Primer: Lean Startup for Social Innovation - CollaborateUp [PDF]

Primer: Lean Startup for Social Innovation Collective Impact, Design Thinking, & Agile Rollout

Purpose This packet of documents contains several articles that explain lean startup for social innovation. The principles and concepts contained in these documents combine to paint a full picture of the ways to conceive, design, test, and refine social innovations. Notice we did not say implement in the sense of a “once and done” approach. These concepts rely on a constant flow of conceiving and re-conceiving, testing and retesting, of constant refinement. These articles should give co-creation workshop participants a quick primer on the fundamentals of lean startup for social innovation and should be read prior to attending the workshop.

Collective Impact The first article on “Collective Impact” argues that large-scale social change requires broad cross-sector coordination and therefore, requires groups of people from multiple organizations to take coordinated action together. These kinds of “collective action” initiatives require potential collaborators to focus beyond isolated interventions of individual organizations and to instead work together.

Design Thinking The next two articles, “Design Thinking Comes of Age” and “Design for Action”, discuss Design Thinking, a method for creating solutions to problems with a focus on how people will actually use or interact with the solutions. This approach puts the potential beneficiary (aka the “user”) at the center of design and calls for interacting with them and all the stakeholders involved in the system throughout the process of framing the problem, working with them to frame the right questions about their collective needs, and creating multiple ideas to test and see what works and learn from what doesn’t.

Problem Definition & The Case for Change This article, “The Stake & the Five Whys” provides some principles and tips for understanding underlying causes of complex problems and articulating the case for change.

Minimum Viable Concepts The item “Minimum Viable Concepts: Why They’re Not Just You Being Lazy” adapts the Lean Startup idea of a Minimum Viable Product and applies it to social innovation.

Agile Rollout The last document describes “Agile Rollout”: how to quickly rollout and test collective action initiatives and programs, creating dynamic and agile partnership frameworks that will produce greater impact at lower cost in less time.








 



 



 Collective
Impact
 By John Kania & Mark Kramer 
 
 


Stanford
Social
Innovation
Review
 Winter
2011 
 
 Copyright
©
2011
by
Leland
Stanford
Jr.
University
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Rights
Reserved
 


Stanford Social Innovation Review Email: [email protected], www.ssireview.org




Collective Impact 300 leaders of local organizations agreed to participate, including the heads of influential private and corporate foundations, city government officials, school district representatives, the presidents of eight universities and community colleges, and the executive directors of hundreds of education-related nonprofit and advocacy groups. These leaders realized that fixing one point on the educational By John Kania & Mark Kramer continuum—such as better after-school programs—wouldn’t Illustration by Martin Jarrie make much difference unless all parts of the continuum improved at the same time. No he scale and complexity of the U.S. public education system has single organization, however thwarted attempted reforms for decades. Major funders, such as innovative or powerful, could the Annenberg Foundation, Ford Foundation, and Pew Charitable accomplish this alone. Instead, Trusts have abandoned many of their efforts in frustration after actheir ambitious mission became knowledging their lack of progress. Once the global leader—after to coordinate improvements at World War II the United States had the highest high school graduevery stage of a young person’s ation rate in the world—the country now ranks 18th among the top life, from “cradle to career.” 24 industrialized nations, with more than 1 million secondary school Strive didn’t try to create students dropping out every year. The heroic efforts of countless teachers, administrators, a new educational program or and nonprofits, together with billions of dollars in charitable contributions, may have led to attempt to convince donors to important improvements in individual schools and classrooms, spend more money. Instead, yet system-wide progress has seemed virtually unobtainable. through a carefully structured process, Strive focused the enAgainst these daunting odds, a remarkable exception seems tire educational community on a single set of goals, measured to be emerging in Cincinnati. Strive, a nonprofit subsidiary in the same way. Participating organizations are grouped of KnowledgeWorks, has brought together local leaders to into 15 different Student Success Networks (SSNs) by type of tackle the student achievement crisis and improve education activity, such as early childhood education or tutoring. Each throughout greater Cincinnati and northern Kentucky. In SSN has been meeting with coaches and facilitators for two the four years since the group was launched, Strive partners hours every two weeks for the past three years, developing have improved student success in dozens of key areas across shared performance indicators, discussing their progress, three large public school districts. Despite the recession and and most important, learning from each other and aligning budget cuts, 34 of the 53 success indicators that Strive tracks their efforts to support each other. have shown positive trends, including high school graduation Strive, both the organization and the process it helps facilitate, is an example of collective impact, the commitment of a rates, fourth-grade reading and math scores, and the number group of important actors from different sectors to a common of preschool children prepared for kindergarten. agenda for solving a specific social problem. Collaboration is Why has Strive made progress when so many other efforts have failed? It is because a core group of community leaders nothing new. The social sector is filled with examples of partdecided to abandon their individual agendas in favor of a col- nerships, networks, and other types of joint efforts. But collective approach to improving student achievement. More than lective impact initiatives are distinctly different. Unlike most

Large-scale social change requires broad cross-sector coordination, yet the social sector remains focused on the isolated intervention of individual organizations.

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collaborations, collective impact initiatives involve a centralized infrastructure, a dedicated staff, and a structured process that leads to a common agenda, shared measurement, continuous communication, and mutually reinforcing activities among all participants. (See “Types of Collaborations” on page 39.) Although rare, other successful examples of collective impact are addressing social issues that, like education, require many different players to change their behavior in order to solve a complex problem. In 1993, Marjorie Mayfield Jackson helped found the Elizabeth River Project with a mission of cleaning up the Elizabeth River in southeastern Virginia, which for decades had been a dumping ground for industrial waste. They engaged more than 100 stakeholders, including the city governments of Chesapeake, Norfolk, Portsmouth, and Virginia Beach, Va., the Virginia Department of Environmental Quality, the U.S. Environmental Protection Agency (EPA), the U.S. Navy, and dozens of local businesses, schools, community groups, environmental organizations, and universities, in developing an 18-point plan to restore the watershed. Fifteen years later, more than 1,000 acres of watershed land have been conserved or restored, pollution has been reduced by more than 215 million pounds, concentrations of the most severe carcinogen have been cut sixfold, and water quality has significantly improved. Much remains to be done before the river is fully restored, but already 27 species of fish and oysters are thriving in the restored wetlands, and bald eagles have returned to nest on the shores. Or consider Shape up Somerville, a citywide effort to reduce and prevent childhood obesity in elementary school children in Somerville, Mass. Led by Christina Economos, an associate professor at Tufts University’s Gerald J. and Dorothy R. Friedman School of Nutrition Science and Policy, and funded by the Centers for Disease Control and Prevention, the Robert Wood Johnson Foundation, Blue Cross Blue Shield of Massachusetts, and United Way of Massachusetts Bay and Merrimack Valley, the program engaged government officials, educators, businesses, nonprofits, and citizens in collectively defining wellness and weight gain prevention practices. Schools agreed to offer healthier foods, teach nutrition, and promote physical activity. Local restaurants received a certification if they served low-fat, high nutritional food. The city organized a farmers’ market and provided healthy lifestyle incentives such as reduced-price gym memberships for city employees. Even sidewalks were modified and crosswalks repainted to encourage more children to walk to school. The result was a statistically significant decrease in body mass index among the community’s young children between 2002 and 2005. Even companies are beginning to explore collective impact to tackle social problems. Mars, a manufacturer of chocolate brands such as M&M’s, Snickers, and Dove, is working with NGOs, local governments, and even direct competitors to improve the lives of more than 500,000 impoverished cocoa farmers in Cote d’Ivoire, where Mars sources a large portion of its cocoa. Research suggests John K a ni a is a managing director at FSG, where he oversees the firm’s consulting practice. Before joining FSG, he was a consultant at Mercer Management Consulting and Corporate Decisions Inc. This is Kania’s third article for the Stanford Social Innovation Review. M a rk K r a mer is the co-founder and a managing director of FSG. He is also the co-founder and the initial board chair of the Center for Effective Philanthropy, and a senior fellow at Harvard University’s John F. Kennedy School of Government. This is Kramer’s fifth article for the Stanford Social Innovation Review.

