Design thinking, Ideo and disruptive business model innovation

To be honest, I get a bit bored about the mantra that design thinking will solve the problems of large corporation. Well, when I go through the case studies at Ideo I am extremely impressed by their client list but not about the output. I have seen several design thinking sessions and I am not impressed at all with the output. The results are very often: More-of-the-Same but with fancier design.

Wer hat es erfunden? Novo Nordisk insulin pen

Where is the invention from design thinking that changed the industry? Where is the iTunes or the Kindle of Ideo? The problem with design thinking starts very early in the process with the problem definition phase. And that is where large corporations fail. They define the scope too narrow and than you get nice new things that sustain your current business but not new business models that rock your industry and yourself.

Ideo is a very good (self-) marketing & design firm but not an industry rocking firm. Large firms just love Ideo because Ideo just offers such a well designed process to solve the big problem of “being not innovative”. You hire Ideo for comforting yourself for not using your own common sense and your own customer insights. You just outsource your understanding of the customer to Ideo.

And how innovative are Ideo’s ideas?

Let’s take the example of the insulin pen Ideo describes on its homepage as a case [update 22nd Oct 2010, case is not available on IDEOs homepage any longer due to redesign of page]. They did the work for Lilly in 1997. Well, that is not really outstanding since the Danish firm Novo Nordisk introduced the pen in 1985. So Lilly was just catching up to this formerly unimportant drug firm from Denmark that solved 12 years earlier the problem that Ideo solved for Lilly. Novo Nordisk was a business innovator. Lilly is not.

Another show case of Ideo is the modular shopping cart they did in project for the TV channel ABC. Instead of having one big bulky shopping cart they came up with a modular cart that is better suited for today’s shopping habits. Definitely, the new shopping cart is nice but definitely not industry changing. Industry changing were such firms as Walmart or discounters like Aldi. They changed the retailing industry forever. For fashion retailers examples are Zara or H&M who saw that fashion is as much logistics as it is about fashion.

Adapt the Definition phase of design thinking

We have to watch out that design thinking will not become the next management fad like scientific management. I propose we go back to what God gave us, our common sense or in German “gesunder Menschenverstand” and that we use more our curiosity why the things are the way they are. The business model canvas will help us to understand the business we are in.

Questions you should answer to better understand your business
The business model canvas by Patrick Stähler

What is great about design thinking that is all about imagination of the unknown. But to really challenge the hidden assumption of any business more time should be devoted to the definition phase and to the unlearning phase. Only, when you challenge the hidden dominant logic of an industry you can rock the industry. If you do so, the design thinking process can be valuable to your company.

Unhiding the hidden dominant logic by looking at the jobs you do for your customers

So the best way to start is to unbundle your current value proposition. Ask questions like which job do you solve for your customers. And quite often, to your surprise, you solve very different jobs for different customers with the same product. And with dissecting the value proposition into job-to-be-done very interesting new problems emerge on which you can apply the design thinking approach.

I have done this several times already in customer projects and it works well. I used this job based unbundling on newspapers in my recent post on “Who says paper is dead?“.

I am interested in your experience with design thinking and business model innovations. Love to hear from you.

43 thoughts on “Design thinking, Ideo and disruptive business model innovation”

  1. I think the problem of businesses approach towards disruptive design or innovation is that any appearing phenomena is talked to death and showed in various case studies etc. There is no just-do-it-mentality in this area. It’s what I know as the the Nato-principle (No Action Talking Only). I studied Mechanical Engineering and from this point of view some of the argumentation feels kind of ridiculous. Rapid Prototyping, Virtual Product Development or Digital Mock Up Technology – all are applied in Bachelor courses at universities and also R&C Departments are often fooling around with this stuff. Being creative and changing the world from scratch is not the right approach in my opinion.

    1. Sorry for the late reply to your comments.

      You say that being creative and changing the world from scratch is not the right approach. What do you think is the right approach? And which approach do you think is appropriate for whom since I believe that we have to distinguish between start-ups and established companies?

