By Eliot Lloyd, Senior Lecturer in Strategy at the University of Bedfordshire Business School

Many small businesses now operate in industries that are evolving more rapidly than ever and in ways that are increasingly uncertain to predict. There is also an increasing need to differentiate one’s business from competitors that may be emerging from different countries and across different industries.

Companies that are reactive, reliant upon traditional models of strategy development or that concentrate on incremental improvements in operational effectiveness may well find that they are being left behind. It would seem that in this highly unpredictable and hyper-competitive environment, traditional approaches to strategy development may not be optimal. Businesses can easily become stuck in the mindset of focusing on such metrics as industry success factors or in competitor benchmarking or indeed process improvement. None of these are necessarily bad things to do but when allied to commonly used strategy development frameworks, that have been around for many years they tend to produce “me too” strategies which leads to businesses increasingly looking like each other, the result of which is increasing competitiveness and customer choice that is based on price or additional offerings rather than true differentiation.

The art of Strategy is to make a set of choices that produces differentiation and creates a compelling reason for customers to choose a company’s products or services ahead of it’s competitors. The real problem with strategy development is that it must take place in two time frames, the present and the future. Generally businesses tend to operate in the past with cultural mindsets tending to extrapolate past successes to future directions and managers eager to ask ‘will it work’? The major problem with this is that prediction about whether something will work in the future or indeed what the future will look like cannot be done with any degree of certainty and what worked in the past is no guarantee of future success. This presents us with wicked problems – those that are complex and present changing requirements that are difficult to recognise.

As a consequence of this there is increasingly an interest in leaving behind the traditional approaches to strategy and one approach is to turn to Design Thinking as a method of developing strategy. Design Thinking is defined by David Kelly, the founder of IDEO, the leading innovation agency, as:

“A human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements of business success”.

It is this approach that attempts to create innovation with a blend of what is desirable in terms of human values, what is technologically feasible and what is viable in business terms. Unfortunately the adoption of this type of approach is often simplified down to ‘innovation workshops’ where companies make use of well known techniques to attempt to develop or design innovative strategies. This is an over simplified version of design thinking that is not likely to produce truly innovative or effective strategies or ultimately provide long term differentiation. Design thinking relies on a much deeper cultural emphasis on the importance and usefulness of empathising with key stakeholders which enables the company learn more about its ‘audience’ and from this define a point of view about what they need and above all value.

The empathy stage means immersing oneself in the customer experience in order to fully understand what they value; what is meaningful to them; their needs and how and why they do things. This approach clearly goes way beyond surveys etc. and is central to Design Thinking. Successful design is iterative and based on consultation and dialogue. It is much more than giving the customer 'what they want' and leads to innovations that develop new and elegant ways to meet and indeed create needs. After the empathy exploration the emphasis then switches to ideation where creative solutions are developed to meet the needs and values of the stakeholders in a way that creates differentiation from competitors. Companies must then be willing to prototype and test their ideas.

The necessity for companies in adopting this approach is to actually adopt the ‘thinking’ part of design thinking and this requires a cultural shift towards being able and willing to deeply understand their stakeholders and to create a mindset within the organisation that genuinely promotes ideation and innovation and adopts a willingness to prototype. Finally it requires the company to relinquish its desire to extrapolate ‘truth’ from past events and data and to be able to explore future possibilities, which requires embracing the power of argument and playfulness over statistics. It also requires companies to engage in conversation and debate with which many may find difficult. Many companies will not be prepared for such a cultural shift and will attempt to create false certainties where no such certainty exists. They are likely therefore to only play with design thinking rather than adopting it and will therefore miss out on its power.