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Design thinking is one of the year's buzzphrases.
Though it has been around for decades, design thinking is back in focus due to the rapid expansion of digital products and services.
I recently wrote an article asking 'What is design thinking?'. Now, let's look at why companies should be using design thinking.
Let's start with the bottom line
Consider this financial measure of design thinking's success:
The Design Management Institute found that, in the US up until 2014, design-led companies have outperformed the S&P by 228% (see chart below).
Performance of 'Design Index' vs. S&P.
Alongside older brand giants such as the ones listed in the chart above, there are a blessing of designer-founded digital unicorns (blessing apparently being the collective noun for unicorns), such as Airbnb and Pinterest.
So, why does design thinking seem to be growing in importance?
Why is design thinking so important?
Though design thinking isn't new, the proliferation of marketing touchpoints and increased service interaction through personal devices (smartphones) has made it even more pertinent.
Design thinking is more than simply an approach to product design, it can help shape an entire brand ecosystem.
In a recent roundtable discussion chaired by Design Week, delegates expanded further on this fundamental change. Anna Bateson of Guardian Media Group (former Director of Digital at Charlotte Tilbury) said that "Design has become a bigger word."
She continued, "You could argue that some years ago it was product-based, around how it looked. Design was aesthetic output. Now it is manifested in so many different ways and part of so many different functions. Its remit has grown and is a much more fundamental part of how the business competes."
The most eloquent explanation of this trend comes from John Maeda and his 2015 Design in Tech report.
Maeda says that 2009 and the mobile boom was the inflection point for design in tech. As you can see from the slide below, taken from John's report and showing acquisition of designer-founded startups, he chooses Mint’s 2009 acquisition as a specific turning point.
Mint was acquired by Intuit for $170m after it had grown to 150m users in two years. As Maeda told Wired.com, “Looking at your finances, that was painful. Mint boxed up something painful so that it that could be experienced in a positive way.”
2010 then saw a whole slew of acquisitions, notably including Instagram, as design-led tech startups proved their value by growing their user bases.
What can we learn from Mint?
The embedded video below shows Mint founder Aaron Patzer discussing the success of his startup.
Whilst the video doesn't exclusively cover design thinking, Kissmetrics has detailed some useful nuggets in a terrific blog post.
One of the anecdotes that catches the eye is about the importance of security. Patzer realised security was paramount after 50 failed venture capitalist pitches combined with some market research showed that people were scared about letting a digital startup have their personal finance details.
So, after testing different wording, Mint.com added the phrase 'bank-level security' to its website, and this was an important factor in persuading users to put reservations aside.
Patzer says that getting your marketing messaging right is a form of validating your ideas, and should be done before prototyping (before the website is built).
This is essentially design thinking, and as Kissmetrics points out, validating an idea like this is free and similar to A/B testing.
Disruption by design
It's not just about testing ideas and messaging though. Patzer sums up the challenge of business, but more specifically building digital products as follows:
“Ideas are really nothing, it’s all in the execution of that idea. Either you have a fantastic idea and you’re one of the only people in the world who can do it, or you have a fantastic idea and you have to be the best executor on that idea.”
And the reality of digital is that brands have to execute a whole lot more. Picking a second chart from John Maeda's Design in Tech report (see below), you can see how 'users x usage' of digital information has increased exponentially thanks to the smartphone.
That makes mobile services the number one touchpoint for many brands (part of the move from product to service). You only have to look at disruptors like Uber, who are disrupting by redesigning the mobile service that encapsulates the taxi ride, but haven't fundamentally changed the ride.
More and more, companies are using design thinking and technology to change users' relationship with products, rather than the products themselves.
Users x usage of digital information has increased exponentially
One simple digital interaction can compromise brand image, and as these interactions proliferate, design thinking becomes more important.
Let's leave the last word to Hugo Pinto, innovation expert at IBM (commenting during the aformentioned Design Week roundtable). Hugh says, "There is a need for all companies suffering from disruption to anchor themselves in method."
He continues, "Design creates differentiation and magic. It’s not about making a product and finding customers. How do you create the whole experience from the object to the interaction?"