not be part of this paper. That’s why in the following I assume the reader to know the methodology with its characteristic interdependencies.

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"Engineering, medicine, business, architecture and painting are concerned not with the necessary but with the contingent – not with how things are but with how they might be – in short, with design. [...] everyone designs who devises courses of action aimed at changing existing situations into preferred ones. Design, so construed, is the core of all professional training: architecture, business, education, law, and medicine are all centrally concerned with the process of design.” (Simon, 1996, p. 111) „The causes of the problem are not just complex but deeply ambigous; you can’t tell why things are happening the way they are and what causes them to do so. The problem doesn’t fit neatly into any category you’ve encountered before; it looks and feels entirely unique, so the problemsolving approaches you’ve used in the past don’t seem to apply. Each attempt at devising a solution changes the understanding of the problem; merely attempting to come to a solution changes the problem and how you think about it.“ (Riel, 2009, p. 23)

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Personally, I stumbled upon design thinking some years ago, as I asked myself some very basic questions that turned out to be very complicated as they include so many facets: What problems do organizations have today? Why do some innovate and some not? What are success factors? What hinders them? And, is there a theory, or better a practical methodology, to ensure continuous innovation outcomes? Research Question I soon realized that the majority of the existing literature focused on optimizing the status-quo and few on envisioning, exploring and implementing possible futures in a feasible way. As this is a – maybe the – most important task in change management I decided to dedicate the purpose of this paper to the exploration of: In how far can design thinking be an adequate means to nurture an innovation culture and overcome obstacles that typically hinder such an attempt? I imposed myself some limitations right from the beginning: Design thinking is a very open approach. As it touches and connects so many different research areas1 it is nearly impossible to demarcate any research boundaries or to stick to certain theoretical frameworks in such a short paper. Therefore I will neither strictly define all of the multifaceted terms like culture, organization or innovation, nor will I attempt to integrate the following into existing frameworks. Nevertheless I did an extensive literature review on »innovation culture«, innovation and change, the characteristics of change as well as on thinking modes and creativity, in order to connect the streams of design thinking research to current (change) management knowledge, as described in chapter 2 » A short Review on Change, Culture and Innovation«. Additionally I conducted two expert interviews (chapter 3) that I aligned with the current state of research.

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For instance knowledge management, strategic planning, human relations, organisation design, and many other areas. In a way design thinking therefore bears resemblance to change management, that „is such a multifaceted phenomenon that every attempt is necessarily limited, but by piecing together partial views, a broader understanding may emerge.“ (Poole, 2004, p. 4)

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A short Review on Change, Culture and Innovation
When talking about innovation, change and culture in relationship to commercial success one has to bear in mind that in the end we talk about speed and time-tomarket. Companies need to be attentive to recognize weak signals and must find ways to absorb and adept fast to new environmental conditions. This is only possible by »moving knowledge about new externalities« faster as the competition across the knowledge funnel1 (Martin, 2009b). This however can be quite difficult, as it requires two different activities: „moving across the knowledge stages [...] from mystery to heuristic to algorithm, and operating within each knowledge stage by honing and refining an existing heuristic or algorithm“ (Martin, 2009b, p. 18). The one activity is concerned with the invention of business, the other with the administration – or in other words: The one with exploration of new possibilities, the other with the exploitation of proven knowledge (cf. Sutton, 2004, p. 268). Innovation requires both, although the right balance may vary across industries. The problem however is, that running these two modes simultaneously, requires the utilisation of completely different thinking and reasoning modes: Exploration embraces divergent or integrative thinking (Brown, 2009; Flynn & Chatman, 2004; Martin, 2009a, 2009b) that uses inductive, deductive and abductive logic2. Exploitation however is often connected with linear thinking, where the preferred modes of reasoning are induction and deduction (Martin, 2009b, 2009c; Moldoveanu, 2009; Sutton, 2004). If the latter becomes more dominant in an organization it leads to a – what Martin (2009b) and Sutton (2004) call – »bias towards reliability3«. This is quiet dangerous, as reliability-oriented organizations can reproduce their success algorithms only when environmental factors stay stable (»c!ter"s paribus

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According to Martin the antecedent condition for innovation is to balance intiuitive and analytical epistemologies when generating insights during the three stages of a knowledge funnel. The first stage – called mystery – is characterized by exploration. This could for example be an question or pheonomenon that cannot sufficiently be explained with current knowledge – in a way the starting point of a wicked problem. The learning and hypothesis-construction process of the mystery stage leads to „a rule of thumb that helps narrow the field of inquiry and work the mystery down to manageable size“ (Martin, 2009b, p. 8). Once this heuristic is put into operation and its regularities can be discovered it converts into the systematized last stage, an algorithm, that can be run and replicated over and over again. The often forgotten and uncared-for »third mode of reasoning« called abduction (named by Charles Sanders Peirce) is a kind of inference characterized by probability – or in other words, the »logic of what might be«. Inductive thinking, however is proving through observation that something actually works (reasons from the specific to the general), deduction on the other hand, means proving through reasoning from principles that something must be (reasons from the general to the specific). There often seems to be a trade-off between reliability and validity in today’s business context. Most corporations favor reliability in their structures and processes as it is the result of a process, that produces a consistent and predictable result over and over. In order to enhance reliability they often have to reduce the number of variables considered and make use of bias-free measurements (here management and controlling methods). A designer in the early stages of his work process in turn favors validity, the extent to which a measure accurately reflects the concept that it is intended to measure. In order to increase the validity of any process he has to consider a wide array of relevant variables (e.g. as done in the observation phase of the design thinking process).

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assumption«). As this is not the case in uncontrolled systems (like the current business environment), those organizations urgently need to incorporate more validity-orientation into their culture, as it is a prerequisite of moving new knowledge across the knowledge funnel: „The validity seeker, unlike the reliability seeker, treats past predictive success as hypotheses to be carefully tested before using them to generate predictions that are expected to be valid. Hence, the real empirist is »a first-rate noticer« of precisely the anomalies that would cause him or her to throw out the »all things are equal« assumption“ (Moldoveanu, 2009, p. 56).
EXCURSUS »RELIABILITY VS. VALIDITY«

