Thursday, January 31, 2013

Should CFO’s be Design Thinkers?

In recent Treasury Café posts we have focused on the topic of innovation:
In “Are You Sure You Want to Innovate?” we explored the realities of organizational forces and how an innovation effort often works at cross purposes to these, resulting in a situation that can be dangerous to your career.
In “Get Closer to Innovation With These 5 Questions” we took the role of a leader who desires innovation but is not directly involved on a day to day basis with a project or process.
Today we explore the underlying force that creates transformative innovations called “Design Thinking”. This is followed by some thoughts about how to deploy this within our organizations.
What is Design Thinking?
Design Thinking is both a process and a mindset.

Tim Brown and Jocelyn Wyatt describe the process side of Design Thinking in the Stanford Social Innovation Review as:
“The design thinking process is best thought of as a system of overlapping spaces rather than a sequence of orderly steps. There are three spaces to keep in mind: inspiration, ideation, and implementation. Think of inspiration as the problem or opportunity that motivates the search for solutions; ideation as the process of generating, developing, and testing ideas; and implementation as the path that leads from the project stage into people’s lives.”
Amir Khella gets to the mindset by answering the question “What Makes a Good Design Thinker?”:
·         “An observing eye and a constant sense of wonder
·         An empathetic attitude toward people’s behavior and habits
·         A questioning mindset that goes beyond the obvious
·         Patience to remain in problem space until the right questions are identified
·         A holistic approach to problem solving
·         The willingness to experiment and build
·         A passion for collaboration”
How Do We Implement Design Thinking?
There are literally hundreds of models that delineate the stages and factors that make up the design or innovation process. For those who want to explore some of these, the “How Do You Design?” manuscript from Dubberly Design Office will give you a great overview.
The Institute of Design at Stanford describes 5 modes that make-up the design process. These modes are iterative - we can bounce back and forth between them and among them in any order. In other words, it’s not linear.
These modes are:
·         Empathize
·         Define
·         Ideate
·         Prototype
·         Test
As we go through these five modes, they suggest that our activities follow the following guidelines:
·         Show Don’t Tell - Communicate your vision in an impactful and meaningful way by creating experiences, using illustrative visuals, and telling good stories.
·         Focus on Human Values - Empathy for the people you are designing for and feedback from these users is fundamental to good design.
·         Craft Clarity - Produce a coherent vision out of messy problems. Frame it in a way to inspire others and to fuel ideation.
·         Embrace Experimentation - Prototyping is not simply a way to validate your idea; it is an integral part of your innovation process. We build to think and learn.
·         Be Mindful Of Process - Know where you are in the design process, what methods to use in that stage, and what your goals are.
·         Bias Toward Action - Design thinking is a misnomer; it is more about doing than thinking. Bias toward doing and making over thinking and meeting.
·         Radical Collaboration - Bring together innovators with varied backgrounds and viewpoints. Enable breakthrough insights and solutions to emerge from the diversity.”
We will now explore each of the 5 modes in turn.
The trait of empathy has manifested several times already throughout this post: in the mindset of Design Thinking, the modes of the Design Process, and in the activity guidelines.
Why is this?
At its core, Design Thinking is a human-centered process. And not just human centered as narrowly defined by the product or service we might be contemplating, but human in its holistic totality. Amir Khella notes “Design is not about products; it’s about people. Think beyond tasks; Their lives. Their challenges. Their dreams. The user’s journey starts long before they click that button.”
For this reason, it is natural that empathy is the place where we begin the design process - we need to understand the humanness of the user.
This is performed using several different techniques.
The first is to simply observe people – what they do, what they don’t do, and the context within which they do or don’t do it. Techniques from the field of ethnography are often deployed in order to accomplish this. Depending on the scope desired this can entail several months of intensive observation - Jan Chipchase and his team spent months and months in Afghanistan living with and observing people in relation to their use of mobile banking.
The second tactic we can perform is to engage with people, either through an interview process or what is termed ‘encounter’ processes. By asking the right set of questions we can gradually begin to understand the “whys” involved in the user’s process.
Finally, we can immerse ourselves in the customer experience, using the products and services, and experiencing their point of view. For example, someone designing a product for handicapped individuals might spend a week in a wheelchair in order to generate a reference experience.
The objective of the Empathize step is to develop a set of observations and experiences so as to develop understanding (or inspiration as the IDEO folks call it) of what user needs and desires require fulfillment.  
Once we have developed a wide range of experiences and understandings of our users, we undertake the Define step. Whereas in Empathize we are seeking as wide a range of information as possible, during Define we are in the process of consolidating and synthesizing the vast amount of data we have collected.
In Ron Moen’s perspective of the IDEO process, he names this step “Synthesis”, noting that:
“All information… is collected in the project room. This room becomes the key tool for translating the information into opportunities for design. Photographs, diagrams and drawings are all mounted on the wall to prompt discussion and illustrate key insights. The room becomes a tool for sorting and recording the ideas that develop.”
An essential thing to note about Define is that we are narrowing down a problem definition and scope through a synthesis process but not a solution. In fact, if we can “perfectly synthesize”, it would theoretically encompass the entire amount of information we had collected during Empathy!
A well-performed Define phase, according to the Institute of Design at Stanford, will generate “compelling needs and insights”, which will lead to ideas that allow us to “scope a specific and meaningful challenge”. This serves to inspire the team and provides a framework upon which to build as we perform other steps.
Once we have one or more challenges as a result of the Define phase, we again embark on a step that is divergent, meaning that we will cast a wide net, move far afield in any number of directions, and entertain as many wild and crazy ideas that can be cooked up.