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that better farming practices and improved plant stocks could triple the yield per hectare, dramatically increasing farmer incomes and improving the sustainability of Mars’s supply chain. To accomplish this, Mars must enlist the coordinated efforts of multiple organizations: the Cote d’Ivoire government needs to provide more agricultural extension workers, the World Bank needs to finance new roads, and bilateral donors need to support NGOs in improving health care, nutrition, and education in cocoa growing communities. And Mars must find ways to work with its direct competitors on pre-competitive issues to reach farmers outside its supply chain. These varied examples all have a common theme: that large-scale social change comes from better cross-sector coordination rather than from the isolated intervention of individual organizations. Evidence of the effectiveness of this approach is still limited, but these examples suggest that substantially greater progress could be made in alleviating many of our most serious and complex social problems if nonprofits, governments, businesses, and the public were brought together around a common agenda to create collective impact. It doesn’t happen often, not because it is impossible, but because it is so rarely attempted. Funders and nonprofits alike overlook the potential for collective impact because they are used to focusing on independent action as the primary vehicle for social change.

Isolated Impact

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ost funders, faced with the task of choosing a few grantees from many applicants, try to ascertain which organizations make the greatest contribution toward solving a social problem. Grantees, in turn, compete to be chosen by emphasizing how their individual activities produce the greatest effect. Each organization is judged on its own potential to achieve impact, independent of the numerous other organizations that may also influence the issue. And when a grantee is asked to evaluate the impact of its work, every attempt is made to isolate that grantee’s individual influence from all other variables. In short, the nonprofit sector most frequently operates using an approach that we call isolated impact. It is an approach oriented toward finding and funding a solution embodied within a single organization, combined with the hope that the most effective organizations will grow or replicate to extend their impact more widely. Funders search for more effective interventions as if there were a cure for failing schools that only needs to be discovered, in the way that medical cures are discovered in laboratories. As a result of this process, nearly 1.4 million nonprofits try to invent independent solutions to major social problems, often working at odds with each other and exponentially increasing the perceived resources required to make meaningful progress. Recent trends have only reinforced this perspective. The growing interest in venture philanthropy and social entrepreneurship, for example, has greatly benefited the social sector by identifying and accelerating the growth of many high-performing nonprofits, yet it has also accentuated an emphasis on scaling up a few select organizations as the key to social progress. Despite the dominance of this approach, there is scant evidence that isolated initiatives are the best way to solve many social problems in today’s complex and interdependent world. No single organization is responsible for any major social problem, nor can any single

Types of Collaborations Organizations have attempted to solve social problems by collaboration for decades without producing many results. The vast majority of these efforts lack the elements of success that enable collective impact initiatives to achieve a sustained alignment of efforts. Funder Collaboratives are groups of funders interested in supporting the same issue who pool their resources. Generally, participants do not adopt an overarching evidence-based plan of action or a shared measurement system, nor do they engage in differentiated activities beyond check writing or engage stakeholders from other sectors. Public-Private Partnerships are partnerships formed between government and private sector organizations to deliver specific services or benefits. They are often targeted narrowly, such as developing a particular drug to fight a single disease, and usually don’t engage the full set of stakeholders that affect the issue, such as the potential drug’s distribution system. Multi-Stakeholder Initiatives are voluntary activities by stakeholders from different sectors around a common theme. Typically, these initiatives lack any shared measurement of impact and the supporting infrastructure to forge any true alignment of efforts or accountability for results.

Shifting from isolated impact to collective impact is not merely a matter of encouraging more collaboration or publicprivate partnerships. It requires a systemic approach to social impact that focuses on the relationships between organizations and the progress toward shared objectives. And it requires the creation of a new set of nonprofit management organizations that have the skills and resources to assemble and coordinate the specific elements necessary for collective action to succeed.

The Five Conditions of Collective Success

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ur research shows that successful collective impact initiatives typiSocial Sector Networks are groups of individuals or organizations fluidly connected cally have five conditions that tothrough purposeful relationships, whether formal or informal. Collaboration is generally gether produce true alignment and lead to ad hoc, and most often the emphasis is placed on information sharing and targeted shortterm actions, rather than a sustained and structured initiative. powerful results: a common agenda, shared measurement systems, mutually reinforcCollective Impact Initiatives are long-term commitments by a group of important actors from different sectors to a common agenda for solving a specific social problem. Their ing activities, continuous communication, actions are supported by a shared measurement system, mutually reinforcing activities, and backbone support organizations. and ongoing communication, and are staffed by an independent backbone organization. Common Agenda | Collective impact requires all participants to have a shared organization cure it. In the field of education, even the most highly vision for change, one that includes a common understanding of the respected nonprofits—such as the Harlem Children’s Zone, Teach for problem and a joint approach to solving it through agreed upon acAmerica, and the Knowledge Is Power Program (KIPP)—have taken tions. Take a close look at any group of funders and nonprofits that decades to reach tens of thousands of children, a remarkable achieve- believe they are working on the same social issue, and you quickly ment that deserves praise, but one that is three orders of magnitude find that it is often not the same issue at all. Each organization often short of the tens of millions of U.S. children that need help. has a slightly different definition of the problem and the ultimate The problem with relying on the isolated impact of individual goal. These differences are easily ignored when organizations work organizations is further compounded by the isolation of the non- independently on isolated initiatives, yet these differences splinter profit sector. Social problems arise from the interplay of govern- the efforts and undermine the impact of the field as a whole. Collecmental and commercial activities, not only from the behavior of tive impact requires that these differences be discussed and resolved. social sector organizations. As a result, complex problems can be Every participant need not agree with every other participant on solved only by cross-sector coalitions that engage those outside all dimensions of the problem. In fact, disagreements continue to the nonprofit sector. divide participants in all of our examples of collective impact. All We don’t want to imply that all social problems require collec- participants must agree, however, on the primary goals for the coltive impact. In fact, some problems are best solved by individual lective impact initiative as a whole. The Elizabeth River Project, for organizations. In “Leading Boldly,” an article we wrote with Ron example, had to find common ground among the different objectives Heifetz for the winter 2004 issue of the Stanford Social Innovation of corporations, governments, community groups, and local citizens Review, we described the difference between technical problems and in order to establish workable cross-sector initiatives. adaptive problems. Some social problems are technical in that the Funders can play an important role in getting organizations to problem is well defined, the answer is known in advance, and one or act in concert. In the case of Strive, rather than fueling hundreds a few organizations have the ability to implement the solution. Ex- of strategies and nonprofits, many funders have aligned to support amples include funding college scholarships, building a hospital, or Strive’s central goals. The Greater Cincinnati Foundation realigned installing inventory controls in a food bank. Adaptive problems, by its education goals to be more compatible with Strive, adopting contrast, are complex, the answer is not known, and even if it were, Strive’s annual report card as the foundation’s own measures for no single entity has the resources or authority to bring about the progress in education. Every time an organization applied to Duke necessary change. Reforming public education, restoring wetland Energy for a grant, Duke asked, “Are you part of the [Strive] network?” environments, and improving community health are all adaptive And when a new funder, the Carol Ann and Ralph V. Haile Jr./U.S. problems. In these cases, reaching an effective solution requires Bank Foundation, expressed interest in education, they were encourlearning by the stakeholders involved in the problem, who must then aged by virtually every major education leader in Cincinnati to join change their own behavior in order to create a solution. Strive if they wanted to have an impact in local education.1 Winter 2011 • Stanford Social Innovation Review

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Shared Measurement Systems | Developing a shared measurement system is essential to collective impact. Agreement on a common agenda is illusory without agreement on the ways success will be measured and reported. Collecting data and measuring results consistently on a short list of indicators at the community level and across all participating organizations not only ensures that all efforts remain aligned, it also enables the participants to hold each other accountable and learn from each other’s successes and failures. It may seem impossible to evaluate hundreds of different organizations on the same set of measures. Yet recent advances in Web-based technologies have enabled common systems for reporting performance and measuring outcomes. These systems increase efficiency and reduce cost. They can also improve the quality and credibility of the data collected, increase effectiveness by enabling grantees to learn from each other’s performance, and document the progress of the field as a whole.2 All of the preschool programs in Strive, for example, have agreed to measure their results on the same criteria and use only evidence-based decision making. Each type of activity requires a different set of measures, but all organizations engaged in the same type of activity report on the same measures. Looking at results across multiple organizations enables the participants to spot patterns, find solutions, and implement them rapidly. The preschool programs discovered that children regress during the summer break before kindergarten. By launching an innovative “summer bridge” session, a technique more often used in middle school, and implementing it simultaneously in all preschool programs, they increased the average kindergarten readiness scores throughout the region by an average of 10 percent in a single year.3 Mutually Reinforcing Activities | Collective impact initiatives depend on a diverse group of stakeholders working together, not by requiring that all participants do the same thing, but by encouraging each participant to undertake the specific set of activities at which it excels in a way that supports and is coordinated with the actions of others. The power of collective action comes not from the sheer number of participants or the uniformity of their efforts, but from the coordination of their differentiated activities through a mutually reinforcing plan of action. Each stakeholder’s efforts must fit into an overarching plan if their combined efforts are to succeed. The multiple causes of social problems, and the components of their solutions, are interdependent. They cannot be addressed by uncoordinated actions among isolated organizations. All participants in the Elizabeth River Project, for example, agreed on the 18-point watershed restoration plan, but each is playing a different role based on its particular capabilities. One group of organizations works on creating grassroots support and engagement among citizens, a second provides peer review and recruitment for industrial participants who voluntarily reduce pollution, and a third coordinates and reviews scientific research. The 15 SSNs in Strive each undertake different types of activities at different stages of the educational continuum. Strive does not prescribe what practices each of the 300 participating organizations should pursue. Each organization and network is free to chart its own course consistent with the common agenda, and informed by the shared measurement of results. 40

