Design Thinking: the customer-centric way to innovate

Design thinking is a five-step method, with use cases ranging from solving customer problems to designing new products.
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A walk down Arundale Street in Mylapore, Chennai, in the 2010s could send your senses into overdrive. From Rayar’s Mess, the popular eatery, came the pungent scent of sambhar and the visual delights of steam breaking free from tumblers of South Indian filter coffee. Today, the repeated chirps and chimes of a mobile phone add to the scene. No, the owner of Rayar’s Mess is not receiving WhatsApp forwards. He is getting notifications from Zomato, one of India’s popular food delivery apps. In a recent news article published by the English daily The Hindu, Manoj Kumar, the fourth-generation owner of Rayar’s Mess, spoke about how the traditional eatery had changed its business model to embrace the digital transformation. His father had been reluctant but, looking back at the losses caused by the pandemic, Kumar believes the decision was the right one. “We are glad we moved to online orders in 2019,” he said.

The pandemic has not been the only “mess” to push businesses into taking another look at digital solutions. India’s demonetization program of 2016, for example, forced consumers and small merchants alike to find alternatives to cash transactions. The payment systems firm Paytm enjoyed a boost in the Indian market because of the program. According to Euromoney, Paytm’s numbers skyrocketed from 125 million users before demonetization to 280 million users by November 2017.

External forces have prodded businesses towards a digital transformation of their business models — whether they do it by latching on to a multisided platform to connect with new customers, or by accepting payments via smartphones. But how can a business owner or manager take the initiative on digitally transforming their business, instead of waiting for an external push? The answer lies in design thinking. Design thinking, as a method, is a potential enabler for digital transformation in companies of varying sizes.

Design thinking is a five-step method, with use cases ranging from solving customer problems to designing new products. Overall, however, the design thinking process is divided between the “problem space” and the “solution space”. Design thinkers spend quite some time in the problem space to gain a crucial understanding of the user and their needs. The solution space is where solutions are sought to help the user solve complex problems and test out prototypes.

1. Empathize with your customers
Rather than a solution-first approach, the design thinking process helps you start your company’s transformation with an open mind and a listening ear for the problems of your customers. The first step is thus focused on unearthing nuggets of insights based on qualitative research.

Take the case of AOK, one of Germany’s biggest health insurers. AOK took to design thinking when it sought to improve its customer experience. Consumers often approach insurers as if they are piñatas filled with ridicule and seldom describe them as sources of stellar customer service. According to Nicole Meisel, head of process excellence and IT partners at AOK Nordwest, developing organizational empathy for such customer perspectives was an important first step in changing their experience of AOK. A design thinking process may also reveal that customers want something different than what was previously assumed, noted Meisel. Empathy may thus mean letting go of preconceived solutions. Similarly, customer outreach under a design thinking process can validate opinions that managers might already have. According to Heike Kemper, a personnel development officer at AOK Rheinland, this underscores the importance of verifiable customer opinion data. In a survey to optimize complaint management, customers said things that were already clear to a lot of people, reported Kemper. “But we needed this impetus from the outside. As we all know, you can often be highly regarded everywhere except at home.”

2. Define the problem
If identifying with your customers to understand their pain points is the first and truly crucial step, the second is to re-define and articulate the problem clearly from the user’s point of view. This step consists of methodical unpacking and sense making, nugget framing, and interpretation, as well as a point of view statement and the creation of a persona.

Let us look at the case of Deutsche Bahn Station & Service AG (DBSS). DBSS is a subsidiary of the German railway provider Deutsche Bahn and manages over 5,400 stations. DBSS customers were unsatisfied with its train station information counters and their notoriously long and slow queues. Using design thinking principles, DBSS worked with the HPI Academy to redesign the service point experience, resulting in the Infopoint 4.0. According to HPI Academy, DBSS first interviewed a wide range of customers – including digital novices, teens, and people with visual or hearing impairments and mobility challenges. In this way, DBSS could understand their needs and pain points with the current information system, as well as gain their feedback on new system developments. By empathizing with their various customers DBSS could identify the key issues to solve - for example, reducing the length of queues.

