The protein that nourishes the ambitious is rewards, both financial and nonfinancial—the latter being primarily the social status earned for a job well done. Typically the highest rewards are conferred on those who run brawny organizations with big-time budgets. The relationship between size and status is pretty straightforward: the larger the revenue and the bigger the staff, the higher one’s station and the greater the financial and status payoff. Executives typically measure themselves by the number of people for whom they have direct responsibility and the bottom line that they deliver each year—“I’m important because I run a five thousand-person organization, with annual revenue of $2 billion.” And of course, bigger is always better. Status comes from running large, high-revenue business units whose operations have been reduced to reasonably reliable algorithms that produce results on time and on budget. Those are the highest goals, that is, the ones that command the highest compensation. That is why 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.
Running huge business units is important work. Companies that cannot run, hone, and refine their known heuristics and algorithms on a large scale cannot generate capital to invest in creating the future. But if running those heuristics and algorithms is the only thing that produces monetary rewards and status, companies will not attract people who can invent the future by moving knowledge through the funnel.
Design shops have a much different approach to allocating rewards. Rewards accrue not to those who run big businesses and large staff but to those who solve wicked problems—those with no fixed definition or solution. Check out the workspace of any star designer: desks, credenzas, and shelves are covered with his or her best designs, the ones that solve the most difficult design challenges in the most elegant fashion. The best designers are accorded star status for the challenges they faced, not the revenue they generate. In the business world, Hartmut Esslinger is recognized as the founder and CEO of frog design, an international creative consultancy that counts Hewlett-Packard, Disney, and Nextel among its clients. But in the designers’ universe, Esslinger is known and revered as the brains behind the look and feel of the Apple IIc, now in the Whitney Museum of American Art. Says Tim Brown of IDEO, “Success is all about impact. Designers get turned off if their ideas don’t make it out into the world.” 9
The organizations that attract talents like Esslinger and Brown give high status to the solving of wicked problems. But there is more to status than rank and title. To keep its people priming the growth engine, P&G imported the designers’ ethos of doing meaningful work. The formation of GBS in 1999 was in essence a challenge to the information technology group to become problem solvers. As Filippo Passerini told Computerworld magazine, the IT group “is all about identifying what is of business value and determining how technology can help provide that value.” 10 Today, his super-geeks are applying virtual-reality technology to improve speed-to-market and improve CRM systems.
By creating a problem-solving culture, Passerini has transformed his organization into a tribe of intrapreneurs who are creating tremendous value for P&G and winning recognition for projects like the integration of Gillette’s systems. Marta Foster, the vice president responsible for business-building solutions, said the project, which required a workforce of seven hundred fifty GBS managers, was “incredibly energizing. It’s far more meaningful when our work is tightly aligned with the company’s strategy. Our people talk about their projects like they’re running their own businesses.” 11
Financial planning and reward systems interact in ways that reinforce reliability over validity. Financial planning processes define budgets rigorously and create the basis for rewards. When Jack Welch took over GE, he saw this broken budgeting and rewards system firsthand. As he explained to me in an interview, “If you made your budget, you got a bonus, a pat on the back, and if you missed it, you got a stick in the eye or worse.” 12 GE had built a rewards system geared entirely around budget numbers rather than actual success in creating value for company. Reliability was winning the day. The design-thinking organization needs to create flexibility both in its financial planning processes to accommodate exploration activities and in its reward systems to encourage the same. Otherwise, reliability and exploitation will win out.
Cultural Norms That Reinforce Design Thinking
Design-thinking companies also have to develop new norms—the implicit rules or guidelines that influence behavior. For instance, balancing reliability and validity demands a new way of thinking about constraints. In reliability-driven, analytical-thinking companies, the norm is to see constraints as the enemy: there is never enough capital, customers demand impossibly short intervals, and distributors are always trying to squeeze a little more. It is only natural to complain about the barriers standing in the way of the goal. If reliability is the only goal, then constraints are seen as immovable obstacles to be circumvented. The only thing that matters is to keep running the system that reliably launches products at a fixed level of capital per product, even when long-term value is created by launching the number of products necessary to produce the desired marketplace outcome.
