Problem Solving and Innovation

Introduction

Figure 6.1 Sometimes, navigating from the recognition of an opportunity to overcoming problems in the development of that opportunity can feel like winding through a maze.

Portions of the material in this section are based on original work by Geoffrey Graybeal and produced with support from the Rebus Community.

Marah Lidey and Naomi Hirabayashi met when they worked together at DoSomething.org, a youth-oriented global nonprofit organization. They considered each other aspirational peers - accessible friends they looked up to and leaned on. While working together, they got the idea to turn the support they gave each other into a product idea: an inspirational platform that would send users a motivational text message each day. In 2015, Hirabayashi and Lidey began to focus on turning their idea into a reality. They conducted a test with seventy individuals before publicly releasing Shine in beta in October 2015. They formally left DoSomething.Org in April 2016 and their startup venture, Shine, was born.

The problem Shine tackles is that "self-help is broken" and its value proposition addresses in part what is known as "the confidence gap," often cited as a barrier that holds women back when it comes to advancing in their careers, raising money, investing, and planning retirement. Shine has four pillars it is built to address: mental health, confidence, daily happiness, and productivity. As of 2018, the Shine community had two million users from 189 countries. What began as a motivational text message service has since evolved to include an app and additional services such as Shine Talks and audio challenges.

Hirabayashi and Lidey recognized a need - or an entrepreneurial opportunity. You learned about identifying opportunities in the chapter on Identifying Entrepreneurial Opportunity. This chapter will explore what happens next - the problem solving and need recognition techniques that entrepreneurs employ to carry the idea forward, and to solve issues that arise as the enterprise advances. Problem solving is essential to the genesis of entrepreneurship. At the same time, problem-solving techniques can be used in management and in an individual's everyday personal life.

Source: Michael Laverty and Chris Littel, https://openstax.org/books/entrepreneurship/pages/6-introduction
This work is licensed under a Creative Commons Attribution 4.0 License.

Problem Solving to Find Entrepreneurial Solutions

Learning Objectives

By the end of this section, you will be able to:

• Define problem solving in the context of entrepreneurship
• Describe and compare the adaptive model and the innovative model of problem solving
• Identify the skills entrepreneurs need for effective problem solving
• Identify types of problem solvers

As you've learned, entrepreneurs often visualize an opportunity gap, a gap between what exists and what could exist, as Hirabayashi and Lidey did with Shine. Entrepreneurial problem solving is the process of using innovation and creative solutions to close that gap by resolving societal, business, or technological problems. Sometimes, personal problems can lead to entrepreneurial opportunities if validated in the market. The entrepreneur visualizes the prospect of filling the gap with an innovative solution that might entail the revision of a product or the creation of an entirely new product. In any case, the entrepreneur approaches the problem-solving process in various ways. This chapter is more about problem solving as it pertains to the entrepreneur's thought process and approach rather than on problem solving in the sense of opportunity recognition and filling those gaps with new products.

For example, as we read in Identifying Entrepreneurial Opportunity, Sara Blakely (as shown in Figure 6.2) saw a need for body contouring and smoothing undergarments one day in the late 1990s when she was getting dressed for a party and couldn't find what she needed to give her a silhouette she'd be pleased with in a pair of slacks. She saw a problem: a market need. But her problem-solving efforts are what drove her to turn her solution (Spanx undergarments) into a viable product. Those efforts came from her self-admitted can-do attitude: "It's really important to be resourceful and scrappy - a glass half-full mindset". Her efforts at creating a new undergarment met resistance with hosiery executives, most of whom were male and out of touch with their female consumers. The hosiery owner who decided to help Blakely initially passed on the idea until running it by his daughters and realizing she was on to something. That something became Spanx, and today, Blakely is a successful entrepreneur.

Before getting into the heart of this chapter, we need to make a distinction: Decision making is different from problem solving. A decision is needed to continue or smooth a process affecting the operation of a firm. It can be intuitive or might require research and a long period of consideration. Problem solving, however, is more direct. It entails the solution of some problem where a gap exists between a current state and a desired state. Entrepreneurs are problem solvers who offer solutions using creativity or innovative ventures that exploit opportunities. This chapter focuses on different approaches to problem solving and need recognition that help potential entrepreneurs come up with ideas and refine those ideas.