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Continuous Communication | Developing trust among nonprofits, corporations, and government agencies is a monumental challenge. Participants need several years of regular meetings to build up enough experience with each other to recognize and appreciate the common motivation behind their different efforts. They need time to see that their own interests will be treated fairly, and that decisions will be made on the basis of objective evidence and the best possible solution to the problem, not to favor the priorities of one organization over another. Even the process of creating a common vocabulary takes time, and it is an essential prerequisite to developing shared measurement systems. All the collective impact initiatives we have studied held monthly or even biweekly in-person meetings among the organizations’ CEO-level leaders. Skipping meetings or sending lower-level delegates was not acceptable. Most of the meetings were supported by external facilitators and followed a structured agenda. The Strive networks, for example, have been meeting regularly for more than three years. Communication happens between meetings too: Strive uses Web-based tools, such as Google Groups, to keep communication flowing among and within the networks. At first, many of the leaders showed up because they hoped that their participation would bring their organizations additional funding, but they soon learned that was not the meetings’ purpose. What they discovered instead were the rewards of learning and solving problems together with others who shared their same deep knowledge and passion about the issue. Backbone Support Organizations | Creating and managing collective impact requires a separate organization and staff with a very specific set of skills to serve as the backbone for the entire initiative. Coordination takes time, and none of the participating organizations has any to spare. The expectation that collaboration can occur without a supporting infrastructure is one of the most frequent reasons why it fails. The backbone organization requires a dedicated staff separate from the participating organizations who can plan, manage, and support the initiative through ongoing facilitation, technology and communications support, data collection and reporting, and handling the myriad logistical and administrative details needed for the initiative to function smoothly. Strive has simplified the initial staffing requirements for a backbone organization to three roles: project manager, data manager, and facilitator. Collective impact also requires a highly structured process that leads to effective decision making. In the case of Strive, staff worked with General Electric (GE) to adapt for the social sector the Six Sigma process that GE uses for its own continuous quality improvement. The Strive Six Sigma process includes training, tools, and resources that each SSN uses to define its common agenda, shared measures, and plan of action, supported by Strive facilitators to guide the process. In the best of circumstances, these backbone organizations embody the principles of adaptive leadership: the ability to focus people’s attention and create a sense of urgency, the skill to apply pressure to stakeholders without overwhelming them, the competence to frame issues in a way that presents opportunities as well as difficulties, and the strength to mediate conflict among stakeholders.

Funding Collective Impact

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reating a successful collective impact initiative requires a significant financial investment: the time participating organizations must dedicate to the work, the development and monitoring of shared measurement systems, and the staff of the backbone organization needed to lead and support the initiative’s ongoing work. As successful as Strive has been, it has struggled to raise money, confronting funders’ reluctance to pay for infrastructure and preference for short-term solutions. Collective impact requires instead that funders support a long-term process of social change without identifying any particular solution in advance. They must be willing to let grantees steer the work and have the patience to stay with an initiative for years, recognizing that social change can come from the gradual improvement of an entire system over time, not just from a single breakthrough by an individual organization. This requires a fundamental change in how funders see their role, from funding organizations to leading a long-term process of social change. It is no longer enough to fund an innovative solution created by a single nonprofit or to build that organization’s capacity. Instead, funders must help create and sustain the collective processes, measurement reporting systems, and community leadership that enable cross-sector coalitions to arise and thrive. This is a shift that we foreshadowed in both “Leading Boldly” and our more recent article, “Catalytic Philanthropy,” in the fall 2009 issue of the Stanford Social Innovation Review. In the former, we suggested that the most powerful role for funders to play in addressing adaptive problems is to focus attention on the issue and help to create a process that mobilizes the organizations involved to find a solution themselves. In “Catalytic Philanthropy,” we wrote: “Mobilizing and coordinating stakeholders is far messier and slower work than funding a compelling grant request from a single organization. Systemic change, however, ultimately depends on a sustained campaign to increase the capacity and coordination of an entire field.” We recommended that funders who want to create large-scale change follow four practices: take responsibility for assembling the elements of a solution; create a movement for change; include solutions from outside the nonprofit sector; and use actionable knowledge to influence behavior and improve performance. These same four principles are embodied in collective impact initiatives. The organizers of Strive abandoned the conventional approach of funding specific programs at education nonprofits and took responsibility for advancing education reform themselves. They built a movement, engaging hundreds of organizations in a drive toward shared goals. They used tools outside the nonprofit sector, adapting GE’s Six Sigma planning process for the social sector. And through the community report card and the biweekly meetings of the SSNs they created actionable knowledge that motivated the community and improved performance among the participants. Funding collective impact initiatives costs money, but it can be a highly leveraged investment. A backbone organization with a modest annual budget can support a collective impact initiative of several hundred organizations, magnifying the impact of millions or even billions of dollars in existing funding. Strive, for example, has a $1.5 million annual budget but is coordinating the efforts and

increasing the effectiveness of organizations with combined budgets of $7 billion. The social sector, however, has not yet changed its funding practices to enable the shift to collective impact. Until funders are willing to embrace this new approach and invest sufficient resources in the necessary facilitation, coordination, and measurement that enable organizations to work in concert, the requisite infrastructure will not evolve.

Future Shock

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hat might social change look like if funders, nonprofits, government officials, civic leaders, and business executives embraced collective impact? Recent events at Strive provide an exciting indication of what might be possible. Strive has begun to codify what it has learned so that other communities can achieve collective impact more rapidly. The organization is working with nine other communities to establish similar cradle to career initiatives.4 Importantly, although Strive is broadening its impact to a national level, the organization is not scaling up its own operations by opening branches in other cities. Instead, Strive is promulgating a flexible process for change, offering each community a set of tools for collective impact, drawn from Strive’s experience but adaptable to the community’s own needs and resources. As a result, the new communities take true ownership of their own collective impact initiatives, but they don’t need to start the process from scratch. Activities such as developing a collective educational reform mission and vision or creating specific community-level educational indicators are expedited through the use of Strive materials and assistance from Strive staff. Processes that took Strive several years to develop are being adapted and modified by other communities in significantly less time. These nine communities plus Cincinnati have formed a community of practice in which representatives from each effort connect regularly to share what they are learning. Because of the number and diversity of the communities, Strive and its partners can quickly determine what processes are universal and which require adaptation to a local context. As learning accumulates, Strive staff will incorporate new findings into an Internet-based knowledge portal that will be available to any community wishing to create a collective impact initiative based on Strive’s model. This exciting evolution of the Strive collective impact initiative is far removed from the isolated impact approach that now dominates the social sector and that inhibits any major effort at comprehensive, large-scale change. If successful, it presages the spread of a new approach that will enable us to solve today’s most serious social problems with the resources we already have at our disposal. It would be a shock to the system. But it’s a form of shock therapy that’s badly needed. n Note s

1 Interview with Kathy Merchant, CEO of the Greater Cincinnati Foundation, April 10, 2010. 2 See Mark Kramer, Marcie Parkhurst, and Lalitha Vaidyanathan, Breakthroughs in Shared Measurement and Social Impact, FSG Social Impact Advisors, 2009. 3 “Successful Starts,” United Way of Greater Cincinnati, second edition, fall 2009. 4 Indianapolis, Houston, Richmond, Va., and Hayward, Calif., are the first four communities to implement Strive’s process for educational reform. Portland, Ore., Fresno, Calif., Mesa, Ariz., Albuquerque, and Memphis are just beginning their efforts. Winter 2011 • Stanford Social Innovation Review

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SEPTEMBER 2015 REPRINT R1509D

