The Design of Business: Why Design Thinking

is the Next Competitive Advantage (Unplugged)

A conversation between Roger Martin & Moe Abdou
The Design of Business: Why Design Thinking Roger Martin with Moe Abdo
is the Next Competitive Advantage (Unplugged)

About Roger Martin & Moe Abdou

Roger Martin

Roger Martin was named one of the top 50 management thinkers in the
world by The Times of London in 2009. He has served as Dean of the
Rotman School of Management since September, 1998. Roger is an
advisor on strategy to the CEO's of several major global corporations. He
writes extensivelyh on design and is a regular columnist for
BusinessWeek. com's Innovation and Design Channel.

Moe Abdou

Moe Abdou is the creator of 33voices — a global conversation about things

that matter in business and in life. moe@33voices.com

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Dean Roger Martin, it is a pleasure for me to spend some time with you. As
I mentioned to you briefly that your work has been top of mind specifically
for me personally for quite some time.

I shared with you a quote that has been sitting on my desk for years. I
think the quote goes back to ’94-’95, somewhere around there, when you
were part of a Mastermind with Bill Taylor and Alan Webber as they were
starting Fast Company.

The quote was something like this, “The role of big companies is to turn
great people into mediocre organizations.” I’d like to start by just asking
you if you still believe that?

Sometimes I guess I wouldn’t concur entirely with the quote, which suggests
that it’s the proper role -- I don’t think it’s ever been or should be the proper
role of a company but I do think that many do.

I should say that that idea was planted in my head by a wonderful man at
Procter & Gamble named Tom Laco who, after a long successful career there,
he ended up as vice chairman under John Smale in the 80s. This would have
been the mid to late 80s. When he retired he wrote a little memo to file, as
senior people at Procter are inclined to do, thinking wistfully about the
company and saying, we hire absolutely the best and brightest. There are days
when I wonder whether we kind of turned them into something less than that
rather than something more than that.

It was actually Tom Laco’s thinking that was on my mind I suspect when I had
that quote because I then observed out in many companies that aren’t good as
Procter & Gamble. I do think that big companies have to really think long and
hard about how they can encourage the kind of thinking and work from their
people that enable them to be fantastic rather than be mediocre. I think many
of them don’t and aren’t changing fast enough.

As somebody who has spent 25 years of his professional career recruiting

and developing individuals in senior level management, that to me was a
wakeup call because I didn’t want to be part of that. Yet, as I continually
work with organizations primarily more on the financial side -- it was
important for us to find out what was happening in the company -- you still
discover that there were a lot of individuals and corporations even in high
level positions that weren’t very happy. As a result, they’re probably not
growing.

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I think it’s true. I think it’s kind of a love-hate thing that happens. I guess it
would be my cut on it or diagnosis, which is these big companies like to hire
talented people for their capability to handle complicated and difficult
situations and come up with clever solutions to them. So that’s why they like to
hire them but then they inadvertently operate in ways that they get hired for
those same people to do the thing they are particularly peculiarly good at. I
think it’s inadvertent for the most part.

In my last book I talk about The Design of Business where there is sort of a
culture or ethic in the modern corporation especially big ones where you have
to be quantitative, analytical, scientific and you have to prove things in order
to do them. What these big companies tend to do is hire highly analytical
quantitative people because they think of them as the smartest. And then
when they are given a complicated challenge or it’s unclear what the answer is
and you actually have to do something new and different -- and you cannot
prove new and different things in advance -- they get told prove it, crunch the
number, show me the analysis.

What the person in question then says, “I really can’t.” So that person gets
trained only to think about things that are analyzable and to not think about
things that do not subject themselves easily to analysis. That I think takes a
part of their being, their brain, who they are, their soul away. That’s why they
are unhappy in the ways you described Moe.

I tell you, you are probably in one of the most important positions I think
today in the world as the opportunity to be able to impact the next
generation specifically the next generation of leaders.

The more that I learn about your program, the more that I see that one of
your overarching goals is to produce not only successful people but
creative people who you want and hope to see make the world a better
place specifically through business. Tell me a little bit about how you’re
preparing your students there.

If you want to think about it in the most simple way - it is. We want to have
our students, not just think but think about how they think - if you will. To be
able to go meta on how they are thinking and say to themselves, “Is the way
I’m thinking about this the best way to think about it or is there another way to
think about it?”

