Application of design thinking for service innovation : current practices, expectations and adoption barriers

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Application of Design Thinking for Service Innovation

Current Practices, Expectations and Adoption Barriers.

Frederike Engberts - 11397780

Final Master Thesis - 23rd June 2017

Msc Business Administration - Digital Business Track

University of Amsterdam

Supervisor - Prof. Dr. H. P. Borgman

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Statement of Originality

This document is written by Frederike Engberts who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

There is an increasing interest from both academics and practitioners on the application of Design Thinking (DT) for innovation efforts. This study explores the current real-life application of DT within five large Dutch multinationals for service innovation projects. It aims to develop an understanding of how and why DT is applied, and what the benefits and challenges are of the adoption. Based on existing literature, five propositions are developed that guide the eight case studies on service innovation projects during which DT was applied. The results show that DT is applied as a mindset or ‘way-of’-thinking, though often requires methods, processes and tools to facilitate this. DT is applied in the expectation to increase the customer value delivered by service innovations, and to help understand and manage

complexity. Adoption of DT is hampered by the individual’s understanding of DT as well as uncertainty avoidance. Based on the discussion of these findings within the extant literature, testable hypotheses and propositions are developed as well as insights to help guide

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1. Introduction

Design Thinking (DT) as an approach to innovation and business challenges, is currently attracting a large (and increasing) amount of interest in both management practice as well as academic literature (Seidel & Fixson, 2013). In the past five years DT has featured in

publications such as The Economist, Harvard Business Review, Business Week, The Wall Street Journal, and The New York Times (Liedtka, 2015), as well as in academic journals like Academy of Management Journal, Organization Studies and Research Policy. However, DT is not a new approach, as the first publication on DT dates back to 1987 by Rowe (Beverland, Wilner & Micheli, 2015; Dorst, 2011). The slow (initial) adoption does explain why, to date, very little research has been conducted on the organizational application of the approach beyond more anecdotal examples in the aforementioned publications (Liedtka, 2015). Some empirical studies do exist, typically in a controlled environment with a student sample (Seidel & Fixson, 2013), and some conceptual studies do theorize about its possible effectiveness (Liedtka, 2015; Gruber, De Leon, George & Thompson, 2015). We were, however, unable to locate studies that methodically studied real-life DT experiences and that offer insights that help guide companies adopting DT.

Given the origins of the DT approach in the architecture and product design practices, it is not surprising that almost all of the aforementioned anecdotal evidence comes from companies designing, producing and selling products. In those environments, the evidence suggests that DT can be of great help for business and innovation challenges (Seidel & Fixson, 2013; Verganti, 2013) and helps to deliver great customer experiences (Gruber et al., 2015; Kolko, 2015). As such it has the potential of uncovering new ways of value creation, something that is also at the heart of many services (Vargo, Maglio & Akaka, 2008). With services making up more than 70% of GDP in advanced economies (Ostrom et al., 2010), and a tremendous need for service innovation in an effort to fuel economic growth (Spohrer & Maglio, 2008), this potential is of considerable interest. Therefore, to investigate the utility of DT and its potential for service innovation and value creation, this study will focus on service innovation projects driven by DT. By doing so, this study answers the call for a greater understanding of the DT practice (Seidel & Fixson, 2013; Liedtka, 2015; Gruber et al., 2015) as well as to enhance the scientific understanding on the ability to design and innovate service systems by using a DT approach (Ostrom et al., 2010; Maglio & Spohrer, 2013; Maglio & Spohrer, 2008). As a result, the focus of this study lies within the question: “Why

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and how is design thinking applied for service innovation projects, and what are the benefits of, and challenges to, adoption of design thinking?”.

In an effort to answer this question, the study will stay close to the heart of DT: “conducting research to inspire better hypotheses, rather than to merely test them; resulting in improved outcomes.” (Liedtka, 2015). As such, exploratory research is conducted which will be presented in five sections. The next section ‘theoretical background’ will focus on

proposition development based on theories of design and organization studies as well as psychology, service and innovation science. This is followed by a more detailed description of the case study design in ‘methodology and cases’, after which results of the data analysis will be presented in ‘findings’. In ‘discussion and future research’ we reflect on the insights gained for the academic debate as well as to inform practitioners, including a brief discussion of limitations and future research areas.

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2. Theoretical Background

In order to be able to study the developed research question, first an understanding of DT needs to be established. This is specifically important in the case of DT as despite the

encouragement of application by both academics and practitioners, the belief on what form it should take differs between and amongst them. Within the academic literature some argue for DT as being a form of reasoning (Dorst, 2011) while others describe it being a specific process (Beverland, Wilner & Micheli, 2015; Brown, 2009). A similar divergence exists amongst practitioners, as the terms ‘process’ and ‘way-of-thinking’ are used intertwiningly across and within literature (Brown, 2009). This difference in beliefs is also indicated by the number of different processes suggested by practitioners, as can be seen in the research of Liedtka (2015). As a result of this misalignment of opinions, a generally accepted theory and definition of DT has yet to emerge (Liedtka, 2015; Dorst, 2011). Nonetheless, the shared understanding of DT being an ‘approach’ can be found in how it is referred to in literature (Seidel & Fixson, 2013; Liedtka, 2015; Gruber et al., 2015; Kolko, 2015; Drews, 2009; Owen, 2007). The utilization of the approach differs from a form of reasoning (Dorst, 2011) to it being a specific process (Beverland, Wilner & Micheli, 2015; Brown, 2009). For the sake of this study, the perspective of academic studies with a similar focus on practical application will be leveraged, describing the approach as having stages or formal methods (Seidel & Fixson, 2013; Liedtka, 2015; Gruber et al., 2015). As a result, the first and ground proposition describes the ‘application form’ of DT as P0 - Design Thinking applied in practice is done by following stages or formal methods.

