‘’Design thinking as an enabler of organizational innovativeness’’
An empirical examination of the relation and application of design thinking to influence organizational innovativeness.Master Thesis
Entrepreneurship and Innovation Management
Faculty of Economics and Business
Supervisor: dr. Ileana Maris-de Bresser
Second reader: dr. Wietze van der Aa
June 24
th, 2016
by Fenna Zandvliet | 11161450
Statement of originality
This document is written by Fenna Zandvliet 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.
Table of content
Executive summary ... 4 1. Introduction ... 5 1.1 Problem definition 8 1.2 Academic relevance 10 1.3 Social relevance 10 1.4 Structure of thesis 10 2. Literature review ... 11 2.1 Organizational Innovativeness 11 2.2 Innovation capabilities 13 2.3 Developing innovation capabilities 14 2.4 Design Thinking 17 2.4.1 Design thinking as a means to develop innovation capabilities 19 2.4.2 Innovation capabilities as a means to boost organizational innovativeness 20 3. Research Methodology ... 21 3.1 Research design 21 3.2 Research question 21 3.3 Conceptual framework 22 3.4 Primarily data Collection 22 3.5 Secondary data collection 24 3.6 Analysis strategy 24 3.7 Reliability & Validity 26 4. Results ... 28 4.1 Developing innovation capabilities 28 4.2 Application of design thinking methods 32 4.3 Design thinking as means to develop innovation capabilities 35 4.4 Innovation capabilities as means to boost organizational innovativeness 37 5 Discussion and conclusion ... 40 5.1 Developing innovation capabilities 40 5.2 Application design thinking methods 42 5.3 Design thinking as means to develop innovation capabilities 43 5.4 Innovation capabilities as means to boost organizational innovativeness 44 6. Implications and limitations ... 46 References ... 48 Appendix 1: Interview guideline ... 54 Appendix 2: Digital safety passport – Development process images Blis ... 55 Appendix 3: Organizational climate images Essent ... 57 Appendix 4: Code book interviewees ... 59 Appendix 5: Interviewees transcripts ... 65Executive summary
The purpose of this master thesis is to explore the application of design thinking in order to explain which factors contribute towards the development of innovation capabilities, which in turn boost organizational innovativeness. Design thinking is a methodology that adapts design principles to business management. In the literature and practice, however, it is not clear what constitutes the relationship between the application of design thinking and development of innovation capabilities.
The analysis of the research has been done by an explorative 2 case study design, consisting of an in-depth interview in which the selected variables have been examined. From the literature 3 main variables have been selected; ‘Application of design-thinking methods, ‘Innovation Capabilities’ and ‘Organizational Innovativeness’. These variables have been researched within two organizations, which are today’s front-runners in the application of design thinking methods. The results of the different companies on these variables have been compared in order to discover differences and similarities in the outcomes. The results of the research show that a clear difference in outcome can be indicated on several variables (or sub variables) and have led to several propositions, which might serve as input for future research. Some in line with theory but also new insights have been gained for example 1) Combining different design thinking practices within the innovation process leads to more organizational innovativeness; 2) Design thinking increases the speed of organizational innovativeness and 3) Design thinking increases external stakeholder communication. Despite the small amount of research subjects the research still could be used as valuable input for future research on the critical variables to develop innovation capabilities by making use of design-thinking method to influence organizational innovativeness.
‘
What we have to learn to do,
We learn by doing’
Aristoteles
1. Introduction
The world economy is changing rapidly due to several influences such as globalization, improved technologies, emerging economies and world population growth. This results in a relationship free world in which every economic transaction is contested globally (Leamer, 2007). Likewise products, that were first known to be state-of-the-art, become suddenly out-of-date by technologies developed by agile startups (Miller & Keoleian, 2015). Consequently organizations throughout the world are aiming to survive in the future’s world of emerging markets; technologies and customer demands. But how can companies stay ahead of the global competition? Innovation is the answer (Damanpour, 1991).
Innovation can be present in various forms, such as product or process innovation, radical or incremental innovation, and administrative or technological innovation (Cooper, 1998). Either the practices or development of more innovative products will create value for the customer, so that the organization maintains its strategic position (Lawson and Samson, 2001). Yet, Siguaw, Simpson and Enz (2006, p. 556) claimed ‘’Innovations are not necessarily the key to long-term business success”. In other words, organization’s long-term survival may rely more on overall strategic-level innovativeness that produces dynamic capabilities, which in turn enhances the development of innovations, and less on the actual innovations themselves (Trott, 1998). Therefore, the key variable of long-term survival through innovation appears an organization-wide innovation capability structure, termed ‘innovativeness’ rather than specific innovations (Kamaruddeen, Yusof, and Said, 2010). Organizational innovativeness, which refers to an organization’s ability to initiate and implement innovations with speed, leads to survival and growth (Hurley and Hult, 1998). Despite the fact that this capability leads to preferable outcomes, managing this ability is fraught with difficulties (Quinn, 1985), complex and risky (Eisenhardt and Brown, 1995; Tushman and Murmann, 2002), and therefore hard to achieve for organizations (O’Connor, 2008). Also a lot of organizations are unable to innovate because they use innovation as a reactive tool to fight declining market share, to reduce cost and to accomplish short-term financial targets (Maraviglia, T. (2015) (How companies can build innovation capability) Retrieved from: http://sawubonang.com/how-companies-can-build-innovation-capability/). Furthermore, it seems complex for organizations to maximize the existing resource base yet simultaneously understand the ongoing depreciation of this same resource base (Grant, 1996). For example the innovation in smartphone technology,
which not only destroyed organizations in the cell phones industry, but also in the industry of MP3 players, cameras, calculators and voice recorders. These organizations were not capable to make choices that were considered necessary to sustain their market position. Consequently, there is a growing interest on how to develop innovation capabilities to sustain innovativeness. (Damanpour,1984). Hurley, Hult and Knight (2005) distinguished between organizational innovativeness and the capability to innovate. According to this research organizational innovativeness is a part of the organizational culture, and thus the capacity to innovate. They have proven that organizational innovativeness reflects not only product innovations, but also cultural traits and willingness to pursue new opportunities of the organization.
