Business Schools’ vital role in driving innovation

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As products and business models become more complex, innovation requires specialised academic institutions, writes Arturo Bris, Director of the IMD World Competitiveness Centre

In the late 19th century, two French brothers – Auguste and Louis Lumière – invented the cinematograph. They are credited as the founders of modern cinema, and owned more than 170 patents in imagery development, and in other fields such as medicine. They are among the few French nationals to be honoured on Hollywood’s Walk of Fame.

In those days, most revolutionary innovations were coming from England or the US; for example, the steam engine or electricity. Why is it, then, that the Lumières – young men from Lyon, a mid-size city in France – gave the world such important technology? 

Auguste and Louis’ creativity was the result of their family – their non-conformist father was the owner of a photography business – and their personality traits (risk attitude, curiosity) also influenced their creativity. However, the main factor for the birth of cinema in Lyon is an educational institution – La Martinière – from which the brothers graduated as engineers. La Martinière could be described as the MIT of the day, with a curriculum that promoted technology, chemistry, industrial knowledge, and experimentation. As well as being the alma mater of some of Lyon’s prominent industrial and commercial leaders, it attracted students from all over the world who were interested in technology and innovation.

The ability to innovate

Very often, we attribute the innovation of specific people or countries to individual attitudes or national culture. When I ask members of IMD’s executive programme why they think that, in Europe, there are no digital platforms along the lines of Alphabet (in the US) or Alibaba (China), they either blame a risk-averse attitude among European entrepreneurs, the lack of a ‘failure culture’, or inadequate regulation. While countries such as Israel and Taiwan are innovative by nature, the same can be said of Jordan and Ukraine. So why do we rarely see see disruptive innovations coming from the latter two? 

My recent book, The Right Place: How National Competitiveness Makes or Breaks Companies, argues that, in determining corporate success, factors such as leadership and strategic choices, are marginal. From my research, and that of others, we can conclude that the impact of leadership teams on corporate performance is moderate at best; some CEOs increase value, but some destroy value. 

The factors determining corporate success are global and national. My work shows that 80% of a company’s stock return variability is explained by factors such as the business cycle, trade wars, geopolitical tensions, and regulation. The Covid-19 pandemic has taught us that the fate of organisations is often dictated by uncertainties that are not controlled by companies.

In that context, decisions at a country level, such as capital markets design, education policies, and fiscal rules for talent attraction, have a greater impact on innovation than the DNA of potential creators. Specifically, educational institutions play a vital role in shaping innovation. 

Stanford comes to mind as a global leader in the production of startups, with Alphabet being its most successful result. Facebook and Microsoft were born in Harvard dorm rooms, while, in total, Harvard is the alma mater of 1,310 entrepreneurs. Michael Dell was a student at the University of Texas when he founded his computer brand. Dropbox was born in MIT; WordPress at the University of Houston; Reddit at the University of Virginia and Fedex at Yale. Skype was developed by a graduate of Uppsala University (Sweden), and Logitech was founded by two colleague students at EPFL in Switzerland. 

Specialist institutions for innovation

As products and business models become more complex, innovation requires specialised academic institutions. That is why Business Schools have been the seed of many important innovations of the past decades. Desigual, one of the most international fashion retailers, was founded by an alumn from the IMD MBA programme. The founders of Zoom Technologies, Peloton, and Grubhub planted the seeds of their companies while attending classes at Stanford, Harvard, and Chicago Booth respectively. 

How can universities, and Business Schools in particular, be centres of excellence for innovation? First, let me point out that, for innovation ecosystems to succeed, they have to combine three key success factors. The first  is access to capital. The benefits of finance are important and have been documented by academics and international organisations. 

In 2000, Professor Jeffrey Wurgler (then at the Yale School of Management and currently at NYU), highlighted in a paper published in the Journal of Financial Economics that more financially developed countries allocate capital with greater efficiently across industries. Specifically, Wurgler found that ‘developed’ financial markets (measured by the size of the domestic stock and credit markets relative to GDP) such as the US and the UK, increase investment in growing industries and decrease it in their declining industries. 

Effective financial systems are both the consequence of and the reason for the competitiveness and innovativeness of countries. Over time, the interaction between Wall Street and Main Street – or between the financial system and the real economy –reinforce each other, and we observe the positive impact that a good financial system has on economic growth and quality of life. Conversely, countries that forget the financial sector struggle to develop a competitive economy, despite their innovation and talent.

The second important factor is regulation. To be innovative, firms need to have rules that protect intellectual property, bankruptcy laws that allow failure and recovery, and fiscal rules that facilitate foreign investment and talent attraction. Regulation removes uncertainty, and this explains why innovation is more difficult in Europe, where innovators need to comply with a myriad of regulatory regimes, compared with the US and China. 

The role of the education system

When good regulation is combined with access to capital, innovators emerge. This is where the third factor – the education system – plays a vital role. Business Schools are becoming important parts of a country’s innovation ecosystem. Entrepreneurs need to be more than creators, and need to learn how to monetise their ideas. The Lumière brothers never attended Business School. And this is probably the reason why their creation did not result in the movie industry being built around Lyon, but in Los Angeles. The Lumière brothers of the 21st century need business education, but such education must fulfill three requirements:

1. Business Schools need a good curriculum
To transform ideas into businesses, innovators need to know finance, marketing, and strategy. Design and technology skills are not enough. This also means that Business School curricula should emphasise management skills at the expense of experiential learning and leadership skills. Traditional Business School disciplines are important – especially for those who do not plan to work for a large organisation – because founders have to have a helicopter view of their companies, which requires a deep understanding of all dimensions of performance.

2. As technology will be the basis for many of the upcoming innovations, Schools need to embrace technology-related subjects
At IMD, we have reduced the importance of accounting in the MBA curriculum in favour of coding, a one-week innovation journey, and courses covering artificial intelligence, Blockchain, and Big Data analytics. We have also enlarged the finance and marketing courses.

3. For Schools to be part of the innovation ecosystem of their country, they must partner with the public and private sectors to create synergies
Governments need to realise that attraction of talent to Business Schools results in innovation, and therefore more jobs and prosperity. At the same time, Business Schools as academic institutions need to feed the country with research related to entrepreneurship, family business, and innovation. 

Business Schools must hear the demands of companies and adapt their programmes to the needs of the labour market. The benefit for Schools is that, as the reputation of their country increases, so does the ability of the School to attract better students.

Innovators are not born but made. Business Schools are part of a country’s innovation ecosystem and while technical universities (the La Martinières of our times) continue generating ideas, Business Schools transform these ideas in businesses, jobs,
and competitiveness. 

Arturo Bris is Professor of Finance at IMD and Director of the IMD World Competitiveness Centre. His new book, The Right Place: How National Competitiveness Makes or Breaks Companies is published by Routledge. 

This article originally appeared in Ambition – the magazine of the Association of MBAs.

Innovation for success in business education

Lightbulb glowing white with cartoon facial features and a metallic arm pointing upright; this is symbolic of innovation and ideas. Business Impact article from Leading change and inspiring lifelong learning.

