#113—Jeanne Liedtka: Design Thinking: Unleashing Creativity in Business

Jeanne Liedtka is the Professor of Business at the University of Virginia’s Darden Graduate School of Business,  where she teaches both MBAs and executives, as well as consulting on innovation, organic growth and design thinking. Jeanne, has served as Associate Dean of the MBA Program at Darden, Executive Director of the Batten Institute for Entrepreneurship and Corporate Innovation, and Chief Learning Officer at United Technologies Corporation, and consulted with a diverse set of organizations including IBM, Samsung, NASA, The United Nations, and the government of Singapore.  

Jeanne’s interests lie at the intersection of strategy and design. She has written eight books, including her most recent book published this year, 2024: The Experimentation Field Book: A Step-by-Step Project Guide, and many articles on the subject of strategy, innovation, and design thinking.

In this thought-provoking conversation, we discuss why this topic is particularly important, as our research shows that companies truly thriving in today's digital, fast-paced world, discuss strategic experimentation, rather than strategic design, more frequently than their competitors.

In this episode, she shares:

• The concept of design thinking—Jeanne's expertise—which provides the structure, tools, and processes needed to unlock creativity—regardless of one’s background.
• How design thinking is a perfect complement to strategic thinking—and the nuanced differences between the two
• How to strike a balance between risk aversion and meticulous planning with innovation
• The interesting paradox of needing data to make decisions, but not over-relying on data to the point where innovation is stifled

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Episode Timeline:

00:00—Highlight from today's episode
1:01—Introducing Jeanne Liedtka + the topic of today’s episode
3:04—If you really know me, you know that...
4:41—What's your definition of strategy?
6:50—What is design thinking?
11:30— Why do constraints enable creativity?
14:40— How do you foster experimentation in a risk-averse organizational culture?
18:52—When thinking about innovative ideas, why is historical data insufficient?
24:50—From product ideas to testable value proposition
29:19—How can people follow you and continue learning from you?
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Additional Resources:
Personal site: https://jeanneliedtka.com/
Book site: The Experimentation Field Book: A Step-by-Step Project Guide
LinkedIn: https://www.linkedin.com/in/liedtkaj/
Twitter: https://twitter.com/jeanneliedtka

Thank you to our guest. Thank you to our executive producer, Karina Reyes, our editor, Zach Ness, and the rest of the team. If you like what you heard, please follow, download, and subscribe. I'm your host, Kaihan Krippendorff. Thank you for listening.

Follow us at outthinkernetworks.com/podcast

Transcript

Kaihan Krippendorff: Thank you for taking the time to be on our podcast.
 
 Jeanne Liedtka: I'm excited to be here. Awesome.
 
 Kaihan Krippendorff: And this will be an experimentation. We'll see how it goes and where it goes. I do wanna start the experimentation with 2 questions that I always start with. The first is just so we can get to know you a little bit more personally,  nothing to do with your work or, you know, professional direction.
 
 Could you complete the sentence for me? If you really know me, you know that.
 
 Jeanne Liedtka: You know that. I am probably the most narrowly educated least creative person you will ever find.
 
 Kaihan Krippendorff: Really?
 
 Jeanne Liedtka: And yet, I don't in the irony, of course, that I've made my reputation writing about design thinking and bringing creativity into business search for organic growth. But in part, you know, I trained as an accountant. I have entirely business degrees. And yet, I think it was my fascination with people who do design well and their extraordinary creativity that drew me to this field. And, really, my life's work in many ways evolve from that, and it has been translating these processes and these ways of operating that truly creative people do intuitively Into systems and processes and tool kits that the rest of us who've been told our entire lives were not the creative ones, and used to produce really terrific outcomes.
 
 Kaihan Krippendorff: Yeah. And so the world that I'm drawn into and listening to you is a group of people discussing something. It could be designing a comedy act. It could be designing a car. It could be designing a strategy.
 