Previous research additionally demonstrated a crucial role for strategy formulation in an organization’s ability to achieve innovation (Hurley and Hult, 1998; Noble, Sinha and Kumar, 2002). However, a direct relationship between strategies and organizational innovativeness results in inadequate understanding of the necessary processes of capability building in organizations. Goyal and Pitt (2007) stated that organizations have to determine an appropriate and suitable method and technique that suits their organizational context and not just adopt any innovation technique that works for their competitors to achieve innovation. Still, it remains unclear, both in the business world and the academic literature, how organizations could achieve this. The main promise in the literature is the work of Brown (2008) about the contribution of design thinking to innovation. Since that point in time many scholars have begun to link design thinking with innovation capabilities (Wylant, 2008; Ward et al., 2009; Carlgren, 2013; LieDesign Thinkingka, 2014) and competitive advantage (Martin, 2009). Still more systematic empirical investigation of design thinking is required (Johansson-Sköldberg et al., 2013), in particular regarding its application in organizations. In the business environment, it appears that the term design thinking is confusing and not well understood. This misunderstanding is mainly caused by its shift from object based to non-object based designing. Non-object based designing can have different forms such as problem solving or decision-making through designing various outcomes (Kimbell and Street, 2009). Besides that, in popular literature, many vaguely creative activities are combined under the concept of design thinking. Therefore the aim of this thesis is twofold: firstly it aims at gaining insights into how organizations make use of design thinking in relation to their innovation capability. Secondly, it aims at understanding how these innovation capabilities influence organizational innovativeness.
1.1 Problem definition
Design thinking research can be separated in two streams. On the one hand design thinking relates to the traditional studies of designers and on the other hand design thinking relates to management studies that focus on design thinking’s role within organizations. The last focus does not refer to classic design disciplines such as engineering design or industrial design, but rather as general human-centered approach to solve problems, foster creativity and innovation in organizational settings (Brown, 2008). Design thinking is poorly conceptualized and examined in organizational settings, particularly in relation to its potential role as an enabler of innovation (Carlgren, 2013). Nevertheless, Carlgren (2013) has proven that the perceived effects of using design thinking are connected to elements of innovation capability theory. Carlgren’s findings indicate that the application of design thinking can hinder or foster building organizational innovation capabilities. In the sense that principles presented in the innovation capability theory such as resources, processes, mind-set and a strategic intent to innovate, influence its potential value by making use of design thinking (Carlgren, 2013). Meaning that in an organization with minimal innovation capabilities it hinders innovation compared to organizations with better-developed innovation capabilities. These better-developed companies can benefit more from using design thinking, and consequently improve capabilities in an upward spiral.
Even though, the link between design thinking and innovation capability is theorized by Carlgren (2013), there is still more research needed on what enables particular capabilities and how these capabilities can be built within an organization due to the lack of empirical research. Hatchuel et al. (2006) have acknowledged that innovation capabilities of employees will influence their ability to adapt and use design-thinking methods. Conversly, the use of design thinking will enhance further development of innovation capabilities, so design thinking and innovation capabilities are interdependent. The focus of this thesis is to examine this interpendency between innovaton capabilities and design thinking by means of a qualitative case study.
In this study, design thinking is defined as ‘’a discipline that uses the designer’s sensibility and methods to match people’s needs with what is technologically feasible and what a viable business strategy can transform into customer value and market opportunity’’ (Brown, 2008, p. 2). This study will define and examine the business use of the following design thinking methods: visualization, journey mapping, value chain analysis, mind mapping, brainstorming, concept
development, assumption testing, prototyping, customer co-creation and learning launches (Liedtka, King and Bennett, 2013).
Secondly, innovation capability is defined as ‘’the skill to continuously transform knowledge and ideas into new products, processes, and systems for the benefit of the organization and its stakeholders’’ (Lawson and Samson, 2001, p. 384). Innovation means creating new methods, ideas or products. Basically saying that a continuous transformation capability contributes towards innovations. Relying on these concepts implies that innovation capabilities contribute towards organizational innovativeness, because innovations refer to the outcome of innovativeness (Hurley et al., 2005). In the next section, the link between innovation capabilities and organizational innovativeness is examined. 1.1.1 Linking innovation capabilities and organizational innovativeness Despite the literature about innovation, research about organizational innovativeness is scarce. A few empirical studies developed measures for organizational innovativeness, however, most of these studies addressed that these measurements need improvement (Avlonitis, Kouremennos, and Tzokas, 1994). Many scholars adopted a certain perspective, such as product innovativeness, but not an overall innovative capability approach. Moreover divers measure approaches such as the number of new products, intellectual properties, R&D funding and/or self-evaluation are used (Knowles, 2007). These different approaches lead to confusion, make it difficult to compare findings and lead to biased conclusions about its relationships with its antecedents and outcomes (Cooper, 1998). These variations resulted from overlapping conceptualizations of innovativeness and innovation (Damanpour, 1991) or from failing to provide a clear distinction between the two concepts (Hurley et al., 2005).
In this study, organizational innovativeness is distinguished from innovation and defined as a five-dimensional construct: creativity, openness, future orientation, risk taking and pro-activeness. These five dimensions represent the organizational climate that support and facilitates continuous generation of ideas and, therefore, innovative outcomes over time (Ruvio et al., 2014). This definition characters Hurley, Hult and Knight’s (2005) argument that an organizational capacity should be regarded as an outcome of organizational innovativeness, defined as organizational culture as mentioned earlier. These outcomes can be behavioral, product, process, market or strategic (Wang and Amhed, 2004).
This research is conducted to gain more insights in design thinking as a concept but also in relation to innovation capabilities and organizational innovativeness. The following research question will be answered:
How do companies make use of design thinking to initiate organizational innovativeness?
1.2 Academic relevance
In this study, the research intends to contribute to the organizational innovation literature by addressing these gaps, researching them empirically and gaining relevant knowledge. The research will attempt to understand the relation between the application of design thinking and development of innovation capabilities. In this study we draw on innovation capabilities theory as well as design thinking theory to investigate the role of design thinking in enhancing organizational innovativeness through innovation capabilities. 1.3 Social relevance This research offers practical perspectives on how different design thinking methods are used in order to develop innovation capabilities. However this research does not try to deliver a solution, it merely provides insights. This research provides an overview of how the organizations in this study apply design-thinking methods. Second, it aims to specify how the organizations make use of desgn thinking to develop innovation capabilities that in turn boost organizational innovativeness.