Unfortunately, most professional schools I think -- let’s just say business

schools to be more narrow but I think it’s a professional school thing -- have
focused to too great an extent, at least for my liking, on teaching analytical

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techniques. Here is how you do an MTV. Here is how you do an IR. Here is how
you do the capital asset pricing model. Here is how you do a Black-Scholes
option pricing exercise. Here is how you calculate the economic order quantity.

Those are all things that cause you not to have to think if you will or you think
in a rogue way. You say, Black-Scholes option pricing theory, here at the
variables you got to plug in. You plug them in this way and do it, and out comes
the answer rather than asking the question, is this tool applicable in this
situation? Is me thinking that Black-Scholes option pricing theory is appropriate
for this a good way to think or not such a good way to think?

That’s what I want our students to be able to do, is go meta and say, am I
thinking about this in the right way. Is there a better way to think about it?
Just because everybody has always thought about it this way, does that mean
it’s a good way to think? That’s what I want them to be constantly probing and
asking themselves.

The big challenge is that they leave the university and get with an
institution that has that level of thinking so they can continually keep on
that path as opposed to drifting backwards.

Yes. This is a challenge although it’s a challenge that I have only so much
sympathy for. One of the things I try to convince students of, is you have either
got to be willing to be different and take this thing as an area of being
different or accept being the same in which case you will have all the benefits
and downsides of being the same.

Lots of the organizations they go out into are not going to be totally amenable
to that kind of thinking. It will actually be scary for some of these companies.
Why are you questioning the way we’re doing this? My view is that if you
actually want to make a difference in the world, guess what, it means being
different. The last time I checked, you can’t make a difference in the world by
being the same as everybody else because you will simply reinforce sameness if
you’re the same as everybody else.

One of the challenges I tell these kids, is that do what I tell you, don’t
necessarily sort of proselytize what I tell you. People in the business world are
going to be interested in better outcomes. If you produce better outcomes by
whatever methodology people will be happy and in due course somebody is
going to say how the heck do you keep on producing that better outcome? And
then tell them.

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I tell them, don’t say upfront, “Guys, I’m going to create a better outcome by
using this very different methodology for getting it.” I like you to buy in to my
different methodology upfront. They’re not going to. If they did buy into your
methodology upfront they would be doing it already.

You have to be bold to change things and do things differently because people
will explain to you in no uncertain terms how you’re just wrong and you should
figure out how to be right i.e. be the same as all the rest of us are then that’s
a challenge. I think it makes life fun but it’s a challenge.

What do you look for in an inspiring leader today? I know that you do
tremendous amount of work with highly successful leaders around the
world and you write about the topic. What’s a profile of an inspiring and
empowering leader today?

I really am getting more and more to think Moe that they leverage breadth and
diversity. I’m just not seeing many people who I call inspiring leaders who are
narrow and who get to be an inspiring leader on the basis of having knowledge
over a single domain and a really deep knowledge of that domain.

I’ll give you an example, I’m quite fond of Michael Lazaridis. To play in fair
disclosure, I’m on the board of RIM. He’s a fellow board member and CEO of a
company that I’m on the board of. Let’s see what people would think of Mike
Lazaridis if they didn’t know the kind work he did, most would say, he’s a
techno geek. He solders things together and he invented the Blackberry. He
must be totally obsessed about software and hardware and that’s about it.

This is not true. Mike is incredibly into the customer. How the customer works
and thinks. How he can make that customer’s life better. What that customer
is interested in. I think that’s what makes him an inspiring leader. Is that he
blends together this kind of knowledge of people and has true belief and care
about customers with a deep technical expertise. Don’t get me wrong, he is a
techno geek in that sense.

He has this great and knowledge in things having to do with mobile telephony
as anybody in the world. But he’s much broader and can fuse together broader
perspectives, better than the average bear and I think that’s what makes him
capable of leading people and have people saying, “Wow, I’d like to work with
this guy. I’d like to think with this guy.”

It’s interesting that you bring that up because I want to jump around a
little bit now. One of the questions I wanted to ask you before I got into
the book, The Design of Business which I think is a brilliant title and just

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the material is fantastic. One of the questions I wanted to ask you is,
where does the customer fit in the design thinking process? I know that you
answered that a little bit by talking about RIM.