2.1 Complexity

In answering why DT is being used, literature argues that it is helpful for a range of business challenges (Seidel & Fixson, 2013), specifically involving high complexity (Kolko, 2015). Highly complex problems are often referred to as ‘wicked problems’ that lack both definite formulations and solutions, and face high levels of uncertainty (Buchanan, 1992; Tidd, 2001). Designers often have to deal with these wicked problems that do not lend themselves to analytical, linear problem solving. As a result, DT uses a more synthetic approach to problem solving and has developed specific, professional practices to deal with open and complex systems (Dorst, 2011). This approach reflects the holistic and contextual consideration DT often takes; not only considering the specific issue at hand but also the system in which it exists (Beverland, Wilner & Micheli, 2015). Particularly services are part

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of systems that are characterized as highly complex, due to the involvement of a variety of people, technologies and organizations that are linked to create value (Vargo, Maglio & Akaka, 2008; Maglio, Srinivasan, Kreulen & Spohrer, 2006). Therefore, innovation efforts that involve services lend itself well to be approached with DT, in order to deal with, and understand the experienced complexity. Taking together this leads to P1 - Application of Design Thinking improves the ability to solve complex problems.

2.2 Customer Value

Contemporary organizations face complex problems more and more, thus so does the need for strategies and tools that aid solving them (Dorst, 2011). These complex problems are largely a result from the increased complexity in modern technology and modern business (Kolko, 2015). To sustain a competitive advantage in this complex environment, businesses are increasingly focusing on how they can deliver superior customer value (Woodruff, 1997). Crucial to reach ‘superiority’ in customer value delivery is that it connects with actual

customer needs (Gruber et al., 2015; Osterwalder & Pigneur, 2010) as value is always determined by the beneficiary (Vargo, Maglio & Akaka, 2008; Vargo & Lusch 2008). Therefore, a deep understanding of such needs is required (Chesbrough & Spohrer, 2006). Within the literature on DT, a shared central principle is that of ‘human-centricity’, ensuring that no matter the size of the project, the customer need is always at the forefront and fulfilled in such a way that it creates value (Liedtka, 2015; Gruber et al., 2015; Kolko, 2015; Brown, 2009; Drews, 2009; Owen, 2007). However, as mentioned by Vargo et al. (Vargo, Maglio & Akaka, 2008) “value depends on the capabilities a system has to survive and accomplish other goals in its environment”. Therefore, it is crucial to ensure that an offering can

accomplish such goals, thereby delivering on the intended or wanted value. To minimize the risk of mismatch and to test an offering’s applicability, experimentation can be used (Liedtka, 2015). Another key principle of DT (Liedtka, 2015; Beverland, Wilner & Micheli, 2015; Gruber et al., 2015; Kolko, 2015; Brown, 2009). Adding this up, leads to P2 - Application of Design Thinking improves the ability to create customer value delivering solutions.

2.3 Understanding Design Thinking

In order for these expected influences to be realized, a prerequisite is that DT is adopted by employees and subsequently applied during projects. However, seen by the slow uptake of DT in practice (Liedtka, 2015; Gruber et al., 2015), there is reason to believe

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adoption barriers exist. A first barrier can be found within the underdevelopment of the topic. Individuals might not be aware what the approach involves or potentially refer to different frameworks due to the degree of information ambiguity, something which is known to be avoided by individuals (Becker & Brownson, 1964; Caballero & Krishnamurthy, 2008). This ambiguity originates from the diversity of beliefs and opinions amongst practitioners about what DT is. Companies such as IDEO, Stanford Design School and Darden Business School each refer to different processes and definitions (Liedtka, 2015). A lack of a generally accepted theory could contribute towards that. Next to that, the logic of DT is highly synthetic, focusing on real world experiences (Owen, 2007). This is contrasting to the

rational-analytical logic, home to management, engineering and marketing (Seidel & Fixson, 2013; Dougherty, 1992; Eikhof & Haunschild, 2007). This difference in so called ‘thought-worlds’- a shared set of understandings by a community of persons - could form a potential challenge as individuals might find ideas meaningless or reject them when not aligned with their own thought-world (Dougherty, 1992; Beverland, Micheli & Farrelly, 2016). Adding this up leads to P3 - The adoption of design thinking is limited by an individual’s

understanding of the approach.

2.4 Avoiding Uncertainty

Whether or not low adoption can be linked to the academic underdevelopment of the approach is an open question we do not address here. Low adoption, in turn, does explain the limited availability of published research looking at the outcomes of projects driven by DT. This issue is also intrinsically difficult, as DT relies on a creative approach and abductive reasoning. This is highly dependent on an individual’s interpretation and thus makes it often infeasible to predict the specific outcomes and assess the effectiveness of DT (Johnson & Krems, 2001).

When faced with uncertainty, there is a natural tendency for people in organizations to disengage from medium to long-term commitments and focus on short-term commitments instead (Caballero & Krishnamurthy, 2008). Therefore, investing time and money in projects with uncertain outcomes or without a clear prospect for success (and using a DT approach will likely contribute to that) will make employees wary to ‘sign up’ for such projects (Bonabeau, Bodick & Armstrong, 2008). This leads to the final proposition P4 - The adoption of design thinking is limited by an individual’s uncertainty avoidance.

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3. Methodology

3.1 Research Design

As the research question suggests, the intent of this study is to explore and provide insight into the application, expectations and adoption of DT. To investigate this, real-life cases were studied (Eisenhardt & Graebner, 2007) which were selected based on a

combination of convenience and snowball sampling (Yin, 2013) due to the limited

availability of use cases for which interviewee referral was necessary. However, the cases had to fit several criteria to ensure they all included the characteristics identified in the research question and propositions (Yin, 2013).