Sticking closely to proven and »true« analytical thinking (focusing on running the algorithm) enables firms to build size and scale (one of the simple-minded management imperatives of the last decade). Such an endeavor needs consistent, predictable outcomes that can reproduced over and over. Management methods and processes that favor reliability therefore need to narrow their scope to what can be measured in replicable and quantitative ways. The side-effect of such an attempt to model reality is that factors like subjectivity, judgment or other »biases« need to be eliminated. Validity-oriented firms however have the problem that they „cannot and will not systematize what they do“ (Martin, 2009b, p. 6) as their foremost goal is to produce outcomes that meet a desired objective, and develop solutions that over time prove to be correct. With only quantitative measures this is difficult to achieve, as they would strip away the, for them very important, nuances and contexts. Obviously both approaches should be found balanced in organizations, but unfortunately the current prevailing management paradigms favor reliability over validity and all too often try to predict rules derived from past experiences. As an validity-seeker can’t „prove the value of [his] ideas by invoking the size of [his] regressions R2“ (Martin, 2009b, p. 49) many companies have developed an unbalanced mastery towards »bulletproof« scientific decision making by creating tools and methods, that continuously refine their current algorithm: „Improved technology and statistical-control tools have given rise to new management approaches […]. Today's business leaders are adopting algorithmic decision-making techniques and using highly sophisticated software to run their organizations. Scientific management is moving from a skill that creates competitive advantage to an ante that gives companies the right to play the game” (McKinsey, 2006). Sutton described this risky phenomenon of uncertainty elimination as »mere exposure effect« to reliability: „The more often people are exposed to something, the more positive they feel about it; rare and unfamiliar things provoke negative evaluations“ (2004, p. 268). Or freely adapted from Churchill: »First they shaped their tools, then their tools shaped them«. Martin explains this bias with the persistence of the past (apparent reliability through the use of inductive and deductive evidence from past experiences), pressure of time (reliable systems generate tremendous time savings), and curiously the attempt to eliminate bias (eliminate subjective judgment) (Martin, 2009c, p. 44 ff.). He further argues that counterproductive pressures from capital markets often force companies to short-sighted reliability biases (Martin, 2009c, p. 50 f.) – namely the exploitation and maintenance of their current status-quo at least as long as the future will no longer resemble the past.

This fundamental problem of balance between reliability and validity, between exploitation and exploration, between linear and integrative thinking has been illuminated by various researchers and from many different perspectives. Tripsas

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& Gavetti (2000) for instance drew their attention to the influence of existing capabilities (algorithms) in the search for new technology innovations. In accordance with the above mentioned »mere exposure effect« they discovered that innovation search processes often are determined by previous knowledge. That means, managers all too often model problems according to former experiences, what leads to an inability to respond to changes in the external environment as it produces a certain fixation in capability development (refinement of current heuristics/algorithms) and therefore organizational inertia1. This organizational (or cultural) inertia is often to be said, to prevent radical and, if ever, favor mere incremental change2. That’s why many scholars demand not only a certain adaptability to environmental transformations, but also a more proactive, re-orienting change behavior of organizations that builds on anticipation (Hayes, 2006, p. 15 ff.; Nadler, Shaw, Walton, & Associates, 1995): „If managers need to understand and coordinate variability, complexity, and effectiveness, then they need to create designs that mix together perceptual and conceptual modes of action or move back and forth between these modes or rely on multiple compoundings of abstraction“ (Weick, 2004, p. 47). In order to achieve that Tushman & O'Reilly (2004) propose organizations to become ambidextrous – executing today’s strategies (heuristics and algorithms) and creating new capabilities for tomorrows demand (mystery exploration). This notion is in conformance with many other scholars (Leifer, 2001; Markides, 2001; Martin, 2009b; Stamm, 2003a; Weick & Quinn, 1999; Weick, 2004) and targets the “balance [of] sufficient predictability and stability to support growth with sufficient creation of knowledge to stimulate growth” (Martin, 2009b, p. 118). Only these »baked-in paradox« organizations will be able to „balance the freewheeling innovation and buttoned-down operational discipline, [the] validity and reliability [tension], and [the] honing and refining versus jumping to the next stage of the knowledge funnel“ (Martin, 2009b, p. 122). Remain the questions in how far design thinking, as a methodology and attitude, can contribute to a balancing culture that is capable to manage such a tension, what exactly needs to change, and what makes the approach so unique… That’s what I wanted to find out in my interviews.

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This phenomenon is closely connected with different epistemologies between diverse practices (e.g. engineers, designers and managers) and has been widely discussed (Boland Jr. & Collopy, 2004; Dunne & Martin, 2006; Lester & Piore, 2004). I will not expose in detail here, what different types of change in the literature exist. When I refer to incremental vs. radical change in the following I’ll equate it with contionous vs. episodic, continous vs. discontinous, and competence-enhancing vs. competence-destroying change (cf. Poole, 2004, p. 5). I am aware of minor arising inaccuracies and the nuances that underlie those theories, but need to take into account the scope of this paper.

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Method
I conducted two expert interviews. As I had to bear in mind that research on design thinking is still very young, I knew I had to balance practical and theoretical point of views for my screening phase. I finally convinced two contrasting personalities, for an one hour Skype session each. The practical perspective was brought in by Christian Schneider1 (Industrial Designer), who was a Managing Director at IDEO. My Interviewee from academia was Dr. Claudia Nicolai (Dipl. Oec.), General Program Manager und Lecturer at the Hasso-Plattner-Institut – School of Design Thinking in Potsdam, that is doing extensive research on the topic. Even though I had already developed some hypotheses based on my literature research, my aim was not to just let them affirm them. Rather I wanted the interview to be open as possible to give space for the unexpected (Flick, von Kardoff, & Steinke, 2007, pp. 263 f., 353 ff.; Gläser & Laudel, 2009a). Therefore I chose an semi-structured, half-open interview form. The Skype sessions were computer recorded and completed by interview notes taken during the interview as well as from memory (Bogner, 2009; Gläser & Laudel, 2009b). I later analyzed and clustered emerging topics. Although I had already developed some categories to prepare my coding process in advance I fortunately determined, that themes I ignored before, like »leadership« or »pitfalls and overestimation of design thinking«, obviously seem to play an important role for my research question as well. These hints turned out to be very helpful during the interpretation phase. Finally the topics that emerged in both interviews were innovation obstacles of big corporations, concrete proposals what needs to change, leadership and top-management commitment, critique on current change management and innovation methods, explanations why design thinking could overcome above mentioned critique points, what it predestines for that and what would be possible pitfalls that would even prevent design thinking making a difference. The most important quotes have been transcribed and can be found linenumbered in the appendix on page 23. All following interview citations refer to these lines.

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Christian Schneider was choosen as an interview partner, as he was a former Director of IDEO Milan, Project Manager at the Studio De Lucchi and co-founder of the air-transportation company EWA in RD Congo. He has guided multidisciplinary and multinational teams for the development of products, services and brand strategies of several fortune 100 companies as well as start-ups. Clients include Deutsche Bank, Deutsche Telekom, ETF (European Technology Fund), EBS (Electronic Banking Systems), Ferrari, FraunhoferInstitut, Merloni and Siemens. He has lived and worked in various countries in Europe, Africa and North America and taught at several Universities such as the Polytechnic University Milan, Carleton in Ottawa and Stanford.