Yeah, you know, right at the center when we teach design thinking to students
and the business design process it starts with deep holistic consumer-user-
customer understanding. We say, it’s holistic in that it means not just thinking
about the functional needs, you know, I need to get this email from my device
to your device but also the emotional and psychological needs.

It’s deep in the sense that it doesn’t ask shallow questions about the consumer
but goes and watches the consumer so that you really understand what they do,
how they do and how your product or service can interact with them.

It’s interesting how much fun it can be when people kind of get used to it.
There are a lot of people who are scared of the customers because they don’t
hang out with them enough. A lot of engineers I think are scared of customers
and so they don’t hangout with them. And when you hangout with them I think
you help but empathize with them, get to really understand them and then
think they’re fun and interesting.

You say that design thinking is the DNA of most innovative companies. In
order for them to grow and innovate and win today they have to
incorporate design thinking. Explain that design thinking advantage Roger.

Well,ab what I think in design thinking is this fusion between analytical thinking
which uses inductive and deductive logic and intuitive thinking that uses
abductive logic. Why I focus on the fusion of the two is because neither of
them separately get you what you need to be a great company. I am not
advocating, some people think I’m advocating, is that you kind of turnover your
company to kind of a bunch of designers. No, I don’t.

Lots of designers, I’m afraid, are purely intuitive and will create great things
from time to time but if they’re actually running a company, the company will
expire between great things that they come up with. So you have to have this
blend of the analytical thinking that gets you a certain level of reliability so
that it keeps you on a path and not up and down so much that you die on the
downs but the intuitive and the abductive logic, the imagining what might be is
necessary to keep you from stultifying.

It’s the combination, the appreciation of both that is relatively rare and is
what defines, in my view, a design thinker. You know, one of my favorite

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design thinkers in the world is A.G. Lafley from Procter & Gamble who just
recently retired as CEO of Procter & Gamble.

His reputation within Procter was he was a real numbers jockey. He could
crunch the numbers with the best of them and at airtight logic. He’s also
somebody who dreamed big dreams of things that didn’t currently exist and
went out and made them happened. You could say, “How could that be?” The
answer is because of respect.

He both respected the traditions of analytical thinking and respected the

traditions of intuitive thinking and realized that you need both to make the
world go round rather than being kind of defensive and saying, I’m an analyst.
I’m very analytical and anybody who does this intuitive crap is the enemy and
they’re dangerous and they are a threat to what I do. I will not listen to them. I
will demean them. I will not agree with them whatever. He’s the opposite of
that. That’s what design thinking is about is being able to operate in the realm
of analytical thinking and intuitive thinking and understand the intersection of
those two.

We have some very well documented illustrations of design driven

organizations like P&G and Herman Miller in the book. Talk to me a little
bit about the cultures inside these companies and inside these boardrooms.
How is the culture inside a true design thinking innovator like P&G or
Herman Miller?

I think the very central part of the key is that they do not believe that new
ideas can be proven in advance in the typical way we think about proof. They
are willing to try things that are unproven. Does that mean they’ve got the
entire company on things that are improving? Does that mean there will be no
logic, no doubt and no analysis? No. But they realize that there are limits to
that. That there is nothing new that you can prove absolutely in advance and
they’re comfortable with that.

You know the great thing for me is the Aeron Chair. The market research for
the Aeron Chair right at the end when they had focus groups with the final
product was mixed. Some people were in love with it. It’s not like it was all
like a bust. Some people were in love with it but some people really didn’t like
it.

In fact, some were outraged by it they said, this is outrageous, you’re calling
me to a focus group and then having me sit on a partially finished chair when
you’ve got the thing stuffed and padded. That’s when you should be bringing

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me back to test out this chair, which to me is not hilarious given what an icon
it has become.

They just said, you know what, I know the market research is mixed but here is
all the work we’ve done to understand user’s needs. Here are all the things.
We think that it’s going to successful. We think the only problem is that people
don’t think it looks like a chair. But they’ll get used to the look of it and they’ll
enjoy the features that we’ve put in and we’ll get over that and let’s go. Like a
real analytical thinking company would have ditched it.

In fact, in Procter & Gamble added the worst it would have because it wouldn’t
have been a blind test, an unequivocal blind test winner. But Procter thankfully
doesn’t always do that. They say sometimes the end consumer has to get used
to it to know that they love it. That’s what happened with Herman Miller.