3. Ideate
Having a clearly (re-)defined problem helps companies to direct their energies in the right direction. The Ideation stage focuses on generating and selecting ideas to solve the proposed, re-framed problem from the previous step. This is often where the challenges of being truly innovative and customer-oriented meet the design thinking methodology, where the user is the core of the process. To smoothly effect change and win over customer satisfaction, the ideation stage acts as a bridge: one which connects the existing problem to several feasible solutions. These solutions stem from creativity, in that managers are encouraged to ideate on how existing technologies or processes can be leveraged to solve the defined problems. Taking the perspective of the customer helps managers understand, empathize, and focus on the actual problem at hand.

4. Prototype
Developing prototypes does not mean that you must go to the nearest state-of-the-art lab. The main idea is to have a low-cost, quick-fix prototype/mock-up of your idea that you can test (not sell!) with the customers. According to Andreas Bürgler, a procurement quality assurance engineer with Deutsche Bahn, this allows the company “to immediately recognize what works and what doesn’t.”

For its prototyping of Infopoint 4.0, DBSS hired the set designer from the German National Opera, who built each iteration in cardboard. The new service point (see picture) creatively uses large display screens to make information visible from afar, an integrated loudspeaker to relay important information, and monitors to help customers confirm the audio information or answer additional questions. Adaptations to seating, counter height, and audio-visual design ensured that a diversity of users could be served equitably. DBSS also added a self-service terminal, giving customers the opportunity to inform themselves rather than queue for employee support. The final version of the prototype provided simple information access and digitized many processes, such as dashboards, self-service screens/terminals, customer monitors, video surveillance, more screens, and better loudspeakers.

 

5. Test
Testing is the final step of the design thinking process. Feedback is gathered from potential users and improvements made to the service offering. First, prototypes are shown to the user alongside the design team. In doing so, one learns about how the ideas “click” with the intended user (and one witnesses any unintended outcomes). Furthermore, testing out ideas with users helps get concrete feedback which can then be implemented for further iterations.

Implementing design thinking in your organisation
While AOK and DB may both be large organizations with sizeable budgets, design thinking requires neither to be a success. Research by ESMT MIM students indicates that design thinking’s primary leverage lies in social competence, that is, having an open-minded team is more important than technical skills. Creative application of existing technologies to solve key issues customers face will go a long way. Once managers have taken the time to understand their customers and identify their pain points, existing or innovative digital solutions can be strategically implemented. In a study from HPI Potsdam (Parts Without a Whole? – The Current State of Design Thinking Practice in Organizations) it could be proven that due to Design Thinking the working culture improved (71%), the innovation processes became more efficient (69%), users were integrated more often (48%), and costs could be saved (18%), thus clearly underscoring the benefits of the methodology.

Using design thinking does not mean reinventing the wheel. It does, however, require managers to think creatively.


Dr. Bianca Schmitz is a director of leadership development programs at ESMT Berlin and has been one of the founding directors of the Hidden Champions Institute (HCI). She is also responsible for establishing new international alliances with other business schools, institutions, and networks. Her research has been published in journals such as Industrial Marketing Management and Journal of Family Business Management. Beyond academic research, Bianca has published numerous case studies and managerial articles on hidden champions and digital transformation. As director of knowledge transfer to the Bringing Technology to Market Center, she is currently working on two research topics: “Bringing digital offerings to industrial markets” and “Corporate governance in times of deglobalization.” Write to her at bianca.schmitz@esmt.org.

Aparajith Raman works as a management consultant and is a teaching assistant at ESMT Berlin, where he also earned his MBA. Prior to that, he held several leadership roles across microfinance institutions, non-profits, and social enterprises. He has expertise in the financial services sector in India. Write to him at aparajith.raman@mba2020.esmt.org.

[This article has been reproduced with permission from ESMT. Views expressed are personal.]