1.4 Structure of thesis
The thesis is structured as follows. First, a literature review will be provided. In the literature review sub research questions are formulated. After the literature review the methodology of the research will be described. In this chapter the data collection method, data analysis method, sample overview and the construction of the interviews will be explained. After this, the analysis section will follow. Here, the results will be discussed. Then, a discussion, conclusion and limitation section of this study will follow.
2.
Literature review
According to theory certain factors may influence the development of innovation capabilities in order to boost organizational innovativeness. This section will identify those factors and the way in which they may influence by applying design-thinking methods. This theory will provide a general overview and will serve as input for the further research and analysis of the data. The setup of this theoretical framework will be: 3. Description of organizational innovativeness 4. General theory overview of innovation capabilities 5. General theory overview of design thinking 6. Design thinking as a means to develop innovation capabilities 7. Innovation capabilities as a means to boost organizational innovativeness 2.1 Organizational Innovativeness
Organizational innovativeness can be viewed from different perspectives according to various studies on this topic. Some studies classify organizations as innovative organizations if the organization adapts an innovation earlier than the majority of the players in the industry (Utterback, 1974). Daft (1982) added that an organization that adopts a new product or process is also considered to be innovative regardless of how many other players in the industry have adopted earlier, because the innovation still represents an innovation in the organization. Zaltman, Duncan and Holbeck (1973) argues that, innovativeness is an organizational culture that encourages employees to be innovative and indicates an organization’s receptiveness to pursue the development of new products or processes. Damanpour (1991) add to Zaltman et al’s definition of organizational innovativeness the capacity to introduce some new process, product, or idea in the organization. Avlonitis et al. (1994) stated that organizational innovativeness represents a latent capability of organizations and that organizational innovativeness is not associated with the adoption of specific innovations and, therefore, innovativeness alone cannot predict the adoption or rejection of specific innovations.
Over the years the definition of organizational innovativeness evolved: Avlonitis, Kouremennos, and Tzokas (1994) define organizational innovativeness from a product perspective as the number of innovations that organizations have adopted. Rogers (1995) sees organizational innovativeness from a process perspective, as an indication of behavioral change, because
(1998) argue that organizational innovativeness is obtained through cultures that emphasize learning, development, and participative decision-making. Further, Teece, Pisano and Shuen (1997) claimed that the integration of knowledge and resources could strengthen organizational innovativeness. Organizations need to integrate, build and renew internal and external resources and knowledge. Subramanian and Nilakanta (1996) highlighted organizational innovativeness endurance and consistent ability to innovate over a period of time. Lumpkin and Dess (1996) add to Subramanian and Nilakanta‘s definition that innovativeness reflects the organization’s tendency to engage in and support new ideas, novelty experimentation and creative processes that may result in new products, services or technological processes. It represents an organizational climate that provides environmental support for the continuous generation of new ideas and products over time (Subramanian and Nilakanta, 1996).
Other scholars also suggest that organizational innovativeness is facilitated by organic structures and flexible work arrangements characterized by autonomy, higher degree of informality, intense information exchange, and participative decision-making (Taggar, 2002). Garcia and Calantone (2002, p.112) also stressed the issue of “newness” in the context of innovativeness and claimed that it “is the capacity of a new innovation to influence the firm’s existing marketing resources, technological resources, skills, knowledge, capabilities, or strategy”. Menguc and Auh (2006) add to Garcia and Calantone’s definition that organizations have to be proactive by exploring new opportunities rather than merely exploiting current strengths to develop innovativeness. Hurley et al. (2005) reveal that organizations with higher levels of organizational innovativeness are more tending to implement or adopt more innovations. The organizational ability to generate ideas and innovate continually over time seems to fall in line with Ruvio et al’s (2014) representation of an organizational climate. According to Ruvio et al. (2014) an organizational climate with the dimensions: creativity, openness, future orientation, risk taking and pro-activeness, facilitates innovative outcomes over time. In conclusion, organizational innovativeness can be seen as an organization’s overall innovative capability of introducing new products to the market, or opening up new products to the markets, through combining strategic orientation with innovative behavior and processes (Wang and Ahmed, 2004).
Many researchers argue that some organizations are better positioned to exploit new ideas successfully than others due to organizations having innovation capabilities (Lawson and Samson, 2001; Francis and Bessant, 2005; Assink, 2006; O’Connor, 2008).
2.2 Innovation capabilities
Innovation capability refers to the ability to correctly and effectively manage resources to where they are required (Porter, Burgelman and Maidique, 1988). It’s about synthesizing two operating paradigms: it brings together the efficiency of regular processes with the creativity of newstream innovation through knowledge and its resource base and the ability to transfer external information into new knowledge (Cohen and Levinthal, 1990). Hence exploit resources optimally (Grant, 1996). Bart (1996) shows that mission statements of organizations, which specify practices of innovativeness, have a strong influence on innovative practices and behavior in organizations.
According to Neely et al. (2001) innovation capability can be also described as its potential to generate innovative outputs. Lawson and Samson (2001, p. 384) define innovation capability as “the ability to continuously transform knowledge and ideas into new products, processes and systems for the benefit of the firm and its stakeholders’’. Important principles are resource management, availability of funding channels, innovation champions and the adoption of e-business principles.
It has also been found that the presence of an entrepreneurial manager, also known as the intrapreneur (O’Connor, 1998), plays a crucial role to support innovation (Akrich, Callon and Latour, 2002). The entrepreneurship literature describes the intrapreneur as a technical innovator and an innovation champion (Shane, 1994; Kelley and Lee, 2010). It requires the innovation champion to have emotional intelligence (Akgün et al., 2009) and conceptual skills (Hess, 2014). Also Danneels (2011) claims that resource cognition is a central management capability to build innovation capabilities. Resource cognition focuses on intelligence, experience, and how they interfere with each other during stressful situations.
Kannan and Aulbur (2004) believe innovation capability consists mainly of the organization’s intangibles. Intangibles are the non-physical characteristics of n organization, which will produce value in the future. Innovation capability is composed of the main processes within the firm and cannot be separated from the main practices because innovation capability is the potential to carry out the practices.
and Kliesch-Eberl (2007) argue that innovative capabilities build slowly over time and emerge as the result of a learning process where problems are solved in the organizational context. O’Connor (2008) on the other hand argues that developing innovation capabilities requires changes to the whole organizational system which is not easily done and requires huge challenges in organizations to succeed. Furthermore, the work of O’Connor (2008) has made an important contribution on innovation capabilities. He sees innovation capabilities from a system perspective and argues that innovation systems should be founded on three pillars being discovery, incubation and acceleration. Also Börjesson and Elmquist (2011) found that a capabilities perspective encourages a system view, which facilitates innovativeness in organizations.