The stunning thing is of course the problem with it was it didn’t look like a
chair to the people who didn’t like it. And then within about five or six years,
every chair had to look like an Aeron chair or it didn’t look like a chair. That’s
what’s common. What’s common is an understanding that to do new things,
you cannot get proof in advance and you got to figure out how to organize your
company, your work, your life so as to be able to give those ideas a chance to
prove themselves over time.

Is that an expectation that they have of their managers and their

employees there to have that thinking process?

Increasingly it is. I think at Procter & Gamble -- I think it was much more
implicit until AG came along and sort of had the big design initiative with
Claudia Kotchka that I helped both of them on. I would say now it’s much more
expected because they kind of understand what it means.

How about a company like Apple? When you have heard Steve Jobs in a lot
of instances talk about a lot of times the consumer doesn’t know what he
or she wants. You also have heard people like Malcolm Gladwell talk about,
you know, a lot of times very few of us know what we want. Does that
reinforce this process to say go with it without having full proof?

I think there are times when you simply have to. Put it this way, if you stand by
the notion that you have to prove everything in advance you simply won’t do
new stuff. It’s almost as simple as that unless people don’t understand that
point but I think to me it’s all the work I’ve done on design has brought me to
that conclusion.

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Will you talk about the way knowledge moves through an organization and
really kind of through life? It starts out as a mystery and then it becomes a
heuristic and then an algorithm. I find Roger, the mystery part,
discovering new opportunities missing a lot in the DNA of a lot of
companies. Do you see that?

Yes. One of the reasons is, it kind of works against a lot of the systems within
companies. You cannot budget for when you’ll solve a mystery either in money,
people, or time. It is hard to tell at the outset of an exploration into a mystery
what kind of capabilities you need because you don’t yet know kind of what
the contours of that mystery are. So in a world in which you got a budget for
things and planning for them and the like, it is hard. It is very hard.

As you continually research and work in this whole design thinking field,
how has your thinking been influenced?

It’s been a huge and interesting journey for me. I guess what I’ve come to
believe and understand is that to the degree which organizational structures
and processes kind of eliminate innovation. I have also understood how
dangerous the words prove it, are. I have kind of understood a lot more about
why it is that good intuitive thinkers tend to hide their intuitions because they
are fearful that people will think of them as silly, flimsy kind of people.

A lot of entrepreneurs who will be listening to this conversation and I know

that you have a keen interest now in this whole social entrepreneurship
field, where does design thinking fit within the scope of an entrepreneur
out there who thinks he or she has got a great idea but just needs to take
the next step to make it happen.

I do think entrepreneurs are people who are willing to try things that haven’t
been proven. That’s almost the definition. I think they are inherently design
thinkers. It’s interesting how much they often they get punted out of their
companies in due course and the analytical thinkers take over like John Scully
coming to Apple who are grown up now enough to have analytical thinkers as if
that’s a good thing. I think entrepreneurs have this challenge of staying
entrepreneurial.

Does that mean continually looking for new ways and continually having
that first stage of mystery as kind of part of their DNA?

Absolutely. I really think that if they don’t. It’s kind of only a matter of time
until they fade in somebody else’s doing that work will move ahead of them.

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I know you feel that one of the other devotions that you have is this notion
of integrative thinking. I know you feel it’s a skill that can be taught.

Yup.

Can you walk us through an example?

I can walk you through an example of some grade 10 girls at a girl school that
we gave a challenge to. We taught them integrative thinking, a 13-week kind of
course and gave them an integrative thinking challenge and they came up with
great integrative solutions.

It was as simple as this. There was an organization of camps in the cottage area
that’s a couple of hours north of Toronto here. They have four camps. They are
for underprivileged kids and underprivileged inner city kids. They are all run by
one of umbrella organization but are run kind of completely independently with
not the same branding and you wouldn’t know it unless you knew the
organization that they’re all run by the same organization.

The group that ran these camps came with a problem which was, do we
standardize and actually make them all one camp, one model, branded the
same, or do we leave them independently? What should we do? The girls came
up with a better answer than the two. They figured out what things, you know,
that it wasn’t all or nothing and it wasn’t compromised. There were some
things where it really made sense to standardize and you could standardize
without hurting the feeling of independents and some things that had to stay
independent without hurting or detracting from the benefits of standardization.
They were 15-year-old girls. It is teachable.

The big advantage to that is that people are getting away from the either
or solution, correct?

Yup. And recognizing that that’s what they should be striving for not leaving it
in the world of my job is to choose, my job is to come up with the best choice
among the either-ors.