 And I think for me, at least, and I think for many of our listener strategy, is just humans coming together and making choices. So, you know, what you are talking about is also strategy. So my question for you is, how do you define strategy?
 
 Jeanne Liedtka: Well, you know, I think you get to a point. I wrote a paper years and years ago when 1 of the things I think is funny about academics is we seem to move on to new topics, but, actually, when you unpack them, they're still the old topics.
 
 Kaihan Krippendorff: Yeah.
 
 Jeanne Liedtka: Early in my career, I was obsessed with what I called strategic conversation. That that we may have strategies that we write down on paper. Right? And clearly, that's an important process. But the real heart of what helps us to shape a new future is it's shaped in the conversations we have with each other.
 
 And the conversations at every level in the organization, not just what the strategy is at senior levels. Decide the future need to look like. But the way in which they engage people at every level of the organization, including the frontline people, to understand what this new intention or this new set of aspirations look like to understand their role in making it happen, And then to equip them with the kind of structure and systems and processes and information, all of the things they need to change behavior because, essentially, strategic success is about behavior change. It's about creating a different kind of tomorrow. And opening up that gap between the current reality of the situation we're in, and this new future that we find more powerful and we wanna create.
 
 So in many ways, I think of, like, the first part of that is a design process. We're having a design conversation, and we're highlighting the portfolio of possibilities for a new future. And then there's the experimentation loop. I mean, I used to call it the execution loop. But I've come to believe I mean, 1 of the things I've changed my mind about is this notion, there's strategy formulation, and then there's execution.
 
 Well, in the middle, is experimentation. And in a world of ever increasing uncertainty, that the skill set around experimentation, that middle piece has become more and more and more critical. This
 
 Kaihan Krippendorff: I mean, I wanna unpack some of what you shared. There's so much in there. I think maybe a way to highlight for our listeners 5 or 6 important things that you've just smoothly, eloquently said, is to contrast we're kinda define what design thinking is. So let's say strategy is and the old view is a bunch of people in a room taking in data discussing it in a room, making a decision that based on a prediction of where things are going, that we're gonna follow that and then we have people execute it below us. How is design thinking different than that?
 
 Jeanne Liedtka: Well, I think for me, the 3 dominant characteristics of how design thinking is a problem solving process differ from our traditional kind of business analytic methods is that, first, we start the process with the people we're designing for very explicitly. And, you know, so often, we start strategy processes with the organization and what we want. Design begins the conversation in the person we're designing for and recognizing that value is not just functional, it's also emotional. So this whole notion of the empathy that designers talk so much about I mean, in some ways in business, I think we just call that identifying unarticulated needs. We know that differentiation is the basis of profitable strategy, and differentiation rests to a great extent on being able to our articulate needs that have not yet been generally discovered in the marketplace.
 
 And so design thinking is fantastic. For strategy, I think, because it begins with this notion of what are the unmet needs out there. If I that that resolved in a set of possibilities that if I could achieve, I would be in a strategic advantage position. And so the first is this notion of empathy starting with the user. The second is this notion of possibility.
 
 And I think the relationship between possibilities and constraints in particular, 1 of my favorite writers on the topic of design as Richard Buchanan. And he's argued that great design occurs at the intersection of 3 things. Possibilities, constraints, and uncertainties. Right? And I believe you can just substitute great strategy for great design.
 
 So in a world of change as strategist, we need to be able to envision a different future. We need to be able to acknowledge the reality of the constraints and use some of our creative thinking to overcome them. Because if we leave all the constraints in place, tomorrow will never look any different than today. And then we have to acknowledge in an environment of uncertainty, we're going to be wrong a good percentage of the time no matter how hard we work, how much great research we do, all of that, we're still gonna be wrong, which means we need to see strategy making as an iterative process. That's the third kind of issue.
 
 So, you know, we've got empathy and starting with unmet needs, we've got possibility driven with a different relationship to constraints, and then we've got an expectation of iteration. Right? Which means, usually, we're starting with a portfolio of possibilities, and we are learning our way. So in some ways to meet strategists have become venture capitalists in many ways. More than traditional business people.
 