In addition, Silva et al. (2012) mentioned that innovation capability varies from firm to firm and is determined by several factors such as investment and expenditures on innovation activities. It seems that the greater the financial investment in acquisition of machinery, equipment and software, internal research and development, acquisition of external knowledge, marketing activities and other procedures, the greater the propensity for firms to innovate in terms of services. Nevertheless, these innovative capabilities can only develop when there is a high level of management awareness and insightful strategic top management in the organization according to Börjesson et al. (2013).
2.3 Developing innovation capabilities
As mentioned above, practical knowledge about how to develop capabilities for innovation is limited (Schreyögg and Kliesch-Eberl, 2007; Börjesson, 2011). Hatchuel et al. (2006) also argue that there is no good understanding of how to develop innovation capabilities in organizations. According to Nobel prizewinner Daniel Kahneman our mind is a confirmation machine and to innovate, people have to take their ‘normal’ thinking to a much higher level, also known as ‘thinking outside the box’. This is hard to achieve because the current educational system and most working environments are framed to avoid failure or focus on predictable, reliable and standardized results (Kahneman, 2012). Conversely, in order to innovate, failures and mistakes are necessary.
By making use of these psychological research findings many innovative companies, such as IDEO and Pixar, developed organizational cultures, which reframed failure and mistakes as ‘learning opportunities’’. This implies that organizations create innovation capabilities by fostering
opportunities inside and outside the organization (Hii and Neely, 2000) and respond to demands (Mitzberg and Huy, 2003). Innovation capabilities are a result of learning processes continuously developed over time (Breznik and Hisrich, 2014). Börjesson and Elmquist (2011) discovered that these learning processes are positive stimulated by focusing on effective sharing and transferring knowledge internally, collaboration with external firms, and the need for a management system that encourages learning and experimentation (Eisenhardt and Tabrizi, 1995). The processes of knowledge transformation are derived from the organizational learning theory as proposed by Nonaka (1994) based on the conversion of knowledge between tacit and explicit forms. Slater and Narver (1995) found that learning results in new behavior (Argyris and Schôn, 1978; Fiol and Lyles, 1985) and the ability to apply knowledge implies a greater level of learning (Sinkula, 1994). Clearly, learning and innovativeness are separate constructs that are interrelated. It seems that developing innovation capabilities is a matter of having a culture supportive of learning. Besides that, it is also a matter of good management. The 2003 DTI Innovation Report argues that innovation is most effectively undertaken within the context of a group interconnected by a set of common beliefs and within an inclusive culture. There is a clear link between innovation and high-performing workplaces where good managers inspire their employees and create a workplace culture in which new ideas are encouraged and rewarded. This report also claims that there is a correlation between growth of high-performing organizations and education of employees about the role of innovation. In order for innovation to flourish, work must be organized in a way that enables new skills and requires the employees’ knowledge to be fully utilized, and to create a culture of continuous innovation (DTI, 2003).
Furthermore, developing innovation capabilities is also a matter of developing and maintaining external relations. Dyer & Singh (1998) introduced the network perspective in the organizational innovativeness literature. They claim that individual organizations are seldom capable of achieving organizational innovativeness on their own and their resources can be upgraded and renewed through the relational interactions within business networks. Basically saying organizations depend on external relationships to foster organizational innovativeness. Also Nahapiet and Ghoshal (1998) have suggested that organizational innovativeness or innovation capabilities are closely related to network resources, human capital and organizational learning. This research did not support a significant positive effect of human capital on organizational innovativeness, but showed a positive effect between network resources, organizational learning
and organizational innovativeness. Having examined the theoretical arguments above, this study will therefore address the following research question:
Q1: How do the organizations in this study build innovation capabilities?
An organization that possesses the following climate characteristics: creativity, openness, future orientation, pro-activeness and risk-taking, is more likely to develop innovative capabilities (Ruvio et al., 2014). The dimension ‘creativity’ refers to ‘the creation of a valuable, useful new product, service, idea, procedure, or process by individuals working together in a complex system’ (Woodman, Sawyer and Saffin, 1993, p.293). Damanpour and Gopalakrishnan (2001) extended the concept of creativity to include the adoption of external new ideas. The second dimension ‘openness’ refers to the flexibility and adaptability of organizations in response to these new ideas and changes (Hurley and Hult, 1998). Furthermore, the dimension ‘future orientation’ refers to preparedness for future environmental changes and consequently the positioning in light of such a changes (Ford, 2002). In other words: the trade-off between backward looking (utilization of past experiences, knowledge and resources) and forward-looking (exploration of future opportunities). Besides that an innovativeness climate need to the ‘pro-active’. This means organizations have to pursuit business opportunities, whether related or unrelated to its present product line (Lumpkin and Dess, 2001). This is risky, because novelty, such as investing in unexplored technologies or introducing new products into new markets, is associated with high risks (Subramanian and Nilakanta, 1996). Consequently, the last dimension ‘risk-taking’ refers to possible gains and losses resulting from aforementioned actions (Morgan and Strong, 2003). As mentioned above an innovation champion needs also conceptual skills. This means the ability to create or apply new constructs that identify patterns or connections between situations that are not obviously related (Buchanan, 1992). This ability is also measured in the cognitive activities that designers apply during the process of designing (Visser, 2006). In line with these findings Buchanan (2011) explains why design thinking opens up better possibilities for organizations: ‘’Managers need to understand the goods and services, without this understanding managers cannot make adequate decisions about the nature and direction of the strategy’’ (Buchanan, R. (2011, October 26, p.1). (Business design: Fad or fact?). Retrieved from: http://www.harbus.org/2011/business-design-fad-or-fact/).)
However Hatchuel el al. (2006) have argued that organizations need to have innovation capabilities to be open for the use of design thinking while – the use of design thinking further develops the innovation capabilities. The next section examines the concept of design thinking.