SPOTLIGHT ON THE EVOLUTION OF DESIGN THINKING

Design Thinking Comes of Age The approach, once used primarily in product design, is now infusing corporate culture. by Jon Kolko

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SPOTLIGHT ON THE EVOLUTION OF DESIGN THINKING

SPOTLIGHT

ARTWORK The Office for Creative Research (Noa Younse), Band, Preliminary Visualization

Design Thinking Comes of Age The approach, once used primarily in product design, is now infusing corporate culture. by Jon Kolko

2 Harvard Business Review September 2015

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SPOTLIGHT ON THE EVOLUTION OF DESIGN THINKING

There’s a shift under way in large organizations, one that puts design much closer to the center of the enterprise. But the shift isn’t about aesthetics. It’s about applying the principles of design to the way people work. This new approach is in large part a response to the increasing complexity of modern technology and modern business. That complexity takes many forms. Sometimes software is at the center of a product and needs to be integrated with hardware (itself a complex task) and made intuitive and simple from the user’s point of view (another difficult challenge). Sometimes the problem being tackled is itself multifaceted: Think about how much tougher it is to reinvent a health care delivery system than to design a shoe. And sometimes the business environment is so volatile that a company must experiment with multiple paths in order to survive. I could list a dozen other types of complexity that businesses grapple with every day. But here’s what they all have in common: People need help making sense of them. Specifically, people need their interactions with technologies and other complex systems to be simple, intuitive, and pleasurable. A set of principles collectively known as design thinking—empathy with users, a discipline of prototyping, and tolerance for failure chief among them— is the best tool we have for creating those kinds of interactions and developing a responsive, flexible organizational culture.

What Is a Design-Centric Culture?

If you were around during the late-1990s dot-com craze, you may think of designers as 20-somethings shooting Nerf darts across an office that looks more like a bar. Because design has historically been equated with aesthetics and craft, designers have been celebrated as artistic savants. But a designcentric culture transcends design as a role, imparting a set of principles to all people who help bring ideas to life. Let’s consider those principles. 4 Harvard Business Review September 2015

Focus on users’ experiences, especially their emotional ones. To build empathy with

users, a design-centric organization empowers employees to observe behavior and draw conclusions about what people want and need. Those conclusions are tremendously hard to express in quantitative language. Instead, organizations that “get” design use emotional language (words that concern desires, aspirations, engagement, and experience) to describe products and users. Team members discuss the emotional resonance of a value proposition as much as they discuss utility and product requirements. A traditional value proposition is a promise of utility: If you buy a Lexus, the automaker promises that you will receive safe and comfortable transportation in a well-designed high-performance vehicle. An emotional value proposition is a promise of feeling: If you buy a Lexus, the automaker promises that you will feel pampered, luxurious, and affluent. In design-centric organizations, emotionally charged language isn’t denigrated as thin, silly, or biased. Strategic conversations in those companies frequently address how a business decision or a market trajectory will positively influence users’ experiences and often acknowledge only implicitly that well-designed offerings contribute to financial success. The focus on great experiences isn’t limited to product designers, marketers, and strategists—it infuses every customer-facing function. Take finance. Typically, its only contact with users is through invoices and payment systems, which are designed for internal business optimization or predetermined “customer requirements.” But those systems are touch points that shape a customer’s impression of the company. In a culture focused on customer experience, financial touch points are designed around users’ needs rather than internal operational efficiencies.

Create models to examine complex problems. Design thinking, first used to make physical

objects, is increasingly being applied to complex, intangible issues, such as how a customer experiences a service. Regardless of the context, design thinkers tend to use physical models, also known as design artifacts, to explore, define, and communicate. Those models—primarily diagrams and sketches— supplement and in some cases replace the spreadsheets, specifications, and other documents that

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Idea in Brief THE CHANGE Increasingly, corporations and professional services firms are working to create design-centric cultures.

THE REASON Many products, services, and processes are now technologically complex. People are not hardwired to deal well with high levels of complexity. They need help.

THE IDEA People need their interactions with technologies and other complex systems to be intuitive and pleasurable. Empathy, experimentation, design smarts, and other qualities help create those kinds of interactions. Those qualities need to spread from the product design function to the whole organization.

have come to define the traditional organizational play.” In his book of that title, he writes that inenvironment. They add a fluid dimension to the novation is “more social than personal.” He adds, exploration of complexity, allowing for nonlinear “Prototyping is probably the single most pragmatic thought when tackling nonlinear problems. behavior the innovative firm can practice.” For example, the U.S. Department of Veterans Tolerate failure. A design culture is nurturing. Affairs’ Center for Innovation has used a design ar- It doesn’t encourage failure, but the iterative nature of the design process recognizes that it’s rare to get tifact called a customer journey map to understand veterans’ emotional highs and lows in their inter- things right the first time. Apple is celebrated for its successes, but a little digging uncovers the Newton actions with the VA. “This form of artifact helped tablet, the Pippin gaming system, and the Copland us better tell a story to various stakeholders,” says operating system—products that didn’t fare so well. Melissa Chapman, a designer who worked at the (Pippin and Copland were discontinued after only Center for Innovation. Even more important, she two years.) The company leverages failure as learning, adds, it “helped us develop a strategic way to think about changing the entire organization and to com- viewing it as part of the cost of innovation. Greg Petroff, the chief experience officer at GE municate that emergent strategy.” The customer Software, explains how the iterative process works journey map and other design models are tools for at GE: “GE is moving away from a model of exhausunderstanding. They present alternative ways of looking at a problem. tive product requirements. Teams learn what to do Use prototypes to explore potential solu- in the process of doing it, iterating, and pivoting.” tions. In design-centric organizations, you’ll typi- Employees in every aspect of the business must recally see prototypes of new ideas, new products, alize that they can take social risks—putting forth and new services scattered throughout offices and half-baked ideas, for instance—without losing face meeting rooms. Whereas diagrams such as cus- or experiencing punitive repercussions. tomer journey maps explore the problem space, Exhibit thoughtful restraint. Many products prototypes explore the solution space. They may be built on an emotional value proposition are simpler digital, physical, or diagrammatic, but in all cases than competitors’ offerings. This restraint grows they are a way to communicate ideas. The habit of out of deliberate decisions about what the product publicly displaying rough prototypes hints at an should do and, just as important, what it should not open-minded culture, one that values exploration do. By removing features, a company offers customand experimentation over rule following. The MIT ers a clear, simple experience. The thermostat Nest— Media Lab formalizes this in its motto, “Demo or inside, a complex piece of technology—provides die,” which recognizes that only the act of proto- fewer outward-facing functions than other thermotyping can transform an idea into something truly stats, thus delivering an emotional experience that valuable—on their own, ideas are a dime a dozen. reflects the design culture of the company. As CEO Design-centric companies aren’t shy about tinker- Tony Fadell said in an interview published in Inc., ing with ideas in a public forum and tend to iterate “At the end of the day you have to espouse a feeling— quickly on prototypes—an activity that the innova- in your advertisements, in your products. And that feeling comes from your gut.” tion expert Michael Schrage refers to as “serious September 2015 Harvard Business Review 5

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Square’s mobile app Cash lets you do one thing: send money to a friend. “I think I’m just an editor, and I think every CEO is an editor,” wrote Jack Dorsey, Square’s CEO. “We have all these inputs, we have all these places that we could go…but we need to present one cohesive story to the world.” In organizations like Square, you’ll find product leaders saying no much more than they say yes. Rather than chase the market with follow-on features, they lead the market with a constrained focus.

What Types of Companies Are Making This Change?