 I mean, think of a venture capitalist. Right? They invest in 10 businesses. They know that less than 2 of them will turn into profitable companies long term, and that's what the date even the best of the venture capitalists will be wrong, 8 times out of 10 on average. So what's important?
 
 What's important is starting with a portfolio of possibilities? Because if you're starting with 1 or 2, you know, you're You don't have enough that batch can make a difference. And then figuring out how to learn your way into which ones should be killed or tabled, and which ones you should double down. I think that is a fundamentally different view of strategy making, then certainly, I was trained as a consultant at BCG. Right?
 
 We would train that, you know, smart people use analysis, and they find the 1 right answer, and then we go off and execute it. That model of strategy making to me is hopelessly outdated in the real world we have, and yet those are the systems we surround managers with and tell them to go off and make strategy.
 
 Kaihan Krippendorff: Yes. Still? Yes. 2 questions I have. I'm gonna go to the first 1, actually.
 
 Pulling something that you shared that you kind of went quickly over. Which wasn't the point of what you were getting to, but I just wanna go back. There is constraints. I've heard you talk about that constraints unleash creativity, and yet I often hear, oh, I'm so constrained here because my company does it this way and I can't do it that way or we don't have resources to do it this or we have to go through this channel because that's our channel. And I have these constraints, and so I can't be creative here.
 
 But if I left and I went into a garage, I could be creative. So talk to me about constraints and why do constraints, enable creative.
 
 Jeanne Liedtka: And you know, in many ways, it is a lot easier to be creative in a garage with a few other people who think the same way you do. Right? We 1 of the myths I think in large organizations is that creativity really matters in coming up with the idea. The solution, the strategy. But I think anyone who's actually worked in a real organization, a large 1, knows that the hard part is generally not having the idea.
 
 It's moving an idea through an organization and added to the marketplace. Because organizations you know, we're designed in the McDonald's model. And I was chief learning officer at United Technologies for a while. You know, a hundred and 40000 employees scattered all over the world in 5 different business units, you know, otis, elevator, carrier, air conditioning, Pratt and Whitney, gen engines. And in every single 1 of those businesses, we had to ensure that all of those people produced a product that had the right quality that was ready at the right time that met the specifications the customer needed and was there and was priced appropriately to be competitive.
 
 We build most of our systems in large organizations to accomplish that, and we need that reliability and that control and that predictability. But then for that, what, 10 percent of the business where we wanna grow and change all of those systems and processes that allow us to be competitively successful at a global level, completely get in the way of managers who are trying to be creative. And I think recognizing that, essentially, running an existing business is an entirely different skill set and perspective And even I used to talk about the physics of growth versus the physics of maintaining the business. You know, the physics is different. And if you ignore the difference in the physics, you constantly put managers in a situation where they're exhorted to do things that they are not then supported to do in the system they operate in.
 
 Right? And so that's the terrible dilemma when we look for growth opportunities. I mean, the growth leaders we've studied, the people who've been very good at growing their business in an inorganic way faster than their markets in large organizations. Operate with a completely different set of leadership principles too.
 
 Kaihan Krippendorff: Sorry. If you don't mind, I'd love to just dig into UTC a bit then be as an example of other So I I've done some for many years, a lot of training inside UTC on strategic design kind of thing that I thought was really fascinating is many of the things that UTC builds need to have a 0 percent failure rate. Right? Building space suits and elevators and escalators, and yet you need to reconcile that with other areas of the business, maybe your HR policies, the way you recruit and things where you don't need that level of rigidity and predictability. So we had Mike Tuchman on talking about the ambidextrous jargon as and we had Oscar Waldron talking about increasing your kill rate.
 
 How do how have you seen it possible to reconcile those 2 things?
 