Two Problem Solving Models: Adaptive and Innovative

There are two prominent established problem-solving models: adaptive and innovative. A renowned British psychologist, Michael Kirton, developed the Kirton Adaption-Innovation (KAI) Inventory to measure an individual's style of problem solving. Problem-solving preferences are dependent on the personality characteristics of originality, conformity, and efficiency, according to Kirton. The KAI inventory identifies an individual's problem-solving approach by measuring agreement with statements that align with characteristics, such as the ability to produce many novel ideas, to follow rules and get along in groups, and to systematically orient daily behavior. The results categorize an individual as an innovator or an adaptor. Innovators are highly original, do not like to conform, and value efficiency less than adaptors.

The first and more conservative approach an entrepreneur may use to solve problems is the adaptive model. The adaptive model seeks solutions for problems in ways that are tested and known to be effective. An adaptive model accepts the problem definition and is concerned with resolving problems rather than finding them. This approach seeks greater efficiency while aiming at continuity and stability. The second and more creative approach is the innovative model of entrepreneurial problem solving, which uses techniques that are unknown to the market and that bring advantage to an organization. An innovative problem-solving style challenges the problem definition, discovers problems and avenues for their solutions, and questions existing assumptions - in a nutshell, it does things differently. It uses outside-the-box thinking and searches for novel solutions. Novelty is a shared trait of creative entrepreneurship, and it's why entrepreneurs gravitate toward this method of problem solving. According to Dr. Shaun M. Powell, a senior lecturer at the University of Wollongong, Australia: "Creative entrepreneurs are notable for a distinctive management style that is based on intuition, informality and rapid decision making, whereas the more conventional thinking styles are not in accord with the unique attributes of creative entrepreneurs". This way of problem solving doesn't alter an existing product. It is the creation of something entirely new.

For example, healthcare facilities have long been known as a source of methicillin-resistant Staphylococcus aureus (MRSA), a deadly infection that can have long-term effects on patients. Vital Vio, led by Colleen Costello, has developed white light technology that effectively disinfects healthcare facilities by targeting a molecule specific to bacteria. The light, safe to humans, can burn constantly to kill regenerative bacteria. An adaptive problem-solving model would seek to minimize harm of MRSA within a hospital - to respond to it - whereas the Vital Vio is an entirely new technique that seeks to eliminate it. Adaptive solutions to MRSA include established processes and protocols for prevention, such as having doctors, nurses, and other healthcare providers clean their hands with soap and water, or an alcohol-based hand rub before and after patient care, testing patients to see if they have MRSA on their skin, cleaning hospital rooms and medical equipment, and washing and drying clothes and bed linens in the warmest recommended temperatures.

Problem-Solving Skills

While identifying problems is a necessary part of the origin of the entrepreneurial process, managing problems is an entirely different aspect once a venture is off the ground and running. An entrepreneur does not have the luxury of avoiding problems and is often responsible for all problem solving in a startup or other form of business. There are certain skills that entrepreneurs possess that make them particularly good problem solvers. Let's examine each skill (shown in (Figure 6.3).

Critical Thinking

Critical thinking is the complex analysis of a problem or issue with the goal of solving the problem or making a decision. The entrepreneur analyzes and peels away the layers of a problem to find the core of an issue facing a business. The entrepreneur focuses on the heart of the problem and responds reasonably and openly to suggestions for solving it. Critical thinking is not only important for developing entrepreneurial ideas: it is a sought-after asset in education and employment. Entrepreneur Rebecca Kantar dropped out of Harvard in 2015 to found the tech startup Imbellus, which aims to replace standardized college admissions tests like the SAT with interactive scenarios that test critical-thinking skills. Many standardized tests may include multiple choice questions asking for the answer to a straightforward knowledge question or math problem. Kantar seeks to create tests that are more concerned with the analytic ability and reasoning that goes into the process of solving the problem. Imbellus says it aims to test "how people think," not just what they know. The platform, which has not yet launched, will use simulations for its user assessments.

Communication

Communication skills, the ability to communicate messages effectively to an intended recipient, are the skills entrepreneurs use to pool resources for the purposes of investigating solutions leading to innovative problem solving and competitive advantage. Good communication allows for the free association of ideas between entrepreneurs and businesses. It can illustrate a problem area or a shared vision, and seeks stakeholder buy-in from various constituencies. Networking and communication within an industry allow the entrepreneur to recognize the position of an enterprise in the market and work toward verbalizing solutions that move an organization beyond its current state. By "verbalizing," we mean communication from and with the company/entity. Internal communications include company emails, newsletters, presentations, and reports that can set strategic goals and objectives, and report on what has been accomplished and what goals and objectives remain, so that employees within an organization are knowledgeable and can work on solving problems that remain within the organization. External communications could include press releases, blogs and websites, social media, public speeches, and presentations that explain the company's solutions to problems. They could also be investor pitches complete with business plans and financial projections.