2.4 Design Thinking
Since Herbert Simon (1969) first mentioned design, many researchers studied the nature of design thinking in organizations (Rowe, 1987; Cross, 1990; Buchanan, 1992; LieDesign Thinkingka, 2004; Lawson, 2005; Whitney, 2006; Brown, 2008; Martin, 2009; Leavy, 2010), management education (Dunne, D. and Martin, R., 2006), and its growing influence as an approach to strategy development (Fraser, 2007; Martin, 2010).
To Buchanan (2011) design is a way to bring appropriate innovation into management thinking. In Buchanan’s words: ‘’designers see things in different ways than people in other fields, and their way of seeing allows them to think of new possibilities for making.’’ He believes that integrating design thinking into the organization, managers become more creative and innovative drivers (Buchanan, R. (2011, October 26, p.1). (Business design: Fad or fact?). Retrieved from:http://www.harbus.org/2011/business-design-fad-or-fact/).
Brown and Wyatt (2010) argue that design thinking enables organizations to be creative and innovative. Ultimately these organizations boost their competitive advantage since they will be able to design better products and services with a customer-centric mindset. Stanford University (2010) introduced a stepwise process framework with several elements: empathize (on data collection of stakeholders also known as personas), define (data synthesis to gain a good problem understanding), ideate (suggest ideas for solving the problem), prototype (transform ideas into a physical form, experience, and learn from the process), and test (with potential users and use observations and feedback to refine the prototype and original point of view).
Deploying design thinking throughout an organization involves more than a process. It also needs methods. There are several methods, however, this study examines only the following ten design thinking methods: visualization, journey mapping, value chain analysis, mind mapping, brainstorming, concept development, assumption testing, prototyping, customer co-creation and learning launches (Liedtka, King and Bennett, 2013). Visualization is used to envision possibilities and bring them to life. Journey mapping, use several ethnographic methods such as
making us of these tools: visualization, journey mapping and value chain analysis, more insights and or (un) articulated needs, can be gathered which eventually build a human connection to recognize or discover potential solutions. This discovery phase is the foundation for the ultimate solution because this solution will only be as good as the individual learning (Liedtka, King, and Bennett, 2013). Mind mapping is a clustering tool that helps to make sense of the torrent of collected data. This tool can either help to turning raw data in deep insights or creating concept out of brainstorm sessions. Concept development provides a structure towards insights gain from the journey mapping and brainstorm. It will foster to play with new ideas without risking a lot. These solutions can be explored and evaluated by making use of the assumption testing stage. During this stage key assumptions that will drive the success or failure of an idea are tested. The prototype stage expresses a new idea in a tangible, low-fidelity form for exploration, testing and refinement. Furthermore, enrolling customers to participate in creating the best solution that best meets their need in the customer co-creation phrase. Learning launches helps to plan and conduct small market experiments to test key assumptions with market data.
According to Simons et al. (2011), Brown and Wyatt (2010) and Denning (2013) design thinking is applied to increase speed, vitality, and inventiveness and promoted as a tool for outside-the-box thinking (Wattanasupachoke, 2012). Several researchers mentioned different elements of the application such as act and think customer-centric mindset, team diversity, flow of a typical process, tools for creative thinking and an inspirational environment (Brown, 2008; Martin, 2009; Brown and Wyatt, 2010; Mootee, 2013; Collins, 2013; Seidel and Fixson, 2013). These elements are used to differentiate a design thinking team and other innovative competitive strategies. Applying these elements, academic literature proposes design thinking increase innovativeness (Brown, 2008; Hassi and Laakso, 2011; Simons et al., 2011; Wattanasupachoke, 2012; Mootee, 2013; LieDesign Thinkingka, 2014; Carlgren et al., 2014; Brown and Wyatt, 2010).
In general design thinking is studied in the traditional fields of design, where architects use design thinking in designing buildings, engineers to design technical equipment, graphic designers to design shapes and symbols. However, few researchers in organizational studies have used the theories developed in the design field, to help explain how design thinking is or can be used in organizations. Secondly, the literature describes design thinking as a consequence of certain tasks e.g. establishes requirements, defining problem etc. Yet, these descriptions describe design planning. The term design thinking is conceived of as rather broad and there is a lack of common understanding among practitioners and scholars (Hassi and Laakso, 2011; Kimbell,
2011). Thus, there is a gap of empirical evidence in the literature observing the use of design thinking. Evidence is scarce because design thinking practices are not systematic applied in practice and hard to measure. Therefore, this study aims to answer the following research questions: Q2: How do the organizations in this study apply design-thinking methods in their work? 2.4.1 Design thinking as a means to develop innovation capabilities In a special issue of Organization Science edited by Karl Weick, jazz improvisation was used as a metaphor for organized autonomy and design thinking (Weick, 1998). Metaphors bridge the gap between our understanding of what we already know and the ability to express in objects of comparison. The metaphor is as follows: Jazz improvisation is an individual design work (improvisation), yet embedded in a large set of design rules (concerning theme, harmony, rhythm) and a structured organizational process (the band, the rehearsals, the instruments). The design rules and culture of jazz are good examples of innovation capabilities, such as strategic intent to innovate and processes. Whereas ‘improvisation’ consists of purposely chosen activities that are spontaneous, novel, and involve the creation of something while it is being performed (Miner, Moorman and Bassoff, 1996), these are good examples of design thinking tenets such us accelerate learning through hands-on experimentation, creating quick prototypes to gain usable feedback, and the integration of current business analysis during the process rather than added on later (Starostka, 2014). Design thinking enables organizations to discover and exploit new opportunities (Martin, 2009), however, organizations need to understand and balance the exploitation and exploration process which is comparable with the jazz improvisation which is embedded in a large set of design rules and structured processes.