When the goal is validity—that is, arriving at a new desired outcome—constraints take on a different look. “Constraints are opportunities,” says Sohrab Vossoughi of Ziba Design. “They force you to be creative. They focus your attention and clarify your thinking.” 13 Rather than an enemy, constraints are features that make the task at hand more exciting, the problem more wicked, and the status for releasing the constraint that much loftier. Constraints point the validity-oriented design thinker to the locus of needed innovation. They frame the mystery that needs to be solved. Instead of telling us what we cannot do, constraints help us reframe the problem and discover new opportunities in the process.
Buckminster Fuller is a hero to designers because he was inspired, not discouraged, by a seemingly intractable physical constraint: buildings get proportionally heavier, weaker, and more expensive as they grow larger in scale. The problem inspired him to make a logical leap to a structure that becomes proportionally lighter, stronger, and less expensive as it grows larger in scale—the geodesic dome.
The Revolt of the Analyticals: Obstacles to Change
Leaders who undertake a thorough overhaul of their organizations’ structures, processes, and cultural norms should expect resistance. The vast majority of corporate personnel are trained to be analytical thinkers; for them, design thinking is not even a legitimate category, much less a discipline worth cultivating. Their managers, financiers, and shareholders exert constant pressure to favor reliability over validity. Those stakeholders will, at least initially, withhold rewards from those who champion validity. And they will attempt to discredit validity by demanding proof by inductive or deductive means. That is why any overhaul must begin with design-thinking experiences that reach every corner of the company, as at P&G. There are three major obstacles to creating the productive balance between analytical thinking and intuitive thinking that must be overcome to create a design-thinking organization: preponderance of training in analytical thinking, reliability orientation of key stakeholders, and ease of defending reliability versus validity.
Preponderance of Training in Analytical Thinking
Only a tiny fraction of managers inhabiting the world of business have any training that would help them be a design thinker. Dan Pink, author of the best-selling A Whole New Mind: Why Right-Brainers Will Rule the World, fancifully argued in 2005 that the master of fine arts degree is the new master of business administration. In our world, though, schools don’t produce enough MFAs to constitute anything close to a critical mass. American schools graduate only about a thousand MFAs per year versus about a hundred forty thousand MBAs—two orders of magnitude more. 14 If American business is going to be saved by MFAs, we will have to get by with twenty new ones per state per year!
With respect to the one hund
red forty thousand MBAs, it is unlikely that even one in a hundred would have been taught anything but inductive and deductive logic during their entire post-secondary education. Many business schools do not merely ignore abductive logic; they inculcate an active hostility to abduction, which is regarded as frivolous. Analytical thinking is presented as not just logically superior but morally superior.
That attitude is carried into the workplace. A client once branded me “willfully negligent” when I argued against putting a question to consumers using a traditional quantitative survey. We would not obtain any useful answers, I maintained, by simply asking, “How would you react to a new service charge?” How would they know how they felt until they saw the charge on their statement? But the client clearly felt that he held the moral high ground by insisting on rigorous research, even if the answers that flowed from that research, reliable as they might be, had no validity.
To executives like my quantitatively minded client, there’s something flaky, irresponsible, untidy, and presumptuous about abductive reasoning. Chapter 7 addresses this misconception, which is something most corporations will never do. It will help you develop your own design-thinking capability by viewing your day-to-day work as a seminar in design thinking and in the forces that discourage it.
Reliability Orientation of Key Stakeholders
Two sets of players critical to corporate operations tend to be heavily oriented toward reliability. By training and inclination, they are slow to reward or even recognize achievements in validity and quick to punish shortfalls in reliability. These stern guardians of reliability are stock market analysts and boards of directors.
