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Design thinking: People first

EMPLOYERS ARE increasingly looking for emotional intelligence, alongside intellectual rigour, in the people they employ. They may be small, nimble start-ups, or longstanding traditional businesses who see younger, more dynamic competitors challenging them. As a result, firms are adopting new business practices, and a new buzzword has entered the business-school lexicon: design thinking.

Design thinking puts customers’ best interests at the centre of problem-solving, rather than a rational, analytical approach that prioritises business’ bottom line. It aims to incorporate a creative thinking process with the approach of a start-up: identify the issue with the user at the centre, come up with lots of ideas, then prototype rapidly before finally rolling out the product. Since it was first introduced into business schools in 2006 it has become more popular on MBA programmes around the world. At its heart, design thinking is a way of considering problems in a more human-centred manner, explains Ileana Stigliani, of Imperial College Business School, London, where design thinking is now offered as a core module in their full-time MBA programme.

The classes and the concepts offered on Imperial’s eight-week module differ significantly from the traditional MBA programme. Teaching is more experiential, with MBAs learning by doing, rather than wading through hours upon hours of theory. Students are encouraged to incorporate thinking across disciplines. Initially, hard-headed students looking to burnish their credentials through a traditional MBA course can be resistant to the new way of thinking. But they are eventually convinced that analytical skills alone will not cut it in a business world that is being disrupted by big changes. “It changes their mindset,” she says. “They look at problems in a different way, and see problems as opportunities.”

At Aalto University in Finland design thinking is placed at the heart of its MBA and executive MBA (EMBA) programmes. The concept is covered in core modules on the school’s business programmes, while around two-thirds of students take an elective module specifically focused on design thinking. Mikko Laukkanen, the academic director at Aalto, doesn’t see the adoption of design thinking principles as a new innovation, but rather a return to the old way of teaching business, before it adopted what he calls “pseudo-science”. Traditional MBA programmes teach that the way to solve a problem is to draw up a market study, segment the market based on that data, and plan a solution based on that market analysis. Design thinking encourages students to ask a simpler question--what problems do customers have? Aalto’s MBAs are asked to undertake more ethnographic studies and less quantitative analysis, learning richer detail about their target audience.

Among the first schools to teach the concept is Rotman School of Management in Toronto, where design thinking was first integrated into the MBA programme in 2006. Its reputation is such that some MBAs choose the school solely for its design-thinking elective, says Mark Leung of Rotman DesignWorks, the business-design laboratory at Rotman. A recent weekend bootcamp on the subject attracted 220 of Rotman’s 350 MBA students, and the design student club has overtaken the finance club in popularity. Companies are keen to attract employees who are innovative and non-traditional thinking to get ahead of the next big disruption. Some Canadian banks are even creating “innovation centres” to entice the creatively minded to collaborate with them, says Mr Leung.

To some, design thinking may seem a voguish response to the rise of start-up firms, whose business models are increasingly focused on alleviating issues for customers. However, the principles are trickling through to bigger, more traditional businesses, too. Larger companies, including IBM, which has established its own innovation lab called IBM Design Thinking, incorporate design thinking ideas into their practices—though as researchers at MIT Sloan have noted, their business structures remain traditional, stymying the adoption of design thinking at certain firms. Even the big four are getting in on the practice: Deloitte’s innovation practice, Doblin, uses cross-disciplinary skills, including design thinking, in its work. The hot new teaching method is here to stay.

Businesses and business schools: Ties that bind

FOR YEARS, an MBA has been a fast track to employability, with an associated boost in earnings. The average MBA graduate in the United States will start on a salary of $110,000 a year, according to the Graduate Management Admissions Council (GMAC), the body that administers the test used by many business schools. But as competition for places has increased with the rise of rival qualifications such as the Masters in Management (MiM), schools are better tailoring what they teach to meet the demands of employers.

This trend is particularly pronounced in Europe, where schools offering a full-time MBA programme face the greatest threat from competing qualifications such as the MiM. The MiM appeals to both students and employers: it is often half the price of an MBA, and graduates are cheaper to hire. This year three-quarters of firms in Europe told GMAC they expected to hire workers from MiM programmes. As a result, those crafting MBA programmes at European business schools have doubled their efforts to ensure the MBAs they produce are still seen as attractive to potential employers.