First of all, cases had to focus on real-life service innovation projects to ensure the approach was made tangible and in an effort to reduce the ability of interviewees to merely theorize. Secondly, cases had to include individuals that had used DT first-hand during the process which could be reflected upon. Lastly, as the question also focuses on adoption, the environment of corporate, service oriented organizations was chosen to represent the current industry trends and academic relevancy (Kolko, 2015). For an overview of cases and

corresponding interviewees, see table 1.

3.2 Data Collection

Data collection was established through in-depth interviews with interviewees that worked on service innovation projects and actively used DT during one of the projects. During the interviews, interviewees were asked to identify the relevant project themselves and afterwards to nominate peers that worked on the same project. This resulted in an interviewee base with a variety of professions, representing reality to a certain degree. That is, not only designers make use of DT, also innovation or business managers, as can be seen in our sample. Interviews lasted between 30 - 50 minutes and consisted of five

semi-structured, open-ended questions which were developed based on the literature derived propositions, see appendix 1 and 2. Initial questions focused on ‘why’ and ‘how’ DT was utilized, referring to the application and expectation elements of the research question. In addition, interviewees were asked to reflect upon the project more in-depth to explain the process (application form) and to explain what went well during the process (expected adoption benefits) and not so well (adoption challenges). To increase the causal nature of the research, probe questions were used to reveal the rationale behind arguments. As an

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appropriate, to increase the amount and diversity of evidence as well as to deepen the understanding of the interviewee’s given arguments. This took shape in figures, in-person drawings, internal presentations or videos. Specifically, in cases with limitations of single informants, documentation was requested for to increase validity.

3.3 Analysis Strategy

From the recorded interviews and provided documents, case reports were drafted consisting of partial transcription and document evaluations. Case reports were coded with codes being developed iteratively and inductively. Nevertheless, codes were sampled reflecting the concepts that proved to have theoretical relevance (Strauss & Corbin, 1990), see appendix 3. Documents were evaluated considering the purpose of the document, the author, the target audience and additional original sources of documents (Bowen, 2009), such as established DT sources i.e. IDEO or Stanford D school. Even though documents were fragmented and often lacking text, they provided a behind-the-scene look and aided in

establishing code category boundaries. The data from documents were analysed together with interview data, so that themes would emerge in both types of evidence. By focusing on within- and cross-case analysis, patterns emerged that provided for a better analysis of constructs related to the developed propositions P0 - P4 (see appendix 4). This included relational patterns between constructs and themes (see appendix 5).

Table 1. Overview of cases and interviews

Company Industry Innovation Projects (case number) Interviewees (interviewee reference)

Telecom Customer Journey Innovation (1) ● Customer Experience Manager (A) ● Service Designer - (B)

Service Innovation (2) ● Service Designer - (B) Telecom Proposition Development (3) ● Segment Marketer - (C)

● Business Analyst - (D) Product & Service Innovation (4) ● Innovation Manager - (E) Banking Digital Tool (5) ● Service Designer - (F)

● Business Manager Digital Client Strategy - (G) Digital Platform (6) ● Business Manager Digital Client Strategy - (G) Banking Digital Service Innovation (7) ● Customer Journey Expert - (H)

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4. Findings

4.1 Application of Design Thinking

To investigate how DT is utilized in regards to service innovations, the first proposition focusses on the application form of DT. Data showed limited support for P0 - Design Thinking applied in practice is done by following stages or formal methods. Not because evidence did not show processes or methods were used during application, but because the relationship to DT appeared to be that of a moderator to the ‘mindset’ of DT. Throughout the interview several forms of application were described or mentioned, such as ‘tools’,

‘processes’ and ‘methods’:

“We always try to go through the process with as many colleagues as possible, that are relevant for our project.”

“…certain tools are getting handed-over to other departments, so they can use it on their own.”

“… we used tools to make people think broader and in a more holistic way about everything the customer went through in their life journey.”

Supplied documentation from four out of eight cases supported this description, by showcasing visualizations of a ‘design thinking process’ (see figure 1). Nonetheless, all interviewees mentioned either explicitly or implicitly that tools and processes were used to facilitate a ‘way of thinking’. Interviewee (B) explained: “In the end it’s about a mindset, not about the tools you use.”. In contrast to the literature, three interviewees (G, H & I) who used DT in an individual effort, explained not to use tools or processes at all, as in some cases using tools or methods was not deemed applicable. Such cases included for example business strategy development, or projects that were future oriented in such a way that customers or users did not recognize a need or want yet. Interviewee (I) explained: “It is quite difficult to use it for strategy development. … because people associate it as an application form due to the word ‘design’, rather than a way of thinking.”. However, all three interviewees referred to tools or processes at later stages. In these instances, tools were argued to be used as encouragement for (other) team-members to ‘think in a different way’, while processes provided ‘guidance’:

“… I tried to use an outside-in approach and include tools. … it works because it forces people to think about it or to question it.”

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“It’s good because it gives you a structure to follow, which provides control of the project flow.”

This dynamic was also seen during DT utilization within a wider team. As

interviewee (C) explained: “… very difficult to get them in a mindset where they have to think differently. Design Thinking Tools can help with this.”

Adding this up, indicates that individuals apply DT as a mindset, without necessarily using tools and methods, though applying them when needed to stimulate this mindset. Figure 1. Samples of ‘Design Thinking Process’ visualizations supplied by interviewees

4.2. Adoption Benefits

4.2.1. Complexity Management

Data showed that DT was used in cases that involved high complexity, in line with the argument of Kolko (2015). This was shown by the ‘wicked’ nature of projects that employees were asked to work on (Buchanan, 1992; Tidd, 2001). Many were introduced as a certain ‘state’ or ‘problem’ of a customer that needed solving, though not specifically

knowing how or with what.