      Kay, I second your comment that product innovation is not enough and therefore the business design process that focuses mainly on product innovation will not solve the growth imperative of large corporations. I think there is a second reason why business design promises too much.
      The problem is in the first phase of the design thinking process, the definition phase of the problem. Here, the problem that the design thinking process is supposed to solve is defined too narrowly. And you can have the best process the output is still mediocre if you have asked the wrong question. You get a great answer for the wrong question.
      And third, there is the belief that with a structured process you will succeed. The interesting thing is that most outstanding ideas evolve over time and usually not in the context of a structure brainstorming session or process. But of course, it sells much easier to managers if you say that even creativity can be actively managed. That’s what managers love and therefore they buy into the business design story.
      I love the saying: A fool with a tool is still a fool. And design thinking is just a tool.

  2. 100% correct Patrick, especially the insight as to why large corporations jump on the IDEO bandwagon. New products alone do little to change a company’s dynamic as they are often easily copied and quickly commoditized. You need an innovative business model to compete as one of one. Too few companies are willing to take the risk and do the hard work of business model change. Leaders do not realize that keeping with the same business model and only doing incremental improvements is a far greater risk. My recent blog post provides tool helpful when using the business model canvas.

    From the states–Happy Thanksgiving, one of my favorite holidays.

  3. Hi Patrick, thx for the response.

    First I have to say that Design Thinking is not my primary focus and maybe I’ve not read enough about it. But from my engineering background this is kind of old wine in new skins. Hence I think it’s kind of ridiculous to claim that “Design Thinking will lead to disruptive changes” from skratch. I’m not saying that it’s not the right approach. Design Thinking appropriates and combines some well known techniques wich can help in an innovation process, but the technique for itself is not enough to innovate. In my opinion real innovations derive from specific need of a problems to be solved and not because someone uses a new buzzword or its corresponding visualization techniques.

  4. I totally agree with design thinking not leading to disruptive innovation.

    I’m a bit irritated by your business model framework: why include leadership style etc? I don’t think it makes sense to try to put everything into a business model.

  5. @Marc
    I use the extended business model framework only for large, established corporations that are looking for business innovations. The culture/value part is included to show them where they will have difficulties to execute the new model. The fact is that even when have designed the best new business model they can not execute it due to their existing culture. And that is the reason why I include the culture/value aspect in the business model for traditional corporations.
    For entrepreneurs I use just the three parts value proposition, value architecture and revenue model.

  6. I think there is still value in leaving the value/leadership section in – even for startup companies.

    Even startups need to think about what kind of culture they want, who is representative of the culture they want and what values will continue to prevail as the company gets bigger. If entrepreneurs aren’t thinking about the people side of the business early, they may lose the magic that got them started.

    1. @Georg You are right. They are excellent in marketing and getting sponsoring from Government and Universities. The links you posted show exactly why I am skeptical. The more Governments think this is the next big thing the more likely it is a fad. Governments are very good at spotting trendy stuff without long-term economic impact. And another good indicator is when large corporation jump on the bandwagon. The large incumbents want to be innovative by using new techniques but they don’t understand that they will not find disruptive innovation this way since their resource allocation process (who gets which resources like management attention, money, etc. and who gets promoted) totally contradicts disruptive innovations. Disruptive innovation will come from outsiders not from the incumbents. And design thinking will not help!

  7. Dear Patrick Stähler,

    thanks for pointing me to your interesting post.

    I agree with your view that challenging the hidden dominant industry logic is the most promising approach to address radical innovation. As a consequence, a new value proposition is mostly linked to a change in the business model and the value network of the innovator. Design thinking may unleash its potential in this process in order to redefine assumptions.

    This concurs quite well with thoughts from Roberto Verganti on “Design-Driven Innovation”:
    I’m currently reading the book with great interest as it’s reshaping my understanding of innovation.
    He also emphasizes that the IDEO approach usually leads to incremental innovation as basic underlying assumptions don’t become challenged.

