Innovation by Design: How to Unlock New Business Opportunities

The term “design” often describes a visual output – a form, color, texture, layout – or a styling activity. In other cases, the meaning of design goes beyond a product’s appearance, also referring to how it works and its functionality. In this article, we discuss how design transforms organizations and inspires innovation. Get ready to dive into the world of innovation by design.

Nowadays, businesses invest much more in design. They do so not only to build beautiful and functional products. They also do it to improve the way in which they create and deliver value for their customers. This requires an innovative culture and process led through design.

Here is the article outline:

• The maturity of design within companies
• Why is design good for business?
• How does innovation happen?
• What does the innovation by design process look like in practice?
• 10 steps to drive innovation through design
• Analyzing market potential
• Takeaways for your business

The maturity of design within companies

Almost 20 years ago, the Danish Design Centre developed the Design Ladder. This model illustrates the different ways in which companies use design. They based the Design Ladder on a hypothesis that has seen confirmation time and time again since. Higher revenue and a greater emphasis on design methods in the early stages of development correlate positively and give the design a more strategic position in the company’s overall business strategy.

The Design Ladder consists of four steps:

Step 1. Non-Design

Design forms a latent part of the teams responsible for product development and the task not handled by trained designers. The team members’ ideas about good function and aesthetics usually decide the outcome, while users’ perspective plays little or no role in the process.

Step 2. Design as Form-Giving

Many designers use the term “styling” for this process. Professional designers may carry out the task but typically people with other professional backgrounds handle it.

Step 3. Design as Process

Design does not mean the final appearance but a process integrated from an early stage of its development. Both economic viability and users' needs and pains drive the solution. This setup requires the involvement and collaboration of product managers, product owners, business analysts, developers, marketing experts, researchers, and of course, designers etc.

Step 4: Design as Strategy

The design professionals work with the company’s owners/management to rethink the business model. They focus on the design process in relation to the company’s business strategy and its desired future position in the market.

Why is design good for businesses?

A higher placement on the Design Ladder correlates with a positive effect on earnings. Companies that systematically incorporate design into their processes have higher chances of success on the market when introducing new products or services since design provides contextual insights and helps define innovation opportunities and strategies.

How does innovation happen?

We find the context in which true innovation happens at the crossroads of three factors:

• Business strategy (what the market at a certain context and moment in time deems viable)
• Design (what the potential customers desire)
• Technical constraints  (what the limits of technology render feasible)

The classic Venn diagram below illustrates this intersection:

The diagram suggests that these three elements must come together to create a successful innovative design. But how does this convergence happen? Not just by chance. Design represents a great idea – identified as a driving force – that aligns technology with customers’ needs and business goals.

What does the innovation by design process look like in practice?

We can manage business innovation, structure it into processes, and use it to stimulate the creative potential within the organization. However, it makes the process unpredictable. Besides, it takes time. Damien Newman created the Design Squiggle, which visually represents the characteristics of the Design Process.

But don’t get discouraged. The result will likely provide a powerful new business model that will assure your company’s future growth.

We put together a step-by-step guide to help you understand how design-driven business innovation can take place. In this guide, we will focus on customer-driven innovations. Knowing your customer’s needs will help you adjust your value proposition, rethink your product or service, and ultimately build your whole business model around them.

10 steps to drive innovation through design

1. Understand the challenge

First, understand why we need innovation, as the journey starts here. Usually, the need for business model innovation results from one of the following objectives:

• Satisfy existing but unanswered market needs
• Bring new technologies, products, or services to market
• Improve, disrupt or transform an existing market with a better business model
• To create an entirely new market

In this step, strive to discuss the company situation with its stakeholders to discover different the current state and perspectives. Whatever the case, start by understanding the challenges the organization faces.

2. Understand how your business works

In the second step, understand better how your business works (or assume how it should work, if it doesn’t exist yet) in order to deliver value. Analyzing the existing business model forms the basis of achieving a successful innovation. One of the most popular, the Business Model Canvas (BMC), allows the simultaneous visualization of the nine basic building blocks of a company:

• Customer Segments
• Value Proposition
• Channels
• Customer Relationships
• Revenue Stream
• Key Activities
• Key Resources
• Key Partners
• Cost Structure

We at UX studio recommend doing it in a workshop together with other team members, as they will likely have different understandings. Find useful information on how to fill in the BMC – as well as many useful tools – at Strategyzer.

3. Understand the context and your position

After creating the BMC, understand the environment in which the business operates. Zoom out and take a look at the business environment, identify your competitors, then talk about trends, macroeconomic, and market forces.

Understanding the environment in which your future business model will operate helps your team:

• Identify threats (e.g. a new competitor)
• Opportunities (e.g. new technology)
• Constraints (e.g. a new regulation)

You will need to address them and ideally turn them to your advantage. In this step, consider collecting and analyzing competitors within the relevant context the most important activity.

4. Understand your (potential) customers

After the third step, go deeper. Identify all your (potential) customer segments by filling in the BMC. Now choose your main customer segment and focus on it. To help yourself with this process, start by creating a persona. It will give your customer segment a personality with which you can empathize more easily. Personas make customer’s characteristics more tangible and concrete.

Next, create an assumptive customer journey. Again, assumptive means you likely haven’t done any research yet. Mapping the user journey will provide you and your team with insights into how customers experience your product or service, as well as how you might better serve or even delight them.