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Findings
As expected, both interviewees confirmed the usual innovation obstacles big1 corporations are facing: The main design thinking inherent activity for example is radical internal and external collaboration, beginning in the earliest stages of every product, service or business development. But even this fundamental exercise is practiced insufficiently in most organizations, although its relevance has been described multifariously (Chesbrough, Vanhaverbeke, & J. West, 2006; Handfield, Ragatz, Petersen, & Monczka, 1999). Combined with an also attested structural and cultural inertia many of the initial assumptions from chapter 2, like thinking in silos and functional departments, fixation in capability development and therefore a lack of interdisciplinarity, got reinforced (Nicolai, 2010, 1-13; Schneider, 2010, 14-59). Mr. Schneider criticized in particular the wrong application of otherwise powerful tools like business ethnography or misconceived market and trend research as mere »vicarious agents« for reliability-oriented decisions2. This follows the initial argumentation of Martin (2009b), stating that they are rather used in the predominant logic of measuring and prognosticating instead of challenging current heuristics and algorithms. In his argumentation the preferred, but misdirected steering of funds to scopes of application that – in the hope of risk reduction – can be measured, bears a paradox – especially in an economic downturn, where anticyclical behavior could be the key to survive or get strengthened: „Design thinking is an economic tool to envision possibilities, [...] relatively cost inexpensive. [...] By applying [it] you have a very cost effective tool to foresee possibilities for economic growth. [...] It would be worthwhile to research how much is spent on field research, or operative marketing and how much does it cost if you employ a team to envision possibilities for your organization. I'm sure this is in no relation“ (Schneider, 2010, lines 36-45). Thus, the predominant thinking with its reliability bias is regarded responsible for structural and process-related problems from both interviewees. This hinders cross-fertilization and the use of even existing diversity in the organization and leads to – in designers eyes – weird decisions (cf. Sutton, 2004), like attaching the responsibility of innovation to dedi-

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Both interviewees pointed out the fact that there has to be drawn a clear distinction between rather smaller and bigger organizations. While in smaller companies the likelihood is greater that people engage in »strategic conversations« in and outside their firms boundaries, in bigger corporations this often isn’t the case anymore. „Even though we talked a lot about innovation in recent years I don't think that there was much innovation going on. We were expanding our markets, we were selling our products to new and different markets, approached different markets. We tried to adept our products to different markets... So ethnographic research was about understanding whether those people like pink or blue. Bullshit! ... Instead of learning from those cultures and learning from those local realities, to really find innovation opportunities we just adapted our products. In the same time innovation was about making them cheaper and cheaper. This happened at the one side by improving the technology, the assembly, the production, the distribution... That happened on the other side by having cheap labor costs. I ask you. Where is innovation?“ (Schneider, 2010, lines 15-25)

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cated managers1: „What all those companies did, back in the ninetieths, is that they have innovation managers or even innovation executives, and those were very, very sad persons. Sometimes we asked: And what do you think? They didn't even dare to speak up! They go a bit happier once they created the position of the CIO because at least they now sat on the round table and got a big salary. The next step now is to create [innovation] teams [in an design thinking sense] within your company. [...] This will already be a big step ahead“ (Schneider, 2010). The same was observed by Mrs. Nicolai: „Larger corporations have established trend research departments – attached to the headquarter – but they have no impact [...]. They are good in figuring out patterns that might be in the future [but] they are not really customer centric. [They have] no experience of addressing the problems for the corporation and the interplay of different people and different contexts“ (Nicolai, 2010, lines 9-13). Regarding this, Martin stated „the farther the area is from the customer, the greater is the reliability bias“ (2009b, p. 139) – a point of view, shared by many other authors (Flynn & Chatman, 2004; Handfield et al., 1999; Lester & Piore, 2004; Tushman & O'Reilly, 2004). In the search for a resolution to these obstacles Tushman & O'Reilly (2004) proposed three main areas that need to be changed in order to become an ambidextrous organization: Organizational culture, architecture/structure and processes. In general, they accord with Martins2 notions as well as with the statements of my interviewees. Altogether their demands sum up to what today already is practiced in design thinking organizations. Let’s begin with the structure. Both, Schneider and Nicolai agree on diverse and project-based teams as the source of innovation. Once a project is finished the team disbands and reforms in a different configuration suited to the next task at hand. That means an ambidextrous organization has to deploy a structure that enables individuals to organize themselves by projects, rather than by permanent structures. Herefore it has to provide time, space3, relatively little money (Schneider, 2010) and must establish an project-based activity system than runs parallely to the more fixed configuration that is running the current business algo-

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This is an interesting example of the typical working style in traditional management as described thoroughly in Dunne & Martin (2006) that tries to attach responsibilites to certain individuals, although the setup of their inner-organizational boundaries is unlikely allowing them to influence any decision in their »area of authority«: „Individuals are typically much more adept at describing ‘my responsibilities’ than they are at describing ‘our responsibilities’“ (Oster, 2008, p. 110). In design thinking the interplay of many decision makers is solved by assigning projects to teams that heavily collaborate with the help of many tools and methods that overcome the typical problems arising in teamwork (POV development, visualization, prototyping, etc.). „To create an environment that balances reliability and validity, that both drives across the stages of the knowledge funnel and hones and refines within stages, a business needs to think differently about three elements of its organization: its structures, its processes, and its cultural norms.“ (Martin, 2009b, p. 118) The supply with, and the configuration of space, is probably one of the most important and most frequent discussed issues within the design thinking community. As a detailed discussion of this important dimension would go far beyond the scope of this paper it shall hereby just be mentioned as as very critical component.