Leaders from Rolls-Royce, PwC and the European Space Agency on how innovation will impact the business world, and what this means for business education. Highlights from a session at the AMBA & BGA Festival of Excellence

What challenges and opportunities await Business Schools in the ‘new normal’ of business? How will Business Schools create the leaders who can not only survive, but also thrive, in uncertain business conditions? And how are boundaries being pushed in terms of creativity in theory and practice at Business Schools? 

A panel of leaders working at the forefront of global innovation shared their take on these challenges and offered solutions as part of the AMBA & BGA Festival of Excellence. 

Chairing the panel was Simone Hammer, Global Marketing Director for Learning and Training Solutions at Belgian tech company, Barco. She introduced the conversation by explaining: ‘We can see as a solution provider that there has been very quick adoption [of new technology] that we didn’t think was possible. So very often in the education sector, faculty or teachers were thought to be technology adverse but the pandemic has meant that they have had to think of a different solution. That’s what we call digital enablement and now we are looking into digital transformation.’ 

Bodo Schlegelmilch, Chair of AMBA & BGA and Professor of Marketing at WU Vienna, agreed. ‘The Covid crisis has been a very big accelerator. We had a number of tendencies which were already visible – for example, more online teaching,’ he said, before adding that the pandemic had brought about, ‘a sudden huge field experiment, into which everybody had to be dragged. We went through stages. The first stage was panic: “How do we cope and how we can we do this?”. The second stage was: “This has worked quite well, so let’s experiment a little bit and make it better.” Now what we’re observing is that [Schools] are starting to become much more familiar with technology and are willing to try things out. This is an attitudinal change where they say: “Zoom is fine but what can we do in addition? Can we use virtual reality or AI in order to tailor the programme for the specific needs of students when they come in?” There’s much more willingness to explore what is possible and this attitudinal change has been very important.’

The coming stratification 

Innovations and disruption in the wider business arena have been widespread and this has also impacted on business education. The thoughts of PwC’s Director of Artificial Intelligence, Rob McCargow, chimed with those of Schlegelmilch. ‘We’ve all been dragged into this massive field experiment and everyone had to pivot to remote working within 24 hours,’ said McCargow. ‘At PwC, we had to move our 300,000 people to a remote setting immediately and this has accelerated many of the digital transformation programmes we were building. In some cases, things that had been on the roadmap for four years [from now] have been dragged to immediate action, which has been really quite exciting. 

‘This has been radical innovation by necessity – not by aspiration – and that’s been an exciting place to be. I keep hearing the phrase, “when we get back to normal,” but if we’re being candid, there is no getting back to normal now and we will see a stratification of companies that have a different mindset about the return to normal, post-Covid-19. There will be some laggards who will be desperately trying to get back to a semblance of normality and wishing to adopt the same format as before the pandemic, but at the other extreme, we will see companies entirely reinventing their business model. We’ve already seen companies disinvest from their real estate portfolio entirely and work to a fully virtual setting. The reality [for most], though, will be somewhere in the middle. PwC is going to be radically different, but we still need to have some face-to-face contact. 

‘My biggest concern is the more junior staff coming into the workplace for the first time. We have to cater for them properly and enable the ability to build social cohesion and social capital. We can’t go too far down a digital track immediately and forget about that essence of humanity.’ 

Finding the right balance

On this point, Manisha Mistry, Head of Digital Culture at Rolls-Royce, explained that more innovative approaches to business education will produce more innovative graduates, and that both Schools and employers will need to adapt quickly to make the most of a creative, tech-savvy stream of talent. 

‘There’s a real balance now that I think organisations, in my experience, are working out how they can allow these [tech-savvy] people to come into a world that we’ve cultivated over years of experience and built to a point where we’re safe in the sense of where we’re operating. We know we need to shift but [these people] are used to volatility; they’re used to changing direction instantly without worrying about all the predicating processes, models or practices around them. They have to do that with us – not to us – and these are the kinds of new areas of focus I think we’re going to need to start seeing coming through Business Schools.’

Frank Salzgeber, Head of Innovation and Ventures, ESA Space Solutions, European Space Agency, summed up the session by voicing his support for the notion of ‘social capital’ to enable innovation: ‘Everybody has a kind of social bank account. When you become older, your career is fuller, and you can really use these connections. If you’re younger, you have to fill up [the account] somehow. While they will also have to do this face to face, we have to see how we teach students that they can do this online. The challenge is to adapt our soft skills to make them work in a digital format.’

Chair: Simone Hammer, Global Marketing Director, Learning and Training Solutions, Barco

Panellists: Rob McCargow, Director of Artificial Intelligence, PwC; Manisha Mistry, Head of Digital Culture, Rolls-Royce; Frank Salzgeber, Head of Innovation and Ventures, ESA Space Solutions, European Space Agency; Bodo Schlegelmilch, Chair, AMBA & BGA; Professor of Marketing, WU Vienna

This article was originally published in Ambition (the magazine of BGA’s sister organisation, AMBA).

Are subscription models the solution for Business Schools?

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Building on his notion of ‘degrees for rent’, AMBA & BGA Chair, Bodo Schlegelmilch, outlines why a subscription model could be the game changer traditional Business Schools need, before considering the significance of alliances in an increasingly heterogeneous landscape

There is no ‘typical’ Business School. Consequently, general predictions and critiques of Business Schools may apply to some types of Schools, but not to others. 

There is a myriad of different types of Business Schools: private and public; self-standing and embedded in larger universities; theoretically oriented and managerially oriented; religious and secular; small and large; degree awarding and non-degree awarding; those that offer executive education and those that don’t. It is therefore important to define carefully the type of institution for which one attempts to make predictions.

However, if we focus on Business Schools that hold at least one of the three major accreditations (AMBA, AACSB or EQUIS), how to adapt to new market realities is a central question. I believe that these Business Schools are increasingly facing business model competition.

Business model competition requires thinking outside the box, and so, as an example, why not consider a radical idea? Future Business Schools could follow the trends in many parts of the digital economy and move from offering ‘degree ownership’ to offering a subscription model in which qualifications would expire unless graduates demonstrate a commitment to continuous professional development.

For degrees with a leaning toward practical knowledge, such as marketing, the argument for granting a degree with an expiry date is particularly strong. Rapid environmental changes, primarily driven by technological advances, call for a continuous updating of knowledge. To this end, a subscription model for degrees would just be a logical extension of the continuous professional development already required in some other professions, such as medical practitioners.

Potential financial benefits of a subscription model

For Business Schools, a subscription model could offer an interesting financial perspective. For one, regular moderate subscription rates could add up to substantial lifetime customer values for Business Schools. From a student perspective, the model could also arguably be more attractive than ‘buying’ a degree and paying that degree’s tuition fees in one lump sum. Spreading the financial burden of a Business School education more evenly over one’s entire career would make tuition fees more palatable, especially when taking into account that yearly earnings are likely to increase as one’s career progresses.

These financial considerations lead to the troubling issue of Business School economics. Traditional Schools have an inherent problem – with research and administrative obligations, it’s possible that full-time professors – albeit, depending on institution, seniority, and country – may only spend a small proportion of their time teaching. Assuming a 40-hour week and calculating a generous seven weeks of vacation, a university professor might spend at best 300 hours, or as little as 120 hours, of their 1,800 hours of annual work time in class.

This model makes teaching rather expensive. Nonetheless, top Schools are able to pass these high costs on to their students by charging tuition fees. It is well documented that MBA programmes can run well in excess of $100,000 USD, or even $200,000 USD when factoring in living costs. 

