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The business environment is changing more rapidly than ever before, and new business ideas are emerging. This book discusses applying insights from design thinking to craft novel strategies that satisfy customer needs, make use of the available capabilities, integrate requirements for financial success and provide competitive advantage.

It guides readers through the jungle encountered when developing a strategy for sustained growth and profitability. It addresses strategy design in a holistic way by applying abductive reasoning, iteratively observing customers and focusing on empathy, as well as prototyping ideas and using customers to validate them.

Uniquely applying insights from design thinking to strategy, this book is a must-read for graduates, MBAs and executives interested in innovation and strategy, as well as corporate strategists, innovation managers, business analysts and consultants.

Inhaltsverzeichnis

Frontmatter

The Concepts and Theories Behind Innovative Strategy Design

Frontmatter

Chapter 1. Understanding the Need for a New Approach to Strategy Development

Abstract
The business environment is changing more rapidly than in the past. Understanding and addressing customer needs is key for being competitive. Disruption is becoming the new normal. Traditional strategy development processes are analytical, linear, problem focused, and backward-looking. They fail to cope with these new dynamics. A paradigm shift is required to address strategy successfully. Design thinking has emerged as a promising approach coping with the increased uncertainty and allows focusing on the strategic aspects that matter most. Design thinking is an abductive approach to solving wicked problems, combining the advantages of design and thinking. Design thinking for strategy supports designing the strategy of a firm around customers and their jobs-to-be-done. Design thinking for strategy relies on the business model canvas as a common language, combined with game theory to embed the resulting strategy outcome into the real world. In addition, design thinking for strategy uses resources (time and money) wisely and focuses on results rather than effort. This ensures that the outcome is a strategy that exhibits four key traits required for success: desirability, feasibility, viability, and uniqueness.
Claude Diderich

Chapter 2. Recognizing Key Insights That Make Design Thinking Valuable to Strategy

Abstract
In recent years, design thinking has become a buzzword for disruptive user-centered innovation. Design thinking is an abductive and iterative approach transforming observations and related insights into practical validated solutions. Abductive reasoning starts with a set of abstractions, that is, an incomplete set of observations, and seeks for the simplest and most likely solution. The initial solution is then improved upon through inference until it becomes a robust solution. Design thinking addresses diverse shortcomings of analytical strategy development methods in a dynamic and fast-paced business environment. It aims at learning from methodologies used by designers, such as architects, artists, or creative directors, to solve problems which are incomplete by nature and cannot be solved by traditional linear problem-solving approaches. Design thinking in the context of strategy development proceeds in four steps, that is, observing, learning, designing, and validating, by iterating through divergent and convergent thinking. This leads to unique value design thinking offers towards developing strategies that work by taking a customer-centric viewpoint.
Claude Diderich

Chapter 3. Revisiting the Business Model Canvas as a Common Language

Abstract
With the use of design thinking to address strategic business challenges, the concept of business model has gained traction. The business model canvas, introduced by Pigneur and Osterwalder in 2011, is a visual language for communicating about strategy. It helps structuring gained insights and transforming them into knowledge. It supports designing and validating strategic options efficiently and effectively. Early in the strategy design process, the lightweight business model, a simplified version of the business model canvas, supports the identification of the high-level characteristics on which a firm’s competitive positioning is defined. It helps identify what makes a firm in particular, competitors in general, and an industry as a whole, valuable and unique. The detailed business model, an extended version of the lightweight business model, supports successfully defining the details on how the strategy delivers value to customers in particular, and stakeholders in general. It simplifies the strategy design process and ensures that resources are focused on those aspects that matter most and non-value adding analysis are avoided.
Claude Diderich

A Structured Approach to Strategy Development

Frontmatter

Chapter 4. Gaining a Collective Understanding of the Strategy Development Challenge

Abstract
In Lewis Carroll’s novel Alice’s Adventures in Wonderland, Alice asks the cat which way to go? To which the cat replied, “that depends on where you want to go?” Similarly, in strategy design, it is important to have a goal in mind before starting. This goal, broadly speaking, is made up of two characteristics, that is, the target industry in which to compete, and guiding principles to follow. Defining these two characteristics sets the stage for successfully designing a firm’s strategy. Combined with identifying the key stakeholders that need to be involved at one point or the other during the strategy design process, an initial budget, an expected timeline, an innovation culture, an inherent risks analysis, as well as an assessment of the capacity to change of the firm, they form the strategy brief. The strategy brief serves as engagement to develop a new or revised strategy and offers a collective understanding of the targeted goals.
Claude Diderich