 Jeanne Liedtka: Yeah. I mean, I think that 1 is just the recognition that this is a very different world. Right. I mean, generally, organizations are risk averse for a reason. I mean, when we're making jet engines or elevators.
 
 Right? We are risk averse for a reason. As you said, there's very little tolerance to failure. And yet, if you get good at experimentation, you're taking a set of risk that are not going to result in catastrophic failures. Right?
 
 1 of our first clients when we started working in the organic growth area was West in house, nuclear services. Well, you there is no 1 more risk averse than a nuclear engineer. That good. Right? But what you had to help people realize was, okay.
 
 You're not going to deviate a community when you come up with a business idea, and you experiment at a in a quick kind of low cost protected way. Right? That's a different category of behaviors. And you need to recognize when 1 set is appropriate and when the other set is appropriate. Because otherwise, the reliability behaviors will drive all the creativity out.
 
 Right? And we get the we get the model where all strategic growth comes to acquisition. Right? And then eventually I mean, that's a that's a fool's game because you just, you know, you keep increasing the denominator. And so getting to a growth rate is harder and harder and requires more and more acquisitions.
 
 And so It's just I think it's a dilemma that almost all corporations face who haven't gotten very good at recognizing the difference recognizing that different managers have to be rewarded and encouraged to do those 2 different things. And then figuring out how they can work together. So for me, design and the hypothesis driven methodology is absolutely critical. When you take people who are risk averse, who come out of an environment that punishes failure quite dramatically, you ask them to try new things they will say no. If their choices are, yes, you can do this thing that looks crazy to me.
 
 And if I'm a chief financial officer, it doesn't look like particularly good use of a company's resources, you know, and my role is fiduciary. If my choices are yes or no, I will say no. And there's no amount of data from the past that you can use to convince someone in that mindset. That they should go forward. I used to joke when I was a consultant.
 
 The only people that are allowed to take poetic license in taking data from the past and leaping to an argument for a future are expensive strategy consultants. Note because we make up numbers. Right? We make up a logic. For how this this data that we have from the past can tell us that we should have confidence in a new future, but organizations don't let their own people make up data.
 
 They don't give them that flexibility. Right? And so managers in my experience in our research, they get trapped in conference rooms trying to justify something with ever more and more data that is never going to be it's always gonna have holes of logic in it that any smart CFO can see right through. Right?
 
 Kaihan Krippendorff: And why why is that? You know, you're with Roger Martin, and I I did I got a couple days with him, and I remember him saying this 1 thing. If you wanna kill any new idea, you could do that with 2 words, prove it. So I wonder if you could just illustrate for us why data when we're talking about innovate innovative ideas, why historical data is not sufficient or not helpful?
 
 Jeanne Liedtka: Well, I think there's always a leap from what is to what might be. Right? So traditionally, we talk about induction and deduction as the ways we make decisions. But there is a logic that we talk about in design of adaption. And adaption looks at this situation and says, Well, it's not this way right now, but it might might it be like that?
 
 But when you're trying to prove something that only might be, not is. Right? It's not on a linear trajectory from the past. And in fact, that's what gross is about. Right?
 
 It's about making making the future different from the past, changing the trajectory of a growth curve, then there's always a creatively that you can never fully justify with logic and with data from the past. And the more creative you're leaping to the more impossible it is to justify it with data from the past. You know? At some level, that's just logical. We're trying to create a new future.
 
 How can we look to the data from a past that that didn't have that future in it to convince us that it's safe to go there? So Instead of saying yes, which is never gonna happen or no, which is what happens, hypothesis generating sets of a completely different relationship between yes and no, it says, what would we need to know in order to have more confidence, CFO person, to allow us to move forward on this. What is a small inexpensive quick set of experiments we can do? That could test some of the assumptions that we differ about because, generally, a growth leader is making a set of assumptions about what's possible, and the person controlling the resources is making a different set of assumptions. Right?
 