However, for all but the very top institutions offering business degrees, this is rapidly becoming unsustainable. Moreover, the spiralling tuition fees lock out talented candidates for whom such costs are out of reach. A more even distribution of costs during an individual’s working life may be an alternative that also has merit from a perspective of social equity and fairness.

Building customer relationships

The potential advantages of a subscription model go beyond financial aspects. It could also open a path for Business Schools to establish deeper and longer-term relationships with their customers. Such relationships offer an inherently more intensive mechanism for knowledge exchange between practitioners and academia than a traditional exchange between students and professors.

In this scenario, professors could tailor their teaching to the specific needs faced by managers at different stages of their careers and, thus, increase the relevance of the knowledge provided. Senior managers could, in return, share more insightful practical knowledge with professors than young, and often inexperienced, degree students are able to. Such exchanges could also inspire more attention to practical relevance in academic research. This would constitute a win–win situation for both Business Schools and their customers.

While a change to a subscription model would constitute a radical shift, most Business Schools currently seek to optimise potential by less far-reaching options. In their quest to reduce teaching costs, there is often an attempt to optimise delivery. This typically includes the use of clinical or practice-based faculty – essentially lecturers that are freed of research obligations. Blended learning or flipped classrooms can further improve the bottom line if less costly tutors can, at least partly, replace expensive full-time faculty.

In such models, individual students, or groups of students, work through a variety of tasks and teaching material outside class and only need attend the campus for a substantially reduced number of face-to-face teaching hours. While these cost reductions seek efficiencies within the existing Business School model, they fail to question the rationale of the model itself. 

The importance and complexity of alliances

A less radical, but still substantial, change in the business model of Business Schools is the increasing importance of alliances, both between and among different Business Schools and between Business Schools and technology partners. Many alliances are technologically motivated and simply reflect that Business Schools cannot manage the substantial development costs of technology platforms themselves. Others, such as the Global Alliance in Management Education (CEMS) network, are motivated by the desire to offer students more international choices and a superior learning experience. 

A relatively recent example of a primarily technology-motivated platform is the Future of Management Education (FOME) Alliance which aims to provide a common standard that enables the sharing of new technologies and pedagogies across its member institutions. A major objective of the collaboration is to challenge the perception of digital education as a lesser alternative to classroom teaching.

Although there are a growing number of Business School collaborations of varying intensity, most Schools find partnering with the heterogeneous group of technology providers from outside the traditional industry something of a scramble. University College London, for example, launched an online MBA in partnership with 2U. There are also hybrid collaborations between Business Schools and technology platforms. Arizona State University, edX, and MIT, for example, offer a master’s degree in supply chain management and claim to offer the world’s first stackable, hybrid graduate degree programme. 

The danger of tech-platform takeovers

With the advent of MOOCs, the competitive dynamics start to shift from competition between individual Business Schools to competition between networks. These networks include web giants such as Google, publishers such as Pearson, and a whole range of companies that team up to design and distribute educational content. From a Business School perspective, the danger may well be that its brand power erodes when they offer courses through a platform. Large and increasingly dominant technology platforms may become better known than individual Business Schools. For example, students may focus on Coursera when they buy a course and not on the School providing the course. This would parallel consumers who say they buy something from Amazon rather than from the vendor supplying Amazon. Student affiliation may switch from Business School to platform, a threat that appears particularly relevant for Schools with weaker brands.

Business Schools may also forge alliances with consulting companies expanding their digital learning offers, such as the McKinsey Academy or Deloitte University. These companies do not (yet) have the right to grant degrees and typically only offer a certificate on completion of their courses. Ultimately, however, it is debatable whether a certificate from a prestigious consulting company, such as McKinsey, or a degree from a relatively unknown middle-of-the-road university bears more currency. 

In short, Business School education is becoming more heterogeneous as traditional Schools become increasingly entwined with other institutions.

The growing importance and complexity of alliances in business education is further evidenced by collaborations between corporate universities and traditional Business Schools. Take, for example, Sberbank Corporate University in Russia. Sberbank has built a large and impressive campus where they not only train their own employees but also those of selected partner companies.

In this process, Sberbank Corporate University teams up with INSEAD and London Business School – strong brands obviously still count – and makes use of learning material from the Khan Academy. Sberbank and other nonconventional Business Schools use a fly-in faculty model, which saves them the expense of full-time professors. In this way, while students at such institutions may well benefit from excellent professors with up-to-date research records, other Business Schools pay for the research time of these professors.

Cosmetic change is insufficient

The myriad of competitive challenges facing traditional Business Schools demand business model innovations. Some innovations may be radical, such as moving to a subscription model, while others will centre on forging networks, primarily to cope with increasing technological requirements. There is now increasing competition from outside the industry by consultants, publishers, and IT companies, and there are increasingly competitive corporate universities. In addition, there are Business Schools that are system integrators with minimal overheads and no research expenditures that rely primarily on a fly-in external faculty model. 

All this suggests that, for traditional Business Schools, the time for ‘business as usual’ is over. A few cosmetic changes to an existing business model will be insufficient for survival. In particular, those Business Schools that are not among the top aspirational brands will need to adopt alternative business models or risk falling foul of the paradigmatic changes in the business environment.

This article is taken from Business Impact’s sixth edition in print and has been adapted from a wider discussion – entitled ‘Why Business Schools Need Radical Innovations: Drivers and Development Trajectories’ – in the Journal of Marketing Education (2020)

Bodo Schlegelmilch is Chair of the Association of MBAs and Business Graduates Association (AMBA & BGA) and heads the Institute for International Marketing Management at WU Vienna. For more than 10 years, he served as founding Dean of the WU Executive Academy.

Avoiding irrelevance and moving forward with innovation

Does your business risk irrelevance? It will soon if three fundamental innovation perspectives are ignored, says Berlin School of Business and Innovation’s Alexander Zeitelhack

In recent years, innovation has become a hot topic and a leading approach with regards to technology, and across many other sectors. The need for innovation and the forms it assumes are a fast-changing reality, calling for adjustments and an ability to adapt from those who are looking to make the most of this.

This article offers three different perspectives and some useful pointers to guide you through some of the still-uncharted territories of innovation.

Three key perspectives on innovation

1. There is the need for a different approach to the way we look at things in day-to-day life. When we try to solve the same problems every day, with the same methods and tools, we are ignoring the need and request for progress.

Everything around us is evolving and developing, and we need to be aware that we cannot survive with the ‘endless growth model’ of economy, as firstly, we’d run out of resources, and secondly, there will be no real improvement.

2. Looking at things we cannot account for, whether this is in business or life. These unknown elements are our enemies. Should our competitors find one of those, we could easily be replaced in the marketplace. Innovation, creation and management are the minimum protections against this threat. Combined, they can help to identify potential issues before they arise and, most importantly, allow them to be dealt with in an effective manner.

3. An invitation to broaden our horizons and outlooks. In society, there is always a need for a specific product or service, and then there is the solution, or product, that fulfils this need. This means that if we only look at what we do (inside), then we will miss what is needed on the outside. This would be a failure to reach out to both existing and potential audiences and customers, affecting our results.