Chapter 5. A Novel Strategy Development Process Based on Design Thinking

Abstract
Most traditional strategy design processes are highly analytical. They are tedious and are built on abstract concepts, like a vision, a mission, and values statements. Typical strategy design theory focuses on the capabilities and resources that define a firm’s competitive positioning. Little is left to creativity, and especially creativity at the customer level. Innovation is often related to technology rather than to how to satisfy customer needs. Traditional strategy development exercises, based on deductive data driven reasoning techniques, often end up in large binders of PowerPoint presentations, and substantial consulting bills. Too much time is spent on analyzing data about markets, their size, and competitors. Too little time is used to understanding customers and their jobs-to-be-done. This does not have to be the case! A novel, three layer, incremental, and iterative process for designing, understanding, and validating sound strategies that addresses these challenges is introduced. The first layer focuses on determining the foundation through an environmental analysis, followed by identifying of the firm’s strategic focus. During the second layer, the business model underlying the strategy is designed and validated. During the third layer, the competitive advantage is determined based on a validated business model, and its sustainability ensured. Finally, the designed strategy is translated into a stakeholder focused communication message.
Claude Diderich

Laying the Foundation for a Successful Strategy

Frontmatter

Chapter 6. Understanding the Industry Environment and Its Implications to Strategy

Abstract
Immediately and instinctively starting to design a new strategy or identifying changes in an existing one, almost never leads to a successful and elegant solution. It is important to start the strategy design process by understanding the environment in which the firm aims at competing from different perspectives. There exist four key perspectives to consider, that is, the customers and their jobs-to-be-done perspective, the industry as a whole and its participants perspective, the firm and its own capabilities perspective, and the surrounding environmental constraints perspective imposed by political, economic, societal, technological, legal, and environmental circumstances. In addition, industry trends influencing the firm and its customers need to be identified and validated to gain a holistic understanding of the industry environment and its implications to strategy design.
Claude Diderich

Chapter 7. Choosing a Tangible Strategic Focus Rather Than Building Upon an Abstract Vision

Abstract
A key challenge faced by many strategy development and review initiatives, whether conducted internally or supported by external consultants or experts, is where to start. Traditional strategy research suggests starting by formulating a vision and a mission, describing the core ideology and envisioned future. Others recommend taking a resource-based approach, focusing on capabilities as the foundation for competitive advantage. More recently, authors such as Christensen, argue that the design of any strategy should start with questions related to customer needs or jobs-to-be-done. The novel concept of strategic focus as the primary dimension along which to compete and differentiate is introduced. Any strategy development should start by identifying the firm’s strategic focus, that is, whether the firm wants to compete and excel by being customer centric, by focusing on product and service innovation, by leveraging core capabilities, or by differentiating around financials. Successful firms primarily compete by being different or superior along exactly one of those dimensions and industry average along the three other ones. The target strategic focus is determined based on the chosen target industry, the environment analysis outcome, and the expected desirability and uniqueness.
Claude Diderich

Iteratively Developing the Business Model Underlying the Strategy

Frontmatter

Chapter 8. Gaining Insights by Observing Target Customers in Their Natural Environment

Abstract
The business model layer of the design thinking for strategy approach focuses on designing how the firm wants to create value for its customers, and subsequently, its stakeholders. Its first step, observing, aims at identifying insights that may be of value during designing. The focus during observing is put on laying the groundwork for subsequently generating innovative ideas onto which the firm’s target business model and strategy can be based. To do so, the target population is observed in its natural environment, looking for analogies, associations, and contradictions. Observing proceeds in four steps, that is, passively observing the target population, conducting ethnographic interviews with informants, cross-checking insights gained by running focus groups, and performing secondary research to get a holistic perspective. The goal of observing is identifying real challenges to be addressed rather than focusing on symptoms, as perceived by the target populations. A sound observing process is introduced, supported by diverse tools and frameworks.
Claude Diderich

Chapter 9. Understanding Target Populations and Their Jobs-to-Be-Done Through Learning