As industry giants such as IBM and GE realize that software is a fundamental part of their businesses, they are also recognizing the extraordinary levels of complexity they must manage. Design thinking is an essential tool for simplifying and humanizing. It can’t be extra; it needs to be a core competence. “There’s no longer any real distinction between business strategy and the design of the user experience,” said Bridget van Kralingen, the senior vice president of IBM Global Business Services, in a statement to the press. In November 2013 IBM opened a design studio in Austin, Texas—part of the company’s $100 million investment in building a massive design organization. As Phil Gilbert, the general manager of the effort, explained in a press release, “Quite simply, our goal—on a scale unmatched in the industry—is to modernize enterprise software for today’s user, who demands great design everywhere, at home and at work.” The company intends to hire 1,000 designers. When I was at the company frog design, GE hired us to help formalize and disseminate language, tools, and success metrics to support its emergent design practice. Dave Cronin, GE’s executive design director for industrial internet applications,

describes how the company came to realize that it was not just in the business of making physical products but had become one of the largest software providers in the world. The complexity of this software was overwhelming, so his team turned to design. “Our mandate was to create products, but also to enable nimble innovation,” Cronin says. “That’s a pretty tall order—we were asked to perform design at scale and along the way create cultural change.” IBM and GE are hardly alone. Every established company that has moved from products to services, from hardware to software, or from physical to digital products needs to focus anew on user experience. Every established company that intends to globalize its business must invent processes that can adjust to different cultural contexts. And every established company that chooses to compete on innovation rather than efficiency must be able to define problems artfully and experiment its way to solutions. (For more on the last shift, see “How Samsung Became a Design Powerhouse,” in this issue.) The pursuit of design isn’t limited to large brandname corporations; the big strategy-consulting firms are also gearing up for this new world, often by acquiring leading providers of design services. In the past few years, Deloitte acquired Doblin, Accenture acquired Fjord, and McKinsey acquired Lunar. Olof Schybergson, the founder of Fjord, views design thinking’s empathetic stance as fundamental to business success. As he told an interviewer, “Going direct to consumers is a big disruptor.…There are new opportunities to gather data and insights about consumer behavior, likes, dislikes.…Those who have data and an appetite for innovation will prevail.” These acquisitions suggest that design is becoming table stakes for high-value corporate consulting—an expected part of a portfolio of business services.

Design thinking is an essential tool for simplifying and humanizing. It can’t be extra; it needs to be a core competence. 6 Harvard Business Review September 2015

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MARTIN BUCELLA

What Are the Challenges?

Several years ago, I consulted for a large entertainment company that had tucked design away in a select group of “creatives.” The company was excited about introducing technology into its theme parks and recognized that a successful visitor experience would hinge on good design. And so it became apparent that the entire organization needed to embrace design as a core competence. This shift is never an easy one. Like many organizations with entrenched cultures that have been successful for many years, the company faced several hurdles. Accepting more ambiguity. The entertainment company operates globally, so it values repeatable, predictable operational efficiency in support of quarterly profit reporting. Because the introduction of technology into the parks represented a massive capital expenditure, there was pressure for a guarantee of a healthy return. Design, however, doesn’t conform easily to estimates. It’s difficult if not impossible to understand how much value will be delivered through a better experience or to calculate the return on an investment in creativity. Embracing risk. Transformative innovation is inherently risky. It involves inferences and leaps of faith; if something hasn’t been done before, there’s no way to guarantee its outcome. The philosopher Charles Peirce said that insights come to us “like a flash”—in an epiphany—making them difficult to rationalize or defend. Leaders need to create a culture that allows people to take chances and move forward without a complete, logical understanding of a problem. Our partners at the entertainment company were empowered to hire a design consultancy, and the organization recognized that the undertaking was no sure thing. Resetting expectations. As corporate leaders become aware of the power of design, many view design thinking as a solution to all their woes. Designers, enjoying their new level of strategic influence, often reinforce that impression. When I worked with the entertainment company, I was part of that problem, primarily because my livelihood depended on selling design consulting. But design doesn’t solve all problems. It helps people and organizations cut through complexity. It’s great for innovation. It works extremely well for imagining the future. But it’s not the right set of tools for optimizing, streamlining, or otherwise operating a stable business. Additionally, even if expectations

are set appropriately, they must be aligned around a realistic timeline—culture changes slowly in large organizations. AN ORGANIZATIONAL FOCUS on design offers unique opportunities for humanizing technology and for developing emotionally resonant products and services. Adopting this perspective isn’t easy. But doing so helps create a workplace where people want to be, one that responds quickly to changing business dynamics and empowers individual contributors. And because design is empathetic, it implicitly drives a more thoughtful, human approach to business.   HBR Reprint R1509D Jon Kolko is the vice president of design at Blackboard, an education software company; the founder and director of Austin Center for Design; and the author of Well-Designed: How to Use Empathy to Create Products People Love (HBR Press, 2014).

“That’s one of my early pieces.”

September 2015 Harvard Business Review 7

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SEPTEMBER 2015 REPRINT R1509C

SPOTLIGHT ON THE EVOLUTION OF DESIGN THINKING

Design for Action How to use design thinking to make great things actually happen by Tim Brown and Roger Martin

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SPOTLIGHT ON THE EVOLUTION OF DESIGN THINKING

SPOTLIGHT

ARTWORK The Office for Creative Research (Noa Younse), Design Sketch

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Design for Action How to use design thinking to make great things actually happen by Tim Brown and Roger Martin

September 2015 Harvard Business Review 3

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SPOTLIGHT ON THE EVOLUTION OF DESIGN THINKING

Throughout most of history, design was a process applied to physical objects. Raymond Loewy designed trains. Frank Lloyd Wright designed houses. Charles Eames designed furniture. Coco Chanel designed haute couture. Paul Rand designed logos. David Kelley designed products, including (most famously) the mouse for the Apple computer. But as it became clear that smart, effective design was behind the success of many commercial goods, companies began employing it in more and more contexts. High-tech firms that hired designers to work on hardware (to, say, come up with the shape and layout of a smartphone) began asking them to create the look and feel of user-interface software. Then designers were asked to help improve user experiences. Soon firms were treating corporate strategy making as an exercise in design. Today design is even applied to helping multiple stakeholders and organizations work better as a system. This is the classic path of intellectual progress. Each design process is more complicated and sophisticated than the one before it. Each was enabled by learning from the preceding stage. Designers could easily turn their minds to graphical user interfaces for software because they had experience designing the hardware on which the applications would run. Having crafted better experiences for computer users, designers could readily take on nondigital experiences, like patients’ hospital visits. And once they learned how to redesign the user experience in a single organization, they were more prepared to tackle the holistic experience in a system of organizations. The San Francisco Unified School District, 4 Harvard Business Review September 2015

for example, recently worked with IDEO to help redesign the cafeteria experience across all its schools. As design has moved further from the world of products, its tools have been adapted and extended into a distinct new discipline: design thinking. Arguably, Nobel laureate Herbert Simon got the ball rolling with the 1969 classic The Sciences of the Artificial, which characterized design not so much as a physical process as a way of thinking. And Richard Buchanan made a seminal advance in his 1992 article “Wicked Problems in Design Thinking,” in which he proposed using design to solve extraordinarily persistent and difficult challenges. But as the complexity of the design process increases, a new hurdle arises: the acceptance of what we might call “the designed artifact”—whether product, user experience, strategy, or complex system—by stakeholders. In the following pages we’ll explain this new challenge and demonstrate how design thinking can help strategic and system innovators make the new worlds they’ve imagined come to pass. In fact, we’d argue that with very complex artifacts, the design of their “intervention”—their introduction and integration into the status quo—is even more critical to success than the design of the artifacts themselves.

COPYRIGHT © 2015 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.

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Idea in Brief THE PROBLEM

Complex new designs of products (say, an electric vehicle) or systems (like a school system) typically struggle to gain acceptance. Many good groundbreaking ideas fail in the starting gate.

The New Challenge

WHY IT HAPPENS

New products and systems often require people to change established business models and behaviors. As a result they encounter stiff resistance from their intended beneficiaries and from the people who have to deliver or operate them.

The launch of a new product that resembles a company’s other offerings—say, a hybrid version of an existing car model—is typically seen as a positive thing. It produces new revenue and few perceived downsides for the organization. The new vehicle doesn’t cause any meaningful changes to the organization or the way its people work, so the design isn’t inherently threatening to anyone’s job or to the current power structure. Of course, introducing something new is always worrisome. The hybrid might fail in the marketplace. That would be costly and embarrassing. It might cause other vehicles in the portfolio to be phased out, producing angst for those who support the older models. Yet the designer usually pays little attention to such concerns. Her job is to create a truly great new car, and the knock-on effects are left to others— people in marketing or HR—to manage. The more complex and less tangible the designed artifact is, though, the less feasible it is for the designer to ignore its potential ripple effects. The business model itself may even need to be changed. That means the introduction of the new artifact requires design attention as well. Consider this example: A couple of years ago, MassMutual was trying to find innovative ways to persuade people younger than 40 to buy life insurance—a notoriously hard sell. The standard approach would have been to design a special life insurance product and market it in the conventional way. But MassMutual concluded that this was unlikely to work. Instead the company worked with IDEO to design a completely new type of customer experience focused more broadly on educating people about long-term financial planning. Launched in October 2014, “Society of Grownups” was conceived as a “master’s program for adulthood.”