Ideation exercises, such as brainstorming sessions (discussed in Creativity, Innovation, and Invention, are good communication tools that entrepreneurs can use to generate solutions to problems. Another such tool is a hackathon - an event, usually hosted by a tech company or organization, which brings together programmers and workers with other degrees of specialization within the company, community, or organization to collaborate on a project over a short period of time. These can last from twenty-four hours to a few days over a weekend. A hackathon can be an internal company-wide initiative or an external event that brings community participants together. A business model canvas, which is covered in Business Model and Plan and other activities outlined in other chapters can be used internally or externally to identify problems and work toward creating a viable solution.

Networking is an important manifestation of useful communication. What better method is there of presenting one's concept, gaining funding and buy-in, and marketing for the startup than through building a network of individuals willing to support your venture? A network may consist of potential employees, customers, board members, outside advisors, investors, or champions (people who just love your product) with no direct vested interest. Social networks consist of weak ties and strong ties. Sociologist Mark Granovetter studied such networks back in the 1970s, and his findings still apply today, even if we include social media networks in the definition too. Weak ties facilitate flow of information and community organization, he said, whereas strong ties represent strong connections among close friends, family members, and supportive coworkers. Strong ties require more work to maintain than weak ties (as illustrated by the strong lines and weak dotted lines in Figure 6.4) and in a business context, they don't lead to many new opportunities. Weak ties, in contrast, do open doors in that they act as bridges to other weak ties within functional areas or departments that you might not have had access to directly or through strong ties.

In fact, many young entrepreneurs, including tech entrepreneur Oliver Isaacs, realize college is a great place to begin building teams. Isaacs is the founder of viral opinion network Amirite.com, which is widely credited as the place where Internet memes started and online slang got a foothold. Amirite.com consists of a large network of pages and partnerships on Facebook and Instagram that reach 15 million users each month. Isaacs recommends using your alumni network to build a team and customer base for your own venture because you never know if you're talking to a future employee or partner.

Sharing of ideas and resources is highly valued in the entrepreneurial process. Communication is a vital skill in problem solving because the ability to identify and articulate the problem (define the problem space) is necessary to adequately address a problem. A problem can be too vague or broad or narrow. Thus, communicating the problem is important, as is conveying the solution.

Decisiveness

Decisiveness is as it sounds: the ability to make a quick, effective decision, not letting too much time go by in the process. Entrepreneurs must be productive, even in the face of risk. They often rely on intuition as well as on hard facts in making a choice. They ask what problem needs to be solved, think about solutions, and then consider the means necessary to implement an idea. And the decisions must be informed with research.

For example, as explained in Adam Grant's book The Originals, the co-founders of Warby Parker, a venture-backed startup focused on the eyewear industry, started their company while they were graduate students. At the time they knew little about the industry, but after conducting some detailed research, they learned that the industry was dominated by one major player - Luxottica. They used this information and other data to refine their strategy and business model (focusing mainly on value, quality, and convenience via an online channel). By the time they decided to launch the business, they had thought through the key details, and they attained rapid early success. Today Warby Parker has over 100 retail stores in the US, is profitable, and is valued at almost $2 billion.

Decisiveness is the catapult to progress. Amazon founder Jeff Bezos preaches the importance of decisiveness throughout his organization. Bezos believes that decisiveness can even lead to innovation. Bezos advocates for making decisions after obtaining 70 percent of the information you need to do so: "Being wrong may be less costly than you think, whereas being slow is going to be expensive for sure," Bezos wrote in a 2017 annual letter to stockholders.

Ability to Analyze Data

Data analysis is the process of analyzing data and modeling it into a structure that leads to innovative conclusions. Identifying Entrepreneurial Opportunity covered much of the sources of data that entrepreneurs might seek. But it is one thing to amass information and statistics. It is another to make sense of that data, to use it to fill a market need or forecast a trend to come. Successful founders know how to pose questions about and make meaning out of information. And if they can't do that themselves, they know how to bring in experts who can.

In addition to public sources of broad data, a business can collect data on customers when they interact with the company on social media or when they visit the company website, especially if they complete a credit card transaction. They can collect their own specific data on their own customers, including location, name, activity, and how they got to the website. Analyzing these data will give the entrepreneur a better idea about the interested audience's demographic.