Ignoring any of the three perspectives above can culminate in a loss of relevance among people and consumers. This happened to the music industry when it tried to ignore MP3 technology, and it will happen to businesses that ignore climate change.

Investing in innovation

With its ever-changing nature, it might be difficult to identify precisely how much businesses should invest in innovation. This doesn’t only apply to infrastructure, but also to a variety of elements that make for a successful business.

A business should make projections for the market size of a future market segment that it wants to explore, a bit like real estate development. Then the future profit in that segment can be calculated and, I would advise, a fivefold increase of annual profits can be planned.

A business should create a story, or narrative, for its corporate culture to attract more young entrepreneurial thinkers. This will have an effect on employer branding and internal competitiveness.

Having a clear focus on diversity – of gender, culture, language, and age – is also important. For example, younger hires that are grouped into teams with senior management might be able to convince with determination and motivation, in spite of their relative lack of experience.

It’s also a good idea to create a working space that looks and feels different, and that can become a factory of ideas. It’s worth investing in a great architect as well as hiring agile coaches and design thinking experts to lead innovation teams.

Unleash talent

For any business that is looking to make the most out of the competitive advantages of optimising operations to drive innovation and creativity, it’s imperative to begin by getting the next generation of creative, global and diverse-minded managers on board.

Make your innovation process the home and castle that these emerging talents need and don’t let the future leave you behind.

Alexander Zeitelhack is Associate Dean at Berlin School of Business and Innovation (BSBI).  He has also been teaching media management, future research and social entrepreneurship at Nuremberg Institute of Technology for 25 years, where he held the position of Managing Director from 2009-2013.

Defining innovation – part 2: a fresh perspective on what innovation means

The fact is, innovation is (relatively) easy to define, but it is notoriously difficult to achieve, as Dave Richards finds out

The concept of ‘value’ embraces commercialisation, commercial success, wealth, utility, adoption and wellbeing, but in a way that doesn’t unduly limit our definition or thinking about what constitutes innovation.

‘Value’ is a more comprehensive psychological construct than utility. Humans can value, appreciate and love things that aren’t useful.

Another key reason to place the concept of value at the heart of innovation is to consider your why, what and wow. Why does your organisation exist? What does it deliver in the world? What’s your ‘wow factor’ that makes your brand or offering stand head and shoulders above others? Would anyone care if your organisation tipped over its collective shoelaces and died?

The essence of any organisation is its business model. At the core of any business model is a product – whatever good or service the enterprise produces that is intended to be of value to someone, usually thought of as the ‘customer’. The rest of the business model is simply whatever the enterprise does to produce the product, and whatever it does to get the product into the hot little hands of the intended customers. In its simplest form, a business model is simply about manifesting value in customer experience.

Of course, in reality, most organisations deliver a complex product portfolio, but we can nonetheless think of whatever is produced as the ‘product’. Further, there might be incredibly complex international supply chains, distribution channels, sales and marketing, and much more involved, but at its essence, a business model consists of these three simple elements. We can also use the term ‘value delivery model’, especially when considering public or social enterprises that might not like to think of themselves as businesses.

The concept of ‘customer’ is also somewhat complex. Whether this customer is a paying consumer or the recipient of charity or public services, they are nonetheless a ‘customer’. And sure, there is some psychological complexity here, in that some customers might be users, while others might be choosers (or buyers), influencers, all three, or any combination. Further, there is typically an incredible level of diversity of customer experience resulting from even the simplest of products, let alone complex product portfolios delivered in a wide variety of ways. Life is complex.

Given the above – that any enterprise should exist to create and deliver value to customers – the best definitions of innovation are ‘fresh thinking that creates value’ or ‘people creating value through the implementation of ideas’ or ‘something new that delivers value to the world’ – recognizing that the concept of ‘value’ must therefore also be clearly and unequivocally defined to fully understand what we mean by ‘innovation’. So, what is value?

Value is a psychological experience, or perception. Value is not absolute, and it’s not equivalent to money. Money, after all, is a human construct designed to enable commerce, trade and wealth. But if you think about it, even when money was made with precious metals, there was nothing inherently valuable about it, other than the value people placed in it based on their expectations for how they might use it. Value is more about love than money. Sure, people pay for love (some more than others), and will pay much more for something they truly love than something that is merely useful. Even the concept of money is psychological, and the value humans place on various forms of currency is also based on their perceptions, expectations, hopes and fears – all psychological phenomena.

Based on all of the above, I offer this definition:

Innovation is the realisation of net new value as experienced by people, resulting from the implementation of ideas (by the same or other people) for value creation.

The degree of innovation success at any given point in time is measurable return on investment (ROI) – the value created relative to the value (time, money, effort or other resources) invested to create it. ROI is usually expressed as a ratio, or percentage:

Innovation ROI = (Value Created – Value Invested) / Value Invested

Whether or not, or to what extent innovation is considered ‘successful’ is therefore a relative judgment. The level of ROI considered ‘acceptable’ by any given organisation, board, or investor will depend on other investment options, and perhaps other strategic considerations.

Being able to agree upon measures of value is critically important both for conversations about innovation, the development and implementation of innovation strategies, and of course the assessment of innovation results.

Money (commercial success, costs, budgets, profits) is of course a common and relatively easy way to measure perceived value – as it’s constantly tied and correlated to value experience in real time, in various local and global markets. But as alluded to above, if we focus only on money as our measure of psychological value, we might miss very important nuances. Leading organisations have learned that measures of customer experience, loyalty (e.g., net promoter scores) and love (of brands, products, etc.) can be vital for predicting and measuring success or failure. Four key concepts to bear in mind: (1) garbage in, garbage out; (2) not all that can be measured is important; (3) not all that’s important can be measured; and (4) the devil is in the detail.

Let’s end this series by defining another term – ‘unnovation’ – to refer to cases where the ROI is negative, negligible or simply disappointingly low. The fact is, innovation is (relatively) easy to define, but it is notoriously difficult to achieve, as witnessed by the fact that innovation success rates are very low (less than 10%) across all types of enterprises and industries globally (Dobin Group, 2012; Richards, 2014; VIIMA, 2018).

Dave Richards is Co-Founder of the MIT Innovation Lab, and a highly acclaimed author, speaker and consultant on strategic innovation leadership. He is the author of The Seven Sins of Innovation: A Strategic Model for Entrepreneurship  and holds a PhD in mathematical psychology and neuroscience from the University of Toronto.

Defining innovation – part 1: why the definitions of innovation that you know might be flawed

We need to think beyond commercialisation and wealth creation to embrace concepts such as utility and wellbeing. But do we require so much complexity to define innovation? Dave Richards Investigates

Many organisations are talking about innovation, without any real clarity or common definition, leading some people to conclude that innovation is just a buzzword that we should stop trying to have serious conversations about.

But that naïve conclusion misses a vital truth. Deeply understanding what innovation is all about enables global industry leaders to establish and maintain superior performance, competitive advantage, and winning strategies for long-term value creation.

Members of the MIT Innovation Lab (which I cofounded in 1993 and codirected until 1996) clearly demonstrate this understanding in everything they do.

3M is a great example – a company with a mission of innovation, an unparalleled infrastructure of technology platforms upon which to build new solutions, and a consistent track record of delivering superior customer value, which of course translates into value for other stakeholders. Some people might choose to ignore conversations about innovation – and do so at their peril. Phrases such as ‘innovate or die’ come to mind.