    Overall, I think, design thinking is for sure no magic tool to inherently solve every business problem. However, it can serve as a valuable approach for successfully addressing incremental improvements and more radical innovation – both types need to be balanced in a portfolio.
    Moreover, the human-centered principles make design thinking an interesting tool for a broad scope of application. I personally embrace the concept as it may help to shift from a technology-dominant to a more customer-centered view – at the end of the day innovation starts and ends with people and how they value the offer.

    Looking forward to keeping in touch.

    Regards from the eastern part of CH
    Ralph-Christian Ohr

  8. Patrick, you have triggered a very spirited discussion – congrats!

    Part of what makes design thinking so appealing is its immediacy. We can marvel at its art museum beauty – and that is one form of utility. We can benefit from its functionality. And when it uniquely defines an original brand, it can build loyalty.

    Business model innovation, however, is redesign of behavior AND customer experience AND potentially product and service. So it goes far deeper – and often requires tough decisions about what to abandon as well as what to create. Culture change is a huge part of this. Stated (or asked) positively, given the change we need to create, what kind of leadership do we need? Do we have the people who can exhibit the kinds of behaviors we need to be successful? If we ignore the people side of it, we end up with a great business model, unimplemented, like so many other great ideas.

    Rather than a jihad about which is better, in my mind the question is, what is the best either can offer? When do we use either of them? How can they create new forms of value when they work together?

    If we get TOO stuck on method, then we become overly control-driven, which is the antithesis of innovation.

    Every company has a portfolio of new offerings, some incrementally better, some revolutionary. Both business model innovation and design thinking will have a place in the portfolio.

  9. @Greg Thanks for your comments. In general I like tools like Design thinking, 5 forces but I am skeptical about how we use them. Even so useful tools like double-entry bookkeeping has be been abused by managers. Instead of using the “true and fair” principle managers and their accomplices like auditors or investment banks created special purpose vehicles with the sole purpose that the assets and liabilities will not show up in the books.
    So ever tool is only as good as the people that use them. The best way to sum it up: A fool with a tool is still a fool.

  10. Good discussion around design thinking, and very much in agreement that it starts too far down the innovation process to come up with anything more than service/ product innovation, and even therein, incremental. Where I have found design massively useful is in the NATO world – where if you can rapidly sketch out an idea to bring it to life people respond much more emotionally than they would to concepts/ powerpoints. It is then a great tool for moving from a complex challenge to something people can get their arms around. It is interesting how well the industry, and particularly IDEO have self promoted themselves, certainly something disruptive there!

  11. Excellent and timely critique. The problem is not with IDEO, it is with design as a discipline altogether – it remains too obsessed and confined to slick products and packaging, all said and done. This was great in its early days, but today it is limiting the discipline into remaining a tail-end innovation cosmetic effort rather than evolving into a discipline of ideas and innovation – regardless of its (industrial or otherwise) context. I have argued elsewhere that in order to grow to its full potential, design must now look for new exemplars and role models who truly embody the power of design thinking and define the discipline around these instances – like Gross National Happiness or Alternative Currency…
    Thanks for the heads-up warning!

    1. Thanks for your comment. The problem we face with almost all trades like management, strategy or design is that we have a too high degree of labor. We are supposed to be just master of our little field of expertise. The broad scope of what a business is, is lacking. The manager is suppose to manage the daily operations, the strategist is in charge of long term strategy and the designer is in charge of the polishing of the product designs, the marketeer is doing all the communication and selling. We are all are experts in our small field but we forget that the whole business is important. It is not just the product that makes a customer happy, but the distribution, the aftersales service, the pricing etc.
      Business Model Thinking is a tool to integrate all facets of a business again and give an overview why the business is existing and what excites or should excite customers. With this overall picture, the designer can be better designer, the manager a better manager….

  12. IDEO’s use of the term “design thinking” is only a few years old, and though its strategic business design work is older still, it was not a primary focus of the company in 1997 (the time of the Lilly pen) or in 1999 (for the Nightline shopping cart). The former was a classic product development project, the latter a weeklong exercise to illustrate their design process on national TV. Faulting IDEO for not making industry-wide changes based on these two projects misses the point widely.