 So as Peter Sangein would talk about, we argue with this ladder of inquiry at the solution to solution argument, which is not resolvable. We have to argue at the assumption level, and then we have to identify the critical make or break assumptions what Roger would call what must be true. Right. And then as partners, we have to identify what we'd have to do to go out and get data that would allow us to figure out which of our assumptions about the future is
 
 Kaihan Krippendorff: is true. As opposed to, hey, you're more senior than me. So you will delete overrides mine, and so right. Right. Let's go find
 
 Jeanne Liedtka: Moving people from veto to responsibility to design and experiment. Right? And that creates common ground between a growth leader and someone who's primarily is charged with, you know, stewarding the organization's resources because it lets you have a database conversation. There's this notion that design thinking is not about data. You know, that's this airy, airy, airy, creativity, and innovation.
 
 It's not about data. It's about intuition and all this stuff. But the reality of it is design thinking is every bit is data driven as anything else in business. It's just a different kind of data and a different use of data. And our own definition of data, you know, if it doesn't if we can't load it into an Excel spreadsheet, it's not data.
 
 Right? You know, if it's not statistically significant samples, it's not data. Right? That is That and that's what proof constitutes. You know?
 
 Kaihan Krippendorff: I see. I got you. Yep. So the early stages of an innovation win, we don't have data of say what the adoption rate would be of a new thing, it's if we if we if the bar is having a statistically significant volume of data, we'll never make that first leap.
 
 Jeanne Liedtka: Exactly. Yep. Exactly. And we need to get into the marketplace to actually test this. We because learning to most new business this fail is because nobody wants what they produce.
 
 It's not that they can't produce it. So the usually, the initial core make or break assumptions are all around desirability, and whether, in fact, creates enough value for someone to actually want it. Right? You can sit in a conference room with historic data. And the other internal people in the organization, all you want, and all those hours of debate will not make you 1 Iota smarter.
 
 About the reality of whether everybody anybody will want that until you get them some facsimile of it. That at least prompts them to be able to give you good feedback about whether or not that a value proposition that they'd really be interested in. So, you know, if you can't, you have to go to the market for desirability. Now feasibility, yes. That's often something that's determined by an internal capabilities.
 
 Can we do it? You know, can we do it? Can we make money on it? That's the third question. Is it a viable business long term for us?
 
 Is it not just something we can do when people want, but will they pay enough for it that we're profitable? All 3 of those areas, you know, desirability, feasibility, viability. They're all critical. But if you don't have desirability, the other 2 don't matter.
 
 Kaihan Krippendorff: Yes. I guess if we link this yeah. If we if we link this back to something you said earlier, which was you didn't use words, but kind of strategy is what we do, not what we say, we need to have internal adoption of the strategy. So I guess, also, the internal users of the strategy whether our people will align with or comply with or adopt, that also becomes part of the design process. Right?
 
 They're the users. We're reaching the top of our time with you. I have, like, 15 questions, but there's 1 I think that we could do. I think we most useful. Going on your point of reducing risk by adopting a tool.
 
 In your most recent book, the experimentation field book, you lay out these 5 steps. I'm gonna just rather than I'm gonna I mean, question will be, which of these 5 steps were people are gonna buy this book and read through it as I did, but where which of these steps is there something that is surprising that people might not understand? So step 1 is framing testable ideas. Step 2, defining evidence. Step 3, selecting your test, and you lay out different types of tests.
 
 Step 4, building your prototype, step 5, executing, analyzing, iterating, and then there's a feedback from 5 to 1 and from 4 to 3, Which I would love to talk about all of these, but which which of these is the most important to Understood.
 
 Jeanne Liedtka: Kinda highlight the first 1. Yeah. You can't a product idea is not a testable hypothesis. Right? You can only test a value proposition that identifies who you're selling it to and what needs are supposed to be met.
 
 So right away, most people start with I've got this idea for new product that's just not a testable. It's not a sufficient hypothesis. Right? Then they go to evidence, and they take the data they've got already. Well, that's usually not what you need to test a hypothesis.
 
