Abstract: Business strategy’s goal is to create competitive advantage – a superior unique value proposition perceived by customers and competitors. The value creation of competitive advantage has to be understanding and putting customers needs first in the business strategy formulation and activities. The quest is enabled by Design Thinking as an approach to be better understanding customers needs as human needs, in order to create unique value proposition.
Business Strategy and somewhat called Competitive Advantage
The ultimate goal of a business strategy is to create a competitive advantage. But then the one million dollar question arises, how do we gain competitive advantage? In most context of business strategy formulation, we tend to analyze ways and methods to explore the source of competitive advantage, either internally or externally. Both environmental analysis are the basics for the quest for competitive advantage.
Competitive Advantage: A superior unique value proposition
What the hell is competitive advantage? Why we should be allocating our resources to achieve it? Well, competitive advantage does really matter, – if you’re a market-based believer, and it’s about establishing the business/company’s unique value proposition in the market to be superior as perceived and accepted by customers and competitors. When it’s “found”, that unique value proposition leads the overall company’s activities to focus its resources proportionately – at least as reflected in your budgeting decision, per say. And that focused activities are what you called as business strategy.
Competitive advantage starts from Human as Customers
Coming back to the question on how do we gain competitive advantage? We should realize it, by sequence, that we have to create our positioning to our customers first, then to our competitors. Meaning to say putting customers first does really important for us. Peter Drucker once said the purpose of business is to create customers. Without customers, our business will perish, and so you dont need to bother to think about competition anymore. Hence, we should always ask ourselves, are we really putting our customers at the center of our company’s activity and goal?
Hence, we should always ask ourselves, are we putting our customers at the center of our company’s activity and goal?
Putting customers at center in our business strategy, or customer-centric has always been a mantra in our business world. We often say that customers needs is important, but it’s really-truly-arguably not an easy thing. CEOs, Strategists, Marketers, and Consultants have tried so many ways through market research, group discussion, data mining etc to understand customers needs better.
Customer-centric = understanding and putting customers needs FIRST
But the thing is, when customers were offered the product and its value proposition, based on market research’s insight per say, the company often got a pitty feedback, in terms of low sales response etc. It turned out to be their product really did not fit to customers needs. Why did it happen? It was possibly affected in the traditional way of doing market research methods. We have to change the approach from exploring and exploiting customers in their abstract needs toward a product created by the company – a company-centric or product-centric.
For instance, at a focus group discussion, the participants were asked about their acceptance level toward a new product. The result showed a positive acceptability level which gave the marketer a green light to launch the product. But when it was launched, what happened was that it’s just NOT really wanted and desired by the consumers.Why? Because it’s not created by the customers. It’s created by the engineers, marketers, and financiers in the company who “think and feel” that the new product will fit into the prospect’s needs and wants.
Putting Customers First with Design Thinking
Then how can we get a better understanding of customers needs? And how do we put our customers at the center? There’s an approach to equip us with lots of empathy experience and experiment toward customers needs. Although this approach has been used widely by design firms, and also tech companies and startups, but now is becoming a global trend in business, social and goverment sectors due to its efficiency and effectiveness. It’s called DESIGN THINKING.
Harvard Business Review in September 2015 edition, highlighted the practice of Design Thinking as business strategy and innovation in big companies such as Samsung and PepsiCo. Both have put Design Thinking principles into their core activities to get better understanding of their customers. For both Samsung and PepsiCo, it’s not all about hiring a “designer” to work on their products and services, but it’s all about to change the overall company’s system and culture to become more human-centered designer.
PepsiCo understands that Design Thinking creates a whole new experience of value creation
PepsiCo has been implementing Design Thinking since 2012, under the leadership of Indra Nooyi, CEO. She even hired the PepsiCo first-ever Chief Design Officer, Mauro Porcini from 3M, to bring in the human-centered design principles into PepsiCo’s core products and business culture. For Indra, design is not entirely about the packaging that looks good to people, but it’s much more than that, on how people falls in love with the product. From then, Pepsi Co has brought in the practice of Design Thinking from creation to production, even through supply-chain, and it’s a whole new experience of value creation. And all started from “listening” to customer a lot.
Design Thinking linked to business strategy
I describe Design Thinking as; a mindset and process to empathize the issues and problems of human-centered/ customer centered needs, then to find ideas and solutions through visualization and prototypes to fulfill their needs. Design Thinking emphasizes the continuous way of thinking, by providing space for the continuous improvement; empathy-test-failure-success-empathy and so on. Design Thinking put human/customers at the center of the activities. Design Thinker truly design the every aspect of human needs as a challenge for innovative ideas. Design Thinker or Human-Centered Designers are trained to be more in being empathic, listening, and observing customers in their real context.
Design Thinking: empathize and design an idea and solution to human needs – Human-centered design
To link with our business strategy process, Design Thinking provides a deep understanding of customers needs – which is the source of our competitive advantage. It puts customers at the center of entire activities of value creation. Design Thinking clarifies of what is really needed and matter the most for our customers by providing them the ideas and solutions gained from direct-insights. Then Design Thinking provides room to validate our ideas to customers by testing it in the form of prototype, to secure customers’ expectation before it’s launched.
Prototyping is always be the corner stone of Design Thinking process. It gives a faster and cheapear market testing, to gain faster feedback. There is no shame of experiencing failure in prototyping. As Design Thinker always says, prototyping is intended to be failed faster in order to be succeed sooner. It’s an iteration method which enabling us to improve the experience or value offering becoming better and better.
Until now, the practice of Design Thinking has been adopted by many companies and organizations to improve their process and system to leverage their business strategy. Then how to implement it into your organization? Design Thinking in general has 5 modes which practiced as circular process. Those 5 modes are: EMPATHY – DEFINE – IDEATE – PROTOTYPE – TEST. For more explanation about these 5 modes, please read my previous articles: