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Why Acceptance of Failure is Critical to Startup Success

 

FAILURE

I talk about failure a lot because I think it can be tremendously instructive and I think that success without failure often masks underlying lessons.

I even prefer to fund entrepreneurs who have experience some level of set-backs in their careers or startups because I think it brings a humility to decision-making that I find healthy. I have experienced many first-time entrepreneurs with too much hubris if fund-raising came easily and press was fawning and employees joined in droves and customer adoption has been rapid.

When I hear the realism that comes from founders with setback it elicits an understanding of what it takes to be successful at a startup that frankly can’t exist unless you’ve walked in those shoes before. It is these stories that helps me bond more with the team because I’ve personally experienced just about every kind of setback at my first startup:

  • Raising too much capital, too quickly & at too high of valuations
  • Hiring too quickly and too senior
  • Building too much functionality before market validation
  • Charging too much, keeping prices too high
  • Seeking too much press before we were ready for it
  • Being too driven by quarterly revenue targets that led me to make bad strategic decisions about products, customers and staff levels
  • Spending too much time on inorganic growth (M&A)
  • Expanding too rapidly to new geographies (I didn’t want competitors to become entrenched)

I could write my blog alone on the mistakes I made.

But even more important than personal lessons of failure, I believe acceptance of failure at a societal level is one of the key ingredients that allows the technology startup industry in the US to flourish. I say this as somebody who has lived in 6 countries and worked in 9 — having lived abroad for 11 years of my work life.

In my experience the US loves the narrative of the come back. We champion a storyline about an underdog who failed many times but through grit and determination have risen above the odds. One of our greatest presidents — Abraham Lincoln — lived a lifetimes of failure and setbacks before being elected as president (1). One of our greatest technology leaders (Steve Jobs) had humiliating business failure before coming back to build the most successful tech come-back of our times.

Silicon Valley itself was built on the sciences with a foundation of trial-and-error and then improving the model and trying again. I believe this scientific method and trial-and-error approach is one of Silicon Valley’s most valuable strengths.

This came to mind a couple of years ago when I had the chance to sit down with the president of South Korea and she asked a small gathering of 19 tech & business leaders for opinions about how to make the Korean economy more “creative.” The backdrop explained was that it was viewed that Korea has been tremendously successful at copying and perfecting other people’s technologies but in order to compete more effective in the future had to be more creative.

Of course as a non-Korean I can only generalize but when it was my turn I told her my experience of living in Europe and Japan where failure seemed less tolerated than my experience of living in California and working in the tech sector. In London when founders failed they were ostracized in the press and culturally I believe it became harder to raise capital. Perhaps that’s changed in the decade since I left but that was my experience when I lived there.

In France in some ways it was worse because if you failed as a startup founder you shouldered personal liabilities that don’t exist in the US under our bankruptcy laws. You also ran the risk that if you hired employees quickly and then demand wasn’t as strong as expected it was incredibility hard to fire people. So founders took fewer risks and at the societal level with fewer companies taking fewer expansion risks job creation is weaker.

Labor-force inflexibility and personal liabilities are bound dampen the entrepreneurial risk taking and a society that shuns failure is likely to kill the entrepreneurial spirit.

In my discussions with Korean friends they tell me that there is big pressure in Korea to work for large companies like Samsung over startups (this is similar to what I experienced in Japan) and that the more educated and hard working ones family was the more pressure to join a prestigious firm rather than starting a company or joining a startup. Many are no doubt trying to change this culture.

People of Korean descent in Los Angeles are amongst the most entrepreneurial people I know — in technology but also in garments, fashion, food and so forth.

So I wondered out loud with the president if the government wanted to encourage more entrepreneurship — was there a way to help promote more of a culture accepting of failure? After all, if people feel more of a safety net for trying and not succeeding more people are bound to try in the first place and more innovation is almost inevitable.

Could government establish laws the encourage more risk-taking knowing that the consequence of 98 failures but 2 massive successes were enough to transform industries and society and lead to both job and wealth creation?