The whole notion of integrative thinking is to get away from this or that.

Yes. I really think the primary reason why people think it’s this or that is
because that’s what they’ve been taught. They have just been taught you face
all these either or situations and that’s what you should concentrate on is, you
concentrate your energy on coming up with the best of two solutions not don’t
choose.

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When this is presented to executives, as you present your ideas to

executives, and I know that you’ve had the great Peter Drucker discuss this
issue with you. What type of feedback are you getting from leaders when
you talk about this?

Most of them sort of recognize that. This is one of the things. I think everybody
actually is an integrative thinker to a certain extent. I think for certain
decisions at certain times, people think integratively. So everybody can
recognize this in them especially when I kind of lay it out to say, alright, when I
make this kind of decision or when I made that decision in the past, that’s the
way I think.

But now that I know what this is and can identify it and see it as a salient part
of my decision making I’m going to try and do that more often. I see the job as
making this more apparent to people so that they can focus on it and practice
on it and get their percentage of integrative thinking up from 5% to 30% or from
50% to 80% or from 80% to 99%. It’s the move the needle in the direction of
searching for something other than the either or more of the time and more of
the time being able to find a much better answer than either or.

I assume you’re a master at that implementation within your own life and
your own business practices. How does that impact the people who work
with you?

I’m not sure I’m a master. I’m working on it. But, I think when I do it well, it
inspires them. They feel more empowered by us coming up with a better
answer that we can then go do but I think also they are inspired to try it
themselves. Just like anything you practice, a lot of it is just about trying. It’s
just about trying.

Are there particular trends that are going on in social entrepreneurship

that had you particularly excited?

I guess what’s gotten me excited about it, as you probably know I’m on the
school foundation board. I’ve been on that board I think six or seven years now
maybe even more. I just think that we’re understanding the phenomenon more
and what are coming out are kind of models that will help people kind of
replicate this kind of thing and other domains.

If I just take a designer business perspective to it, social entrepreneurship is

moving from a mystery to a heuristic. When you get to heuristic you get much
more efficient, you have search mechanisms for saying here is how I can think
about this problem and apply a social entrepreneurial outcome to it.

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So I’m very excited. I think the field is going to just continue to blossom and
grow and build on the shoulders of the great investments that have been made
by the initial social entrepreneurs.

When these type of entrepreneurs come to you for advice about growing
personally and professionally. What do you tend to tell them?

My general advice is to be conscious of how you’re thinking. Again, it’s back to

the same advice as the students; think about your thinking. Ask yourself the
question after you’ve thought about something. Was that the only way I can
think about it or there is a different way of thinking about it? Why did I think
about it this way? Isn’t there another way? To just do a lot more of that and
they’ll be kind of much better off.

Everybody who’s got the opportunity to work with you, the students who
are at Rotman that have the great privilege of your leadership, it’s a real
treat for me to have this conversation with you. I’d like you to kind of
share with everybody how can people get more familiar with your work?
How can they get more familiar with some of the thinking that you are
constantly working on?

I would say four ways. I would say you could read my book, The Opposable
Mind -which is on Integrative Thinking. That is available on Amazon.com,
Barnes & Noble, etc easily or The Design of Business which is my book on
design thinking.

I highly recommend subscribing to Rotman Magazine. You can just go to the

Rotman School website and subscribe to it. Three times a year we come up
with a brilliant magazine by our brilliant editor Karen Christensen. The latest
issue is Thinking About Thinking 2. Our second issue of what Thinking About
Thinking. It’s terrific.

And then lastly if you want to see everything I’ve written and things that have
been written about what I do, just go to my website which is
www.RogerLMartin.com. It’s got my middle initial L in because
RogerMartin.com is a real estate broker in Houston. Those four are great places
to start.

It is a real treat for me. I appreciate you making the time. I hope that we
can continue this dialog because the work that you’re doing I think, I truly
believe is certainly at the forefront of everything that’s going on in
business.

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I would be delighted to. I would be remiss of not saying that I’ve got a new
book coming out in May called Fixing the Game. Around the time that comes
out I would be happy to talk to you about it again. It’s about our models of how
we think about stock based compensation, shareholder value maximization that
are getting us into big trouble. That’s what that book is about.

I can’t wait. May can’t come soon enough then.

Terrific. Great to talk, Moe.

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