Design Thinking: The New Competitive Advantage

Design Thinking: The New Competitive Advantage

Traditional problem solving techniques based on deductive and / or inductive reasoning fail to support designing competitive business models. Analytical thinking relies on past experience and historical data. According to the philosopher Charles Sanders Peirce, it is not possible to invent the future using the past. Successful businesses require traversing the knowledge funnel with high velocity. Design thinking allows solving wicked problems associated with traversing the knowledge funnel. It helps develop competitive advantages by matching people’s needs with what can be delivered by current and future capabilities in a way that forms a viable business.

From traditional reasoning to design thinking

Traditional problem solving techniques rely on deductive and / or inductive reasoning using past experience and historical data. They focus on analytical thinking to declare truths and certainties about the world. Judgment, bias, and variation are avoided as much as possible. Reliability of derived solutions are key, such that they can be translated easily into repeatable algorithms.

The fallacy of using analytical thinking to innovate lies within the definition of innovation itself – seeking the world as it should be. How can techniques that rely on quantified history allow departing just from that history? They cannot! Indeed, deductive as well as inductive reasoning fail to solve wicked problems[*].

Design thinking is a formal method for practical, creative resolution of problems and creation of solutions, with the intent of an improved future result. By considering both present and future conditions, as well as parameters of the problem, alternative solutions can be explored simultaneously. Design thinking differs from analytical thinking by identifying and investigating both known and ambiguous aspects of the current problem in order to discover hidden parameters and open alternative paths which may lead to innovative solutions[†]. It is predestined for addressing wicked problems.

Design thinking as a tool for the design of business

Many companies stagnate or fail to grow at above market because they fail to reinvent themselves. They become more and more comfortable with their current role and focus on the administrative aspects of business rather than the innovative ones. The most prominent example is probably Kodak.

Why does analytical thinking not work?

In analytical thinking, all proofs emanate from knowledge, information, and observations stemming from the past, that is, are based on what already happened. But, to change, introduce new ideas, concepts, or thoughts, one must think about the future and not the past. The American philosopher Charles Sanders Peirce, sometimes called the founder of pragmatism, stated that it is not possible to prove any new though, concept or idea in advance using analytical thinking, because otherwise they would no longer be new. Analytical thinking can thus not be at the center of innovation!

We need tools different from analytical thinking to design businesses ready of the future.

How can design thinking help break than innovation ban?

Roger Martin[‡] suggests focusing on the knowledge funnel. The knowledge funnel describes how knowledge evolves, or at least should evolve, over the lifetime of a business. The first stage of the funnel is called the mystery. It includes all unresolved problems a company is, explicitly or implicitly, confronted with. Each firm, in the course of doing business, develops for the most important mysteries heuristic solutions, that is, rules of thumb that help address these challenges. Heuristics guide the firm towards solutions by the way of organized exploration of possibilities. During the third stage, companies transform these heuristics into algorithms, which are a formulation of a replicable solution.

Design thinking, by its fundamental nature of focusing on present and future conditions, rather than pas conditions, helps accelerate the movement though the knowledge funnel from mystery, to heuristics, up to the algorithm stage. Its exploratory traits, iteratively searching for solutions, supports business innovation. It also helps reduce the complexity of the world through simplification.

Gaining a competitive advantage through applying design thinking

Gaining competitive advantage required understanding what is needed to achieve a valuable competitive positions. Strategy theory tells us that three characteristics are needed:

  • Value for customers,
  • opportunities that will allow to create the identified value for customers, and
  • capabilities that permit to deliver the identified opportunities to customers.

Addressing these three characteristics requires moving through the knowledge funnel. The velocity of movement, powered by design thinking, provides the most powerful formula for competitive advantage.

Design thinking, with its four questions based process “what is? – what if? – what wows? – what works?”[§], helps identify customer value through applying tools like direct observation, ethnographic interviews, or identifying jobs to be done helps identify opportunities to create customer value in a unique way. Formulated differently, design thinking provides a method to match people’s needs with what can be delivered by current capabilities and what forms a viable business strategy. It focuses on delivering customer value is a unique way.

[*] A wicked problem is a problem that is difficult or impossible to solve because of incomplete, contradictory, and changing requirements that are often difficult to recognize. The use of term “wicked” here has come to denote resistance to resolution.

[†] “Design thinking.” Wikipedia: The Free Encyclopedia. Wikimedia Foundation, Inc., 14 Jan. 2014. <>.

[‡] Martin R. (2009). The Design of Business, Harvard Business Review Press, Boston MA..

[§] Liedtka J. & T. Ogilvie (2011). Designing for Growth: A Design Thinking Tool Kit for Managers, Columbia University Press, New York, NY.

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