Could leaders of society try to change the culture in ways that encourage acceptance of failure? Could Korea’s largest companies increase their funding of startups and provide them with initial business development deals as so often happens in Silicon Valley? Could big business accept its own creative destruction?

I’m not sure I know how societies can change to become more tolerant of failure but at a minimum an acknowledgement of a problem has got to be the starting point for making change.

I feel strongly that lowering the bar for risk-taking in all of its forms: liabilities, work-force flexibility and de-stigmatizing of businesses that don’t succeed would inevitably lead to more innovation and more job creation.

I was interviewed recently by Inc Magazine and they have been publishing snippets of this interview online. I was asked about this topic of failure and you can see my views in the short, one-minute interview below. (2)

(Cross-posted @ Both Sides of the Table)

The Corrosive Nature of Over-Introducers

 

capture

In modern society we’re all over-worked and over-loaded with information and tasks and to-dos and obligations. Nowhere is this more apparent than working in a startup where you are definitionally under-resourced and trying to make big accomplishments in compressed periods of time.

That’s why focus is critical. Saying “no” often to people who want to divert you from your mission becomes obligatory if you want to make progress. Modern-society is also littered with over-networkers and over-introducers and professional conference attendees. These people are like the friend in college who always tempted you by telling you about the latest party when you were at the library studying.

I find the over-introducers especially corrosive around first-time founders who often struggle with the balance of their time between tasks like building product versus tasks like speaking at conferences or meeting with potential business development partners.

Focus is almost always the right answer. Meeting new people is critical to business success yet you must be judicious with your time.

It’s human nature to try and be helpful to others. In many instances this help is genuine, well-meaning and productive. Most of us like to help create connections between people for whom an introduction, we believe, would be mutually beneficial.

For the respectful person we usually try to assess whether the recipient of the introduction would truly find it useful and we try to filter out unnecessary connections because we know that connecting people creates a time obligation. Many of us go one step further and almost always ask the recipient if it’s ok to do an introduction before we do it. It’s often called the “double opt in” as in you make sure both sides are ok with an introduction before creating it.

Draped under the guise of “being helpful” many super-connectors create flurries of meetings for first-time founders. I try to steer entrepreneurs away from over-introducers and I often find myself wanting to be careful about them becoming an investor in companies I back.

It starts seemingly innocent enough. A person at a board meeting starts listing all the people they know at companies a, b and c. Or an angel investor starts emailing the CEO of a company with all the people they want him or her to meet.

Newer founders are often flattered to make the connections, are not experienced enough to know which people are valuable to meet or are simply too polite to say “no.” It’s hard enough building a valuable product or service in competitive global markets without spending time on unproductive tasks.

I find over-introducers are often motivated by their own self currency. Showing founders they know important people makes them feel more self important. They assume that helping senior executives meet interesting startup people will show the introduced party that they are tapped in and relevant.

Over introducers use this currency liberally because in the absence of any real operating knowledge or without actually taking the time to diagnose what the important issues are at a company and how to truly be helpful, over-introducers fall back on the easiest and often least-productive form of help.

I know some will read this as an indictment of all introductions and of course it’s not that. I introduce people constantly and it’s an important part of my job. Each time I carefully consider whether the connection would be helpful to each party and I almost always ask both sides whether it’s ok.

Mostly I just wanted to write this as a reminder to founders to be suspicious of people who constantly introduce you around. And maybe also a reminder that the library, while infinitely less exciting than the party, is where real breakthroughs occur.

(Cross-posted @ Both Sides of the Table)

CIO workshop: ROI of customer experience

Customer experience is one of those vague phrases that one hears about digital transformation (itself one of the most common jargon buzzwords of our time). There are two issues associated with customer experience: determining the meaning and quantifying the value or ROI.

To understand the meaning, let’s turn to two authoritative sources, Dion Hinchcliffe and Paul Greenberg, both of whom are fellow columnists for ZDNet.