THE SOLUTION

Treat the introduction of the new product or system—the “designed artifact”—as a design challenge itself. When Intercorp Group in Peru took that approach, it won acceptance for a new technologyenabled school concept in which the teacher facilitates learning rather than serves as the sole lesson provider.

Rather than delivering it purely as an online course, the company made it a multichannel experience, with state-of-the-art digital budgeting and financialplanning tools, offices with classrooms and a library customers could visit, and a curriculum that included everything from investing in a 401(k) to buying good-value wine. That approach was hugely disruptive to the organization’s norms and processes, as it required not only a new brand and new digital tools but also new ways of working. In fact, every aspect of the organization had to be redesigned for the new service, which is intended to evolve as participants provide MassMutual with fresh insights into their needs. When it comes to very complex artifacts—say, an entire business ecosystem—the problems of integrating a new design loom larger still. For example, the successful rollout of self-driving vehicles will require automobile manufacturers, technology providers, regulators, city and national governments, service firms, and end users to collaborate in new ways and engage in new behaviors. How will insurers work with manufacturers and users to analyze risk? How will data collected from selfdriving cars be shared to manage traffic flows while protecting privacy? New designs on this scale are intimidating. No wonder many genuinely innovative strategies and systems end up on a shelf somewhere—never acted on in any way. However, if you approach a largescale change as two simultaneous and parallel challenges—the design of the artifact in question and the design of the intervention that brings it to life—you can increase the chances that it will take hold.

Designing the Intervention

Intervention design grew organically out of the iterative prototyping that was introduced to the design September 2015 Harvard Business Review 5

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SPOTLIGHT ON THE EVOLUTION OF DESIGN THINKING

process as a way to better understand and predict customers’ reactions to a new artifact. In the traditional approach, product developers began by studying the user and creating a product brief. Then they worked hard to create a fabulous design, which the firm launched in the market. In the design-oriented approach popularized by IDEO, the work to understand users was deeper and more ethnographic than quantitative and statistical. Initially, that was the significant distinction between the old and new approaches. But IDEO realized that no matter how deep the up-front understanding was, designers wouldn’t really be able to predict users’ reactions to the final product. So IDEO’s designers began to reengage with the users sooner, going to them with a very low-resolution prototype to get early feedback. Then they kept repeating the process in short cycles, steadily improving the product until the user was delighted with it. When IDEO’s client actually launched the product, it was an almost guaranteed success—a phenomenon that helped make rapid prototyping a best practice. Iterative rapid-cycle prototyping didn’t just improve the artifact. It turned out to be a highly effective way to obtain the funding and organizational commitment to bring the new artifact to market. A new product, especially a relatively revolutionary one, always involves a consequential bet by the management team giving it the green light. Often, fear of the unknown kills the new idea. With rapid prototyping, however, a team can be more confident of market success. This effect turns out to be even more important with complex, intangible designs. In corporate strategy making, for example, a traditional approach is to have the strategist—whether in-house or a consultant—define the problem, devise the solution, and present it to the executive in charge. Often that executive has one of the following reactions: (1) This doesn’t address the problems I think are critical. (2) These aren’t the possibilities I would have considered. (3) These aren’t the things I would have studied. (4) This isn’t an answer that’s compelling to me. As a consequence, winning commitment to the strategy tends to be the exception rather than the rule, especially when the strategy represents a meaningful deviation from the status quo. The answer is iterative interaction with the decision maker. This means going to the responsible 6 Harvard Business Review September 2015

The Launch Is Just One Step in the Process

In his book Sketching User Experiences, user interface pioneer Bill Buxton describes the Apple iPod as the “overnight success” that took three years to happen. He documents the many design changes to the device that took place after its launch—and were essential to its eventual success. As this story illustrates, a sophisticated designer recognizes that the task is first to build user acceptance of a new platform and later to add new features. When Jeff Hawkins developed the PalmPilot, the world’s first successful personal digital assistant, he insisted that it focus on only three things—a calendar, contacts, and notes—because he felt users initially could not handle complexity greater than that. Over time the PalmPilot evolved to include many more functions, but by then the core market understood the experience. The initial pitch for the iPod was an extremely simple “1,000 songs in your pocket.” The iTunes store, photos, games, and apps came along later, as users adopted the platform and welcomed more complexity. As strategies and large systems become the focus of design thinking, imagining the launch as just one of many steps in introducing a new concept will become even more important. Before the launch, designers will confront increasing complexity in early dialogues with both the artifact’s intended users and the decision maker responsible for the design effort. A solution with purposely lower complexity will be introduced, but it will be designed to evolve as users respond. Iteration and an explicit role for users will be a key part of any intervention design. New information and computing technologies will make it far easier to create and share early prototypes, even if they are complex systems, and gain feedback from a more diverse population of users. In this new world, the launch of a new design ceases to be the focus. Rather, it is just one step somewhere in the middle of a carefully designed intervention. —Tim Brown

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executive early on and saying, “We think this is the problem we need to solve; to what extent does that match your view?” Soon thereafter the strategy designers go back again and say, “Here are the possibilities we want to explore, given the problem definition we agreed on; to what extent are they the possibilities you imagine? Are we missing some, and are any we’re considering nonstarters for you?” Later the designers return one more time to say, “We plan to do these analyses on the possibilities that we’ve agreed are worth exploring; to what extent are they analyses that you would want done, and are we missing any?” With this approach, the final step of actually introducing a new strategy is almost a formality. The executive responsible for green-lighting it has helped define the problem, confirm the possibilities, and affirm the analyses. The proposed direction is no longer a jolt from left field. It has gradually won commitment throughout the process of its creation. When the challenge is introducing change to a system—by, say, establishing a new kind of business or a new kind of school—the interactions have to extend even further, to all the principal stakeholders. We’ll now look at an example of this kind of intervention design, which involved a major experiment in social engineering that’s taking place in Peru.

Designing a New Peru

Intercorp Group is one of Peru’s biggest corporations, controlling almost 30 companies across a wide variety of industries. Its CEO, Carlos Rodríguez-Pastor Jr., inherited the company from his father, a former political exile who, upon his return in 1994, led a consortium that bought one of Peru’s largest banks, Banco Internacional del Peru, from the government. Rodríguez-Pastor took control of the bank when his father died, in 1995. Rodríguez-Pastor wanted to be more than a banker. His ambition was to help transform Peru’s economy by building up its middle class. In the newly renamed Interbank he saw an opportunity to both create middle-class jobs and cater to middle-class needs. From the outset, however, he grasped that he couldn’t achieve this goal with the “great man” approach to strategy characteristic of the large, family-controlled conglomerates that often dominate emerging economies. Reaching it would take the carefully engineered engagement of many stakeholders.

Seeding a culture of innovation. The first task was making the bank competitive. For ideas, Rodríguez-Pastor decided to look to the leading financial marketplace in his hemisphere, the United States. He persuaded an analyst at a U.S. brokerage house to let him join an investor tour of U.S. banks, even though Interbank wasn’t one of the broker’s clients. If he wanted to build a business that could trigger social change, absorbing some insights by himself and bringing them home wouldn’t be enough, Rodríguez-Pastor realized. If he simply imposed his own ideas, buy-in would depend largely on his authority—not a context conducive to social transformation. He needed his managers to learn how to develop insights too, so that they could also spot and seize opportunities for advancing his broader ambition. So he talked the analyst into allowing four of his colleagues to join the tour. This incident was emblematic of his participative approach to strategy making, which enabled Rodríguez-Pastor to build a strong, innovative management team that put the bank on a competitive footing and diversified the company into a range of businesses catering to the middle class: supermarkets, department stores, pharmacies, and cinemas. By 2015 Intercorp, the group built around Interbank, employed some 55,000 people and had projected revenues of $5 billion. Over the years, Rodríguez-Pastor has expanded his investment in educating the management team. He sent managers each year to programs at top schools and companies (such as Harvard Business School and IDEO) and worked with those institutions to develop new programs for Intercorp, tossing out ideas that didn’t work and refining ones that did. Most recently, in conjunction with IDEO, Intercorp launched its own design center, La Victoria Lab. Located in an up-and-coming area of Lima, it serves as the core of a growing urban innovation hub. But Rodríguez-Pastor didn’t stop at creating an innovative business group targeting middle-class consumers. The next step in his plan for social transformation involved moving Intercorp outside the traditional business domain. From wallets to hearts and minds. Good education is critical to a thriving middle class, but Peru was severely lagging in this department. The country’s public schools were lamentable, and the private sector was little better at equipping children for a middle-class future. Unless that September 2015 Harvard Business Review 7

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SPOTLIGHT ON THE EVOLUTION OF DESIGN THINKING

Intervention Design at Innova Final design guidelines were created for the classroom space, the schedule, teaching methods, and the role of the teacher.