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rithm (Martin, 2009b). This is consistent with Tushman & O'Reilly's demand for autonomous groups and an organizational structure, that remains small with flat hierarchies: „Size is used to leverage economies of scale and scope, not to become a checker and controller that slows the organization down. The focus is on keeping decisions as close to the customer or the technology as possible” (Tushman & O'Reilly, 2004, p. 288). This customer or human-centeredness is another characteristic of design thinking as it serves as the one and only corridor for all decisionmaking1. This in return encourages other innovation prerequisites that are widely accepted: e.g. a culture of informed risk taking and autonomy, keen on experimenting employees that feel a sense of ownership and are responsible for their own results (Martin, 2009b; Nicolai, 2010; Schneider, 2010; Tushman, 2004) and a tolerance for certain types of failure. Furthermore such an high-participative approach has several positive side-effects that solve typical organizational problems, like »organizational silence« (Morrison & Milliken, 2000) or infrequent »minority dissent2« (De Dreu & M. A. West, 2001), since the users and their reactions will become the neutral decision instance3. As a result the withhold of opinions and concerns could disappear and upward information flows more freely. In connection with the above mentioned demands Schneider frequently emphasized the support for experimentation (Schneider, 2010, lines 39, 266) in such an organizational structure, what leads us to the process perspective. The nature of a design thinking process is, what Weick (1989) would describe a »struggle with sensemaking4«. It is a hypothesis-driven theorization process that embraces comprehension fostering imperatives like »fail often an early«, »show don’t tell«, »focus on human values«, »create clarity from complexity«, »be biased towards action«, »collaborate across boundaries«, »be mindful of process« and »get experimental and experiential« (Hasso Plattner Institute of Design Stanford, 2009). Such a mindset requires the reorganization of central corporate processes that today

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This decentralization of decision-making is the glue, that holds such an contradictorily and ambigous working environment together: „There is a delicate balance among size, autonomy, teamwork, and speed which these ambidextrous organizations are able to engineer. An important part of the solution is massive decentralization of decision making, but with consistency attained through individual accountability, information sharing, and strong financial control” (Tushman & O'Reilly, 2004, p. 288). The direct user/customer feedbacks also serve as decision benchmarks that help prevent the often feared group cohesion, although design thinking per se prevents that, as it embraces divergent thinking as a norm (Flynn & Chatman, 2004, p. 237). The notion of preventing minority dissent is also consistent with Sutton, who says that „If it's creativity you want, you should encourage people to ignore and defy superiors and peers – and while you're at it, get them to fight among themselves“ (Sutton, 2004, p. 271). Obviously there are other major instances that guide decision making as well – like the corporate vision (Collins & Porras, 2004) as one compass, or the project vision and goals. Unfortunately their interactions and interconnectednesses cannot be discussed here as this would go beyond the scope of this paper. „Theorizing consists of disciplined imagination that unfolds in a manner analogous to artificial selection. It comes from the consistent application of selection criteria to "trial and error" thinking and the "imagination" in theorizing comes from deliberate diversity introduced into the problem statements, thought trials, and selection criteria that comprise that thinking.“ (Weick, 1989, p. 516)

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often are dramatically tilted toward just running existing heuristics or algorithms1. Martin, namely mentions two all-but-invisible process forces, able to promote or stifle innovation culture: financial planning and reward systems (Martin, 2009b, p. 123 ff.). Regarding the financial perspective, he criticizes the often discussed (shorttermed) strive for consistent outcomes that board and stock analysts demand, and reminds the reader that financial planning – especially, if fed with past data – can’t hardly foresee what is needed for pushing knowledge through the funnel. Conventional reliability oriented budgeting approaches must give way to a planning that consists of setting goals and organization dependent, reasonable spending limits only (2009b, p. 124). Closely connected, and also mentioned by my interviewees, are the reward systems. Here he argues that „most executives prefer the known to the unknown. It is much easier, safer, and rewarding to run a billion-dollar business than it is to invent one“ (Martin, 2009b, p. 125). Therefore he can’t explain himself, why a misconception could have developed, that favors running heuristics and algorithms as main source for monetary rewards and status. In his view this is a major problem, as this is unlikely to attract people with the abilities to explore new business possibilities by moving knowledge through the knowledge funnel2. This complies with the notions of many other researchers (cf. Flynn & Chatman, 2004, p. 238 f.; Tushman & O'Reilly, 2004, p. 288) arguing that not just success but also failure should be rewarded while reserving punishment only for inaction: „Enhancing innovation also has to do with how performance is rewarded. This, too, entails a dramatic departure from the management practices ingrained in most companies. Rather than rewarding success and punishing failure, companies should reward both. Again, I must distinguish between what is right for routine work and what is right for creative work“ (Sutton, 2004, p. 272). Empowered employees, enabled to act as intrapreneurs, therefore are the most likely source to make innovation happen.

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A phenomenon also one of my interviewees commented: „In the end [corporations], that are very based on measuring everything, very respective, also controlling the output [will prevent ] divergent thinking [because] you cant really come up with comparable measures.“ (Nicolai, 2010, lines 238-241) The differences regarding source of status, style of work, flow of work life, reward systems, mode of thinking and the dominant attitude between »typical managers« and »designers« are thourougly described in Boland Jr. & Collopy (2004) and Dunne & Martin (2006).

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Additionally Schneider and Nicolai permanently emphasized another important aspect of an innovation culture, that we should pay close attention to. Schneider named it »diversity«1, other authors describe it in terms of a »boundary management« by using a rich variety of internal and external sources, coupling with the project team, and driving the innovation process: „If you want to practice design thinking you need a flat hierarchy, you need free space, and also you have to make use of diversity... but also from different people... you can learn an awful lot outside the company. You can learn an awful lot if you observe people in real life scenarios! When I did Deutsche Telekom we were observing poor turkish people, we were observing social cases, handicapped people etc. And this is were we learned [...] Those people do not work in a company. It is very important that we go out and explore the world. The visions do not emerge behind the desk“ (Schneider, 2010, lines 80-87). These design thinking inherent co-creation and observation processes (with preferably »extreme users«) are further key aspects that can evidently2 lead to innovation (Chesbrough et al., 2006; Chesbrough, 2006; Hippel, 2006; Piller, Schubert, Koch, & Möslein, 2005; Prahalad & Ramaswamy, 2003; Reichwald & Piller, 2009; Stamm, 2003b). The herewith induced self-reflection, in- and outside the organization (Nicolai, 2010, line 109), makes design thinking a self-observation and learning process (Beckman & Barry, 2007) that could create the often-quoted »organizational questioning attitude« for innovation (Baecker, 1994; Brown, 2009; Hamel, 1998a, 1998b; Kim & Mauborgne, 2005; Markides, 2001; Martin, 2009b; Riel, 2009; Schneider, 2010). An attitude that challenges existing mental models and basic assumptions, that resolves seemingly insuperable constraints (Vandenbosch & Gallagher, 2004), and envisions possible futures. On that score designerly divergent thinking could – once introduced and established in the organizational (sub)culture – per se, serve as the driving force for organizational change. This however leads us to the third and last area that needs to change according to Tushman & O'Reilly and Martin: cultural norms. As above findings have shown the ambidextrous organization needs to embrace both, convergent and divergent thinking. This is also the pragmatic view of both interviewees. „I don’t think you have to change the corporation completely, but you have to make sure that you establish a new kind of subculture – this subculture is a value for the corporation as a whole. It is not about changing everything so I wouldn’t say that design

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Not to be confused with »diversity management« that often is understood as a rather inward looking concept.