Dion Hinchliffe positions customer experience as part of what he calls “digital experience management:”

digital experience management attempts to provide a framework — along with supporting processes and platforms — that allows us to better and more systematically organize and manage all of these touchpoints. A subset of digital experience, customer experience management (CEM), is getting most of the focus today since the customer audience is both the largest and most significant in terms of generating revenue for businesses, consequently getting the most attention and priority.

Paul Greenberg talks about engagement as a point of evolution beyond customer experience alone:

So let’s take that back to why my definition of customer engagement? I repeat it here.

“The ongoing interactions between company and customer offered by the company, chosen by the customer.”

To explain.

  1. If the interactions aren’t bidirectional (between company and customer) they aren’t interactions
  2. If they aren’t ongoing then the customer is not engaged for more than a moment, and thus the company has failed at keeping that customer involved.
  3. Offered by the company – the company has to be able to provide the customer what they want to have.
  4. Chosen by the customer

In summary, customer experience drives how that customer perceives a brand, which directly affects their loyalty, purchases over time, and referrals (or warnings) to potential buyers. When customer experience turns into engagement, all those benefits become even stronger.

Despite the intuitive benefit of creating positive experiences for customers, many organizations struggle with allocating resources in this domain. These teams need proof that investments in customer experience will yield tangible results. Despite the intuitive benefit of creating positive experiences for customers, many organizations struggle with allocating resources in this domain. These organizations need proof that investments in customer experience will yield tangible results.

Professional services firm Avanade and marketing platform developer, Sitecore, recently participated in commissioning a study to show the business value of customer experience. The results were precisely in line with what we would expect: investments in customer experience do yield an ROI.

Some of the key findings include:

  • US $3 return on investment expected for every $1 invested in customer experience
  • Almost six in ten (58%) have seen increased customer satisfaction over the last 12 months
  • Close to four in ten (37%) have seen improved sales cycles

The graph below summarizes business benefits from customer experience, including higher revenue, greater profitability, and faster sales cycles.

Customer experience ROI

Customer experience ROI

This chart shows the benefits of improving customer experience. Of course, measures such as customer loyalty and retention quickly translate into higher revenue.

 

Loyalty and other customer experience benefits

Loyalty and other customer experience benefits

In this research, respondents described their reasons to focus on customer experience, including being more competitive, responding to customer feedback, and lowering operational costs.

 

Reasons for customer experience

Reasons to improve customer experience

The obstacles, or challenges, associated with improving customer experience include outdated technology and lack of qualified personnel and skills.

 

Challenges to customer experience

Challenges to customer experience

Consistent with the results described so far, respondents focused on revenue and profitability as the main reasons to improve relationships with their customers.

 

Lifetime benefits of customer experience

Lifetime benefits of customer experience

What this means for the CIO

From a CIO perspective, we can draw several conclusions:

Improving customer experience is crucial. The value of customer experience should be obvious, but sometimes we need to hear the same message again. In this day and age, can anyone seriously question the importance of developing relationships with customers that lead to engagement?

Technology matters. Doing this right requires a range of tools, from social listening to personalization. Therefore, the CIO and IT have an important role to play.

It’s more than technology. Although technology is important, improving customer experience requires a mindset and cultural shift. It’s really about recognizing that customers are central to all business success. For the CIO, this means getting on board and helping lead this charge.

Customer experience initiatives are one of those pivotal activities that require a coordinated technology and business strategy. Therefore, it presents an ideal opportunity for CIOs to participate at both the tech and business levels.

Disclosure: Avanade is a CXOTALK partner.

(Cross-posted @ ZDNet | Beyond IT Failure Blog)

#CXOTALK: Technology innovation advice from Accenture’s CTO

The consulting firm, Accenture, is a member of the Fortune 500 and one of the largest companies in the world, with revenues over $32 billion and approximately 300,000 employees.

During the 45-minute discussion, we focused on issues surrounding digital transformation and innovation.

You can watch the entire conversation below and read a complete transcript on the CXOTALK site.

 

Of course, innovation is an important part of digital transformation, and Daugherty explained Accenture’s multi-layer process for ensuring the large firm retains a leading position on important new technologies.

