The Design of Business

Knowledge Funnel

The Design of Business: Why Design Thinking is the Next Competitive Advantage’ is a book published in 2009 by Roger Martin, Dean of the University of Toronto’s Rotman School of Management. The book describes the concept of design thinking, and how companies can incorporate it into their organizational structure for long term innovation and results.

Martin introduces the ‘knowledge funnel’ as the process followed by leading businesses to innovate more consistently and successfully by eliminating mysteries and developing heuristics (shortcuts and workarounds) and eventually algorithms (forumas). The mystery stage comprises the exploration of the problem, this transitions to the rule of thumb (heuristic) stage, where a rule of thumb is generated to narrow work to a manageable size. In the algorithm stage the general heuristic is converted to a fixed formula, taking the problem from complexity to simplicity.

Martin poses that there are currently two forms of business thinking. Analytical thinking is driven by a quantitative process, standardizing to eliminate judgment, bias, and variation. Intuitive thinking focuses more on an instinct to drive creativity and innovation. Analytical thinking has become much more prevalent in organizations, because it is more consistent, easier to measure, and can scale in size. Martin labels the difference between a bias for the two schools of thought as the distinction between ‘reliability’ versus ‘validity.’ Organizations are much more likely to favor what is reliable, because their structures motivate analytical thinking. This means that organizations are often poor at achieving valid solutions because they do not fully take advantage of all three areas of the knowledge tunnel, just the two latter stages.

Design thinking balances analytical and intuitive thinking. It combines an openness to explorative thoughts with an exploitative mentality, striking the balance between innovation and a systematic scalable process. It pulls resources back into the knowledge funnel and allows to progress through all three stages. Martin argues that business is currently missing abductive reasoning, the third form of logic (deductive logic and inductive logic being other two). Charles Sanders Peirce formed the idea of abductive logic, arguing that no new idea could come from inductive or deductive logic. Peirce described the process of discovery as new ideas that arose when thinkers observed data that did not fit with the existing models. The first step of reasoning was not observation but wondering. Designers live in the world of abductive logic, actively looking for new data points and changing the way that things are done. Incorporating this into organizational structures allows firms to become better at the mystery stage of the knowledge funnel.


One Comment to “The Design of Business”

  1. The concept is interesting but, for a good laugh listen to Martin praise RIM for its ability to innovate and adapt.

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