A design-led approach to formulating business strategy

Saturday, 01 May 2021


    This rapidly shifting business landscape calls for human-centred design that puts customers in the loop, writes professor of strategic management Eric Knight.

    Unsurprisingly, one of the most exciting fields in business is strategy. Strategy, by definition, is about the future. As the future is authored by those who take action, the field of strategy continues to evolve at a cutting pace.

    What strategy was

    Strategy today is different to what it was 20 years ago. The classics of Harvard Business School professors Michael Porter and the late Clayton Christensen, and McGill University management studies professor Henry Mintzberg, have taken their place in history — and a new brand of thinkers is updating the way we think about strategy.

    The differences are fundamental. Porter and Christensen were strategy thinkers — largely focused on an organisation’s idealised position in the market. Porter analysed companies through his “five forces” model of its situated environment. Christensen added a dynamic lens to this, thinking about a firm’s future position and the complacency of incumbency — what he famously called the “innovator’s dilemma”.

    In both cases, these scholars determined strategy as a plan. A firm’s strategy should be determined through numbers, data and analysis — from which an optimal position in market could be determined, planned and then achieved.

    What strategy is

    Modern strategy calls for something more — the ability to think and feel; to analyse and intuit; to act and react. In other words, we are beginning to realise that strategy is more than what you intend to do. It is just as much about how you respond to the unexpected. COVID-19 has put this in sharp relief, but it is by no means the exception. Every crisis — whether it be environmental disaster, reputation threat or financial precarity — must be understood in terms of the preparedness of the board and executive.

    How well have they considered all possible outcomes, intuited the future and covered off all contingencies and black swan events?

    How is this superpower cultivated? Its source of truth anchors to something beguilingly simple — knowledge of your customer. Your ability to design successful products and services necessarily links to a single, important data point — how relevant and meaningful is it to your customer today and, even more interestingly, tomorrow? Strategies that get too caught up in analysis paralysis have the potential to lose sight of this simple test — as well as the systems, processes and mindset needed to stay ever close to the customer.

    Design-led strategy

    Design-led strategy is one approach executives can adopt to ensure they stay relevant to customers, both today and tomorrow. Design thinking — a process for creative problem-solving, which combines what is desirable from a human point of view with what is technologically feasible and economically viable — has been widely adopted, but it is deployed largely in product development teams. Design-led strategy brings it into the boardroom to answer key questions about which markets to play in, which products to invest in and how to mitigate risk. Without going into its practices, let’s consider some of its central questions.

    Customers in the loop

    Design-led strategy firstly asks, who is your target customer? Any organisation probably services multiple types of customers. However, design-led strategists need to ask, which of these customers is most relevant to my organisation? The answer in the past may not be the same as the future; and the interests of your customers might change as their expectations change in real time. For example, during the past 12 months, customer expectations for companies to offer online delivery have structurally shifted and probably won’t disappear. Businesses whose strategies missed this — or that have held off investing — will likely be disadvantaged.

    Don’t just think about strategy — touch, feel and experience it

    Secondly, design-led strategists ask: what does my strategy look and feel like? Strategies are constituted in numbers and words. But they are also embodied in products and services that evoke feelings, emotions and judgements. Can you really appreciate the difference between Apple and Samsung without having weighed each company’s products in your hands, felt their differences and thought about how they each make you feel?

    Companies adopting design-led strategy should cheaply prototype every new product or service they develop and run it through a simulated real-life customer journey — one which is accessible to the board. With low-cost, advanced manufacturing, companies can get this kind of due diligence and market intelligence much more cheaply and easily than ever before. For example, using Unity product visualisation technology, automotive companies can now do product reviews of cars based on virtual renditions. Customers can give real feedback as if this product was in their daily use — not a theoretical “what if?” analysis. If you’re overseeing a major investment or strategic pivot in your company without this level of design-led data, are you making an investment, or a bet?

    Design-led strategy represents a fundamentally new way of thinking about strategy.

    Empathy — an important diversity consideration

    The board develops strategies. It is a social process — one of conception, contention and, ultimately, commitment. But if you don’t have people in your leadership team who know their customers, or are similar to them in some way, their ability to ask the right questions and/or interpret the data might be a limitation. Empathy matters. Can you evaluate the BNPL (buy now/pay later) sector if you have never needed short-term borrowing? Can you appraise the market for luxury electric cars and whether customers will switch over, if you don’t drive one?

    Design-led strategy represents a fundamentally new way of thinking about strategy. It is also a way of strategising that is becoming more relevant to our modern age. Informed by speed, agility and the ability to work at the intersection of business, science and engineering, we need new approaches to doing strategy that keep up with the fruitful and dynamic intersection of these new disciplines.

    Latest news

    This is of of your complimentary pieces of content

    This is exclusive content.

    You have reached your limit for guest contents. The content you are trying to access is exclusive for AICD members. Please become a member for unlimited access.