Stock market analysts are so enamored of reliability—in their case, defined as hitting their earnings or revenue forecasts—that they actually prefer companies that bring in their earnings on the nose to companies that deliver substantial upside surprises. No matter that the outperformance indicates that the company’s strategy is working even better than anyone expected. The upside surprise demonstrates validity, and most analysts can measure only reliability. And in the mind of the analyst, all that matters is what can be measured.
It takes a committed management team to ignore the games played by analysts, a game whose object is to cram an entire universe of information, not all of it coldly quantitative, into the procrustean bed of an earnings model. It takes even more commitment to train the analyst community to understand and appreciate the company’s commitment to validity, despite its attendant lesser predictability and consistency. In fact, among U.S. companies, perhaps only Apple Inc. has successfully trained its analysts to value design, largely through the force of Steve Jobs’s charisma and the growing popularity of its designs.
Corporate directors might be an even tougher nut to crack than analysts. Boards quite rightly regard themselves as shareholder advocates, and many see the rigorous insistence on reliability as the responsible stewardship of shareholder assets. The leader who seeks to balance reliability with validity should expect resistance from directors and capital markets, whose desire for lasting competitive advantage is often greater than their understanding of how to achieve it.
Ease of Defending Reliability vs.Validity
In most corporate settings, it is much easier to defend analytical thinking and reliability than it is to defend design thinking and validity. Most executives reached their station in life by studying the past in gruesome detail to chart a course for the future. They have empirical data to support the course they advocate. They are not prepared to evaluate an alternative viewpoint that proceeds not from the basis of what was, but what could be. Such a way of thinking appears fuzzy, dreamy, and more suited to an idealistic undergraduate than a seasoned veteran of the real world. But if a corporation is to bring anything new into the world, it will have to cultivate respect for the sort of logical leap that brought the Aeron into a world that had never seen anything like it.
The challenge for the corporation is to make validity part of the lexicon, overcoming the core training of its employees, boards, and investors. To overcome those challenges, it needs to build in structures and processes that foster, support, and reward a culture of design thinking. “Companies are good at producing ‘hothouse tomatoes,’ ” says John Maeda of the Rhode Island School of Design. “They’re perfectly formed and identical, edible but not delicious. Most don’t yet know how to integrate the ‘heirloom tomato’—the tomato that looks a little different than the rest, lovingly grown by hand with attention to detail, mouth-wateringly delicious. There’s a place for both of them at the table.” And, he says, a very good reason to go after both. “When people are working on a creative project, they’re happy. When a team can come together around a creative cause or a knotty problem, they want to come to work every day. A tough design challenge could be one of the best retention tools a company today has for its best innovators.” 15
CHAPTER 6
World-Class Explorers
Leading the Design-Thinking Organization
IN THE EARLY 1980S, in a town near Quebec City, a high-school dropout, accordion player, and fire-breather named Guy Laliberté joined a small, itinerant theatrical troupe composed of other jugglers, acrobats, and musicians. By 1984, the group had mounted a successful street festival, and Laliberté began to see the potential for more. Laliberté and his friends were circus performers, but they had no desire to work for a traditional circus. When Laliberté looked at circuses, he saw some remnants of their original allure—the grand spectacle, the potential for joy and surprise. But he also saw the elements that made the circus feel like the dusty remnant of bygone era—the tacky cardboard sets, the smell of sawdust and straw wafting into the audience (among other, less pleasant odors), the sad lives of the circus animals, and lack of a central, cohesive narrative to draw spectators into the experience. 1
Laliberté began to imagine a new kind of circus, one that captured the magic and spectacle created by the circus performers but replaced the trappings that audiences found dispiriting. Out went the animals, and the many costs and constraints they imposed. Out went the parade of unrelated acts on multiple, garish stages. In came lithe acrobats and contortionists performing a singular-themed show. In, too, came dramatically higher ticket prices, as Laliberté created a show—and price point—that compared favorably with the upscale, grown-up artistry found at the theater, ballet, and opera. He called his new-model circus—part performance art, part comedy routine, part surrealist drama—Cirque du Soleil.