SETTING THE STAGE

Innova Schools launched its initiative to bring affordable education to Peru by holding information sessions on its interactive-learning approach with local parents and students.

SEPTEMBER 2011

DESIGNING A NEW MODEL

The team began by exploring the lives and motivations of Innova’s many stakeholders to find out how it could create a system that would engage teachers, students, and parents.

Ideas began to crystallize around a technology-enabled model that shifted the teacher from “sage on stage” to “guide on the side” and would make schools affordable and scalable. Teachers tried out software tools and provided feedback on them.

changed, a positive cycle of productivity and prosperity was unlikely to emerge. Rodríguez-Pastor concluded that Intercorp would have to enter the education business with a value proposition targeted at middle-class parents. Winning social acceptability for this venture was the real challenge—one complicated by the fact that education is always a minefield of vested interests. An intervention design, therefore, would be critical to the schools’ success. Rodríguez-Pastor worked closely with IDEO to map one out. They began by priming the stakeholders, who might well balk at the idea of a large business group operating schools for children—a controversial proposition even in a business-friendly country like the United States. Intercorp’s first move was starting an award in 2007 for “the teacher who leaves a footprint,” given to the best teacher in each of the country’s 25 regions. It quickly became famous, in part because every teacher who received it also won a car. This established Intercorp’s genuine interest in improving education in Peru and helped pave the way for teachers, civil servants, and parents to accept the idea of a chain of schools owned by the company. 8 Harvard Business Review September 2015

As that strategy solidified, Innova held many sessions with teachers, parents, and school leaders to get feedback on classroom design, discuss ways the schools would evolve, and invite stakeholders into the process of implementation.

Next, in 2010 Intercorp purchased a small school business called San Felipe Neri, managed by entrepreneur Jorge Yzusqui Chessman. With one school in operation and two more in development, Chessman had plans for growth, but Intercorp’s experience in building large-scale businesses in Peru could take the venture far beyond what he envisioned. However, the business would have to reengineer its existing model, which required highly skilled teachers, who were in extremely short supply in Peru. Rodríguez-Pastor brought together managers from his other businesses—a marketing expert from his bank, a facilities expert from his supermarket chain, for instance—with IDEO to create a new model, Innova Schools. It would offer excellent education at a price affordable for middle-class families. The team launched a six-month human-centered design process. It engaged hundreds of students, teachers, parents, and other stakeholders, exploring their needs and motivations, involving them in testing approaches, and soliciting their feedback on classroom layout and interactions. The result was a technology-enabled model that incorporated platforms such as the U.S. online-education pioneer

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NOVEMBER 2012

PILOTING THE PROGRAM

Full pilots were run in two seventh-grade classrooms in two schools. Teachers were thoroughly trained in the new approach, and the model was repeatedly adapted to address their real-time feedback.

2013–PRESENT

IMPLEMENTATION & EVOLUTION

Today the technology-enabled learning model is being implemented in all 29 of Innova’s schools. Innova continues to work with its 940-plus teachers to help them use this new approach. It also regularly runs parent engagement sessions; seeks feedback from teachers, coaches, and students; and iterates on its methodology and curriculum.

Khan Academy. In it the teacher was positioned as a facilitator rather than the sole lesson provider. The intervention design challenge was that parents might object to having their children learn via laptops in the classroom, and teachers might rebel at the notion of supporting learning rather than leading it. So after six months of preparation, Innova launched a full-scale pilot and brought in parents and teachers to design and run it. The pilot demonstrated that students, parents, and teachers loved the model, but some of the assumptions were far off base. Parents didn’t object to the teaching approach; in fact, they insisted that the laptops not be taken away at the end of the pilot. Additionally, 85% of the students used the laptops outside classroom hours. The model was tweaked on the basis of the insights from the pilot, and both the parents and teachers became huge advocates for the Innova model in nearby locations. Word of mouth spread, and soon the schools were fully enrolled before they were even built. Because Innova had a reputation for innovation, teachers wanted to work there, even though it paid less than the public system. With 29 schools up and running,

Innova is now on track to meet its goal of 70 schools by 2020 and plans to expand into every market in Peru and even markets outside the country. Spreading the wealth. If it followed conventional business wisdom, Intercorp would have focused on the richer parts of the country’s capital, Lima, where a middle class was naturally emerging. But Rodríguez-Pastor recognized that the provinces needed a middle class as well. Fostering one there obviously involved job creation. One way Intercorp could create jobs was to expand its supermarket chain, which it had purchased from Royal Ahold in 2003 and renamed Supermercados Peruanos. In 2007 the chain began establishing stores in the provinces. Local consumers were certainly receptive to the idea. When one store opened in Huancayo, curious customers queued up for an hour or more to enter it. For many it was their first experience with modern retail. By 2010 the chain was operating 67 supermarkets in nine regions. Today it boasts 102 stores nationwide. Early on, Intercorp realized that retail ventures of this kind risked impoverishing local communities rather than enriching them. Though a supermarket September 2015 Harvard Business Review 9

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did provide well-paid jobs, it could hurt the business of local farmers and producers. Since they were small scale and usually operated with low food-safety standards, it would be tempting to source almost everything from Lima. But the logistics costs of doing that would erode profit margins, and if the chain crowded out the local producers, it might destroy more jobs than it created. Intercorp thus needed to stimulate local production through early engagement with local businesses. In 2010 the company launched the Perú Pasión program, with support from the Corporación Andina de Fomento (an NGO) and Huancayo’s regional government. Perú Pasión helps farmers and small manufacturers upgrade their capabilities enough to supply their local Supermercados Peruano. Over time some of these suppliers have even developed into regional or national suppliers in their own right. Currently, Supermercados Peruanos sources 218 products, representing approximately $1.5 million in annual sales, from Perú Pasión businesses. One

is Procesadora de Alimentos Velasquez. Originally a neighborhood bakery serving a few small nearby grocery shops, it began supplying a Supermercados store in 2010, generating just $6,000 in annual sales. Today, thanks to Perú Pasión’s help, it supplies three stores for nearly $40,000 in annual sales. Concepción Lacteos, a dairy producer, is another success. In 2010 it began supplying its local Supermercados store for about $2,500 in annual sales. In 2014 it supplied 28 stores, including the chain’s upscale outlets in Lima, and generated $100,000 in sales. Intercorp’s success in boosting the middle class in Peru depended on the thoughtful design of many artifacts: a leading-edge bank, an innovative school system, and businesses adapted for frontier towns across Peru. But equally important has been the design of the introduction of these new artifacts into the status quo. Rodríguez-Pastor carefully mapped out the steps necessary to engage all the relevant parties in their adoption. He deepened the skills of the executives on his leadership team, increased the design know-how of his people, won over teachers and parents to the idea that a conglomerate could provide education, and partnered with local producers to build their capacity to supply supermarkets. In conjunction with well-designed artifacts, these carefully designed interventions have made the social transformation of Peru a real possibility rather than an idealistic aspiration.

“...and this is our meeting simulation tank, where associates train for the rigors of long-term sitting.” 10 Harvard Business Review September 2015

Tim Brown is the CEO and president of the international design consulting firm IDEO and the author of Change by Design (HarperBusiness, 2009). A professor at and former dean of the Rotman School of Management, Roger Martin is a coauthor of Getting Beyond Better (Harvard Business Review Press, forthcoming) and Playing to Win (Harvard Business Review Press, 2013).

This document is authorized for use only by Richard Crespin ([email protected]). Copying or posting is an infringement of copyright. Please contact [email protected] or 800-988-0886 for additional copies.