    Besides, as a consulting firm, IDEO is hardly in a position to change any industry but its own. Has it helped place design at higher levels of corporate strategy? Has it influenced the process of product and service development? Has it helped changed the way design is perceived in industries that previously were driven by bottom-line concerns? I believe it has done all these things, and not only for its own success but for all design firms.

    I don’t believe that IDEO has ever claimed an ability to “rock” industries, but they do seem to rock their clients’ culture and process, in ways that aren’t always apparent in a project’s final output. This, to me, is the power of design thinking.

    1. @Scott Thanks for your true insights into IDEO and your elaboration on the development of the design thinking concept. As a former employee you have insights I definitely do not have. Have you written somewhere how IDEO is working on the problem definition? If not, I would like to invite you to write here on my blog. It is so crucial to ask the right questions and I would love to hear from the best.

      @Scott @David My main pain point with design thinking is with the large corporations. I wrote “…the problem definition phase… is where large corporations fail.” We ask the wrong questions with a great tool and therefore the output is not as rocking as it could be. That is what you call the lack of opportunity.

      What I criticize currently is the hype around design thinking. We have a university here in Switzerland that uses the design thinking process. I do not know if they have licenced the methology or not. They position themselves as if they find very innovative solutions with it. The case they presented a conference was less than exciting. It was classical MOTS, More-of-the-same.

      So my criticism goes to the large corporations that do not dare to ask the daring questions and to copy-cats that uses a method but cannot apply them as the master of the design thinking can do it.

      As we say “A fool with a tool is still a fool”. And the guys from IDEO are definitely no fools 😉

  13. One cannot dispute the need for a designer, such as IDEO, to critically examine the problem definition. I wish, though, that Patrick Stähler had tipped his hat to the ‘opportunity’ portion of the equation: analogical thinking + opportunity. Opportunity is not homogenously available. For example, no application of design thinking is likely to radically change or improve sailboat design. I would have liked to see a paragraph on how to talk to clients (even between segments of a single organization) about paying for and executing research into company assumptions and customer traits toward designing value propositions. Research that has no guarantee of turning up worthwhile opportunities. Expanding the scope of a problem likely entails not only having the executive on board, but gaining the authority to enforce the design solutions.

  14. Patrick, I can’t give an answer that applies to all of IDEO; I’m not a spokesman, so this is my opinion: Despite definitions that we see in books and websites, design thinking remains a fairly fuzzy and dynamic concept — the phrase “nailing Jello to a wall” comes to mind. However, the problem definition phase of a project is a key component, and this is where not only big corporations but individuals like me fail.

    People and teams are measured by what they get done. DT asks that, before we try to *do* things, we spend a significant portion of time at the start of a project questioning assumptions. This can look a lot like doing nothing important. It might look like shopping, or visiting a theme park, or interviewing grandmothers, but it doesn’t look like design, and it doesn’t seem to get the project closer to completion.

    It’s only when the team gets an insight that helps turn their project in a new and valuable direction that that initial investment of time and energy becomes clear. “Remember that thing we saw? What if we…”

    So, I absolutely agree with you: It is crucial to ask the right questions, and I think DT helps give people who are used to solving problems quickly a method (and permission) to slow down and determine whether they are solving the right problems. This may go against corporate culture, because it may mean questioning your boss’s assumptions.

    Other aspects of DT also have trouble at large companies, like collaboration across departments, and rapid and iterative prototyping, and messy dedicated project spaces, etc., etc. All of these things have been around for decades under a variety of labels. And it’s probably true that both IDEO and design thinking suffer from hype.

    But underlying that, everyone I know there is practicing DT principles because they are effective, and there’s an honest enthusiasm in promoting them to others — especially to people who don’t see themselves as designers, but who are called upon to “design” in their jobs (whether planning a significant project or improvising an on-the-spot solution) every day.