Do you know the ‘official’ definition of innovation, mainly used (not very well) by governments to measure and monitor national and regional levels of innovation?

The Organisation for Economic Cooperation and Development wined and dined hundreds of academics and civil servants in one of the world’s most expensive cities, Oslo, for weeks to come up with it. The resulting ‘Oslo Manual’ definition of innovation is ‘a firm connecting something new to a marketplace’. This definition is fatally flawed for three reasons:

1 Only ‘firms’ can innovate, such that innovation within public or ‘third’ (charitable) sectors is (by definition) impossible – which hopefully we all agree would be a bad thing.

2 Anything ‘new’ to a marketplace is viewed as innovative. But should we really accept that anything ‘new’ is ‘innovation’? What about a new strain of flu, accidentally unleashed by a company trying to create a vaccine? What about the Edsel – a very new car design introduced by Ford in 1958 – a spectacular market flop? And what about, or Come on now!

3 Again, because only ‘firms’ can be the authors of innovation, users are precluded from driving or contributing to innovation, even though a considerable body of research (see von Hippel, at MIT) shows that users are often the first to come up with ideas for innovation, and that they frequently modify the products provided by firms to make them more useful and fit for purpose (e.g., surgeons modifying surgical instruments).

Luckily for us, there are many far cleverer definitions of innovation offered by various experts, none of which resulted from expensive boondoggles at taxpayer expense:

  • ‘Innovation is the specific instrument of entrepreneurship. It is the act that endows resources with a new capacity to create wealth’ (Drucker, 1985).
  • ‘Innovation = Invention + Exploitation’ (Roberts, 1987).
  • ‘The starting point for innovation is the generation of creative ideas. Innovation is the process of taking those ideas to market or to usefulness’ (Ijuri and Kuhn, 1988).
  • ‘New ideas – plus action and implementation – which result in an improvement, a gain or a profit’ (3M’s definition, according to Kelley and Littman, 2006).
  • ‘People creating value through the implementation of ideas’ (attributed to the Innovation Network, by Kelley and Littman, 2006).
  • ‘New products, business processes, and organic changes that create wealth or social welfare’ (attributed to the OECD, by Vaitheeswaran, 2007).
  • ‘Fresh thinking that creates value’ (Lyons, of Goldman Sachs, attributed by Vaitheeswaran, 2007).
  • ‘Innovation is new stuff that is made useful’ (McKeown, 2008).
  • ‘Innovation is the conversion of knowledge and ideas into a benefit, which may be for commercial use or for the public good; the benefit may be new or improved products, processes or services’ (attributed to Smallwood by Waschke, 2011).
  • ‘Note the difference between invention and innovation: invention is the creation of a new idea or concept – innovation is taking that idea, reducing it to practice, and making it a commercial success’ (THECIS, 2014).
  • ‘Executing an idea which addresses a specific challenge and achieves value for both the company and customer’ (Skillicorn, 2016).
  • ‘Something new or different that delivers value to the world, with the key criteria that I’m not innovating if I’m not bettering people’s lives’ (Barba, 2019).

Is innovation the successful commercialisation of ideas?

That’s a measure of innovation success for commercial enterprises. But again, what about non-commercial enterprises, and what about users adapting products to better meet their needs, perhaps without commercial motivations?

Clearly, we need to think beyond commercialisation and wealth creation to embrace concepts such as utility and wellbeing. But do we require so much complexity to define innovation?

Isn’t there a single concept that embraces commercialisation, commercial success, wealth, utility, adoption and wellbeing?

Look out for part two of this series, next week, to find out.

Dave Richards is Co-Founder of the MIT Innovation Lab, and a highly acclaimed author, speaker and consultant on strategic innovation leadership. He is the author of The Seven Sins of Innovation: A Strategic Model for Entrepreneurship  and holds a PhD in mathematical psychology and neuroscience from the University of Toronto.

Brexit is a rally cry for innovation

Now is the time for Business Schools to help their students capitalise on the opportunities that Brexit uncertainty could introduce, argues Victoria Harrison-Mirauer

Wherever you sit on the Brexit spectrum, from ennui to exasperation, there can be no doubt that, for many organisations, the present levels of uncertainty are uncomfortably high.

Uncertainty is nothing new to business – concepts such as ‘VUCA’ (volatile, uncertain, complex and ambiguous) have become so much a part of common parlance, and which so infuses Business School curricula, that they can sometimes float past almost unnoticed. 

Brexit has added a new dimension – a ‘perfect storm’ showing that many of the ‘old’ rules are ripe for reassessment. The current political chaos in the UK serves to highlight that many of the organising systems and structures we rely on to make decisions are no longer helpful. As these structures are proving themselves inadequate, now is the time to focus on innovation and the opportunities that Brexit uncertainty could introduce.

Whatever the terms of Brexit and its final details, the UK still operates in a global, networked, connected context, and the country will still be full of skilled, creative and forward-thinking businesspeople who can find opportunities in plenty of sectors. The innovative, competitive and dynamic economic forces that make up the UK’s creative industries, universities, health system, financial and professional services companies are the envy of the world and matter now more than ever. 

Innovation has a central part to play in rewriting the post-Brexit rulebook. Innovators (who are, by nature, optimists) might look at the situation now and hope that new politics, new types of organisation, new global relationships and new commercial opportunities are there to be shaped.

A 21st-century Business School can help its students step up to this opportunity in the following ways:

1. Contextualising the change. This will help ensure future leaders are well equipped to respond to the challenges of unprecedented technology-led innovation, the spectre of climate change and the responsibility of business to the planet, as well as the seismic implications of new-world demographics and emerging economies. This is about helping students see the ‘big picture’, and encouraging them to take some ownership and agency in shaping how it develops. 

When schoolchildren take to the streets to protest about climate change, our time to act on this issue must be surely be running out. What this tells us is that the world is in need of some ideas, and fast. It is the responsibility of Business Schools to ensure their students are ready to drive this change, and to help them graduate both wanting to, and feeling capable of, making a difference.

2. Equipping students with an innovation mindset. Without question, the ‘red threads’ woven through the success narratives of tomorrow’s leaders will be agility, a growth mindset, and resilience as a personal ‘super power’. Business Schools are well placed to encourage and facilitate the development of an innovation mindset, as well as to focus on building creativity and problem-solving skills. Students need to be prepared for new kinds of leadership in new kinds of organisation ecosystems. This environment is one where collaboration, co-creation, partnership and flexibility count. 

3. Developing students’ communication skills. Innovation and uncertainty both demand leaders who are brilliant communicators. Being able to lead for innovation means being able to bring diverse interest groups and stakeholders along with you. Communication is essential for those who want to work at pace in complex circumstances, where strategies are increasingly emerging in ‘real time’, and where priorities are constantly changing and so much is simply unknown. 

If Brexit teaches us anything, it’s the central role communication plays in creating understanding, building consensus and negotiation. It also teaches us what happens when communication breaks down. Tomorrow’s global leaders need to be able to communicate effectively across increasingly international teams and cultures, and to be technology agnostic, moving seamlessly between face-to-face and virtual contexts. Business Schools which use experiential learning effectively can help their students practise these skills in a safe space, as a supportive proving ground.