Abstract
During the exploratory observing step, a diverse set of information is collected. Once key insights have been collected, the learning step focuses on making sense of the observed insights and ensuring a common understanding. Learning aims at retaining key insights and transforming them into knowledge to be used during the designing step of the design thinking for strategy process. The objective of learning is to understand the present by creating a mental model or a map that structures the gained insights, focusing on the firm and its relationship with the environment, primarily customers and their jobs-to-be-done. To do so, learning focuses on retaining, sorting, aggregating, and structuring insights gained from observing. Insights are clustered using various generic as well as specific frameworks, to synthesize knowledge. The derived knowledge serves as the basis for designing the firm’s future business model and strategy. Learning, consistent with observing, is on gaining knowledge around the strategic focus. Visualization tools, especially the detailed business model canvas, play a major role.
Claude Diderich

Chapter 10. Shaping the Strategy by Designing Business Model Prototypes

Abstract
The designing step of the business model layer of design thinking for strategy writes the play to perform on the strategic stage. Designing is about generating novel ideas and combining existing knowledge in a novel way to describe how the firm will conduct its business and compete in the future. Designing is about creating options for the future around the firm’s strategic focus. Designing is also about transforming those options into detailed business model prototypes that can be validated. The goal of the designing step of the strategy design process is to develop multiple testable prototypes of the firm’s target detailed business model. Designing focuses on what is new and/or what is different relative to the firm’s current detailed business model. The designing step is where the crucial creativity happens during the strategy design process. During the designing step the knowledge gained from the learning step and the environmental analysis, are used to generate innovative ideas around the strategic focus. Different ideation techniques are applied. The identified ideas are used to design multiple possible target business model prototypes. Commonalities are identified, consolidating different prototypes and leveraging ideas.
Claude Diderich

Chapter 11. Managing Uncertainty Through Experiment-Based Validation

Abstract
Two types of mistakes can often be observed in strategy design processes. The first is, executives believing that they know their customers better than customers do know themselves. This leads to offerings being developed that nobody wants, or nobody is willing to pay for. The second big mistake often observed, on the opposite end of the scale, is decision takers only being willing to decide if they are 100% convinced that change will be successful. A key feature of design thinking for strategy to address these mistakes is experiment based validation with real customers. During designing the detailed business model, choices are made based on sound assumptions. Although strategy designers believe in the assumptions they make, that does not necessarily mean that these assumptions are true. Assumptions must be validated. To do so validation experiments are designed. They primarily focus on trying to invalidate the made assumptions rather than confirm the already known, in line with the credo fail fast, to succeed faster. Experiments are prioritized based on their probability to fail and significance for the validity of the prototyped business models. The outcome of the validation phase is one or more business model prototypes that are desirable, feasible, and economically viable.
Claude Diderich

Exposing the Designed Strategy to the Competitive Environment

Frontmatter

Chapter 12. Exploiting Findings from Game Theory to Succeed in a Competitive Environment

Abstract
Business is a high-stake game. Strategy is about ensuring that the firm plays the right game in the right way. To do so, the competitive advantages underlying the designed business model are defined based on answering Porter’s five strategy questions. The firm’s competitive advantages describe its unique positioning among all key players. In extension to traditional strategy schools embracing the competitive advantage approach, design thinking-based strategy development puts a strong focus on the role of the customer to competition. To ensure the sustainability over time of the competitive advantage, a game-theoretic analysis developing possible competitive strategy game plans, for reacting to external threats, is performed. A successful strategy identifies and attains a competitive equilibrium among all involved players, putting the firm center stage. As such an equilibrium is transient in nature, strategy adjustments are needed over time. The competitive layer of the strategy design process defines this equilibrium, through making the competitive advantage of the firm explicit and pro-actively, rather than reactively, anticipate potential changes in the competitive environment over time.
Claude Diderich

Chapter 13. Laying the Groundwork for Strategy Implementation Through Stakeholder Focused Communication

Abstract
The last but not the least important step of the strategy design process is communicating the developed strategy and the associated detailed business model to stakeholders, selling it to the crowd, so to speak. Communication strategy is about informing. Only if you know where to go, can you find the way to get there. Communicating strategy is about setting the stage for change. This means, ensuring that the stakeholders understand the new or revised strategy, so that they can identify and plan required changes within their area of influence. Communicating strategy is about convincing the stakeholders that the strategy choices made are optimal for the firm and support it to be profitable in a sustainable way. And finally, communicating strategy is only successful if the recipients of the messages feel be taken seriously. This chapter describes how the audience and related communication channels are identified. Targeted messages are prepared, tested, and delivered according to a well defined schedule. A key focus is on storytelling the strategy message. Through a feedback loop, consistent with the design thinking approach, it is ensured that the communicated strategy message is understood as expected.
Claude Diderich

Backmatter

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