Case 1 Case 2

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“We focused on freelancers and wanted to create a community. … but we didn’t have a clear idea about what problem we were trying to solve.”

“Often the gap is not able to be solved in the system you’re currently operating. … therefore, people do not know how to.”.

Another way in which project complexity revealed itself was in terms of project characteristics, such as size, number of stakeholders, or variables such as information

technology. As interviewee (C) described: “We had a basic idea of the proposition, but it was quite large and we wanted an end-to-end good experience. … it also had a lot of IT.”.

In concurrence with theory (Beverland, Wilner & Micheli, 2015), interviewees showed to use DT for projects where contextual understanding and holistic solutions are desired. This can be seen in the type of cases such as services, service tools and value propositions, where understanding of the context is essential to develop an in-use value creating solution (Vargo, Maglio & Akaka, 2008). Interviewee (G) expressed this contextual relevance for case 6. The project set out to develop an online tool, though when DT was applied the project was put to a hold. This was a result of a discrepancy between the solution that was being developed and the actual requirements of the end-user. Contextual

circumstances made the online tool redundant. While elaborating the interviewee explained the rationale: “It’s about how can we service the customer in its total journey, not just when he or she calls the bank.”.

Many of the interviewees did not describe complexity management to be the specific motivation for adopting DT, though implicitly pleaded for it. An example is the reasoning of interviewee (C) “... it works very well as it makes something quite complex understandable and tangible for people”. A single interviewee (A) however, did argue that application of DT is specifically for complex problems: “Design thinking is more for complex issues, it’s not just a customer journey tool”.

Adding this up, leads to our first hypothesis H1 – The degree of design thinking adoption positively improves the ability to manage complexity.

4.2.2. Customer Value

Data showed that ultimately DT was adopted with the expectation to increase value creation for the customer. All interviewees explained the motivation for utilizing DT as to be related to the creation of solutions with greater customer value. Interviewee (A) explained to believe the project actually delivered on this potential, as can be seen in the quote: “It was a

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very successful project, everything is implemented and we have had a lot of enthusiastic responses throughout the company, including those of customers.”.

In agreement with literature, putting the customer central (Seidel & Fixson, 2013; Liedtka, 2015; Gruber et al., 2015; Kolko, 2015; Brown, 2009; Drews, 2009) and

understanding their needs (Chesbrough & Spohrer, 2006) were argued to be at the base of being able to develop value creating innovations.

“… to build the proposition so it really matches the customer.” “… ensure that the customer is central to the strategy we develop.”

“… to understand the customer as thoroughly as possible and based on this develop propositions.”

“… you cannot skip the first parts. You need to have a solid understanding of the customer before you move on …”

Interviewee (B) described how customer centricity and understanding were embedded in the project process: “We made a morphological framework … and from that we were able to make five situational need profiles. … we used it to base the offering upon.”. What

interviewee (B) did in this situation is linking the customer understanding and centricity to the actual offering. Additional data showed that this connection between understanding and actually embedding in the actual project outcome, is deemed essential. Interviewee (I) described about case (8) that an understanding of the customer’s needs and wants was created, though was not embedded in the final solution. The interviewee’s attitude towards this was negative, and she expected the solution not to deliver great customer value.

This finding in accordance with the rationale that services and their corresponding value creation is always determined by the beneficiary (Vargo, Maglio & Akaka, 2008; Vargo & Lusch 2008), and thus requires to be embedded in the solution. This view is shared within the service innovation cases studied and thus results in H2 – The degree of design thinking adoption positively influences the ability to create customer value delivering solutions.

4.2.3. Complexity Management for Customer Value

A pattern that was not specifically sought for, but which emerged from cross-case analysis is that of projects showing active effort to manage complexity and the perceived project results. Cases 1, 2 and 3 showed to use processes, tools or specific environments (customer experience room) in their project process, with the purpose to ‘bring various stakeholders together’, ‘analyse the situation’ or to ensure ‘did we think of everything’. The

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3 cases also showed to share the characteristic of dealing with open and complex systems (Vargo, Maglio & Akaka, 2008; Maglio et al., 2006). This was seen in for example the number of project stakeholders (1, 2, 3), technologies (1, 3) or organizations (1, 2). However, all case informants were of the opinion that the project delivered value to customers:

“… build the proposition so it really matches the customer.”

“It was a very successful project, everything is implemented and we’ve had a lot of enthusiastic responses throughout the company and including customers.”

The opposite relation was found as well, projects that involved a high degree of complexity though low effort of understanding this, were believed to deliver limited customer value (case 4, 6, 8). For example, case 6 was kicked off without any use of tools, processes or methods to understand the project’s focus and its context. As interviewee (G) explained: “… we did not have a problem statement, so we didn’t know what problem we were solving.”. The project was put on hold, as proposed ‘solutions’ did not show to be solving any customer problems during validation. Thus, the project propositions were no solutions at all, neither were they fulfilling any customer needs, and therefore not generating any customer value (5, 20).

This relation between complexity and value creation has been argued before in literature on services. For example, the link between social systems and value (co-)creation (Edvardsson, Tronvoll & Gruber, 2011). Pairing this with the pattern found, the following hypothesis can be formulated: H3 – During service innovation projects, the higher the complexity management the higher the ability to deliver customer value.

4.2.4. Adoption Benefits Summarized

When combining the developed hypotheses above, the adoption benefits of DT can be summarized in the following proposition: The adoption of Design Thinking directly improves the ability to create customer value delivering solutions, as well as indirectly through

improved complexity management.