To do so, some schools are forging closer links with businesses. This is a smart move: though there has always been interaction between those teaching the employees of the future and the companies that will hire them, a more symbiotic relationship ensures that the MBA programmes provides what employers are looking for. There is no better defence against the threat of a cut-price interloper than saying your institution will give applicants the skills they need to walk into a job after graduating.

Integration with business is the whole philosophy of the MBA, says Julie Hodges, dean of Durham University Business School, which offers its MBAs a range of three-month business development programmes in addition to its core 12-month taught programme. In addition to undertaking a strategic business project during the course of their MBA, where they work with a company on a strategic issue with a real-world company, Durham students can also take up the offer of a three-month internship with companies where they can put into practice what they have learned on the programme. According to Dr Hodges, 40% of Durham’s MBAs stay on for the extra three months. The internship puts them in front of prospective employers, many of whom then go on to hire the students they have worked with.

At Berlin’s European School of Management and Technology (ESMT), the integration with business is even closer. Founded by a collection of 25 German firms in 2002, MBA students have always had to take part in a consulting project that connects them with potential employers. The school has also responded to a call from businesses to bolster MBAs’ soft skills by altering its teaching, says Rick Doyle, ESMT’s dean. “Pretty much the whole class” of MBAs at the school will also be involved either in company visits or international projects with employers, giving them practical experience alongside textbook knowledge.

That desire for practical skills, tailored to the needs of employers, has become stronger since the 2008 financial crisis, Dr Hodges believes. Then, MBAs attended her school with plans of going into corporate banking. Now, just 10% of MBAs do, according to GMAC. Instead, people take MBAs to go into a plethora of jobs, for which they need far more than the ability to navigate a balance sheet. Indeed, technical skills such as quantitative and qualitative analysis languish in the middle of the list of desirable qualities employers want. Oral communication, listening skills and adaptability are the top three desirable skills.

Just like the wider world of higher education, as the cost of an MBA has increased, those taking the qualification demand more for their money. No longer can schools simply cycle through the same case studies and lessons year after year. They need to show they are offering more or risk losing further ground to the MiM.

Business-school research: Bulldozer needed

BUILDING walls, rather than breaking them down, has become the focus of political discourse in the past year. Education has not been an exception. 

Business schools, many think, are typical of institutions that have become firmly entrenched within their own walls. “Because you work in a university environment and you’re competing with other departments, you tend to be more theoretical and academic than we should be,” says Graeme Currie of Warwick Business School, who along with colleagues from the University of Huddersfield and King’s College London, has written a paper calling for business schools to collaborate more readily with their colleagues in other departments. This tendency for business professors to navel gaze has it own term: physics envy. Esoteric, self-referential research takes priority over addressing pertinent issues that were once the domain of management education, such as improving health care and dealing with the demographic and economic issues associated with an ageing world population.

Academic view: Small business should not mean small-minded

Christoph Loch (pictured), dean of Cambridge Judge Business School, says start-ups and small businesses need to look beyond simple excuses for their lack of financing, growth and innovation

THERE is a common refrain heard from entrepreneurs and small-business owners: banks and other lenders simply won’t provide the capital they need to flourish. (Regulators seem to agree.) But I have some candid news for such companies: it’s not only them, it’s also you.

One reason start-ups and other small and medium-sized businesses (SMEs) have a hard time getting access to capital is that such firms are simply not transparent, and many are downright opaque. Banks often don’t know what is going on at these companies, and if there is one thing that lenders particularly dislike it is being in the dark. The last thing they want is to invest in an SME, only to find out later that the firm is struggling or going bankrupt. Why take a risk on a company they don’t properly understand?

Reporting standards for SMEs are far less stingent than for large public companies, so less information is provided and that which is supplied is not standardised. But any company seeking growth should open up. It should be transparent by supplying data on current indicators such as turnover, profit, costs and staffing levels. Not only that, investors should be clear about its strategy, its position in the eyes of customers, the scalability of its processes, and the motivation of its employees. This can open the door to fresh capital.

Many young companies resist transparency because they fear leaking information to competitors, or they simply don’t like being in the spotlight. Secrecy can make people feel safe. But sometimes external scrutiny can force them to take a hard gaze at themselves. In addition to looking at management capabilities, young companies need to look hard at three notions that can often be a barrier to growth.