4. Focusing less on innovation processes and more on cognitive and behavioural approaches. As far as innovation is concerned, ‘where there’s a will, there‘s a way’. As with Brexit, innovation can be a messy and unpredictable business; however, as we all now know too well, being comfortable with ambiguity is easier said than done. Understanding and embracing the cognitive diversity that drives creative problem solving and innovation is an essential piece of the future leader’s toolkit. 

One of Google’s mantras is ‘creativity loves constraint’. The constraints of Brexit are therefore a rally cry for innovators. Educators must avoid fuelling panic and instead work hard to ignite the optimism that, in turn, fuels the kind of opportunism and entrepreneurship that can be the foundation of new markets, new technologies, new jobs, new business and growth.  

In response to some international businesses expressing concern about disruptions to their supply chains as a result of Brexit, UK-based businesses have to be persuasive and optimistic about their ability to meet these challenges. Innovation is a fundamentally optimistic pursuit; it has to be. Innovation is also positive and future-focused. These qualities are all the more important in times of crisis and uncertainty. 

Now is not the time to turn off the innovation tap, but quite the reverse. Investing in the ability to innovate, solve problems creatively and lead in the development and commercialisation of
new technologies is more important than ever as the UK forges new structures, new politics and seeks to lead different geopolitical relationships.

Young people, aspiring business leaders and entrepreneurs are often described by the media as the ‘victims’ of Brexit. This may be troubling – and it may be true – but by creating connected communities, active global alumni networks and using genuinely international content, Business Schools are well-placed to counterbalance that narrative. 

Hult International Business School is a case in point. With five campuses globally and a globe-trotting cohort, its UK base is one cog in a truly international machine. Hult MBAs move across campuses in ways that mirror the international career aspirations of many of its participants. Perhaps this peripatetic option becomes more attractive to students as a result of Brexit who might otherwise have chosen a single-campus, UK-based institution. 

A few years ago, I came across some interesting discussions into a 300-year-old theory that challenges today’s innovators. A team at Cambridge University explored some ideas by English philosopher and statesman, Francis Bacon, and used his approach to think about how organisations innovate today. 

Bacon’s theory was all about ‘unknown unknowns’, different ways of creating hypotheses and therefore ideas and hunches. Born in 1561, he was what history celebrates as an influential ‘thinker’ and someone whose ideas have stood the test of time by being both innovative in context, as well as useful and interesting, posthumously.

Commenting on this research, University of Cambridge Judge Business School Professor of Economics and Organisation. Jochen Runde said: ‘We urge people to imagine possible influences that might lead to business scenarios that are radically different from the one they think is most likely. By being induced to look for information about extreme possibilities, they will be taken away from the familiar places they would normally be looking and thereby put themselves in a position of learning things that are truly new to them. Effectively, the method we are proposing provides a means to counteract the confirmation bias, as well as many other biases that have been identified by behavioural psychologists. And it can be done on either end of the spectrum – extremely good outcomes or extremely bad outcomes.’

The future is certainly unpredictable, but what is interesting is our continued attempts to predict it. The efforts made to ‘future-proof’ loom large in the scenario planning around Brexit, with many businesses across the UK making plans for a ‘no-deal’ scenario. 

To an extent, this scenario-planning conversation is good strategy practice; thinking about the context of your operations, anticipating key influences and trends, working with organisational strategy as an ‘emergent’ rather than fixed entity. 

The organisations best prepared for the future are the ones that spend less time trying to predict it, and more time building the innovative, adaptive, and agile capabilities of their employees at all levels so that they are ready to respond to it and shape it.

Victoria Harrison-Mirauer is a Cambridge University graduate with 19 years of experience across innovation, marketing, digital and brand strategy. She is currently the Discipline Lead for Innovation at Ashridge Hult International Business School and runs a private innovation practice, The Ideas Machine.

How to become a creative problem solver like Elon Musk

Using lessons from Tesla’s Elon Musk and biopharmaceutical firm, Regneron, this excerpt from Innovation Capital looks at how you can use first-principles thinking to question assumptions and create new solutions using a blank-slate approach

Elon Musk has been instrumental in building three revolutionary, multibillion-dollar companies in completely different fields. His ability to solve seemingly unsolvable problems is essential to his success and he attributes his problem-solving success to first-principles thinking.

‘I operate on the physics approach of analysis by first principles,’ Musk told us. ‘The first principles approach to thinking is where you boil things down to the most fundamental truths in a particular area and then you reason up from there.’

In lay terms, first-principles thinking – which was first articulated and named by Aristotle – is the practice of identifying what you think is true and then actively questioning every assumption you have about a given problem or scenario.

Challenge everything

First-principles thinking helped Regeneron, the New York–based biopharmaceutical company, revolutionise how it develops new therapies. Whereas it costs, on average, $4.3 billion USD for the average company to develop an approved therapy, Regeneron has been estimated to develop therapies for less than $1 billion USD per approved therapy, which is 20% of the cost of its competitors.

How? ‘We challenge everything,’ says Regeneron CoFounder, President, and Chief Scientist, George Yancopoulos. ‘Every concept. Every scientific principle. Nothing is unchallengeable, and you don’t take anything for granted. Most of what we believe are facts are not.’

The next step is to identify the constraints to achieving what you want to achieve and then start with a blank slate and create solutions that might solve those constraints. ‘We always try to figure out what’s limiting in a field. What’s the bottleneck?’ Yancopoulos says. ‘Then you look for a game-breaking idea that addresses the limiting factor.’

Tesla’s approach to expensive batteries

To illustrate how to apply a first-principles process, consider Musk’s description of how automotive and energy company, Tesla, approached the problem of the high cost of battery packs for automobiles.

Some people say: ‘Battery packs are really expensive and that’s just the way they will always be. . . Historically, it has cost $600 USD per kilowatt hour. It’s not going to be much better than that in the future.’ With first principles, you say, ‘what are the material constituents of the batteries? What is the spot market value of the material constituents?’ It’s got cobalt, nickel, aluminium, carbon, some polymers for separation, and a seal can. Break that down on a material basis, and say, ‘if we bought that on the London Metal Exchange, what would each of those things cost?’ It’s, like, $80 USD per kilowatt hour. So, clearly, you just need to think of clever ways to take those materials and combine them into the shape of a battery cell, and you can have batteries that are much, much cheaper than anyone realises.

Of course, it isn’t that easy to ‘think of clever ways’ to combine the materials into a battery cell, but first-principles thinking starts with a blank slate, questions every assumption, and considers a wide variety of options. Here is a three-step process for first-principles problem solving:

1. Identify the problem you want to solve

In the case of Tesla, the key problems the company needed to solve were reducing the cost of the battery pack (to make it affordable) and increasing the range a car could go on a single charge (to reduce range anxiety).

At Regeneron, two big delays in the creation of successful new medicines were the time required to create and breed accurate animal models, a necessary step in ensuring safety before clinical-stage testing in humans, and the time required to develop ‘fully human’ antibody drug candidates that would be accepted in a human immune system.