4.3. Adoption Challenges

4.3.1. Individual Understanding

The adoption of DT within the studied cases was either requested for by senior management (cases 1, 2, 5, 8) or done out of individual motivation (3, 4, 6, 7). However, DT

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is generally not adopted organization-wide as was experienced first-hand when many research requests were answered with “Design Thinking, what is that again?”. This limited awareness of DT was also experienced by interviewees and perceived to be a challenge to adopting the approach. In particular, a lack of understanding the approach was believed to negatively impact the dedication towards DT adoption. As interviewee (C) explained: “During the project I also used a lot of stakeholder management and ways of creating buy-in. To convince people it is a good idea (using DT).”. Interviewee (F) acknowledged this as well: “People want to put the customer central and use DT … but they don’t know how.”

Data showed that DT adopters used several ways to develop an understanding of DT amongst colleagues or stakeholders, such as visualizations (cases 1, 2, 5, 7 & 8), videos (case 7) or workshops (cases 3, 5 - 8).

“Everybody uses the word (DT tool), but no-one really knows what the word means. So that’s one of the things that we elaborate on in Design Thinking workshops. … to explain what it is.”

“We developed our own framework on request of the manager, … so we can explain how to use it.” (see figure 1, case 5).

An additional effort adopters made to establish understanding, was by taking up the role of DT facilitators (Schwarz, 2002). This role was owned by several interviewees:

“… they don’t know how. So, they use us, as facilitators for the process.” “You don’t notice it yourself. However, we do get a lot of compliments like, the exercises were very refreshing and I think we got a lot of new ideas on the table.”

The need for DT facilitators was also expressed from the opposite point of view by interviewee (G): “I would talk to someone like (designer) to talk about how to conduct such an interview. Because I notice I would start thinking in solutions quite quickly.”

Nonetheless, many interviewees elaborated that even when an understanding is established, adoption by project-members can still be challenging. As interviewee (A)

illustrated on collaborating with market researchers during the project: “we have a difference in vision … they do not like our approach. … they do not believe that design thinking

includes proper research.”. This aligns with the literature on thought-worlds, ideas that do not fit one’s own thought-world can be deemed meaningless and potentially be rejected (Dougherty, 1992; Beverland et al., 2016). Additional evidence regarding idea rejection is found when going back to case (8); initially DT was adopted by team members however disregarded at a later point within the project process. Interviewee (I) explained: “Because they (developers) fell back into their own ways of thinking and used their assumptions.”.

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Taken together, this leads to H4 - The degree of design thinking adoption is positively influenced by an individual’s understanding of the approach.

4.3.2. Uncertainty Avoidance

When interviewee (H) explained that to build understanding he ensured other project team members experienced the DT application, he clarified: “Once it is used, you get a lot of buy-in. Take for example company X, they engaged with several agencies using design thinking and now they are working in-house with 150 students on design thinking driven projects.”. As such he explained the desire of corporations to experience DT project

successes before adopting the approach in-house. This desire for tangible results, known up-front is mentioned by many interviewees as being an obstacle to adopting the approach:

“As long as you cannot proof that it (the project) has direct effect on the sales, for example, is it very difficult to get these projects pushed forward….”

“Commercial goals are often at the top of the list and sometimes conflict with design thinking projects. Design Thinking projects often need to proof themselves first, … it is difficult to predict that in advance.”

“You can have a great project, that makes customers very happy though it is priced at 3 million. There are also 200 other projects of which 20 are cheaper and a no-brainer, so they win it over the 3 million project.”

Thus, the limitation lies within the disability to forecast the project outcome(s) and its tangible result(s). This corresponds with the literature on abductive reasoning (Johnson & Krems, 2001) and the typical problems DT is being applied to, which tend to be ‘wicked’: lacking up front definite formulations and solutions (Buchanan, 1992; Tidd, 2001). However, the core issue is related to the uncertainty around what the outcome will be, resulting in disengagement from medium to long-term commitments (Caballero & Krishnamurthy, 2008). This pattern was most explicit across cases that were embedded in organizations focusing on the short-term (case 3, 4 and 8). Take case 3, the project was rejected after direct results were not able to be measured. The rationale for this was explained by interviewee (D): “…

because it was going to cost money and a bit of effort…. It’s a company that is focused on short-term, and does not look at long-term benefits.”.

Using an approach that is not (academically) validated also contributes towards this adoption barrier, as mentioned by interviewees (H) & (B). (H) indicated: “... a lack of company support. … because the approach is not proven yet.”, while (B) explained: “... there are not many frameworks that have been tested that show to be valid or credible.”. This

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does not necessarily relate to literature directly, though it contributes towards the overall uncertainty of the project. A lack of information about a specific project process or duration showed to be undesired by organizations. However, DT adopters often found it challenging to avoid this. As interviewee (A) explained: “You cannot say, we’re going to execute this

process. That’s what the company prefers, including that they know that at the end of the process we have X. This is sometimes difficult.”

In summary, these results lead to H5 - The degree of design thinking adoption is negatively influenced by organizational uncertainty avoidance.

4.3.3. Individual Understanding and Uncertainty Avoidance

As described above, the avoidance of uncertainty is seen to be an obstacle to adopting design thinking during innovation projects. This challenge was identified out of the provided information of individual respondents, who experienced this during their DT adopted

projects. In these cases, the individuals or project teams did not avoid the potential uncertainty and adopted DT. What all these cases also have in common is that the project informants had an understanding of DT. However, during cross-case analysis an outlier indicated a discrepancy. Throughout case 4, the informant showed limited understanding of the approach, specifically in terms of experimentation and customer centrality (Liedtka, 2015): “How do you test a process or service that’s not exciting yet? Then you almost have to do it manually.” and “If you look at what the customer wants, then the current products in the market don’t really solve that need. … but we’ll do it … we have to start somewhere and pick up those first learnings.”. As can be read in the second statement, DT was adopted though only during customer need analysis. When the uncertainty about what did solve the customer needs presented itself, DT was not adopted and instead market trends were followed. In short, controversial to the other cases, this case showed a lower individual understanding and also avoided uncertainty. This is the opposite pattern of what was found amongst the other cases.