At this point, you could easily fall into the trap of believing you know your customers very well and you don’t need to do field research. You would be making a terrible mistake. Don’t. Combining field observation with interviews gets the best insights. For anyone unsure about how to plan, conduct, and analyze interviews, we wrote this guide. You might find it useful.

Your research should answer the following questions:

• What jobs does our customer try to do in their work or life?
• What pains does our customer face before, during, and after, or even completely prevents them from doing so?
• What gains does our customer face after getting a job done?

To organize the insights you will get from the interview, use the Value Proposition Canvas. It makes you think differently about your customers and what you offer them.

The Value Proposition Canvas has two sides:

• On the right, we have a customer profile. It helps clarify your understanding of the main customer segment.
• On the left, we have the Value Map. This helps describe how you intend to create value for that customer.

5. Focus on problems worth solving

Now you have a better understanding of the jobs your customers are trying to do, their pains and gains. Next, prioritize them. This lets you design a value proposition that addresses the things customers really care about. Order them in three separate columns:

• Most important jobs on top, least important at the bottom
• Most extreme pains on top, moderate pains at the bottom
• Essential gains on top and nice-to-have gains at the bottom.

You should end up with something like this:

6. Define your value proposition

For the next step, identify the value you wish to create for your main customers: your value proposition. An outstanding value proposition should focus on the most important jobs, pains, and gains of your customer. The left side of the Value Proposition Canvas comes into play here. It will help you make explicit how (you believe) your products and services will help customers get jobs done, ease pains, and create gains.

Ask yourself:

• What products and services do (can) we provide to enable our customers to get their most important jobs done?
• How do (could) our products and services help customers alleviate their most extreme pains?
• How do (could) our products and services create expected or desired outcomes and benefits for our customers?

Find a fit between the Customer Profile and Value Map canvasses. When you do, your value proposition will excite the customers. This will only happen when you address important jobs, alleviate extreme pains and create essential gains that they care about.

7.Ideate for solutions

Even though we don’t have a clearly defined value proposition yet, we do have the basic building blocks. We can use the top ideas from our Value Proposition canvas to quickly sketch multiple value propositions, using the Ad-Lib below. Don’t settle for just one – try to explore multiple directions.

Next translate the new value propositions into the form of products, features, services, processes, brand experiences, etc. Brainstorm with your team to figure out what possible solutions you could deliver to your customers. But don’t stop there, try to describe what features a product will have, what structure a service will have, etc. In the case of digital products, look for features that will directly address your customer’s pains and help them carry out their jobs.

8. Prioritise solutions

After the brainstorm session, you should have a multitude of solutions and ideas which will require prioritization. To get an idea of how to do it, check our article on feature prioritization techniques. It explains the process in more detail. Again, do the feature prioritization in a workshop together with the other team members.

9. Prototype solutions

Next, build a prototype to bring your ideas to life. Prototyping means making quick and rough models of your ideas to explore alternatives. Of the many prototyping techniques, start with some quick hand-drawn paper sketches. They will allow you to quickly explore radically different directions for the same idea before refining one in particular. Then go digital by building wireframes and interactive prototypes, ranging from low to high fidelity. Read more on prototyping techniques here.

10. Test solutions

Last but not least, test your solutions with real customers from your potential target group. Conducting interviews and user tests will indicate if the customers would use the solution you have in mind. They will also provide you a lot of valuable insights into how to improve it.

Testing can happen on different levels of your business model, but focus on these:

• The product or service you prototyped
• The features of your value proposition
• The customer's willingness to try the product or service.

For testing the product, check out our Ultimate Guide To Successful Usability Testing. Based on the user feedback and analytics you collect, start making improvements to your business model. You might realize that customers find your value proposition hard to understand, or the product or service inconvenient to use. Whatever the issue, the process doesn’t end here.

Analyzing market potential

At the end of this process, you might have a solid value proposition and a desirable product or service. You’ll still need to assess its market potential in order to determine the viability of the business model. By “market potential” we mean:

• Market size – The number of potential customers and the value of the market. It will give you insights about the sales potential of your product or service.
• Competition – Gauge market competition, determine the market position of various competitors and plan strategies to tackle them when the time comes.
• Customer segmentation – Determine the size of your main (potential) target group and if it has clear segments with different drivers of demand, price sensitivity, etc.

These quantitative market insights will help determine the intensity of the need which your product or service addresses, the size of your potential target group, how much they would pay for your solution, how the threat of your competitors, etc.

Takeaways for your business

The success of any new product or service ultimately depends on human motivations and behavior. While technology can enable innovation, human-centered design plays a central role in a successful and long term business strategy. Regardless of if you have a start-up or an established business, keep doing the following:

#1 Prepare for the future by constantly reflecting on the current business model and discovering ways to improve it.

#2 Understand your current or potential customers. Find out what they want to achieve the most and what causes them the biggest pains which your business might address.

#3 Adjust / Adapt your value proposition to address the most important needs of your main customers.

#4 Ideate for solutions that directly address the jobs your customers are trying to accomplish or alleviate the pains that are giving them headaches.

#5 Prototype the low-hanging-fruit solutions in particular and test them with real customers. Iterate based on the feedback you get.

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