Equally, or perhaps more, importantly, he emphasized Accenture’s focus on linking technology to business results. For Accenture, technology provides value when it solves business problems and practical use cases.

Bear in mind that Accenture’s core business strategy reflects business value based on technology innovation. Therefore, it must address the needs of ongoing, present-day client work while anticipating future business and technology shifts. The combination of present and future underlie Accenture’s rich approach to innovation.

Of course, many companies face a similar challenge, but Accenture’s large scale is a prime motivator behind the institutionalized approach to innovation presented in our conversation.

Here is an edited transcript of sections where Paul Daugherty discusses innovation at Accenture:

How does Accenture view technology innovation?

Every year we have to add $3 billion of profitable revenue. So, in essence, we have to add 100,000 people every year, and that is what we hire every year with new skills that generate profitable growth equivalent to 3 unicorns of revenue.

To make that happen, we need a lot of innovation mechanisms in our business. Technology moves so fast today that if you are not at the forefront with the important technologies, you’ll miss key parts of positioning and growth.

As an example, two years ago blockchain wouldn’t have been singled out by many people as an important technology for us. In just two years, it’s now important for us to have a blockchain practice. We’ve invested in a couple of blockchain startups, so we work with them more closely to drive change. And we’ve got blockchain R&D and we have blockchain work going on with clients across different industry groups.

That’s just in a couple of years, and that’s the type of speed in which the technology is moving.

How does Accenture drive innovation internally?

We have something we call our innovation path, which is how we make innovation work. It starts with research. We have Accenture research, which generates thought leadership and provocative points of view on the game-changing trends like our technology vision. That’s Accenture Research.

Then we have Accenture Labs, a major R&D investment in seven labs that we have around the world, with researchers and Ph.D.’s driving hands-on applied research. We have the hands-on experience to drive those technologies as they take off.

We have Accenture Ventures, which is where we invest, reach out, and work with start-ups, VCs and entrepreneurs through an open innovation approach. We also take investments in companies where we can create a special relationship and create a good way to grow their business and our business, together going forward.

We have something we call Accenture Studios, where we bring our clients to ideate and co-innovate together in an environment that combines everything from design thinking, to experiential, hands-on technology, to new development techniques like extreme programming and agile development, where you can quickly ideate and build solutions.

Then, those skills get into our global delivery network and all of the businesses of Accenture. We are investing increasingly in that, and if you look at our business we’re again 30 billion in revenue, and we invest about 3 billion a year in improving our capability, about 10% of our revenue. It’s about a billion in internal investment and about a billion in acquisitions and about a billion in people in training. And that for a company of our size in our industry that is a lot of investment to make, but we believe that’s what’s required to keep moving the organization at pace.

To round out one point that I mentioned — acquisitions. We have acquired over 40 companies in the last 36 months. Bringing in that new capability to accelerate this kind of rotation is a key part of the strategy as well.

How do you connect innovation to ROI and practical use cases?

That’s what gets us excited. You can get anybody excited at Accenture when you talk about innovation and business value. That’s exactly the way which we look at it. Even starting on that innovation path and the research stage we’re looking the potential.

For example, when we started working with drones some years ago, it was, “What are the applications?” and we started working with oil and gas companies around pipelines inspections using drones. We just deployed an application using drones for a very large agricultural producer in Asia to use drones to improve their agricultural productivity dramatically, etc.

We look for those combinations of technology and use case.

Virtual reality as a great example. One of the exciting things that we did last year was work with a manufacturer to apply augmented reality in the manufacturing setting. An assembly worker using augmented reality, with laser guided precision and machine intelligence and machine learning built into the software, could operate at a far more skilled level using augmented technology. It makes that person a better worker, a safer worker, a more productive worker, and [produces] better quality products. A win-win for the worker and the company.

Those kind of scenarios are exciting and go across many domains.

What is the relationship between innovation and culture?

The days of top-down, multi-year strategies are gone in the same way as the era of very rigid fixed organization structures are gone; people need to work differently. Understanding how the culture of the company changes to become more innovative and more adaptive is essential.