Hatchuel et al. (2006) clarify the link between design thinking strategies and innovation capabilities. They argue that design processes are not the expression of some pre-given knowledge in material and organizational form, but are to be seen as knowledge projects themselves. The design of artifacts is at the same time the design of implied knowledge. The ultimate benefit of design is obtained when design thinking is combined with business strategy and an operating model (Heather, 2007; Clark and Smith, 2008). According to Hatchuel el al. (2006) organizations need to have innovation capabilities to be open for the use of design
2.4.2 Innovation capabilities as a means to boost organizational innovativeness
Follow this line of reasoning; it was argued that learning is essential to develop innovation capabilities (Schreyögg and Kliesch-Eberl, 2007; Breznik and Hisrich, 2014), while innovation capabilities are essential to guarantee organizational innovativeness (Damanpour 1991). Besides that an organization that possesses the following climate characteristics: creativity, openness, future orientation, risk-taking, and pro-activeness, is more likely able to generate ideas and innovate continually over time (Ruvio et al., 2014). This is in line with Calantone, Cavusgil, and Zhao (2002) findings, because they argue that organizational learning has a stronger relationship with openness and creativity (Hirst, van Kippenberg and Zhou, 2009). Consequently this will influence organizational innovativeness, because organizational learning is considered as an antecedent of organizational innovativeness (Siguaw, Simpson and Enz, 2006). Moreover design thinking researchers also emphases between ‘what could be’ and being future-oriented (Fraser, 2009). Following this line of reasoning, the use of design thinking can be conceptualized as a mechanism for learning. Inspired by this theoretical link between design thinking and innovation capabilities, the following question will be examined empirically in this study:
Q3: How do the organizations in this study make use of design thinking - as a learning mechanism - to develop innovation capabilities, which in turn boost organizational
3.
Research Methodology
This section will discuss the research method that has been used to gather and analyze the data from the sample selection. Also the validity and reliability of the results will be discussed.
3.1 Research design
As stated in paragraph 1.1, there are several gaps in the literature regarding the relationship between design thinking and organizational innovativeness. Based on these gaps the decision is made to execute an exploratory research. This research design is especially suited for investigating new phenomena, because it seeks to get new insights, assess the topic in a new light (Saunders & Lewis, 2012) and tries to map differences and similarities (Korzilius, 2000). More specifically, there is chosen to conduct a qualitative case study design. This research design enables to closely explore and investigate the data within a specific real-life context (Yin, 1994). Due to the fact there were other cases available for replication, a multiple case study was chosen. The multi-case study design enhances and supports previous results by making use of pattern-matching, a technique linking data from the same case to some theoretical proposition, this will help to raise the level of confidence and robustness of the methods (Campbell, 1975; Zainal, 2007). Furthermore this method is ideal to define insights about how the organizations in this study apply design-thinking methods, and identify the mechanism to develop innovation capabilities, which in turn boosts organizational innovativeness. Saunders & Lewis, (2012, p.117) support this view and state: “case studies are particularly good at enabling the research to get a detailed understanding of the context of the research and the activity taking place within that context”.
3.2 Research question
The main question that will be answered through this research is:
How do organizationsmake use of design thinking to initiate organizational innovativeness?
In order to obtain a comprehensive answer to the questions above an inductive qualitative exploratory multi-case study research will be conducted.
The research should provide an answer to how design-thinking methods are used in general and to influence organizational innovativeness and how innovation capabilities influence this relationship. This results in the following sub questions in order to being able to answer the main
Q1: How do the organizations in this study build innovation capabilities?
Q2: How do the organizations in this study apply design-thinking methods in their work?
Q3: How do the organizations in this study make use of design thinking – as a learning mechanism – to develop innovation capabilities, which in turn boost organizational innovativeness? 3.3 Conceptual framework Figure 1: conceptual framework 3.4 Primarily data Collection For this research qualitative interviews are chosen to acquire case study evidence. According to Yin (2009) interviews make it possible to ask respondents about the facts of the matter as well as their opinions about events, it gives the researcher the ability to focus directly on case study topics, and it provides perceived causal inferences and explanations (Yin, 2009).
Subject, contextual perceptions and interpretations were of interest in order to answer the research questions. In order to understand the interviewees’ interpretations an interview guideline was used (see Appendix 1). Furthermore, this interview guideline is based on the critical incident technique in order to 1) analyze described situations and 2) minimize social desirability bias (Flanagan, 1954). Throughout the interview, the interviewee was asked to refer to a specific project where design-thinking methods were applied. The interview guideline is divided into three parts, based on the literature review. First, the application of design-thinking
methods is assessed in order to find which methods these organizations applied in projects. Follow by the second part of the interview, which focus on the innovation capabilities. Finally, the influencing factors of design-thinking methods and the development of innovation capabilities on organizational innovativeness were covered. A total of eight qualitative interviews with a variety of design thinking practitioners were held within 4 weeks. Most of them have had experience with design thinking for over five years. These experts have a professional point of view on design-thinking practices and its influence on innovation capabilities and innovativeness. Each interview durated between 45-60 minutes and was recorded electronically with permission in order to make a transcript (see Appendix 5). Below, the case studies used in this research are outlined.
3.4.1 ESSENT (RWE)
The first case is about the application of design thinking for developing new technologies, but also improving today’s processes and technologies at the Innovation hub of RWE/Essent. Essent is a public limited liability corporation based in 's-Hertogenbosch in the Netherlands. Essent is the largest energy company in the Netherlands. Belgium is their second home market. Essent provides customers with gas, electricity, heat and energy services. Essent (including its predecessors) has over 90 years experience of generating, trading, transmitting and supplying electricity. Essent has 2.3 million customers for electricity and about 2.0 million for gas. Essent is part of RWE. To become the innovation leader in the future energy systems, RWE created the RWE Innovation Hub, a platform and team to develop RWEs innovative business models of the future. In the Innovation Hub the most courageous, creative and entrepreneurial people are free to explore ideas and develop the best ideas to reach market maturity. The simple mission is: to innovate. 3.4.2 BLIS The second case is about the application of design thinking methods during product development processes at Blis, specifically the development of a digital safety passport commissioned by ProRail. To improve its safety guarantee, ProRail was looking for a digital replacement for its paper safety passport, which was susceptible for errors and fraud. The paper safety passport gave access to the tracks and ensured that staff working on and around the tracks could prove their qualifications and that they were performing their work in accordance with statutory
combination of a physical ID card, a portal and an app. BLiS won a Dutch Interactive Award for this project in 2015. BLiS, based in Barendrecht and Amsterdam, the Netherlands, is a digital agency. Blis has over 10 years experience with building web applications, apps and software, start-ups and digital marketing activities.