This phase is known as Ideate, and contrary to the old IBM commercial, it is not a silent personal experience but rather one that utilizes the “radical collaboration” noted earlier. The objective of this phase is both quantity and diversity in ideas.
There are a number of tools that can be used to accomplish this. Brainstorming is one that IDEO relies on heavily (in some interpretations of their process this step is called Brainstorming rather than Ideate). Story boards, where an idea is sketched out as a number of scenes in the users journey, is another useful process to consider.
People who have done career or “life-mission” exercises are familiar with the “write your obituary” process, which is yet another means of generating ideas that might be relevant to the challenge at hand.
For those interested in exploring other possible tools used to kick start idea generation, the Service Design Tools website has close to 20 to choose from.  
The Prototype phase is one where we take our ideas and convert them into something tangible and real.
What is somewhat different about this phase in the Design Thinking framework compared to others is that it is a “down and dirty” exercise rather than a “Beta” version, so to speak. In “The Art of Innovation”, IDEO’s David Kelly discussed how he, a significant customer, and others on the project team carried around a shaped block of wood as a prototype of the Personal Digital Assistant device. When encountering a situation where the device might be used, the person would literally take the block of wood out of their pocket and pretend to use it!
Because these are low-cost and low-tech, they allow rapid deployment and therefore rapid feedback, which lets one know whether they are on the right track or not. As IDEO’s Tim Brown notes in his book “Change by Design”, one of their maxims is “Fail early to succeed sooner”.
In addition to finding out what fails sooner rather than later, other benefits of the prototyping process involve learning, conversation and idea ignition, and as a means to discuss disagreements, perspectives, and possibilities that the prototype represents. Feedback from this process can provide additional insights to the other process phases – additional empathy for the user or new ideas for example.
Whereas in the “normal” world testing is the step that precedes final deployment, in Design Thinking the Test phase, like all the phases, is one that is iterative with and between them. The maxim, as stated by the Institute of Design at Stanford, is “Prototype as if you know you’re right, but Test as if you know you’re wrong.”
Learning and refinement – of the user, the potential solutions, and/or our definitions - are some of the objectives of this step.
Ultimately, however, this is the phase that leads to deployment. In some versions of the Design Thinking process the final step is labeled Implementation.
One advantage to using the term Test instead is to illustrate that the design process is not over or final until the team is satisfied that it has developed something worthy of moving from the realm of concept and prototype to something that is in fact deployed.
Applying Design Thinking to the CFO’s Organization
Now that we have performed a brief survey of Design Thinking, we now turn to the CFO’s organization in order to discuss its usefulness.
The CFO organization involves relationships with people. A useful diagram of these is provided by Samuel Dergel, a leading executive recruiter. Given that relationships are fundamentally about people, an approach focused on human-centered design has a certain logical appeal.
Some possibilities of how Design Thinking might be deployed are:
Board of Directors
An organization’s Board of Directors gets a “package” prior to their meetings from Finance, which contains agendas, presentations, and other information as background to the upcoming discussions. What might come about if we used the Empathy step with this group?
Through formal interviewing, we might learn of their concerns with the company, their understanding of the dynamics and the financials, and their lingering but unanswered questions that they bring to the meeting because it was unanswered in the materials.
Through the observation technique, we might notice that although they receive the entire package at one time, they pace themselves and review it in increments over several days or weeks. We might notice that all the Board members make notes on notepads while they are reviewing the materials and they pack all materials when traveling to the meeting.
From these observations we might decide to send the “package” in increments, which alleviates extra effort on the part of staff to meet a singled deadline. We might redesign the materials so that there is room within them for note taking, simplifying their task by eliminating excess items.
Investors and Analysts
The investment community is another important constituent of the CFO organization.
As we have discussed in prior posts such as “Your Step by Step Guide to Calculating ROIC”, GAAP financials often do not present items in a way that allows us to view them from the cash perspective or on an “apples to apples” basis with other companies. In that post we ended up bouncing back and forth through a 10-K like a basketball!
Perhaps we can prototype and test a financial information delivery system that takes the relevant data for a set of ratios and provides that in one shot uploadable format. Under the collaboration sphere, perhaps we engage with these folks as we make decisions about which accounting policies to implement or which assumptions are selected.
A hint of these types of possibilities is Boeing’s recent announcement that they were going to make some alternative financial disclosures which disregarded the impact of pensions, since these can distort financial statements a great deal.  
Business Unit and Function Partners
Treasury Strategies, in their most recent State of the Treasury Profession webinar, discussed the fact that the finance group is more and more a “critical partner” within the organization.
In partnering roles, the finance team is providing both information and services. Design Thinking can be used in this context to enhance the “Customer Journey” through “Engineered Experiences”. Tools within the Design Thinking toolkit, such as the Service Design Blueprint, can help us better assess and deliver relevant items to our business unit partners in ways that they will find valuable.
Imagine if everyone in the company looked forward to the budgeting process! We can make it so, if only we employ a bit of Design Thinking.
Key Takeaways
Design Thinking provides a mindset and toolkit for creating and implementing transformative innovation and improvements within organizations. Incorporating this within our finance organizations will allow us to create great change.
·         What issues do you currently face that a Design Thinking approach might be able to solve?
·         Have you had any experiences where the Design Thinking process was used?
Add to the discussion with your thoughts, comments, questions and feedback! Please share Treasury Café with others. Thank you!

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