The result of these findings leads to the following hypothesis H6: The better the individual understanding of design thinking, the lower the uncertainty avoidance towards it.

4.3.4. Adoption Barriers Summarized

Combining the developed hypotheses above, we see that both individual

understanding and organizational uncertainty avoidance influence the degree of DT adoption. However, the degree of organizational uncertainty avoidance showed to differ per case, though the amount of individual understanding across cases was equally important. Next to

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that, individual understanding can increase or decrease the amount of uncertainty avoidance of individuals – individuals combined being organizational -, as seen in the previous section. As such, individual understanding of DT is the cornerstone of adoption challenges. This relationship between understanding, including thought-worlds, and adoption is also seen within other management practices such as Six Sigma (Kwak & Anbari, 2006) and Agile Methods (Moe, Dingsøyr & Dybå, 2010). Overall, it is proposed that: The more developed the individual understanding of design thinking, the more likely DT is adopted.

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5. Discussion and Future Research

Why and how is design thinking applied for service innovation projects, and what are the benefits of, and challenges to, adoption of design thinking? The findings from the case studies show that design thinking is applied in the form of a mindset rather than a process. When needed, tools, methods and process visualizations are found to be used to facilitate this mindset. This addresses the ‘how’ in the research question. However, even though critical to understanding what DT is, the application form is not translated into a hypothesis as there is limited constructive evidence to do so. The topic simply remains too abstract. Next to that, a ‘mindset’ or ‘usage of tools and methods’ in the way it is being discussed in this study, is not measurable and thus does not lend itself for a testable hypothesis. Nonetheless, the evidence of the real-life cases shows to be a new approach to DT application, and could be an

interesting avenue towards developing a definition of DT.

To continue on answering the research question, the drivers to adopt design thinking were found to be twofold. First of all, DT is adopted in an effort to manage and understand complexity. It helps individuals to solve problems and meet needs that have no definite formulation or a solution (‘wicked problems’). Next to that, DT and related tools are expected to help to develop a specific contextual understanding of the wider system. As a result, DT was perceived to generate ‘holistic’ solutions that meet the totality of the project at hand. As a result, cases that managed and understood complexity were perceived to deliver customer value. Secondly, DT is expected to increase the customer value delivery of projects. Core to this is the customer understanding and centricity, which forms the base for the

project. However, it is essential that this is linked to the eventual project outcome. As such the innovation will ensure it meets the value expectations set by the beneficiary.

Based on the above adoption benefits, DT is expected to be specifically valuable for service innovation as it supports the focus on value creation within complex configurations. Thereby, this study answers the quest for scientific understanding of ways to enhance design and innovation of service systems, making the case for DT as approach to accomplish just that (Ostrom et al., 2010; Maglio & Spohrer, 2013; Maglio & Spohrer, 2008). In addition, the findings presented in this paper contribute towards the academic discussion and

understanding of the role and application of DT (Liedtka, 2015; Gruber et al., 2015; Kolko, 2015). In order to work towards a generally accepted theory, the academic literature could benefit from research focusing on even more respondents studied longitudinally. With a focus

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on DT practices used during ‘live’ projects, and related to eventual value captured, it will distinguish optimal application forms for specified purposes.

In order for DT to be adopted for (service) innovation projects, both researchers and practitioners are urged to focus on tackling the challenges found in this study; individual understanding and uncertainty avoidance. Due to the economic interest in service innovation (Spohrer & Maglio, 2008), an understanding of how to lower barriers to adoption is an interesting area for future research. Suggestions for specific directions can be made based on the findings and limitations of this study. First of all, this study found evidence that

interviewees tend to use explicit methods and tools not only to stimulate a mindset but also to create an understanding of the DT approach (see figure 1). Fully understanding this effort and its effects cannot only help to determine strategies for reducing adoption barriers to DT, it can also contribute towards understanding how to overcome thought-worlds (Spohrer & Maglio, 2008) and stimulate resourceful sensemaking (Beverland et al., 2016). Secondly, understanding the optimal combination of tools, methods and visualizations for service innovations, can be significantly interesting when related to value generated. This will not only be useful to ensure greater value creation, it will also answer business’s desire for validation and tangible results, thereby again lowering adoption barriers. Lastly, as seen within this study, academic research on DT could help develop the topic by establishing a generally accepted theory that has the potential to be validated. This does not only add to developing and consolidating academic understanding, it also helps to lower the uncertainty around the approach’s substance. In an effort to work towards this, hypotheses and

propositions were induced from the data, which can be summarized in a model, see figure 2. This model depicts the empirical generalizations of the observed relationships and

consistencies amongst the variables (Bourgeois III & Eisenhardt, 1988). However, when tested this could demonstrate to be a model for DT adoption for innovation projects.

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6. References

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7. Appendices

Appendix 1 – Interview Protocol 1

To be used with first informant of the case Introduction

1. Introduction of interviewer a. Personal background

b. Short and not too detailed introduction of the study i.e. rational and motivation, research question.

2. Introduction of interviewee a. What is your background?

b. What is your position within the company? c. What are your daily activities?

Questions

Individual and Organizational perspective on design thinking 1. How do you use design thinking?

2. Why do you use design thinking? Service Innovation Project(s)

3. Can you give me a concrete example of a project where you used design thinking? 4. Can you give me a rundown of the project and how design thinking was used? 5. In this project, what went well?

6. What did not go so well? Additional room for Interviewee input

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Appendix 2 – Interview Protocol 2

To be used with additional informant of the case Introduction

3. Introduction of interviewer a. Personal background

b. Short and not too detailed introduction of the study i.e. rational and motivation, research question.

4. Introduction of interviewee a. What is your background?

b. What is your position within the company? c. What are your daily activities?