  15. Take any answer: It will be true in some contexts and not true in others. All answers are conditional — they require a context of relevance. In which conditions and why is Design Thinking relevant? And more particularly, why now?

    One word: complexity. Due to the accelerated rate of change, truth is fleeting. As the business game changes at a more rapid pace, what was known yesterday becomes less relevant tomorrow. There are many critical contributions that Design Thinking brings to the table to ameliorate these challenges, if used effectively.

    Question Everything
    Beliefs are grounded on certain facts. With so many things in flux in the industry, long-held beliefs may now have underlying facts that are no longer valid.

    Collective Expertise
    The breadth of expertise needed to see and understand the larger whole requires multiple people and perspectives — this is not for solo acts.

    While multiple perspectives are critical, they often conflict with one another. This is where solo act skills do come to play — in the shaping of what’s relevant and what’s not and how they fit together. This is where science meets art: in removing what’s not relevant for the statue to emerge from the block of marble.

    Immersive Possibilities
    This is particularly relevant. In a recent piece ( ) I speak about issues of mental gaps that individuals cannot cross themselves. All learning has to be grounded against something we already know. More and more we’re dealing with things we have nothing to ground it to — or nothing obvious to ground it to. The grounding has to occur by immersive experiences. The collective discovery elements of Design Thinking is invaluable for bringing these gaps.

    Most business operational practices evolved from the manufacturing era. The control required for mechanizing something is achieved through linearity — removing variability. This makes things repeatable. It also makes things repeatable by others — which minimizes market differentiation. Market differentiation now comes through embracing non-linearity — shifting from the machine to leveraging the full potential of human wetware. In this way Design Thinking is the machine floor mechanism for tapping that human potential.

    Why vs. How?
    Circling back to challenging all assumptions, the operative word in Design Thinking is “why”. We are far too often solving the wrong problems or symptoms of the problem, but not the problem itself. Also a huge issue in current business models is the budgeting mechanisms — when money is divided into departmental pockets, problems are often neither viewed or solved across departments. While most associated with the realm of Systems Thinking (which has relevant DT practices and perspectives), Russ Ackoff is a champion of good DT practices. He points out that creativity is discontinuous — most businesses are embracing practices that thwart, rather than enhance creativity (tying back to the issues of linearity and variability) (video of Russ with some of his key thoughts).

    Services vs. Products
    This is where I’ve watched the evolution of IDEO in the grand “aha” — the true potential of Design Thinking is not with products but with services. The greater majority of commerce today is not products, but services — and yet businesses continue to embrace business models designed to optimize products as output. Again, we introduce the distinctions between fixed and variable. The more human interaction involved the more variability required. Most business operations are just not good at striking a balance between fixed and variable. Even the term ‘management’ implies control — but all indications are that there is a false belief that more control is desired.

    We have a lot of long-term beliefs to unravel and new operational models to explore. DT is one means to help us explore those possibilities and tap the potential.

    While written to a specific topic, see if you can find hints of most of these things in this piece

  16. I just stumbled onto a great paragraph that reinforces my points, from the preface of the new book “Game Storming — A Playbook for Innovators, Rulebreakers, and Changemakers”

    “Since the invention of the computer chip, we have been moving from an industrial to a post-industrial economy, where the nature of work is changing. In an industrial society, workers are expected to fit standardized job descriptions and perform their duties according to clear policies, procedures, and prescriptions. Knowledge work is fundamentally different: workers are expected not so much to perform standard roles but to generate creative, innovative results that surprise and delight customers and colleagues. They are expected not only to perform a function but to design new and better products and services, and even to provide dramatic, breakthrough results.”

    Marry this with what Russ Ackoff was saying and we immediately have a stalemate: you can’t get there from here. Squishy outputs require squishy techniques. Design Thinking is just too squishy for many.