First, because many SMEs don’t grow into larger firms, they feel it is unrealistic to set ambitious growth targets. We need to turn this argument on its head, because the evidence clearly shows that without ambitious growth targets SMEs just don’t grow. There are a variety of ways to set such goals: attract more revenue from existing services to existing customers, offer new services to current customers, and find new customers. But without ambitious targets SMEs will stagnate and remain roughly where they are.

The second canard is that SMEs can’t attract good people. But many start-ups manage to find talented employees, even though they have fewer resources than SMEs. They do it by promising excitement—perhaps offering shares rather than salary, or a leadership role in a likely-looking venture. Smaller firms also need to stoke workers' enthusiasm. That doesn’t happen if the chief executive treats employees badly and will not delegate. But it does when he offers people the opportunity to be involved throughout the whole business, and to be responsible for a chunk of it, which large companies often can’t do because they are compartmentalised.

Third, some SMEs feel they can’t innovate. They blame this on not having the money to invest in technology. But that’s another poor excuse. In fact, investment in developing technology is often risky for SMEs and doesn’t lead to growth. There is plenty of technology that can be bought from the outside, such as computers, process manuals and software packages. SMEs that grow use such technology in clever ways, even ways the tech vendor may not have foreseen.

In any case, innovation doesn’t have to come through technology. It can be generated through understanding customers: not just what they say (because that usually only unearths current irritations) but by looking at their long-term needs. That insight can be used to change how a company operates—in relation to suppliers, sales and more besides—so as relentlessly to improve service to customers.

Such an outlook means being open to scrutiny. Looking in the mirror is hard, but it is usually more effective than simply casting about for an easy target to blame for a lack of growth. 

Lavish funding for superstar British business professors has not improved their work

STUDENTS may pay business-school professors’ salaries, but it is research that wins faculty its reputation. Unfortunately for Britain, the standard of research coming out of its business schools has been lacking. Though business school attendance grew there in the 1990s, its representation in academic journals, and its ability to win funding from research councils, lagged behind. So in 2002, the Advanced Institute of Management Research (AIM) was launched with the goal of redressing the substandard work academics were producing. The best part of £30m ($43m) was spent in an attempt to bolster the quality of research by directly funding superstar academics, rather than their research. That project ended in 2012, so what impact did that all that money have?

Not much, according to a paper soon to be published by Stuart Macdonald of the University of Leicester and two colleagues in the British Journal of Management. “The passing of AIM has been little mourned,” reckon the authors. “The vast majority of management academics in the UK had little chance of joining AIM and gained little from it,” they go on.

Academic view: Managers must take responsibility for building a more cohesive society

THE concept of the modern, open democracy that embraces freedom, diversity and human rights, is under threat. We live in a time of conflict unlike any other. A war is underway that is not just being fought out on conventional battlefields among state powers, but on the internet and the streets of our towns and cities, as the citizens of Paris found to a shocking cost in November.

Academic View: Taming the irrational executive

David De Cremer, a professor at Cambridge Judge Business School, says business leaders need to use irrational tendencies in constructive ways

BUSINESS today is characterised by the growing number of connections, both between people and across countries. Such a change of pace is hard to manage. Business executives are supposed to act rationally and stay in control. Unfortunately, research on human biases shows that the quicker the change the more irrationally executives will act. So it is important that managers who pass through business schools are prepared to recognise their irrational tendencies and use them in constructive ways.

Ever since Daniel Kahneman—a psychologist—won the Nobel prize in economics, business schools have become aware that much of what they teach is limited. The business world does not act in ways that can entirely be captured by business models, relying on rational actors, as recent financial failures have shown. We would not be crying out for ethics and trust if those notions could easily be replaced by contracts, corporate governance and rule-driven compliance systems.

Recognising the imbalance between what we expect from the business world and the irrational nature of its decision-makers, business schools have revised their curriculums. But most have not gone far enough. Rarely do they develop full-blown courses that make students understand the meaning of an irrational act and the consequences it has. Instead, demonstrations of irrationality are regarded as funny illustrations of human nature. What we need is a more balanced view of the role that psychology plays in influencing the workings of business. Only then will students be able to relate their own irrational thinking to the challenges they will face as future business leaders.