Questions

Individual and Organizational perspective on design thinking 8. How do you use design thinking?

9. Why do you use design thinking? Service Innovation Project(s)

10. In a previous interview with team member X we discussed project Y. Based on your experiences, can you give me a rundown of the project and how design thinking was used?

11. In this project, what went well? 12. What did not go so well? Additional room for Interviewee input

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Appendix 3 – Codebook Aggregated Dimensions Second Order Concepts First Order

Concepts Description Quote

Design Thinking Application Tools for support • Tools & methods for understanding • Tools & methods for mindset • Tools & methods for rationalising A description or visualisation of tools and methods used, in relation to supporting projects.

“The process I used has 9 steps and 3 phases. … it works because it provides me with a structure.” Mindset • Stimulate mindset Notion of design thinking as a way of thinking about subjects at hand.

“In the end it’s about a mindset, not about the tools you use.”

Managing Complexity Problem understanding • Complex problem • Understanding complexity Characteristics of a complex problem and effort to understand it.

“We had a basic idea of the problem, but it was quite large and

we wanted an end-to-end good experience. It also

had a lot of IT. … made the situation easier to understand

and very easy to explain to people.”

Context

understanding • Broader thinking

Characteristics of a complex situation and effort to understand it. “… I also use it to ensure that we think

about a holistic service, not just a

small feature or button in an app.”

Customer Value Customer

understanding • Customer central • Customer need understanding Attitude towards, tactics

aimed at, and description of, putting customers central to projects. “… sometimes it also prohibits mistakes as

it shows that the customer is wanting

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Outcome matches with understanding • Customer understanding base for offering • Better outcome Approaches taken, rationale behind, and believes mentioned of project outcomes and the connection to customers. “… you sometimes need to do this in order to create new

and increased customer value.” Understanding Lack of understanding • Buy-in Tactics undertaken by informants aimed at increasing DT adoption dedication.

“During the project, I also used a lot of

stakeholder management and ways of creating

buy-in. To convince people it is a good idea to use DT.” Developing understanding • Experience DT First-hand experiences of, or tactics towards, developing an understanding of DT. “... I give workshops throughout the company, … so they understand what DT is.” Executing understanding • Thought-worlds • Lack of skills Discrepancy mentioned by informants of a DT understanding and the actual adoption of DT. Often assigned

to team members.

“We’ve done this once and the idea is;

now we can do it ourselves. This is maybe a bit optimistic, potentially even opportunistic.” Uncertainty Avoidance

Risk aversion • Avoid risk _{• Not proven} approach Organizational behaviour and rationales related to risk aversion, perceived by informants. “… experienced a lack of company support. … because

the approach is not proven yet.”

Intangibility • Tangible results

Rationales described by informants including, numbers, facts, key performance indicators or other tangible results.

“The core to this is that research is about facts and figures and design is

about following your intuition.”

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Appendix 4 – Data Analysis Cross-case

Managing Complexity

Cases Problem complexity Context complexity DT adoption

Case 1

Not known up-front how to solve problem, involved a lot of IT systems and emotional

value.

Looked at end-to-end solution including many

external stakeholders.

Active use of processes and tools, up-front and on-going training of team-members on

DT.

High High High

Case 2 No clear problem or solution, highly emotionally and contextually factors influencing. Looked at end-to-end solution including many external stakeholders and

integration with other IT systems.

Used an external DT agency and various tools and methods to understand the

problem to solve.

Case 3

Project offering was known upfront, though no executional details.

Aimed at end-to-end experience, relatively large,

involving a lot of IT.

Problem statement developed, no clear process

but tools & methods utilized by several team members.

Medium High Medium

Case 4

New terrain for company and no solution to problem known upfront.

Limited number of stakeholders,

No real approach, limited to market and competitor analysis and individual

mindset.

High Medium Low

Case 5

Problem statement was known, solution project

outcome limited.

Many political stakeholders to problem. Context highly

depended on customer.

Company stimulated adoption. Usage of processed, tools and additional DT agency.

Medium High High

Case 6

Problem not known upfront, though value wanted to be delivered

is. Highly complex, many factors influencing

problem.

Many different IT systems, many different stakeholders

and highly contextual.

Initially no adoption. When adopted, project got postponed based on

findings.

High High Low

Case 7

No clear solution known up-front. Many different

factors influencing problem. Many integrated IT systems, solution depended on external context.

Tools and methods in effort to stimulate adoption of team members. Apart from

such cases, an individual effort.

High High Medium

Case 8

Solution was fairly straight forward, though

problem was unclear.

Context was clear and well-known. Social aspects were

fairly complicated.

Initial adoption, not carried out through complete project

process.

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Customer Value Cases Customer Understanding Outcome matches customer understanding DT adoption Case 1

Active effort through several techniques to understand customer. Mentioned to be central

focus of project.

Established understanding used as base for outcome. Positive customer reactions

as mentioned by informants.

Active use of processes and tools, up-front and

on-going training of team-members on DT.

Case 2

Active effort through several techniques to understand customer. Deep

understanding of customer behaviours established.

Established understanding used as base for outcome.

Used an external DT agency and various tools

and methods to understand the problem

to solve.

Case 3

Several tactics to develop customer understanding, including customer service

and field trips. Central focus of project offering.

Based on understanding, tested with customers and

fine-tuned. Though not executed.

Problem statement developed, no clear process but tools & methods utilized by several team members.

High Medium Medium

Case 4

No effort made towards understanding needs and

pains. Only idea of value wanting to be created.

Offering not based on understanding, but on market trends. Argued project outcome is something unwanted by

customers.

mindset.

Low Low Low

Case 5

Several efforts made, and tactics used, to understand

needs of customer and stakeholders.