Figure 2: Case studie selection
Case Company size No of interviews Position of interviewees RWE/ESSENT > 60,000 4 Insights & Ideation manager Innovation acceleration manager Intrapreneur/Senior innovation manager Accleration lead RWE Innovation HUB BLiS > 50 4 Partner/Operational manager Experience designer Business development, IT Lead. NET developer 3.5 Secondary data collection
The secondary data can be found in the theoretical framework. Academic reports, books and internet sources will be used to find proper information regarding theories and concepts described. These concepts and theories will be analyzed and linked together in order to get a comprehensive oversight of the fields associated with the subject of this thesis. Furthermore, visuals regarding design thinking methods and outcomes are used (see Appendix 2 and 3).
3.6 Analysis strategy
According to Eisenhardt (1989) “analyzing data is at the heart of building theory from case studies, but it is also the most difficult and the least codified part of the process”. According to Yin (2003, p.109) data analysis consists of “examining, categorizing, tabulating, testing or otherwise recombining evidence, to draw empirically based conclusions”. Both Eisenhardt (1989) and Yin (2009) state that within-case analysis and searching for cross-case patterns are often recommended analyzing methods for multiple-case study research. Therefore this research uses within-case analyses and cross-case analysis as analyzing methods.
In order to analyze the qualitative data, a specific coding procedure is applied. The framework of
Liedtka, King and Bennett (2013) will be used as backbone of application interpretations of design thinking and the multidimensional construct of Ruvio et al. (2014) as construct to discover whether it has influenced the organizational innovativeness climate, especially the behavioral outcome (Wang and ahmed, 2004). Due to the time limitation and research scope this study will only examine eight in-depth interviews. According to Galvin (2015) there is a lack of a sound theory to justify a certain number of interviews. Mason (1996) however confirmed it is about meaning instead of quantity. One approach that can be taken is that of reaching a point of ‘saturation’ (Glaser and Corbin, 1990). Saturation is the point at which, after a number of interviews have been performed, it is unlikely that performing further interviews will reveal new information that has not already emerged in a previous interview. Yin (2009) argues that analytical conclusions independently arising from two or more cases will be more powerful than those coming from a single case alone. Therefore this research uses eight cases to discover how different professionals understand and use design-thinking methods to discover patterns across the participants. Analyzing data is the heart of building theory from case studies, but it is both the most difficult and the least codified part of the process. Since published studies generally describe research sites and data collection methods, but give little space to discussion of analysis, a huge chasm often separates data from conclusions (Eisenhardt, 1989). One key step is within-case analysis.
3.6.1 Within-case analysis Within-case analysis is about analyzing the collected evidence of each case study independently and drawing conclusions on each individual case. The first step is categorization of the data, which is the process of funneling the data into relevant categories for analysis by means of coding (Dey, 1993). According to Marshall and Rossman (2006) the process of category generation involves noting patterns evident in the setting and expressed by participants.
3.6.2 Cross-case analysis
Cross-case analysis is one of the five (pattern matching, explanation building, time-series analyses, logic models, and cross-case synthesis) analytical techniques described by Yin (2009) as suitable for case study analysis. This research uses the multiple-case study method; therefore results from an individual case are analyzed and compared with results of the other case.
Furthermore, results of the two cases together are held against related literature in order to validate the results.
All semi-structured interviews are recorded with permission, and thereafter all recorded data is transcribed. In order to generate theory from the transcribed data, which was defined by Strauss and Corbin (1990, p.15) as: “a set of well-developed concepts related through statements of relationship, which together constitute an integrated framework that can be used to explain or predict phenomena”, several steps are undertaken. First eliminating irrelevant data such as small talk downsizes the amount of data. Secondly, the data is coded, in order to be able to relate the data and identify emerging patterns or common themes. Overall, the coding procedure resulted in 22 codes in the ‘NVivo’ code. (NVivo is qualitative data analysis software for researchers). For each category the associated concepts and quotations are presented in tables (See Appendix 2). Seven interviews were held in Dutch and one was held in English. The quotations of the interviewees given in the following sections are translated word-for-word. Findings for each case are summarized in tables in order to be able to perform with-in and cross-case analysis. A relative score per variable will be constructed in order to quantify the variables. The sub-variables serving as key measures for this research are scored: 1, 2, or 3. 1) Meaning low, no application of this sub-variable; 2) meaning medium, average application of this sub-variable; and 3) meaning high application of this sub-variable.
These scores will be used for further analysis of the variables in relation to the literature.
3.7 Reliability & Validity
Bell (1999) states that reliability is a measurement concerning the likelihood of getting the same results at different times when all circumstances are the same. Reliability is pursued through semi-structured interviews in order to examine cases in the same way. An interview guideline with questions and topics is used to eliminate disadvantages of this method. Furthermore, to limit the reliability (Eisenhardt, 1989) the interviewees are selected on the basis of different professions and roles in the process.
Bell (1999) further claims that validity is something more complex. Validity can be described as the conformity of what you set out to investigate and what you actually investigate. The aim is to achieve internal validity through the use of multiple semi-structured interviews. The design of the interview will be based on understanding of the theory and pilot testing to make sure questions are understood as intended.
First, in order to get a better understanding about the topics for this research, a literature review was conducted. Yin (2009) states that the literature review is a means to an end and not an end itself. He argues that a literature review is a necessary tool to review previous research in order to be able to develop sharper and more insightful questions about the research topic. Secondly, the external validity will be ensured through the use of two cases to examine whether findings can be generalized over a number of organizations. The following factors: subject selection, history, testing, mortality, and ambiguity about causal direction. In order to enhance the validity of this research, the research incorporated different type of organizations to analyze the research questions from different perspectives, are eliminated in order to enhance the validity of this research (Saunders and Lewis, 2012).
4. Results
In this chapter, the findings of this study are presented. First, section 4.1 presents the findings concerning how organizations in this study develop innovation capabilities. Then, the findings concerning how they make use of design-thinking methods are presented. Followed by section 4.3 which will present findings how these applications of design thinking methods will influence the development of innovation capabilities. Section 4.4 will present findings how these two concepts in turn will boost organizational innovativeness, specific on innovative outcome on behavioral level. 4.1 Developing innovation capabilities Examining the empirical cases of this study, the following elements were found as important in developing the innovation capabilities at Essent and Blis. 4.1.1 ESSENT For Essent, an internal platform, external partnerships, management awareness/strategy are the most important resources to develop innovation capabilities as presented in table 3. Essent developed an internal platform that creates transparency between national and international offices. Essent believes this creates more ideas and awareness of running projects within the organization. Furthermore, Essent often highlighted the value of partnerships. Not only with organizations with no financial aim such as TedEx and Universities, but also with start-ups. Essent partners with start-ups for two reasons: one) start-ups bring fresh ideas, different products and a customer-driven approach and two) start-ups bring a different kind of culture. This helps Essent to develop more entrepreneurial thinking.
