People are the crucial element in organizational innovation, but frequently overlooked by the innovation models that are often theoretical and difficult to enact in the real world, observes Stefano Magistretti and his colleagues at The Politecnico di Milano.
They studied how PepsiCo had transformed its organisation by adopting a design thinking approach and identified nine design thinking practices that could lead to organizational innovation. Core to its success has been aligning personal aspirations to corporate vision and nurturing ‘co-conspirators’; champions that help win over colleagues.
The researchers reviewed the current literature and comment that organizational innovation requires a firm to ‘learn and adapt’ and this critically relies on its people’s flexibility and willingness to experiment.
Design thinking is a pragmatic method to address seemingly intractable and complex problems and consider them in their entirety. Although originally focussed on new product development it has been applied to organisational innovation to offer a human-centric and practice-orientated approach. It has particular value in industries where transformation requires new competences and capabilities to develop effective customer experiences.
However, very little is known about how it can be applied in the real world.
PepsiCo (the food and beverage multinational) had concentrated on competing with its rival Coca-Cola using traditional marketing technique such as sales promotion and branding. This strategy changed in 2012 when the CEO Indra Nooyi’s created a vision for the company to become globally recognised as a pioneer in organizational innovation through design thinking. He appointed Mauro Porcini as Senior Vice President and Chief Design Officer, to establish a new Design+Innovation unit. The aim was to instil the design thinking mindset and practices in the entire company.
Porcini was the first designer hired by the company and by 2022 there were 160 designers and 15 Design Centres.
“Design thinking permeated the entire organization not only as a tool for managing innovation projects, but also as the set of mindsets thanks to which we organize our units. In PepsiCo, design thinking is not just the doing, it is also the thinking, absorbing, and reflecting.”
– Mauro Porcini, PepsiCo Senior Vice President and Chief Design Officer
Getting internal people on side
- Empathy with people – he started by talking about himself, his desires and vision
- Placing people in a comfort zone where they can perform their best – he found spaces and moments to create natural conversations with employees and internal stakeholders
Porcini describes how he achieved this:
“When I organize a strategic meeting in New York, the city where I work and where I live, I often take team members and partners to some of my favourite Italian restaurants. I recommend the best dishes, I let them try meals that they never tried before. Through food I share my culture, I share myself, I share my life, and my vision of life. On the table there isn’t just food, there is my diversity and uniqueness, and through them I try to build a more intimate bridge with the other person’s diversity and uniqueness. Empathy is the keyword.”
The nine design practices include:
1. Leverage one-to-one connections
Discovering the personal attitudes and desires of individuals was seen as crucial to PepsiCo’s organizational innovation.
2. Engaging stakeholders
By involving clients and allies at an early stage Porcini gathered insights and data to co-develop a better vision and stronger strategy.
It also create a new “reason why” and sought to involve the customer side (e.g., big hospitality brands) more as consultants or innovation partners than as commercial partner. This was to be a turning point in relationship management, completely atypical in a consolidated and mature industry.
3. Adopting cultural change
Porcini disrupted the concept of design as a graphics and packaging tool, widening the scope to embrace tacit and hidden human needs to design for the future. An example of this is the innovation of the SodaStream, which was positioned as an eco-friendly hydration platform.
4. Encouraging abductive reasoning
Some design thinkers have an aptitude for observing data that does not fit within an existing model and guessing at a plausible explanation – this inference logic is the basis for imaging the future and is called abductive reasoning. PepsiCo created work spaces that encouraged this type of design reasoning. Transforming design into a culture-crafting tool to communicate company values.
5. Empowering visualisation
Creating prototypes helps to ensure alignment around a concept. They can also be used as incomplete fictional props leaving room for people to imagine the future.
6. Celebrating success
The launch of new product or the opening of a new market are milestones that can be used to create ‘proof points’ for internal and external stakeholders.
7. Developing the wider ecosystem
The impact of design is wider than that of a single product – creating an ecosystem of experiences across every touchpoint delivers the full value of the brand. A good example is the launch of the Apple iPhone which also had attractive packaging and in-store experience in the Apple shops. Ecosystem-based competition serves to attract new markets, media and partners and new retailing systems.
8. Identifying co-conspirators
Champions that are advocates for a new idea can act as diffusers through the organisation.
9. Aligning personal aspiration with corporate vision
Porcini says the starting point is to align the interests of employees with organisational goals, starting with a reciprocal agreement.
He says: “One question I always ask myself is ‘how can I make that person succeed?”
In conclusion: driving organizational innovation
More information about the study with PepsiCo can be read in the article “Design Thinking for Organizational Innovation at PepsiCo” Stefano Magistretti, Claudio Dell’Era, Cabirio Cautela, and Josip Kotlar in The California Management Review 65(3).
Stefano Magistretti concludes that this study contributes to the managerial field by enriching our understanding of how design thinking can foster organisational innovation, the nine design thinking practices are a useful starting point for practitioners in other sectors.