2. Break down the problem into its fundamental principles, and list major constraints to solving it

The main constraint to an affordable battery pack might have been the cost of one or more of the materials. So then you would ask, ‘how could we possibly reduce the cost of that key material?’ For Tesla, the challenge of creating a lower-cost battery pack had less to do with materials and more to do with the process of combining them into a battery cell at enough scale to reduce the cost (hence the need for the Gigafactory, Tesla’s facility to design and build lower-cost lithium batteries at scale). A major constraint to increasing the range of a Tesla from a single electric charge was the weight of the car body. Thus, Tesla became the first automaker to use a lightweight, all-aluminium body.

At Regeneron, the limiting factor to rapid, successful drug testing was the time required to carefully test, select, and breed for certain genetic qualities in mice to ensure the closest parallels to future human patients. So Regeneron sped up the process by developing a precision technology capable of directly inserting human immune-system genes in mice, eliminating the need for many generations of breeding to accurately model human diseases and produce antibodies that could be safely introduced into humans. These ‘fully human’ mice have allowed Regeneron to more quickly and accurately identify medicines that will work on humans, thereby reducing the cost of each potential new drug. This breakthrough has contributed to a tenfold increase in the company’s stock price in the 10 years since 2010.

3. Create new solutions using a blank-slate approach

Ask yourself: ‘If I could create any solution I desired, what would that solution be?’ The point here is to imagine the perfect solution and then consider a wide variety of approaches that might eliminate the greatest bottleneck.

At Regeneron, the blank-slate solution was having an animal model respond exactly like a human during early-stage drug testing. Of course, Regeneron needed to figure out how to make this solution a reality, or at least closer to reality.

During this phase, you need to engage four behaviours actively – questioning, observing, networking, and experimenting. Creative problem solvers excel at questioning, constantly challenging the status quo with ‘why not’ questions to turn things upside down. They also frequently ask ‘what if’ questions to envision a different future. They are also intense observers, carefully watching the world around them – especially customers, products, services, and processes— with a beginner’s mindset. Creative problem solvers also stand out at networking, talking with diverse people to spark a new way to solve perplexing problems. Finally, they search for new solutions by constantly experimenting.

First-principles thinking is a helpful approach to attacking problems creatively. And if you want to become an innovative leader, you will need to be as creative as you can in navigating around the obstacles that get in your way.

This is an edited excerpt from Innovation Capital: How to Compete – and Win – Like the World’s Most Innovative Leaders (2019) by Jeff Dyer, Nathan Furr and Curtis Lefrandt, courtesy of Harvard Business Review Press.

BGA members can benefit from a 20% discount on Innovation Capitalclick here for details.

Solving complex problems with design thinking

Design thinking requires essential ‘front-end’ questioning skills to understand the end user’s experience fully writes David Steinberg

Allow me to introduce you to three hypothetical individuals, with differing priorities, who will set the context for the following article:

Zaha is a full-time MBA student at a prestigious Business School, taking a design-thinking course and learning how to apply the process to her capstone project. Her School will apply design thinking to help her take the next step in her career.

Anna is a partner at a prestigious consulting firm and responsible for recruitment planning. She recently completed a design-thinking course for executives offered by Zaha’s Business School. She’ll apply design thinking to help Business Schools around the world visualise the ideal student profile in three, five and even 10 years. 

Etienne is Director of Post-Graduate Careers at Zaha’s Business School. He recently met and spoke at length with the professors who teach Zaha’s and Anna’s design-thinking courses. Etienne will apply design thinking to help his Business School align its curriculum to the strategic goals of the world’s most successful companies, including Anna’s firm. He’ll also help Zaha take that next big step in her career.

What Zaha, Anna and Etienne don’t realise is that their questioning skills are critical to the success of their design thinking. 

Why? Because design thinking begins with empathy. With empathy, we can immerse ourselves in the world of the end user, and by doing so, we can properly frame the problem experienced by the end user, and go on to solve the problem together in extraordinary ways. 

Design thinking fosters the co-creation of value, ideal for those who work in the highly competitive, ever-changing and relationship-dependent professions of graduate business career services and employer recruitment.

What is design thinking? 

Tim Brown, CEO and President of IDEO, describes design thinking as ‘the integration of feeling, intuition and inspiration with rational and analytical thought.’ 

To Roger Martin, former Dean of the Rotman School of Management in Toronto, design thinking is a ‘balance between analytical mastery and intuitive originality’. 

Meanwhile, David Kelley, founder of IDEO and the Hasso Plattner Institute of Design at Stanford University, calls it a ‘framework that people can hang their creative confidence on,’ providing those who don’t consider themselves to be creative with a way to solve some of the world’s most complex problems. 

University of Potsdam and Stanford University are two of the leading centres for the study and application of design thinking. Companies flock to the campuses to apply it to their challenges and change management. Ian Wylie at the Financial Times writes that industry adoption of design thinking ‘has encouraged Business Schools to add design-thinking methods to their executive MBAs and help students find innovative solutions in sectors from healthcare and pharmaceuticals to banking and insurance’. 

It turns out that there isn’t one design-thinking process: several have emerged in the past decade, each with its own terminology and devotees. 

For example, IDEO’s process focuses on inspiration, ideation and implementation. Roger Martin’s version requires ‘moving through a knowledge funnel’ from mystery to heuristic to algorithm. The Design Council, Google and IBM have their own versions. However, the Stanford five-step process is considered the gold standard: empathise, define, ideate, prototype and test.  

Let’s bring in Anna and Etienne to help explain each phase of the Stanford process using a simple scenario.

Empathise: during a recent meeting, Etienne initiated a series of questions and learned some sobering news about new hires from his School. They’re not building trust with clients of Anna’s firm. Etienne then conducted extensive interviews with other clients and heard a similar story. 

Define: Etienne returned to his School and met with faculty and staff to define the problem. They determined that the underlying issue was that students, while certainly high-calibre, lacked training in advanced interpersonal skills.

Ideate: Etienne’s team held a brainstorming session and came up with several solutions, including coaching and feedback, workplace simulations and field immersion.

Prototype: a sub-committee of Etienne’s team developed a prototype programme to solve the problem.

Test: Etienne’s School tested and tuned the programme with a selected group of graduate business students before formally launching it the following year.

The enduring value of the Stanford process is that when it is applied properly, it can produce innovative solutions that emerge not from the ‘ideate’ phase per se, but from the ‘empathise’ phase – the information-gathering phase. Proper application means not moving too quickly downstream into the latter phases – what most of us would consider to be the exciting bits involving late nights and whiteboards and lots of pacing around the room – without first understanding the underlying issues associated with the end user’s experience. 

Here’s a common and costly mistake that many companies and organisations make: they conduct a few cursory interviews with end users; they think they understand the problem; they think they have a solution; they roll out the solution and go home feeling good. They return the next day… and the problem is still there. 

IDEO’s Tim Brown describes empathy as the most important skill for the design thinker. He adds that empathic designers ‘notice things that others do not and use their insights to inspire innovation’. 

Design thinkers are taught how to empathise by combining observation and engagement in ways resembling techniques used by ethnographers in the field. Observation includes looking for work arounds and for disconnects between what is said and what is done. Engagement means asking mostly ‘why’ questions to ‘uncover deeper meaning’. 