Laliberté had done no research to forecast the size of the market for his new form of circus. How could he? The market did not yet exist. Undeterred, he launched his Cirque du Soleil in 1984 with a thirteen-week, eleven-town tour of Quebec. After some early struggles—including the collapse of the big-top tent before the tour’s first show and a chronic shortage of cash—Cirque hit its stride in 1990, with a show called Nouvelle Expérience. It was a critical success, and audiences loved it. It was aptly titled; people had never experienced anything like it before. Cirque du Soleil quickly grew from a single show into an organization that simultaneously mounted several different traveling productions. In just a few years, Cirque blossomed from a one-off street festival into an unstoppable international force.
The temptation to keep delivering the same kind of show must have been tremendous. Laliberté and his colleagues had invested almost ten years in developing a show that really worked. But Laliberté somehow resisted the temptation to repeat himself. Throughout Cirque’s existence, he has reinvented Cirque’s creative and business models time and again, usually over protests that he was fixing what was not broken and that he would destroy the company. He created a permanent show, Mystère, in Las Vegas in 1991. As ever, the doubters were out in force. They scoffed at the notion that Vegas gamblers would leave the tables and slot machines long enough to watch two hours of high-concept entertainment and questioned whether Cirque could even pull off a permanent show. “With Mystère,” Laliberté said in 2006, “we were
planting a flower in the desert. It was a big risk and beautiful creative challenge. We had to learn a completely different type of production, but we knew we have the creative ability.” 2 Not only did Mystère appeal to the Vegas crowd, it became a destination fixture, one of the things visitors to Vegas simply must see.
Cirque du Soleil continued to innovate with its formats, with Delerium (an arena show that featured reinterpretations of past Cirque performances), with Zumanity (a risqué, R-rated show), and with Love (a show based entirely on the music of the Beatles that spawned a best-selling CD). All are a departure from Cirque’s tested model, yet all have the unique look and feel that defines the Cirque du Soleil brand.
By 2007, Cirque du Soleil was a $600 million-a-year business with four thousand employees and nineteen shows operating either on tour or at a permanent location. Some 70 million people around the world have experienced a Cirque du Soleil show. And for more than twenty-five years, Laliberté has embodied the leader who cultivates design thinking throughout the organization he leads. He stared into a mystery—how can the circus be updated for today’s more sophisticated tastes?—and created a new-to-the-world heuristic, the Cirque du Soleil show. Like RIM’s Mike Lazaridis, he played a direct role in guiding the creation of the product, though he became less hands-on as Cirque grew to international scale. Laliberté kept Cirque innovating, doing new things, and pushing the edge.
To do so, he cultivated an environment that consciously put creativity before profit taking. Approximately 70 percent of Cirque’s profits are funneled back into R&D and new shows. And he made it his personal responsibility to ensure that reliability did not overpower validity. “A multinational that hires thirty-five hundred persons worldwide, many of them artists who travel constantly, needs a solid organization,” explained longtime Cirque executive Jacques Renaud in 2006. “But rules and procedures are a damper on creativity. So, we do have a paradox here. We had to tell the creatives, ‘Look, you need strong management; none of you guys is able to run thirteen shows on four continents.’ But then, we had to remind legal, finance, or marketing that they wouldn’t have much left to manage in the future if the creatives were stifled.” 3 Laliberté saw what Cirque could be if it maintained its dynamic balance of strong management and creativity. His leadership nurtured a culture defined by the “ability to start from scratch, from a white page, till we’ve come up with stuff that nobody had ever dreamed before,” said Gilles Ste-Croix, one of Cirque’s founding members and a member of Laliberté’s inner circle. “And then to risk it, to find ways to make it happen.” 4
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