The pace of change is so extreme; you need an organization that can adapt quickly accept change as a new normal rather than something you just do once in a while.

Disclosure: Accenture is CXOTALK partner.

(Cross-posted @ ZDNet | Beyond IT Failure Blog)

Changes in the Venture Capital Funding Environment

Changes in the Venture Capital Funding Environment

The funding environment for tech startups is an ever shifting ground as we go through predictable shifts that go hand-in-hand with the slowing of the overall market.

chicken

The most important shift I would characterize as the market moving from “high conviction” and thus strong follow-ons to “limited conviction” and lots of gamesmanship / games of chicken … at your expense.

Here is a brief history first to put the changes into context.

  1. Rise of Seed. To understand today’s trend it’s worth stepping back a decade or so. Prior to then the concept of “seed funds” barely existed and as I’ve argued before the seed fund phenomenon was largely driven by: Open source + horizontal computing + Amazon AWS. In other words, it isn’t that VCs suddenly got smart, it’s that the costs of starting a company went down dramatically.
  2. Rise of Angels. The second major trend was the rise of the angel that was a function of the boom in Silicon Valley wealth (Google, Facebook, Zynga, Twitter, Salesforce.com, etc) plus the rise of crowd-funding platforms (AngelList) plus the rise of Y Combinator / 500Startups / TechStars.
  3. Boom in Number of Startups. There was an explosion in number of startups both because it was cheap and there was tons of available capital.
  4. Explosion in Seed Funds. I remember when seed funds first started (they were being incorrectly called “super angels” and then Micro VCs before Seed Funds stuck) and every LP (who invest in VCs) told me they weren’t convinced about Seed Funds (too small, too hard to pick winners, would they be able to follow on?). Now seed funding is conventional wisdom. I
  5. Leaderless Rounds. With a massive increase in companies created and a huge number of sources one trend that we witnessed from 2012–2015 was the rise of the undisciplined round. Specifically I mean teams that were going too fast at raising, optimizing around the highest price or avoiding larger investors because they wanted a lot of small players who couldn’t exert any control (terms, price, etc.). This works in a booming market or in a company that never hits any headwinds.
  6. Non VC Growth Rounds. The other major trend of 2012–2015 was the entrance of “non VCs” into late-stages of venture capital, which mostly consisted of hedge funds, mutual funds, corporate investors, sovereign wealth funds and even LPs doing direct deals. This led median valuations to triple in 3 years and led to this stupid phenomenon that people refer to as “unicorns,” which I am convinced will the the thing most historians laugh most about in this era. The fact that I still see it referred to in pitch decks is farcical.
  7. Late-Stage VCs Pay Up. VCs of course responded to all of this by raising larger funds, raising growth funds and making sure they didn’t miss out on marquee deals — even if it meant investing when a company was already worth billions of dollars (otherwise not known as venture capital). Some called this “buying logos.”
  8. The market eventually slowed down. In Q3/Q4 2015 the market changed noticeably for VC funds and the market started to realize this by Q1 2016. While a slowdown is hard to pinpoint to a single event, I’d say the most telling “Black Swan” event was the day that LinkedIn and Tableau lost 50% of their public market caps in a single day. It had come on the heels of a long, public slide at Twitter and the beginning of a questioning about valuations overall.

Where does that leave us now?

There is a lot of resetting that has already taken place. I have spoken about some of it here in my quick video primer I called “clash of the titans” and you can get some more broad-based fund-raising environment commentary on my snapstorms/fundraising page, which I’ll continue to update.

But there are two major trends worth understanding that most VCs know by now and I suspect most entrepreneurs do not. That is simply because we see 20–25 deals / year across our funds (new and follow-ons) and entrepreneurs usually see 1 deal every 2 years.