Outcome based on findings and tested. However, had

to incorporate political interests of stakeholders as

well.

High Medium High

Case 6

No understanding of customer and or needs and

pains. No effort made to directly understand

customers.

Solution purely based on ideas of internal stakeholders. Validated to be not matching customer ‘wants’ and project was

postponed.

findings.

Low Low Low

Case 7

Described customer needs and characteristics, took active effort to establish.

Based offering on findings, challenged other informants

when not done so. Validated through testing.

Tools and methods in effort to stimulate

adoption of team members. Apart from such cases, an individual

effort.

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Case 8

Initially no understanding of wants. When established,

rejected.

Offering was validated, showed to nog meet customer needs, was developed nonetheless.

process.

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Understanding Cases Lack of Understanding Developing Understanding Executing Understanding DT adoption Case 1 Companywide initiative to adopt design thinking. No mention of tactics to stimulate dedication. Creation of process visualisations, training of team members.

Enough skills within project team, moving

in one DT direction. Lack of execution in different departments involved in project. Active use of processes and tools, up-front and on-going training of team-members on DT.

Low High Medium High

Case 2 Companywide initiative to adopt design thinking. No mention of tactics to stimulate dedication. Creation of process visualisations, training and process guidance by DT agency. Execution ensured by usage of DT agency. Who team

moved in one direction. However,

believed that skills are insufficient to execute understanding independently of agency. Used an external DT agency and various tools and

methods to understand the problem to solve.

Low High Medium High

Case 3 Used stakeholder management to increase opportunity for adoption. Limited to schooling single employees and placing these in project teams. No development of understanding wider project members. Project members revert back to old way of working. Lack

of skills mentioned. Informants are ‘on

their own’.

Problem statement developed, no clear process but

tools & methods utilized by several team

members.

Medium Medium Low Medium

Case 4 Statements and behaviour that contradict DT ideas. No buy-in from wider project stakeholders. No effort at all to develop understanding. Single employee was once trained

years ago.

No execution of understanding. Skills are limited to a single

DT tool. No real approach, limited to market and competitor analysis and individual mindset.

High Low Low Low

Case 5

DT adoption from the start of project,

team wide buy-in. However, had to use additional DT agency to create buy-in of political project stakeholders. Creation of process visualisations, workshops given organizational wide. Usage of agency to develop DT skills. High number of stakeholders with DT background, therefor high level of skills and shared

thought-worlds. Company stimulated adoption. Usage of processed, tools and additional DT agency.

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Case 6

No tactics for DT adoption needed,

universal dedication. Though, stakeholders did not

have DT understanding. Companywide workshops given, though not facilitated for project members. Many conflicting ideas, DT not the central focus. Skills limited to 1 individual on project team. Initially no adoption. When adopted, project got postponed based on findings.

Medium Medium Low Low

Case 7 Specialists employed to ensure DT adoption. However, limited understanding amongst wider project members and stakeholders. Informants taking role of DT facilitator. Using DT tools to develop a DT understanding amongst colleagues. No active trainings. Highly influenced by perspective of other members, persuasion needed to ensure execution DT understanding.

Skills are there.

Tools and methods in effort

to stimulate adoption of team

members. Apart from such cases,

an individual effort.

Medium Medium Medium Medium

Case 8 Specialists employed to ensure DT adoption. However, persuasion and training/ education needed to get project members on board. Usage of process visualisation, single ‘DT champion’ for project team. No active effort to school on DT. Understanding executed when design thinker was

part of process, afterwards DT understanding got rejected. No skills except single individual. Initial adoption, not carried out through complete

project process.

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Uncertainty Avoidance

Cases Risk Aversion Tangible Results DT adoption

Case 1

Desire to know outcome in advance, and exact process. Concessions made by project team to

meet risk concerns. Project sign off took long, risk was taken.

Project goals linked to key performance indicators.

Requested to measure customer needs and

behaviour.

Active use of processes and tools, up-front and on-going training of team-members on

DT.

Case 2

Validity and reliability of approach questioned by stakeholders. Project sign off took long, risk was taken even though

it did not meet any commercial goals.

No standards known to adhere to, though wanted. Requested to deliver upon commercial goals set by

senior management.

Used an external DT agency and various tools and methods to understand the

problem to solve.

Case 3

Unknown approach resulting in limited

dedication, uncomfortable. Industry known to not take risks, profit margins are low no

investment made in uncertain outcomes.

Key performance indicators and management goals are primary focus, every project has to contribute towards it.

Problem statement developed, no clear process

but tools & methods utilized by several team members.

Case 4

Industry known to not take risks, profit margins

are low. Projects with known outcomes have priority of DT projects.

Key performance indicators and management goals are primary focus, every project has to contribute towards it. Financial analysis required

upfront.

mindset.

High High Low

Case 5

Limited risk taking, therefor limited resources made available. However, faith

in the approach and its viability.

Control wanted in terms of results due to external stakeholder investment. Upfront results requested in

terms of NPS.

Medium Medium High

Case 6

No risks taken, project relies on market and

financial analyses. Uncertainty avoided.

Due to strategic nature, all projects are translated into

numbers and goals.

findings.

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Case 7

Lack of support mentioned. Argued to be

due to approach not proven, outcomes not

known up-front.

Project goals linked to employee key performance

indicators. Measured several previous DT projects for outcomes

before full adoption.

Tools and methods in effort to stimulate adoption of team members. Apart from

such cases, an individual effort.

Case 8

Full steam ahead for approach, no reluctance

despite viability issues. However, risks were not

taken and the most comfortable/known solution was used for

development.

Desire shown to generate tangible results before customers get involved. However, not all referred

back to numbers as this was an internal project and

not translated in commercial goals or NPS

scores etc.

process.

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Application of design thinking for service innovation : current practices, expectations and adoption barriers