If empathy is the most important skill for the design thinker, then asking questions comes a close second. However, there are as many generic approaches to understanding the end user’s experience as there are processes for design thinking. One size doesn’t always fit all. What follows is an approach to questioning tailor-made for the ‘empathise’ phase of the Stanford process and for people in career services and employer recruitment. Indeed, business students can also use it to complete their external projects. This approach will put you on the right path towards successfully defining and solving the end user’s problem. 

Change points

Your first step as a designer is to determine the topics to explore with the end user. John Sawatsky, Michener-Award-winning investigative journalist and interview expert, argues that the secret to crafting compelling questions is to build them around ‘change points’, which are key changes in someone’s personal or professional life. In the context of design thinking, the designer seeks to discover change points in the end user’s experience and to understand the associated underlying issues. Focus on the timeframe before a change point and build your question sequence around it. 

There are parallels between this process and an intriguing principle in Eastern philosophy called ‘ma’. According to theatre director Colleen Lanki: ‘Ma is a Japanese aesthetic principle meaning “emptiness” or “absence”. It is the space between objects, the silence between sounds, or the stillness between movements… The emptiness is, in fact, a palpable entity.’

Listen for ma in Japanese conversation in the form of question fragments, or in the silence between drum beats or flute notes or lyrics in Kabuki theatre. Look for ma in Japanese visual arts such as paintings that have empty space in them. Author and TV presenter James Fox notes that ma can give structure to the whole, the way open spaces in traditional Japanese homes are given meaning by those who live in them. It’s the spaces between the change points in people’s lives that offer rich insights for the design thinker.

Ask ‘what-how-why?’

Your next step is to develop a list of questions. In the early 1980s, Sawatsky began teaching journalism at various Canadian universities. He noticed that students who asked ‘what-how-why’ questions (topic-process-motivation) for class projects elicited more vivid responses from sources compared with students who used other words and sequences. This sequence corresponds with the neural basis of human listening. 

Social Neuroscientist, Robert Spunt, at Caltech writes: ‘Listening requires not simply a comprehension of what others are saying and how they are saying it, but also why they are saying it: what caused them to say that and to say it in that way?’ 

Think of the what-how-why sequence as a navigational system in an aircraft cockpit. Use the sequence to prepare for your end-user engagement by developing questions that function as waypoints between the first and last topic you’d like to explore. 

In between the what-how-why waypoints, probe and clarify responses using questions that you deem appropriate; open-ended questions work best, particularly when you want to explore matters of degree such as confidence, dedication, and success. When you’d like the person to confirm or deny a topic, ask a yes/no question, but it’s best to do so after you’ve explored a matter of degree. Moreover, use what-how-why when the person offers you a revelation. If you only have one opportunity to ask the person questions, you must quickly improvise a new sequence. You might eventually return to your original flight plan, or you might decide to stay on the new course. You’re the pilot.

Remember: we prepare to improvise.


The Stanford ‘empathise’ phase begins with defining the challenge. This can be interpreted as discovering one or more change points associated with the end user’s experience. Three question models follow to jumpstart your information-gathering process: 

Etienne’s questions for Zaha

• What was a positive moment during your time at the Business School that you vividly remember and often reflect on?

• How did this moment make you feel?

• Why do you think this moment made you feel this way?

This question sequence helps Etienne ‘dig into the emotion’, as the Stanford design school phrases it, to help Zaha take the next step in her career. Etienne learns that Zaha often thinks about her idea for a startup project in her elective: to build high-definition cameras and install them inside incubators in neonatal units to help parents see their newborns when they’re away from the hospital. Her work group’s enthusiastic response to her idea gave her a level of confidence she’d never had before.

Etienne’s questions for Anna 

• What is your firm’s top strategic goal in the next five years?

• How will this strategic goal change your firm?

• Why is this strategic goal important to your firm?

This sequence is designed to create alignment between Etienne’s Business School and Anna’s firm, while at the same time assuring that he understands the underlying issues associated with her firm’s strategic goals. Etienne learns that Anna’s firm has access to vast quantities of data with no means of harnessing it for clients. He also learns that the firm’s managing director is growing uneasy about the fierce competition from rival consulting firms, and has asked for ways to design innovative solutions for clients and to roll them out more quickly. Indeed, Etienne learns that the firm would like to launch a new data/predictive analytics division.

Anna’s questions for Etienne 

• What, in your view, is the next step for our employer/ Business School partnership?

• How can we collaborate on this next step?

• Why do you feel this step is right at this time?

This sequence is also designed to align Etienne’s Business School with Anna’s firm but from Etienne’s perspective. Anna learns that Etienne’s Business School proposes to co-create the new analytics division to help the firm’s clients address their own customers’ challenges and make informed predictions about the future. Students would enrol in a new business immersion course and spend six weeks at Anna’s firm. 

After the induction period, students would then work on challenging projects based on their specialisation. This partnership would provide students with the immersive learning experience they expect, and provide Anna’s firm with a continuous supply of ideas and skills provided by students at one of the world’s premier Business Schools. 


Once you have defined the challenge by discovering a change point, the next step in the Stanford ‘empathise’ phase is to gather inspiration, which can be interpreted as exploring the change point. Help the end user go deeper into their experience. 

As market research interviewers will attest, the end user’s first response may not fully capture their feelings. 

For example, the end user might initially describe their long-haul flight to Shanghai as being ‘fine’, but after a few probing questions, ‘fine’ turns out to mean ‘the in-flight meal was average and the entertainment was limited’. 

Here are three ways to explore a change point:

Ask an immersive question

Craft a question in a comparative structure and turn up the contrast. 

For example, Etienne might ask Zaha this question to learn more about how her work group’s positive reaction to her start-up idea has changed her self-perception: ‘Thinking back to your work group’s positive reaction to your startup idea, how would you compare your perception of yourself as an entrepreneur then and now?’

Embed a verbatim comment

Embed a verbatim comment made by the end user in a comparative structure and once again, turn up the contrast. For example, Anna might ask Etienne this devil of a question to learn more about his Business School’s vision of the ideal student profile in five years: ‘You recently said that “artificial intelligence will reshape labour markets in unimaginable ways”. How would a student’s profile that takes into account the rise of high-level machine intelligence compare with the profile of a current student?

Wrap the change point

Again, it’s the spaces between a change point that are as important as the moment of change. Ask one question that takes the person back into the moment before the change point. Ask a second question that explores the actual change point. Then ask a third question that explores the moment after the change point. 

For example, Zaha might ask the following three questions to her client at Lego as part of her capstone project:

• Thinking back to 2012, before you introduced your co-creation process, how did Lego developers bring their ideas to market?

• When Lego introduced co-creation with customers, what were the steps to bring these products to market?

• What’s the primary difference between products created only by Lego developers and those co-created with your customers?

Design thinking offers people in career services and employer recruitment a way to co-create rather than dictate solutions. It also offers a way for students to hone their problem-solving skills and to co-create solutions with their clients for class projects. 

However, design thinking requires essential ‘front-end’ questioning skills to fully understand the end user’s experience. Mastering these skills will assure that everyone involved is headed in the right direction. 

Dr David Steinberg is Principal at Reykjavik Sky Consulting. He conducts MBA masterclasses on advanced questioning skills at several Business Schools including Cass Business School and Nottingham Business School and is Associate Professor in Leadership, Strategy and Organisation at Heriot-Watt University.