  1. VC Infighting. In a booming market everybody felt like each stage of investors’ interests were aligned. In fact, sometimes they were synergistic. Angels / seed often wanted to exit early and late-stage wanted more ownership than founders would sell so secondary transactions were common. But now the trend is in-fighting. If a company raised a big B and/or C round and needs more money the late stage guys have the bucks and that early-stage guys often don’t. So in companies with high burn rates you can find the following: Seed funds wanting to sell the company / get a return or growth investors pushing for a recap or massive down round. I’ve seen this a bunch in the past 12 months. These are extreme positions and often the deals settle in between but it can be U-G-L-Y and the financings are at times coupled with changing management teams.
  2. Lack of Conviction / Follow Through. In a booming market the trend was that everybody was fighting to take their full prorata shares. In fact, many seed funds set up “opportunity funds” or “overage funds” so they could follow longer. But with inside rounds (where there is no outside lead) more common these days the most worrying trend I see is the lack of support exiting investors are showing. If you have 2–3 traditional VC funds they usually work together in tough times. There are unwritten rules in The Valley — you don’t screw other investors when everybody decided to pitch in and help out the company. It is a norm that is held because it’s a multi-party game (Prisoner’s Dilemma) in which you want to work with these funds again. It helps control bad instincts / behavior. But with so many newer seed funds in deals, with so many VC funds created in the last 5–7 years (never managed through a non-booming market) and so many non-VCs around — these norms aren’t holding.

Some examples

  • There was an A-prime round of a high-profile deal coming together. 3VCs agreed to fund an inside round and cut costs. But at the last minute one got cold feet after looking more closely at the data. They were the smallest of the three shareholders in ownership but the largest fund. They pulled out. The other two didn’t want to shoulder the burden. Fighting broke out, time was running out … and the company went bankrupt. Expect more of this.
  • There was a C-round deal where the company ran out of money unexpectedly. The largest fund saw this as an opportunity to drive down price since they felt they overpaid in the last round. Early investors fought. It dragged for months but a deal got done. People lost jobs.
  • A company that had an offer to be acquired but needed time to complete the M&A process. Some funds came in — one literally said “we have no more reserves” and ended up funding a trivial amount. The committed funds bit their lips because the company was going to miss payroll and just funded it anyway to preserve the peace.
  • A company with strong prospects but needed a bridge round to get to a fund raising event. One lead fund agreed to do prorata, 2 other funds decided they’d prefer to do “half of their prorata.” This lack of support is now commonplace and is a warning sign to those who believe that: leaderless round or “dumb money, highly priced” are good ideas. There are good VCs and bad VCs and I don’t want to pretend otherwise. But in this industry you are way more likely to see consistent actions from those who understand the rules of the game vs. new entrants who can be fair-weather friends.

The industry is changing in predictable ways. Be thoughtful about from whom you raise capital. Always assume that if you’re able to raise money in good markets but will have to also raise in tougher markets. Think through your strategy when money is easy and ask yourself how these funding sources will act in a tough market.

For year’s I have counselled to “raise at the top end of normal” and in my seminal “lines, not dots” post I’ve pointed out many times in public speeches that if VCs need to get to know you above time (a line) then you need to know your investors even more so. VCs can afford to get a few decisions wrong. One wrong decision by an entrepreneur can torpedo all of your hard work or your future.

Choose wisely.

(Cross-posted @ Both Sides of the Table)

#CXOTALK: Design for innovation, digital transformation, and organizational change

Design plays a crucial role in modern technology companies. From creating user experience to helping organizations become customer-centric, design is fundamental to digital transformation.

Design in Tech 2016

Design in Tech 2016

This broad concept of design, going far beyond attractive screens and pretty colors, is connected closely to innovation and evolving business models. For this reason, both startups and large, established companies have recognized the importance of creating user experiences that are both functional and compelling.

John Maeda is one of the world’s most prominent voices advocating this expansive view of design. Currently a partner with the leading VC firm, Kleiner Perkins Caufield Byers, Maeda was previously President of the Rhode Island School of Design and held posts at MIT and other prestigious organizations. His work is in the permanent collections of the Museum of Modern Art, the San Francisco Museum of Modern Art and the Cartier Foundation in Paris.