Subsequent Essent has strong management awareness to foster innovation. Several interviewees highlighted the fact that the Innovation hub is not a department, but a network organization. They work with a proof-of-concept in little start-up teams that fasten up processes; they work with people from inside and outside the company, from different countries and with different kind of contracts. For Essent, their innovation capabilities are related to their system and to their external partnerships. The more awareness their employees have and the more external partnerships they have, the higher their innovation capabilities will be. One of the interviewees’ described it as follows:
‘Partnering is not only about external partnering. It also means internal partnering. I’m not responsible for renewables, but we if we need our colleagues, we can call on them’
(Interviewee 3_Essent)
Furthermore the interviewees mentioned that for them sharing knowledge is very important. The purpose of sharing knowledge according to Essent, is threefold: discussing barriers and how to overcome them, gaining knowledge that can be used in future projects and increasing individual’s knowledge base over time. Not only internal by making use of their internal platform, but also by making use of external networks such as their partnerships with TedEx and Universities. These learning’s will help them to develop their innovation capabilities because they see making mistakes as part of their learning process: acknowledge the situation and communicate why it happened, whereas, one interviewee explained: ‘.. do not get to personalized towards projects or solutions that you made up…. When the project or idea fails you are able to keep your head up’ (Interviewee 2_Essent) Moreover Essent increases awareness about new working methods such as agile, business model canvas and design thinking methods, by continuous training to eliminate old working processes and change old mind-sets. One interviewee highlighted: ‘Old processes are familiar….old habits, the difference between old and new methods is the uncertainty, but, the old processes where also filled with uncertainties but covered through assumptions’ (Interviewee 2_Essent) These implications create more openness towards other perspectives and maintain motivation to come up with other ideas. This is in line with their view, presented above, that the employees’ skills are the most important resource for innovation. For Essent, developing innovation capabilities is a matter of improving the employees’ skills and that is done by means of sharing knowledge and training about agile working methods such as design thinking and business model canvas.
Transform knowledge 3 1 Individual behavior 2 1 Resource management 2 2 Systems 3 3 External relations 3 3 Learnings 3 2 Management awareness 2 3 Other findings: Experience 3 2 Total: 21 17 4.1.2 BLIS
For Blis, external relations, individual behavior and applications, are the most important resources to develop innovation capabilities as presented in table 3. Blis emphasizes the importance of methods and techniques to foster new ideas and to solve problems. These techniques, mostly online applications, increase accuracy and speed in development processes, which in turn boosts their skills to continuously transform knowledge and ideas into new products. One of the interviewees clarified:
‘If I need five computers screens than I get them, because their philosophy is: hardware is cheap, but my hours are expensive’ (Interviewee 6_Blis)
Furthermore, Blis puts a lot of empathize on working methods. They believe two things: one) leave perfection behind and two) working with each other must be fun. These believes will enable a nice, fun working atmosphere that in the long run will foster a sense of belonging and common trust, whereas methods help to structure focus and responsibilities. However these methods are means, and not the goal. Blis works along with external relations, mainly for two reasons: one, to maintain a flexible, flat organization and two, co-operate with the best experts in the field. This means Blis can react fast towards market changes and develops innovation capabilities through coaching employees in their discipline to gain more experience (learning by doing) and build more confidence, which in turn boost personality traits and empowers. One of the interviewee expressed it as follows: ‘ by doing it often, you can learn, experience and develop intuition…. I have created self-confidence … I trust my gut feeling’ (Interviewee 7_Blis)
For Blis, their innovation capabilities are related to their techniques and to their external relations, whereas, the faster and accurate their employees deliver products the more external clients they will serve and the faster their innovation capabilities will develop.
4.1.3 Overall findings
Overall, the data shows that there are various ways in which innovation capabilities are developed within Blis and Essent. Several differences came to the surface in the procedures; due to the fact Essent is a much larger organization than Blis. For example at Blis training and workshops are important, however, employees are responsible for their own participation. In comparison to Essent trainings and workshops are part of the job and continuously offered through their intranet. Furthermore, it seems that Blis creates an open, fun working environment to share ideas, other point of views and in turn create a flat decision making process as a company. This type of organization, a cell-structure, is also addressed by the interviewees of Essent, however, the main difference is the discrepancy with the ‘old’ working processes which are used in Essent’s regular business and the ‘new’ working methods which are used in the innovation hub. Yet both organizations have two findings in common. On the one hand all respondents have addressed that developing innovation capabilities are also related towards personality traits. On the other hand both organizations have addressed that they facilitate learning’s through available resources such as applications to share knowledge and contracts with external partners are very important to foster innovation capabilities.
4.2 Application of design thinking methods
Examining the empirical cases of this study, the following elements were found as important during the application of design thinking methods.
4.2.1 ESSENT
Design-thinking methods are applied in the Innovation hub at Essent. The Innovation hub continuously develops new, sellable products and new business models in start-up teams in an agile approach: understanding - ideation - solving - build a pilot –testing - scaling up. These start-up teams apply several design thinking methods in combination with the business model canvas during each stage. At Essent, personas, develop prototypes and assumption testing, are the most frequent mentioned design thinking methods as presented in table 2. These methods support the opportunity space, also known as ideation process, and stimulate to think about ideas, products and services outside in instead of inside out. A statement, which responds to this: ‘it is more about putting the customer and his needs in focus’ (Interviewee 1_Essent)
The application of the design thinking methods is common at the beginning stages. However after testing and scaling up, it seems that projects, which are successful during the testing phase are killed during scaling up when the business case is not profitable, instead of testing the project again with another business model or target group. One of the interviewees expressed it as follows: ‘If the business model appears not to be successful, as we expected to be with all the tested assumptions during the pilot phase, only they have not tried to modify the nine squares of the business model, instead they killed it’ (Interviewee 2_Essent) Table 2: application design-thinking methods
Design thinking methods (Liedtka, King and Bennett, 2013) Blis Essent