TERESA BURNS PARKHURST

THE PRINCIPLES of this approach are clear and consistent. Intervention is a multistep process—consisting of many small steps, not a few big ones. Along the entire journey interactions with the users of a complex artifact are essential to weeding out bad designs and building confidence in the success of good ones. Design thinking began as a way to improve the process of designing tangible products. But that’s not where it will end. The Intercorp story and others like it show that design thinking principles have the potential to be even more powerful when applied to managing the intangible challenges involved in getting people to engage with and adopt innovative new ideas and experiences.   HBR Reprint R1509C

The Stake & the Five Whys Turning Slow-burning Problems into Urgent Solutions

When faced with a tough problem, Sakichi Toyoda, founder of Toyota Industries, would ask “five whys.” A worker on an assembly line installed the wrong part. Why? She didn’t know to install the correct part. Why? She wasn’t trained properly. Why? The training class was canceled. Why? We slashed the training budget. Why? We reallocated training funds to executive compensation. Oh. That’s why. Many of us are uncomfortable with “why.” We want to move quickly to “how.” We think we already know why problems exist so it would waste time to delve into why when we need to get down to the how of fixing them. If we don’t really delve into the why, though, we end up addressing symptoms and not causes. Moreover, when we’re tackling complex problems in human systems we need to address not just the technical parts of the problem. We need to understand the mindsets, beliefs, and behaviors of the stakeholders in the system. People talk about “dysfunctional systems.” They don’t exist. Every system operates exactly as designed. We may not agree with the outcomes it produces, but the system itself operates as the people who have a stake in it want it to – consciously or unconsciously. So when we take on these kinds of problems we need to understand the deep underlying why of the problems and we need to understand what’s at stake for stakeholders.

The Stake Understanding deep, underlying problems requires getting grounded in the “As Is” (see diagram1). What it’s like to be in the system as it exists today. Before we can get people to change a mindset, belief, or behavior, we must understand what it’s like for them today – and not just the “users” or “beneficiaries” of the system. We need to understand what it’s like for all the stakeholders, the people who make the system function today. That means asking lots of “why” questions. Why do beneficiaries behave in such-and-such a way? Why does this or that government official or community leader behave in another way? Why doesn’t the system function as we think it should or could? Then and only then can we start to conceive of a better future in a way that will actually resonate with stakeholders and beneficiaries. Unless we know what their lives are like we lack credibility. Conceiving of the “To Be” future (see diagram) takes asking a set of “what if” questions –using analogies to other systems or processes not directly related to the specific problem we’re trying to tackle. What if it could be as easy as sending a text message? What if it could be the “Uber” of [fill in the blank]. What if questions let us think about and paint a compelling picture of the future. The use of metaphor and analogy connects the vague and uncertain future with something in the now, anchoring uncertainty in concrete ideas that people can visualize, aspire to, hope for, and ultimately will into existence. Once we have that kind of compelling vision, we can turn to what many of us wanted to start with: how.

1

Source: The Clearing

How questions – how will we make it as easy as sending a text message – help create a strategy (see diagram), specific ways of changing the system. The goal isn’t to come up with fully baked plans. Rather, we need to come up with multiple testable approaches that we can take to users and stakeholders to get their feedback, constantly iterating and improving as we go. But the really tough part, the place where most social innovation falls apart, is a failure to adequately address what’s at stake. People will talk of a business case or the case for change and in the same breath they’ll also say that people fear change. People do not fear change. They fear loss. And stakeholders will often hold on to and support what appears to be a dysfunctional system out of fear of loss. No matter how small their stake might be in the world, they want to hold on to it and humans are hard wired to avoid loss more than seek gain. If we want them to actually change the mindsets, beliefs, and behaviors that keep them trapped in the systems of today, we need to either make standing still so scary or moving to the future so compelling that they’re willing to override their inherent fears of loss. That's why the entire diagram is pitched on the fulcrum of the stake. Our ability or inability to articulate what's at stake will tilt the system toward stasis or toward change.

Minimum Viable Concepts for Social Innovation Why they’re not you just being lazy Two teams were given the same timed-challenge: make a tower out of uncooked spaghetti noodles, string, tape, and top it with a marshmallow. Both dove into the challenge. The first brought highly analytical methods, set up structured roles and responsibilities, and subjected themselves to rigorous evaluation and debate. The other team just started trying stuff – testing different configurations, failing, starting again, learning as they went. The highly structured and analytical group got in in one or two tries in the time limit and ultimately failed to come up with a functional design. The less structured group got in lots of tries and came up with multiple functional designs. What was different about the two groups? The first was made up of Harvard MBAs. The second group? Kindergarteners1. For better or worse, in about first grade we’re taught that we need to have the “right” answers. Trying and failing isn’t rewarded, it’s punished. But innovating – coming up with truly new ways of doing things – takes lots of trial and error. So if we want to innovate, what are a bunch of highly trained and analytical adults to do?

Lean Startup & the Minimum Viable Concept In his seminal work, Lean Startup, Eric Reiss dispels the myth of the elegant innovator slaving away in a lonely garage perfecting an idea and bringing it forth fully formed with fame and fortune to follow. Most innovators don’t work like that. They’re much less like the MBAs in our story and much more like the kindergarteners, tinkering, shaping and reshaping their idea in constant communication and experimentation with the market, their target customers, suppliers, and other stakeholders. Reiss calls these experiments “minimum viable products” or MVPs. Rather than seeking perfect information in order to predict the future, the innovator asks, “how can I test the future so I don’t have to predict it?” Reiss suggests creating MVPs asking, “what’s the minimum I need to know to get out in the world and start selling?” In social innovation, we’re not creating commercial products but the basic lesson of trying to develop minimum viable concepts (MVCs) still applies: how can we, in the face of imperfect and incomplete information, put forward concepts we can test? What’s the minimum we need to know in order to get out in the world and start collaborating?” After creating these MVCs we need ways of testing them. These tests could be pilots or full-scale field tests or even randomized, double-blind trials, but long before we get to that level of sophistication, we can test with prototypes (maybe a paper worksheet version of an electronic tool) table-top simulations (getting a few stakeholders around a table and having them try using the paper version of the tool) or a small focus group of users or peers to give constructive feedback. Regardless of the methods you select, emulate the kindergarteners: try multiple configurations, test them in the real world with real users and stakeholders, and rapidly learn and adapt as you go. 1

Source: A More Beautiful Question. Berger, Warren. ©2014

Agile Rollout Principles

Overview This document lays out the underlying principles of agile rollout: how to quickly roll out collective action initiatives and programs, creating dynamic and agile partnership frameworks that will produce greater impact at lower cost in less time. By following the principles and guidance laid out below, collaborators can accelerate and amplify impact of their programs. Agile Principles As a group, collaborators commit to:  Falling in love with problems before falling in love with specific solutions  Valuing relationships and collaboration over rote processes and bureaucracy  Quickly delivering functional programs instead of comprehensive but delayed programs  Integrating with existing efforts instead of creating new or isolated programs  Adapting to change instead of following a fixed plan Ruthless prioritization is essential for a multi-stakeholder collaborations to remain effective and avoid mission dilution and mission creep. It is the responsibility of the conveners and collaboration managers to enforce priorities, which will entail de-prioritizing tasks as necessary. S.M.A.R.T. Outcomes When organizing work, each collaborative team sets its own outcomes that align with the overarching collective objectives. These outcomes should follow the S.M.A.R.T. system:  Specific: Specify precisely what value the outcome will provide, who does the work, and who benefits. Using only one action verb per outcome is preferred.  Measurable: Outcomes are testable propositions that can be measured against a defined target.  Assignable: Outcomes are clearly assigned to a responsible party or parties.  Realistic: Outcomes are attainable within the given time frame and resources allotted.  Time-based: Outcomes include a timeframe for completion. Example:  Vague outcome: “Training module is designed.”  S.M.A.R.T. outcome: “Training module for airline personnel on identifying illegal wildlife trafficking is designed by the Training & Awareness Working Group by October 1, 2015.”

Maximizing Learning through Iteration An iterative design and implementation process maximizes the amount of information learned about target beneficiaries per dollar spent, ultimately leading to better outcomes. As an example, rather than trying to develop the perfect, end-to-end system or training program, teams should quickly produce a specific module or class for a subset of early adopters to try. We then gather feedback, analyze and learn from the data, and incorporate it into the next iteration of the design. This process is known as “rapid prototyping.” Rapid prototyping accelerates adoption by including target communities at every step in the process, ensuring both a better and a more readily-adopted solution. Crucially, teams must remain flexible and open to big changes to the design, even late in the game. Figure 1: Traditional Project Process Ideas

Design

Implement

Measure

Figure 2: Rapid Prototyping Process

Learn

Evaluate

Evaluate

Evaluate

Release

Learn

Define problems Design

Design

Release

Learn

Release

Design

End

Short timescales are an integral aspect of iterative design. After laying out 12-18 month goals, teams should break work down into "design sprints" with deliverables due in three to six month increments. Deliverables may include a range of internal and external items with soft or hard outcomes (see Table 1 for examples). Table 1: Types of Deliverables

Internal

External

Soft

Memorandum with recommendations to Core Team

MOU with an airline to provide guidance on training of airline employees

Hard

Downloadable training manuals for use by members

New training program