Maeda’s 2016 Design In Tech report, analyzes the state of design among technology companies and is an essential reference and compilation of data. The report examines M&A activity and offers advice to both small and large organizations on the economic importance of design.

Maeda has extended the concept of design to include economics, leadership, and organizational change. He describes three kinds of design (and designers):

  • Classical design
  • Computational design
  • Design thinking

As part of the CXOTALK series of conversations with innovators, I spoke with Maeda to learn about the report and gain color on his findings. Listen and watch our conversation, which is embedded below. You can also read a complete transcript of the discussion.

What are the three kinds of design?

Classical designers are trained in the old way. The way of the physical world and in print; all the most beautiful thought design for centuries has lived in this space.

Design can be applied to making a user experience; that’s computational design.

And then there is design thinking. It’s the idea that your company doesn’t move fast enough, and if you can think more creatively, like a designer, your company can innovate better.

Of the three kinds of design, design thinking and computational design are going to have the biggest impact on the economic success of countries today.

What is design thinking?

Design thinking is all about organization agility; rediscovering innovation over execution. In the case of design thinking, they’ll take Post-it notes and use a whiteboard and think about ideas and move them around as if they’re sketching the organization, the people roles. So it’s all about the ability to sketch. Not just to draw, mind you; the ability to ideate very quickly.

People who do design thinking may not be classical designers; they may not be computational designers. But they’re a kind of designer that can think in the medium of organizations and ideas and people.

It’s going to help your team, your units; the whole company gets a little more malleable by sketching ideas, testing them and working them out together through a non-rigid medium; in this case, post-it notes and whiteboards, clips of paper.

Is design about active ideation rather than the specific output or medium?

The whole idea behind design, at the most basic level, is process. It’s a process of approaching a problem. It’s medium-agnostic at its highest level. A great experience is made by having plastic processes, meaning to iterate and test ideas before you execute. What is the famous phrase by Frank Lloyd Wright, “It’s better to put a pencil to paper than have a sledgehammer at the construction site.”

What is the role of empathy?

You have to care about what the customer feels.

But, in the world of pure software engineers, empathy isn’t part of the goal. The goal is to execute on durable code, test it with code. Code that won’t fall down, like a bridge maker, like a person who designed a bridge wants to make sure that, number one, it doesn’t fall down. But while doing that, they need to think about the person that’s going to cross the bridge.

Designers in Silicon Valley have been bringing in the viewpoint, which is obvious to everyone except the people making the bridge, which we have to ask, “How does a person crossing the bridge feel?”

Empathy. So, empathy is what designers bring to the table all the time. They ask, “How does that make you feel and how can I make you feel better? How do I improve the experience?”

So, successful design combines empathy with creating a meaningful experience that’s appropriate for the context?

Engineering is important in relationship to design. And a business model to make that product affordable. Good business, good engineering, and good design are important together; they make great products, but not in isolation.

It’s synergistic but depends on the product too. They’re three things that pull on each other, but at the base level, the engineering has to work. Design can’t solve a bad engineering solution.

What about teams and leadership?

At a startup, you’re not designing a product; you are designing a team that can build a product. At large companies, you are designing products, designing companies to make great products in perpetuity.

The hands-on makers have a hard time becoming leaders, and so in the report, I feature two characteristics of a company in which design leaders can make a difference: culture and systems.

How can companies create a culture of design?

It requires the CEO to care about design. Not just as a buzzword, but to understand there are three kinds of design and to understand there are three kinds of designers in their company.

It requires the executive team to understand that design is not just about pretty things, like a good looking shirt. But, there are business design thinkers who can help the company think in a more agile way. There are computational designers who work [at huge] scale and reliability. And yes, there are the traditional designers who design amazing, quality experiences in print in the old way.

Bring design expertise into the boardroom, into the executive team meetings. Not to review design, but to ask how can design thinking be used in our company? How can we help our culture innovate better?

Watch CXOTALK for in-depth conversations with the most innovative business leaders on the planet!

(Cross-posted @ ZDNet | Beyond IT Failure Blog)