    I bring chocolates, crayons and playdough. We need to adopt a little Pixar along the way:

  17. I just think design thinking is too good! We are also utilizing IDEA innovative models to do consultancy for Chinese manufacturing firms, but we do find that it is very hard if the corporate culture is a die hard. Therefore, any splendid ideas may come out as in vain if there is a compatible, adaptive corporate culture to support organizational change and innovation.

    1. @Valerie. I totally agree that design thinking is a good tool. But as you have mentioned the corporate culture is needed for two things: First for allowing to ask the right question and second, for accepting that the culture and the corporate value have to change as well when we implement the innovative ideas. That is the reason why I have included culture and values as one core building block on the business model canvas. Take a look at If we do business model innovation right (based on design thinking techniques but adapted for our use), we have to include corporate culture in the process. Change Management is often seen as a different task. But is not. Change and business model innovation go hand in hand.

  18. while on one hand i do think that a small percentage of organizations who have explored the aspects of design thinking have been basking on its equity ,i cannot but think that design thinking would be a clear evolution from the standard management thinking.Now we can debate on the facts of design thinking variances but then that’s the core tot this thinking or way of dealing with fluid decisions .It is heavily contextual so while ideo might be right in a particular context the same process might have to be evolved , tweaked and molded based on the context . Yes i also feel that to much of reliance on a tool will lead to average outcomes and not a true solution whether its incremental or radical .
    Design thinking has its basis with the way designers go about thinking and this methodology can be explored and evolved with the character of the problem .
    Personally while i also appreciate the tools like INPD or the ideo method cards i feel they are more a guidance and reference not a rule .To take them as a rule as most managers and engineers ( sorry don’t intend to demean anyone ) tend to take their text book theories design’s considerable fluidity makes its relevant to today’s fluid environment . Of-course fluidity also cannot be synonymous to lack of direction or non identity .
    I think we are still at the exploratory stages of design thinking and also agree that too much of hype and over exposure (with no qualitative outcomes) would only add on to distractions …
    Hope the design faculty is conscious of this meta outcome and doesn’t stay limited in exploiting the inherent strength of the thinking.

    1. @Vishal Thx for your comment. I am always surprised that we talk about how managers think and that there is something like standard management thinking. There is no standard way of management thinking. It is company, industry or country specific.

      I have seen many firms and yes, large and publicly quoted firms are different from SMEs, but also the corporate culture in large firms can be very different. It can range from entrepreneurial spirt to pure technocratic and bureaucratic management. Design thinking is a good way to open your eyes to things you haven’t thought about. But while design thinking is a more procedural approach or process, business model thinking is more about thinking about the things that make up a firm. It is a think tool E.g. most managers take their revenue model as given, but that is a huge area for innovation. The marriage of design thinking (process) with business model (mental frameworks for the right questions) is very helpful. I have added “Value & Culture” to my business model canvas since that can be a spot for innovation as well. Business Model Innovation and Change have to go hand in hand, and culture is the most difficult thing to change.

  19. I do not agree with the fact, that only business model innovations are able to gain disruptive, industry-changing businesses. I do think that there is a strong tendency that customer feedback, data & insights are at the core of each true innovation. Thats the point with all common human-centred approaches, from Service Design to Lean Startup an such. It´s all about the customer. And because of that I currently think, that at the core of each innovation a customer benefit is solved for the better not by doing a “top down” business model innovation but by integrating the “real customer voice” in a good manner. If this process of turning those insights into new solutions tend to form a process innovation, a product/service innovation or/and at the end a business model innovation seems to depend from industry to industry.

  20. Hi Tim, disruptive innovations by definition have a strong impact on the business model, particularly on the value proposition as it serves unserved or overserved customers. And the value proposition is all about the customer when you take the following description of a business model To serve these new customer segments, also the offer or other parts of the business model has to change. And this is IMHO a business model innovation since it changes two major elements of a business model. Lean startups etc. focus in my opinion too much on the product and not on the decisive business model. And yes, the customer is in the focus of most good business models. The only thing that stays constant is the job-to-be-done for the customer. The rest of business model is today under constant change due to the Internet, Globalization and the change in the energy mix.

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