Procter&Gambles famous »Connect + Develop« approach that uses open innovation as an major source for future competitivness, for instance emerged out of another program, called »Design Works«. Design Works has been developed among others with IDEO in order to introduce an design thinking attitude into the corporation. Once P&G adepted principles of such an approach to innovation (that now some call hybrid thinking), they realized, that they had to broaden their obseration and collaboration basis. Today P&G’s goal is to generate half of it’s product innovation with outside help. (Riel, 2009)

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thinking can be applied to every problem a corporation has“ (Nicolai, 2010, lines 62-66). Schneider argued „[If] a big company has the budget – again as I sad relatively small – and gives the space to explore innovation opportunities [...] this is much more feasible than to say, now we introduce an »innovation culture« in our company.“ (Schneider, 2010, lines 76-79). It also coincides with Tushman & O'Reilly who discovered ambidextrous organizations having established cultures that are simultaneously »tight and loose1«. Regarding the »tight-aspect« they argue that such an culture should rely on strong norms, that emphasize the already above mentioned design thinking attributes, like openness, autonomy, initiative, risk taking, etc. With »loose« they mean „the manner in which these common values are expressed, [varying] according to the type of innovation required“ (Tushman & O'Reilly, 2004, p. 288). Martin looks at it from a more meta-level and states that „balancing reliability and validity demands a new thinking about constraints“ (2009b, p. 127) which must lead to norms that treats constraints rather as a pointer to the locus of needed innovation, than as to the immovable enemy2. In order to achieve that, both authors and also my interviewees agree on the uttermost importance of leadership – in the sense of top-management commitment3 (Nicolai, 2010, lines 111-115; Schneider, 2010, lines 129-139; Tushman & O'Reilly, 2004, p. 288) – to introduce such an approach to innovation, although Mrs. Nicolai and Mr. Schneider prodded me to the fact, that once it’s established, a very different, engaging and collaborative kind of leadership will have to emerge, that so far isn’t researched enough4.

1

“Tight in that the corporate culture in each is broadly shared and emphasizes norms critical for innovation such as openness, autonomy, initiative, and risk taking. The culture is loose in that the manner in which these common values are expressed varies according to the type of innovation required.” (Tushman & O'Reilly, 2004, p. 288) A more detailed discussion on the different handling of constraints between reliability and validity-oriented businesses can be found in Dunne & Martin, (2006); Martin, (2004, 2009a, 2009b) and Vandenbosch & Gallagher, (2004). Martin for instance emphasizes the importance of leadership by refering to his experiences with the introduction of design thinking at Procter&Gamble: „Culturally it’s imperative that people know it is safe and rewarding to bring forward an abductive argument.[...] CEO’s must consciosly take on the role of validity’s guardian to counter the internal and external pressures toward reliability“ (Martin, 2009b, p. 138). That this isn’t the fact today was confirmed by Mr. Schneider who complained: „We need the leadership and it is very hard to get. Because then people are afraid. [...] You [as a design thinker] don't fit into the scheme. But that's exactly what you need as an [innovation] leader. It is still seen as something strange, that certain companies can do. Thats why I hear all the time: Well, Fortune 100 companies can do it because they have the resources... and so on and so forth“ (Schneider, 2010, lines 129-134). As roles often are relayed and teams members come and go during a typical design thinking process, it does not fit into existing explanation approaches: „ I would say if you're in design thinking you got different roles. Leadership in it’s normal sense, but also in being able being a networker, but also being a resource investigator – so leadership got different roles in terms of internal and well as external activities – in and outside the corporation. [...] We know about different teaming, we know also about bringing together different team roles within a project – also in design thinking procjects – but we haven't found so far that profound knowledge what kind of people, what kind of leadership do we need in the different steps. This is up to future research. This is something that hasn't been tackled so far“ (Nicolai, 2010, lines 104-120). Or as Mr. Schneider expresses: „Leadership in design thinking is not as what you would expect with the german term leadership because leadership here is much more about engaging. What you really do is engage. So we do not lead. We are showing directions. We lead by motivation, we lead by breaking down barriers, by opening up opportunities. By engaging people. By exploring their own potential. By making them run. That's what I mean by making people fly! There you have to have the skills, the personality and the responsibility also“ (Schneider, 2010, 122-128; cf. Jung, Chow, & Wu, 2003).

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3

4

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Now, having shortly examined the contribution of design thinking towards an ambidextrous organization, respectively their common overlappings regarding structure, processes and cultural norms, it is very interesting to again discover obvious similarities to the theory of organizational learning. According to Nonaka & Takeuchi (1995) the enabling conditions for organizational learning are intention (vision and objectives), fluctuation and creative chaos (often referred to as »intentionally generated crisis«), redundancy (in terms of blurred boundaries and learning by intrusion of »other« concepts via knowledge networks with the outside world), and a requisite variety (diversity). They are accompanied by an organization design that enables a »layering structure« with a business layer for normal routines (algorithms), a project team layer were the conversations happen (mysteries, heuristics), and a knowledge base layer (heuristics, algorithms) were both are shared. They argue, that the organizational success depends on how seamlessly individuals can move in and out these layers. On the one hand, these mentioned enabling conditions describe nothing else than the already inherent nature of a design thinking process. On the other hand, the layering structure aligns with Tushman O’Reilly’s and Martin’s notions of ambidexterity and the balance between exploitation and exploration.

5

Conclusion
Although design thinking seems to have found a practical way, how to bring together the requirements needed to nurture innovation, some questions remain. Even though the methodology may be already suited to dock on reliabilityoriented organizations, my interviewees and I asked ourselves: Are they, yet? How must an change process look like, that introduces design thinking as means to nurture innovation culture into an reliability-oriented organization? Martin and Riel gave first clues by describing the transition of P&G (Riel, 2009). Nevertheless research needs to be conducted, also in terms of how to overcome to be expected obstacles1 towards such an hybrid organization. Design thinkers will not – or seldomly – have empirical data to support their course. Those to be convinced organizations have. So how to overcome the ease of defending reliability vs. validity? Indisputable the CEO needs to take on the role of validity’s guardian (Martin, 2009b, p. 138), as already described. Nonetheless a clash, for instance, of working styles is to be expected: „If you want to introduce an innovation culture like that, you have to be

1

A closer look leads fast to the discussion of more abstract levels of research, like e.g. management education with its preponderance of training in analytical thinking (Martin, 2009b, p. 129) or the reliability orientation of key stakeholders, like stock market analysts or the board of directors with their preference for measurable reliability (»what matters is, what can be measured«-attitude).