It is therefore worth discussing three irrational tendencies that can trip up business executives. The first, which contributes to many executive failures, concerns how badly relationships are managed. No matter how smart managers are, they do need relationships with others to succeed. Unfortunately, those climbing the career ladder tend to express overconfidence in their ability and influence. They risk becoming detached from their social environment and relying too much on their own perspective.

The other extreme may also be true. Successful executives often come from the same top business schools and social networks. They can become accustomed to a particular way of seeing the world. If that social environment is well-informed, acts in ethical ways and has good intentions, not much will go wrong. But if not, then it can spell disaster. As a business executive, the important thing is to find the optimal balance between acting as an individual and acting as a member of the social group.

A second challenge is how to motivate people. Humans are impelled to establish control over uncertain situations. As a result, rule-based management systems are popular. Unfortunately, this does not elicit a true sense of control, but rather the illusion of it. Executives think they are getting things done; in reality not much is achieved. A management style based on control disempowers employees, so workers experience no ownership of their job and take little responsibility and initiative.

The final challenge that complicates the life of many business executives is knowing when they are right and when they are not. In the corporate world, there is a belief that intellect is an important requirement for success. So being recognised as the one who is right becomes a treasured ambition. This desire is further fuelled by the idea that being successful in business equates to the ability to compete. The result is that the business world is still populated by too many executives who value winning an argument rather than making the best decision.

The key question, then, is how to mitigate the influence of these irrational tendencies. A first line of defence is without a doubt to make executives aware that those tendencies are not simply a funny fact of life but—without them even knowing it—shape their business life. Working with that awareness executives can promote their forecasting skills and operational decisions. Yet the biggest challenge for business schools will be translating this into workable action plans based not on the assumed and predictable, but rather on the unpredictability of human nature.

David De Cremer is the KPMG professor of management studies at Judge Business School, University of Cambridge. He was mentioned as the most influential economist in the Netherlands in 2009-2010 and was recently awarded the mid-career award by the British Psychology Society, section social psychology.

L'exception française

Adapting to the unique French management style

THE modern manager drinks cappuccino in a British coffee chain while consulting his American smart phone which was assembled in China. But despite an increasingly homogenous world, every nation remains, at least in some way, unique. And of all national groups, to misquote George Orwell, the French may be more unique than others.

After all, France prides itself on its individuality; on its continuing refusal to accept English as the world’s lingua franca; on its resistance to the Americanisation of its shopping streets (notwithstanding its love of McDonald’s restaurants). L'exception française even extends to an enlightened attitude to the personal lives of politicians.

A place for political correctness

LAST month Jonathan Chait, a columnist for New York magazine, wrote an essay on the return of “political correctness”, which he described as a “system of left-wing ideological repression”. The “system” Mr Chait wished to identify was hard to define, as he lumped together an attack on an anti-abortion protester by a professor in California, an internal debate in a journalists’ Facebook group, and various mocking Twitter tags. (One sprang up in the wake of his essay: #ChaitLiberalism.) But his argument was easily understood: that allowing debates to be constrained by the potential hurt suffered by their listeners was “dour puritanism” and “exhausting”.

Administrative Science Quarterly, a sober academic journal, rarely (if ever) tries to time the news; so the recent publication  of “Creativity from Constraint? How the Political Correctness Norm Influences Creativity in Mixed-sex Work Groups” has to be a fruitful coincidence. Written by Jack Goncalo of Cornell and three others, the article suggests an alternative to Mr Chait’s condemnation: that, rather than suppress ideas, political correctness may provide enough social structure to allow ideas to flow more freely.

The futile search for perfection

MOST people would probably recognise the following scenario: you are wandering around a new town with your partner looking for a restaurant, but you cannot agree on where to eat. So you discuss the merits of every establishment you pass until, at long last, a mutually acceptable choice presents itself. But because you have spent so long searching, the restaurant is now full and there is no hope of a table. Tired and hungry, there is only one thing to do: have a blazing row.

This is an example of what Vincent Mak, a professor at Cambridge University’s Judge Business School, calls “oversearching”. In retrospect, the best thing you could have both done would have been to agree quickly on an eaterie that neither of you actively hated, rather than hold out for the perfect fit.


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