Reinvention through "design thinking"

I want to work with the fast company part of my organization!

 IBM faces a dilemma. How can they continue to reinvent themselves so they can meet the growth targets Wall Street demands?

IBM has more than 370,000 employees. While its revenues are huge, the company’s quarterly reports have shown them steadily declining in the last two years. The falloff in revenue is partly intentional, as the company sold off less profitable operations, but the sometimes disappointing profits are not, and they reflect IBM’s struggle with its transition. Last month, the company shaved its profit target for 2015.

In recent years, the company has invested heavily in new fields, including data analytics, cloud computing, mobile technology, security, social media software for business and its Watson artificial intelligence technology. Those businesses are growing rapidly, generating revenue of $25 billion last year, and IBM forecasts that they will contribute $40 billion by 2018, through internal growth and acquisitions. Just recently, for example, IBM agreed to pay $2 billion for the Weather Company (not including its television channel), gaining its real-time and historical weather data to feed into Watson and analytics software.

But IBM’s biggest businesses are still the traditional ones — conventional hardware, software and services — which contribute 60 percent of its revenue and most of its profit. And these IBM mainstays are vulnerable, as customers increasingly prefer to buy software as a service, delivered over the Internet from remote data centers.

Virginia M. Rometty, IBM’s chief executive, has warned that this will be a difficult transition year. It will take time, she says, before its new businesses are large enough to become engines of growth for the whole company. The strategy, she insists, is the right one. What remains is to move ahead faster. “People ask, ‘Is there a silver bullet?’” Ms. Rometty said in a recent interview. “The silver bullet, you might say, is speed, this idea of speed.”

One key strategy is called "design thinking". Here is a brief explanation:

Mr. Gilbert answers that question with something called design thinking. (His title is general manager of design.) Among other things, design thinking flips traditional technology product development on its head. The old way is that you come up with a new product idea and then try to sell it to customers. In the design thinking way, the idea is to identify users’ needs as a starting point.

Mr. Gilbert and his team talk a lot about “iteration cycles,” “lateral thinking,” “user journeys” and “empathy maps.” To the uninitiated, the canons of design thinking can sound mushy and self-evident. But across corporate America, there is a rising enthusiasm for design thinking not only to develop products but also to guide strategy and shape decisions of all kinds. The September cover article of the Harvard Business Review was “The Evolution of Design Thinking.” Venture capital firms are hiring design experts, and so are companies in many industries.

This laser focus on customer needs can lead to new insights. Here is an example of how IBM trains its personnel in "design thinking":

Defining problems more expansively is part of the design-thinking ethos. At a course in New York recently, a group of IBM managers were given pads and felt-tip pens and told to sketch designs for “the thing that holds flowers on a table” in two minutes. The results, predictably, were vases of different sizes and shapes.

Next, they were given two minutes to design “a better way for people to enjoy flowers in their home.” In Round 2, the ideas included wall placements, a rotating flower pot run by solar power and a software app for displaying images of flowers on a home TV screen.

IBM is competing for talent against top names in technology like Apple and Google. Here is how they recruit prospective college graduates:

The recruiting pitch made by Mr. Gilbert and his colleagues has been essentially twofold: First, you can make a difference in socially important fields because IBM’s technology plays a crucial role in health care, energy, transportation, water and even agriculture. Second, you can be part of a groundbreaking effort to apply design thinking in business.

At Stanford, the prevailing view of working for IBM, Mr. Burnett said, has shifted from “Are you kidding me?” to “This is a pretty interesting opportunity.”

Joe Kendall thinks so. Mr. Kendall, 28, finished a two-year graduate design program at Stanford and joined IBM in June. He chose IBM over Apple, where he would have worked in its iPhone business. At Apple, he figured, his opportunity would be to help make a great product a little bit better. At IBM, Mr. Kendall sees a different opportunity. “No one is using design thinking to solve problems on this scale,” he said, adding that he could be part of “changing the future of this giant entity.”

The article goes on to note that all of the top senior executives have taken the training. Here is an example of how the work is being executed with one customer:

That proved to be the case for GameStop, a video game and electronics retailer. Jeff Donaldson, a GameStop technology executive, recalled that IBM’s reputation at the company’s suburban Dallas headquarters was as a slow-moving corporate bureaucracy, dominated by a sales culture offering expensive hardware and software. The reputation, he said, was “certainly not positive.”

But in the last year or so, the two companies have worked side by side — often in IBM’s Austin studio — to figure out better ways to serve GameStop customers with mobile devices and data. The floor staff at GameStop’s more than 4,100 stores in the United States can now tap iPads to look up the past purchases of customers who have downloaded the GameStop app or joined the company’s loyalty program. Coupons, trade-ins and loyalty-point rewards can be offered on the spot, as well as game recommendations.

The cloud software to make it happen was built in a few months, tested in a small group of stores and then quickly rolled out nationwide. Further projects are in the works to study how online behavior affects buying patterns.

“They’ve completely turned us around,” Mr. Donaldson said. “We’re working with the fast company part of IBM.”

Here is the link to the full article:  http://www.nytimes.com/2015/11/15/business/ibms-design-centered-strategy-to-set-free-the-squares.html