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aware of the difficulties, obstacles and challenges. For instance we have a funny way of taking on responsibility. I always say that I make team members or MBA students fly and then I shoot them... Which means how do you come back on earth, how do you come back to reality? If you have a real innovation it has no precedent it has no previous case, so it's something that is crazy if you want. You have to get back then and you to try to find out how are the possibilities of implementation, how is the feasibility of this innovation idea. Therefore we can take on those risks on a certain extent but then we have to become realistic again. That is a funny experiment and most companies are not used to that“ (Schneider, 2010, lines 257-267). In its extreme cases this can lead to inner-organizational resistance and a questioning of the misunderstood concept. That means the needed leadership towards an, as well as the leadership within an existing design thinking organization is up to urgent future research (Nicolai, 2010, line 104 ff.). However, once such a transition succeeded, and the in chapter 4 mentioned areas structure, processes and cultural norms are aligned towards more tolerance regarding validity-oriented thinking, abductive reasoning and experimentation, an organization should have all the attributes it needs, to become ambidextrous. Design thinking itself already fulfills the general conditions needed to make innovation happen. It embraces convergent and divergent thinking, it historically originates to resolve wicked problems (often encapsulated as the conflict between reliability and validity in the form of constraints), and it therefore has the capability to combine the often conflicting triangle of viability (business focus), feasibility (technological focus), and desirability (design based on human values and user needs focus) (Brown, 2009). Schneider summarized that as follows: „I don't know any other methodology which is so finely balanced between creative, innovative thinking and real life focus. And I think this is what makes design thinking really unique.“ (Schneider, 2010, lines 274-277). To put it even more clearer, this unique combination of realistic self-observations with the anticipation and envisioning of possible futures could provide the ground for continuous change in an organization. In particular, as the methodology itself can be regarded as an permanent learning process that nurtures an ongoing strategic conversation1 (Heijden, 1999), were strategy flows top-down and bottom-up, preventing organizational inertia, as stipulated by Tushman & O’Reilly: „Finally, technologies, products, markets, and even senior managers are retained by the market, not by a remote, inwardly focused central staff many hierarchical levels removed from real customer“ (2004, p. 289).

1

Van Heijden described »learning loops« in his book »Scenarios – The Art of Strategic Conversation« as strategy development processes that integrate experience, sense-making, and action into one holistic phenomenon.

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Summed up, like change management design thinking connects many research areas, from strategic planning, innovation management, human relations to organizational development and many more. But its ability to knot very diverse topics (Nicolai, 2010, lines 168-173) in a practical way, that makes conscious what problems really need to be addressed in an organization, fills a gap that hasn’t been tackled so far in change management (Nicolai, 2010, lines 154-167). So for instance Mrs. Nicolai formulated: „It’s really about the content that has been missing, also in the discussions about organizational culture… Which is more or less about how can we change a corporation based on what you've got so far? … It’s about working together! Maybe it’s about something that has the ability to link very diverse topics within management, within human relations, within organizational development etc.“ (Nicolai, 2010, lines 168-173). Poole pragmatically summarized it: „By now it is common sense that people, space and time – [are] the »least common denominators« of change and innovation theory” (2004, p. 16). As design thinking in the end connects all these dimensions (Nicolai, 2010, line 220 f.) in an »ambidextrous way«, it could have the potential to help organizations constantly renewing themselves by motivating reasons for innovation (Schneider, 2010, p. 223 f.).

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Appendix
The Expert Interviews
IDEAL-TYPICAL INNOVATION OBSTACLES OF BIG CORPORATIONS? NICOLAI „We are still wondering to see how difficult it is sometimes for the corporation to come up with a team which has people from different departments. We often figure out that they haven't been in contact before.“ #00:17:22.8# (Nicolai, 2010) „[Some inexperienced firms are] not big enough, that they already have developed routines but they know this will come to an end when they grow.“ #00:06:01.2# (Nicolai, 2010) „Larger corporations have established trend research departments – attached to the headquarter – but they have no impact [...]. They are good in figuring out patterns that might be in the future [but] they are not really customer centric. [They have] no experience of addressing the problems for the corporation and the interplay of different people and different contexts.“ #00:07:51.4# (Nicolai, 2010) SCHNEIDER „Even though we talked a lot about innovation in recent years I don't think that there was much innovation going on. We were expanding our markets, we were selling our products to new and different markets, approached different markets. We tried to adept our products to different markets... So ethnographic research was about understanding whether those people like pink or blue. Bullshit! ... Instead of learning from those cultures and learning from those local realities, to really find innovation opportunities we just adapted our products. In the same time innovation was about making them cheaper and cheaper. This happened at the one side by improving the technology, the assembly, the production, the distribution... That happened on the other side by having cheap labor costs. I ask you. Where is innovation?“ #00:28:49.7# (Schneider, 2010) „Where is innovation? It's continuously repeating something, and then you're a bit better than the other. Why are you better? Maybe because you produced cheaply, because the shape of your product is a bit nicer, or, or, or... We still think about innovation as something somebody does – like a crazy guy that had a great idea – and that then gets copied by somebody else. But this approach can also happen in very small steps, but improve things in a very significant way.“ #00:48:43.6# (Schneider, 2010)

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„We are in an economical downturn, so the budgets of research and development are decreasing. That is a paradox because in theory, if you are in an economic downturn, you should find ways to enable an economic upturn again and to do this, you either expand the market or you innovate. Design thinking is an economic tool to envision possibilities, because if you think about it, it is relatively cost inexpensive. If you build prototypes and models, if you build scenarios you don't have an implementation train in a factory already. You just have an experiment and then you try to understand and think of opportunities to foresee how this experiment could turn out in real life. By applying design thinking you have a very cost effective tool to foresee possibilities for economic growth. [...] It would be worthwhile to research how much is spent on field research, or operative marketing and how much does it cost if you employ a team to envision possibilities for your organization. I'm sure this is in no relation.“ #00:07:11.2# (Schneider, 2010) „Experiment does not mean that we do something crazy. It just means, it is not finished yet. It is not a final solution, something that has to change your entire company. But that we envision possibilities for you to grow. Possibilities to innovate.“ #00:07:32.1# (Schneider, 2010) „What all those companies did, back in the ninetieths, is that they have innovation managers or even innovation executives and those were very, very sad persons. Sometimes we asked: And what do you think? They didn't even dare to speak up! They go a bit happier once they created the position of the CIO because at least they now sat on the round table and got a big salary. The next step now is to create [innovation] teams [in an design thinking sense] within your company. [...] This will already be a big step ahead.“ #00:24:14.8# (Schneider, 2010) „If it's not possible to make use of all the resources, the human potential that you have, and letting it cross-fertilize to make something happen which was unexpected, why do you have them at all?“ #00:46:25.9# (Schneider, 2010) WHAT NEEDS TO CHANGE IN CORPORATIONS TO NURTURE INNOVATION? NICOLAI „I dont think you have to change the corporation completely, but you have to make sure that you establish a new kind of subculture – this subculture is a value for the corporation as a whole. It is not about changing everything so I wouldn’t say that design thinking can be applied to every problem a corporation has.“ #00:14:17.2# (Nicolai, 2010) „I also think although opening up, to open such a new out of the box thinking – you also have to think about how to incorporate that – not only as a think tank,