 You usually and this is what strategy consultants do. Right? They go find the data they need to test the hypothesis They don't take what they've already got and pretend that it's a good test. Right? So I think that up front stuff, people get wrong.
 
 And then at the back end, surprisingly, people build, like, prototypes with way higher fidelity than they need. Right? We all have this MVP mindset when, in fact, we should be starting with a a storyboard, not a minimum viable product. Right? And so we over invest in experimentation, which slows us down and uses resources that we don't even need to when there would be a much more effective way to test the assumption, not the whole product.
 
 Right? So, you know, throughout the process, there are places where people make very obvious mistakes than retrospect. You say, yeah. Sure. That makes sense.
 
 I knew that. But when you look at what people are doing in the trenches, They're, you know, they're trying to test products rather than value propositions. They're taking the data they've got that is inadequate to test it. And then they're spending a bunch of time and money doing trials with expensive MVPs when they should be doing cognitive walkthroughs with the storyboard. Early on with a couple of people.
 
 Right? They should be able having a lemonade stand at some industry conference
 
 Kaihan Krippendorff: Mhmm.
 
 Jeanne Liedtka: Talking to people. Right? There's all these quick methodologies that we just we don't even know about generally as managed.
 
 Kaihan Krippendorff: Yes. Vastly. And the book has, like, really well thought through and designed templates and tools that I just found very inviting. So I I really encourage people to buy it, and it is sort of an addendum to your prior book. As well.
 
 Right? So they go in parallel.
 
 Jeanne Liedtka: They do. Because I'm thinking, you know, we've spent a lot of time explicating the design thinking process, but mostly the front end. What always troubled me was design thinking requires good testing. I mean, yes. It requires creative idea generation.
 
 But all those, like, creative ideas that you've done with your very low sample sets and making assumptions about what people wanted and all. You can't scale them in organizations without taking enormous risks. You need testing. And yet, I felt that testing got defined very loosely as prototyping and design thinking when we need a much more rigorous design of experiment methodology at the back end. Yeah.
 
 And we need it for agile. We need it for lean startup. I mean, it isn't just designed thinking all of so many of the methodologies we're adopting today, the new methods, fundamentally substitute experimentation for traditional and losses.
 
 Kaihan Krippendorff: I understand. Right. Yeah. Because I think that's another mistake is to assume that no data is helpful. I think that know, we should look at what data there is already.
 
 Right? Yeah. But that's not sufficient. Okay. So many implications and opportunities, possibilities from this.
 
 Unfortunately, we've reached the top of our time with you. But thank you very much for being here. How can people continue to stay with connect with you and learn from you? Certainly, encourage them to buy both of your books and and follow your work, but what's the best way to stay in touch with you?
 
 Jeanne Liedtka: My next area of research that I'm really excited about is how do we bring experiments to strategic planning processes. I think strategic planning processes are dinosaurs. So as an academic, I can only study, people who are already doing interesting things. So I am on the lookout for strategists who are doing interesting creative things. About strategy making.
 
 And easiest way to get me is just if you Google my name and UVA, I pop up and it goes straight to my email or I'm on LinkedIn, how however it makes sense to contact me. I'd love for people to reach out and just tell me some of the stories of what they're doing that is bringing new perspectives to strategic plan. That'd be awesome.
 
 Kaihan Krippendorff: That's awesome. Yeah. I know many of our listeners are equally passionate about that possibility, and we'll reach out to you. You know, thank you so much for being here and for the work that you do and for sharing with us.
 
 Jeanne Liedtka: Thanks for a great conversation.
 
 Kaihan Krippendorff: Thank you to our guest. Thank you to our executive producer, Karina Reyes, our editor, Zach Ness, and the rest of the team. If you like what you heard, please follow download and subscribe. I'm your host, Kaihan Krippendorff. Thank you for listening.
 
 We'll catch you soon with another episode of Out Thinkers.