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but also how to influence business within your corporation.“ #00:12:50.9# (Nicolai, 2010) „So you also have to work on a structure where these think tanks are working together with mangers in line.“ #00:13:06.4# (Nicolai, 2010) SCHNEIDER „Usually individual smaller companies innovative and then get bought by big companies. And I tell you, that scenario can also happen in a big company, which means that a big company has the budget – again as I sad relatively small – and gives the space to explore innovation opportunities. From my consulting experience this is much more feasible than to say, now we introduce an »innovation culture« in our company.“ #00:16:26.4# (Schneider, 2010) „If you want to practice design thinking you need a flat hierarchy, you need free space, and also you have to make use of diversity... but also from different people... you can learn an awful lot outside the company. You can learn an awful lot if you observe people in real life scenarios! When I did Deutsche Telekom we were observing poor turkish people, we were observing social cases, handicapped people etc. And this is were we learned [...] Those people do not work in a company. It is very important that we go out and explore the world. The visions do not emerge behind the desk.“ #00:22:22.4# (Schneider, 2010) „The next step now is to create [innovation] teams [in an design thinking sense] within your company. [...] This will already be a big step ahead.“ #00:24:14.8# (Schneider, 2010) „It needs very skilled leadership. But more than the leadership it needs the time, money and space to be practiced. Again, this space, money and time is relatively low compared to all the other tools we had in the past like quality function deployment etc. So one have to has to bear this in mind, that the investment is relatively low.“ #00:35:11.3# (Schneider, 2010) „We need the leadership and it is very hard to get. Because then people are afraid. [...] You [as a design thinker] don't fit into the scheme. But that's exactly what you need as an [innovation] leader. It is still seen as something strange, that certain companies can do. Thats why I hear all the time: Well, Fortune 100 companies can do it because they have the resources... and so on and so forth.“ #00:37:05.3# (Schneider, 2010)

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LEADERSHIP AND DESIGN THINKING NICOLAI „We know about different teaming, we know also about bringing together different team roles within a project – also in design thinking procjects – but we haven't found so far that profound knowledge what kind of people, what kind of leadership do we need in the different steps. This is up to future research. This is something that hasn't been tackled so far.“ #00:27:03.4# (Nicolai, 2010) „Design thinking really needs at the very beginning to be self-reflective, to observe the corporation - ??? has been so far - and also to be open to new approaches in terms of thinking about the question, the problem. Nevertheless I think [remark of the autor: top-management] leadership is important. If the corporation would like to become more design thinking-oriented you need the commitment of the topmanagement and the CEO as well. Every project needs leadership to an certain extent and thats the thing with design thinking. There must be somebody who is not only responsible for the project. I would say if you're in design thinking you got different roles. Leadership in it’s normal sense, but also in being able being a networker, but also being a resource investigator – so leadership got different roles in terms of internal and well as external activities – in and outside the corporation.“ #00:25:49.2# (Nicolai, 2010) SCHNEIDER „Leadership in design thinking is not as what you would expect with the german term leadership because leadership here is much more about engaging. What you really do is engage. So we do not lead. We are showing directions. We lead by motivation, we lead by breaking down barriers, by opening up opportunities. By engaging people. By exploring their own potential. By making them run. That's what I mean by making people fly! There you have to have the skills, the personality and the responsibility also.“ #00:39:19.4# (Schneider, 2010) „We need the leadership and it is very hard to get. Because then people are afraid. [...] You [as a design thinker] don't fit into the scheme. But that's exactly what you need as an [innovation] leader. It is still seen as something strange, that certain companies can do. Thats why I hear all the time: Well, Fortune 100 companies can do it because they have the resources... and so on and so forth.“ #00:37:05.3# (Schneider, 2010) „It needs very skilled leadership. But more than the leadership it needs the time, money and space to be practiced. Again, this space, money and time is relatively low compared to all the other tools we had in the past like quality function de-

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Paper »Change Management«

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ployment etc. So one have to has to bear this in mind, that the investment is relatively low.“ #00:35:11.3# (Schneider, 2010) CRITIQUE ON CHANGE MANAGEMENT AND THE RELEVANCE OF DESIGN THINKING FOR INNOVATION AND CHANGE NICOLAI „Try to come up with something that also guides the future of the corporation. In last years change management has become popular, and the learning organization as well, but both approaches or both streams of research haven’t been really focusing what kind of change do we need. What kind of learning is neccessary. I think this is the gap that at at the moment design thinking really fills.“ #00:21:53.8# (Nicolai, 2010) „What is still missing in the whole literature on change management is ..., well, in change management ... there are no really good models out there. In particular if you look at the bigger names – I look for example at Kotter. This is about staging change but it doesn’t really have a body of knowledge in there I think.“ #00:31:24.0# #00:31:28.9# (Nicolai, 2010) „The change literature too often is not helpful and design thinking in terms of – OK what kind of problems are we addressing? – fills the gap which still is lacking in change management. So it is about the content, it is about making the organization fit for tomorrow in terms of being more responsive, being more able to not only to react but also to be proactive in terms of coming also up with different models of how to organize your organization. Having network structures, thinking beyond departments which is so far behind many organizations.... And also building on what we call intuition! The knowledge would also more or less incorporate on what we found so far, what we call implicit knowledge. This is something that also with design thinking comes more into play. Explicit knowledge is about how to do things, organization routines. Implicit knowledge is about pattern recognition – it’s about connecting the dots, connecting observations – which is in terms of the knowledge a very valuable insight.“ #00:33:41.1# #00:33:52.8# (Nicolai, 2010) „It’s really about the content that has been missing, also in the discussions about organizational culture which is more or less about how can we change a corporation based on what you've got so far. It’s about working together. Maybe its about something that has the ability to link very diverse topics within management, within human relations, within organizational development etc.“ #00:22:49.5# (Nicolai, 2010)

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Paper »Change Management«

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SCHNEIDER „What all those companies did, back in the ninetieths, is that they have innovation managers or even innovation executives and those were very, very sad persons. Sometimes we asked: And what do you think? They didn't even dare to speak up! They go a bit happier once they created the position of the CIO because at least they now sat on the round table and got a big salary. The next step now is to create [innovation] teams [in an design thinking sense] within your company. [...] This will already be a big step ahead.“ #00:24:14.8# (Schneider, 2010) TIMEFRAME NEEDED TO INCORPORATE A DESIGN THINKING ATTITUDE INTO AN ORGANIZATION NICOLAI „More in the long run. Its not about we have done that one project. ... You need at least two years, then you get the impact in the organization.“ #00:23:59.0# (Nicolai, 2010) WHY IS DESIGN THINKING BECOMING SO POPULAR? NICOLAI „Couple of reasons. Fashion and trends in the end. It’s about having the next big thing. If you look in particular what we find in the history of business administration there have been always these kinds of areas that popped up, like busines process reengineereirng, then the focus on stakeholders etc. I think it was time for a new topic. If you look back.... It often is easier to look back and recognise a pattern... There has been a lot work done already ten years ago by quiet influtential mangers and researches which have already adressed the problem of understanding the market and the markets of tommorow in terms of not being market-driven but trying to drive the market and your competitors. On the other hand there was the design community to become more visible in terms of well-known players and they also started to do this. And then the development of the economy where you got all those things you couldn’t really explain why things became popular, like brand hacking etc. [Those were] lots of phenomena which couldn’t be explaind with the models known so far.“ #00:21:12.0# (Nicolai, 2010) SCHNEIDER "Design thinking was born in period of time, where we had technological innovations and we thought about how can we apply these technologies. And to find ways that make sense and that have a place in the world, we used the methodology to implement the technology in a human-centered way. That was the birth of this methodology. This is how it evolved." #00:04:04.8# (Schneider, 2010)

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"[It helps to discover] what subconsciously somebody is concerned about. I think this is a methodology thats helps you to understand that and to drive your strategies in a direction that will make sure that your product or service is successful in the end." #00:02:59.9# (Schneider, 2010) WHAT IS DESIGN THINKING FOR YOU? NICOLAI „For me it is more about an attitude in the sense of »geisteshaltung« It’s about a different way of solving problems, also applying a different way of asking questions regarding your problems. This knowledge is not new to the world it’s about combination of different steps but also combination of approaches which are different in terms of where you're going to work – its about space and people and the project management itself.“ #00:16:59.2# (Nicolai, 2010) SCHNEIDER "[The] application of design thinking is reality-driven innovation... With it’s help it is very much funded what the reasons for innovation must be. Design thinking is a tool to motivate reasons for innovation. I think it is a tool for understanding the collective unconscious." #00:01:46.4# (Schneider, 2010) „This deep qualitative understandiung can help to find reasons for innovation.“ #00:04:49.1# (Schneider, 2010) WHY COULD DESIGN THINKING FAIL? NICOLAI „It hasn’t been as long as needed on the agenda of the top-management, normally you get the topmanagement, the CEO and the board – who are in moment very commmited to open up, and create space in the organisation that opens divergent thinking – but at the end it's also about being commitied in terms of letting it run – lets say – longer than four years. This is a major thing that came up in our experience – although you got commitment first, they dont stick to that idea, do not really believe in that in the long run.“ #00:12:00.1# (Nicolai, 2010) „In the end [corporations], that are very based on measuring everything, very respective, also controlling the output [will prevent ] divergent thinking [because] you cant really come up with comparable measures.“ #00:12:21.6# (Nicolai, 2010) „I also think although opening up, to open such a new out of the box thinking – you also have to think about how to incorporate that – not only as a think tank,

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but also how to influence business within your corporation.“ #00:12:50.9# (Nicolai, 2010) „So you also have to work on a structure where these think tanks are working together with mangers in line.“ #00:13:06.4# (Nicolai, 2010) SCHNEIDER „In my experience it constantly happens that a company says now we do a workshop, now we do a seminar and we are all cool and we are all doing freaky stuff and freak out in our brain storming and we have great ideas and then... nothing happens! And that is the worst thing you can do. Because if your collaborators invest their energy – and they are not used to that, they are used to stick to the rules and they all in the sudden have to be creative and have great ideas – thats already a hard process. But if then nothing follows up, then that's a killer.“ #00:11:52.8# (Schneider, 2010) „If you want to introduce an innovation culture like that, you have to be aware of the difficulties, obstacles and challenges. For instance we have a funny way of taking on responsibility. I always say that I make team members or MBA students fly and then I shoot them... Which means how do you come back on earth, how do you come back to reality? If you have a real innovation it has no precedent it has no previous case, so it's something that is crazy if you want. You have to get back then and you to try to find out how are the possibilities of implementation, how is the feasibility of this innovation idea. Therefore we can take on those risks on a certain extent but then we have to become realistic again. Thats is a funny experiment and most companies are not used to that.“ #00:13:42.8# (Schneider, 2010) WHAT ARE THE CONTRIBUTIONS OF DESIGN THINKING TO INNOVATION? SCHNEIDER „This methodology is a very good tool to keep risks low and also to keep costs low. You cannot produce a product, then sell it, and then find out if it works. That is why you have to trial and error, prototype, this is why you need qualitative research.“ #00:29:53.8# (Schneider, 2010) „It takes time to establish itself to filter into companies and to find its tradition. I don't know any other methodology which is so finely balanced between creative, innovative thinking and real life focus. And I think this is what makes design thinking really unique.“ #00:41:57.1# (Schneider, 2010)

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„Otherwise we continue to repeat and to improve and to make slight modifications, make things a little bit better, [...] think about the car. Box on four wheels. It still is a box on four wheels.“ #00:47:13.6# (Schneider, 2010) ARE THERE LIMITATIONS OF DESIGN THINKING? SCHNEIDER „It is hard to say what are the limitations of design thinking because it is just a way to improve. The limitations are really if you expect that people who were never told to think out of the box [immediately embrace it], that you have to be aware of the hierarchical structures, ...of the company, ...you have to deal with that in a diplomatic way. You [also] have to be aware of the feasibility, of the possibility of the outcomes. Great ideas that cannot be produced are worth nothing.“ #00:33:46.4# (Schneider, 2010) „What I think is strange, and risky, and bizarre is to say, now there's is a methodology that is called design thinking and we change our corporate culture by introducing this philosophy. I think this is a bit over the top.“ #00:43:45.4# (Schneider, 2010)

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