In entrepreneurship, analyzing data can help with opportunity recognition, creation, and assessment by analyzing data in a variety of ways. Entrepreneurs can explore and leverage different data sources to identify and compare "attractive" opportunities, since such analyses can describe what has happened, why it happened, and how likely it is to happen again in the future. In business in general, analytics is used to help managers/entrepreneurs gain improved insight about their business operations/emerging ventures and make better, fact-based decisions.

Analytics can be descriptive, predictive, or prescriptive. Descriptive analytics involves understanding what has happened and what is happening; predictive analytics uses data from past performance to estimate future performance; and prescriptive analytics uses the results of descriptive and predictive analytics to make decisions. Data analysis can be applied to manage customer relations, inform financial and marketing activities, make pricing decisions, manage the supply chain, and plan for human resource needs, among other functions of a venture. In addition to statistical analysis, quantitative methods, and computer models to aid decision-making, companies are also increasingly using artificial intelligence algorithms to analyze data and make quick decisions.

Understanding of Business and Industry

Entrepreneurs need sound understanding of markets and industries. Often times, they are already working in a large organization when they see growth opportunities or inefficiencies in a market. The employee gains a deep understanding of the industry at hand. If the employee considers a possible solution for a problem, this solution might become the basis for a new business.

For example, consider a marketing agency that used traditional marketing for thirty years. This agency had an established clientele. An executive in the organization began studying social media analytics and social media. The executive approached the owner of the business to change processes and begin serving clients through social media, but the owner refused. Clients within the agency began to clamor for exposure on social media. The marketing executive investigated the possibility of building an agency in her locale servicing clients who wish to utilize social media. The marketing executive left the organization and started her own agency (providing, of course, that this is in compliance with any noncompete clauses in her contract). Her competitive advantage was familiarity with both traditional and social media venues. Later, the original agency started floundering because it did not offer social media advertising. Our intrepid executive purchased the agency to gain the clientele and serve those wishing to move away from traditional marketing.

A similar experience occurred for entrepreneur Katie Witkin. After working in traditional marketing roles, the University of Wisconsin-Madison graduate, pictured in Figure 6.5, left agency life behind four years out of college to cofound her own company, AGW Group. In 2009, Witkin had been interning at a music marketing agency that didn't have a social media department. She knew, both from her time at college and from observing industry trends, that social media was changing the way companies connected with customers. For her own venture, she expanded the focus to all supporting brands to manage all things digital. Today, the cultural and marketing communications agency has fifteen employees and big-name clients ranging from HBO to Red Bull.

Creative Problem-Solving Process

Learning Objectives

By the end of this section, you will be able to:

• Describe the five steps in the creative problem-solving process
• Identify and describe common creative problem-solving tools

Creativity can be an important trait of an entrepreneur, as the chapter on Creativity, Innovation, and Invention discussed. In that discussion, we learned about creativity's role in innovation. Here, we will look in more depth at creativity's role in problem solving. Let's first formally define creativity as the development of original ideas to solve an issue. The intent of being an entrepreneur is to break away from practical norms and use imagination to embrace quick and effective solutions to an existing problem, usually outside the corporate environment.

The Steps of the Creative Problem-Solving Process

Training oneself to think like an entrepreneur means learning the steps to evaluating a challenge: clarify, ideate, develop, implement, and evaluate (Figure 6.9).

Step 1: Clarify

To clarify is the critical step of recognizing the existence of a gap between the current state and a desired state. This can also be thought of as having need awareness, which occurs when the entrepreneur notes a gap between societal or customer needs and actual circumstances. Clarifying the problem by speaking with clients and developing a detailed description of the problem brings the specifics of a problem to light. Failure to identify the specifics of a problem leaves the entrepreneur with the impossible task of solving a ghost problem, a problem that is fully unknown or unseen. To establish and maintain credibility, an entrepreneur must clarify the problem by focusing on solving the problem itself, rather than solving a symptom of the problem.

For example, a farm could have polluted water, but it would not be enough to solve the problem only on that farm. Clarifying would involve identifying the source of the pollution to adequately tackle the problem. After gaining an understanding of a problem, the entrepreneur should begin to formulate plans for eliminating the gap. A fishbone diagram, as shown in Figure 6.10, is a tool that can be used to identify the causes of such a problem.

In the case of our water pollution example, a fishbone diagram exploring the issue might reveal the items shown in Figure 6.11.

Step 2: Ideate

To ideate is the step of the creative problem-solving process that involves generating and detailing ideas by the entrepreneur. After collecting all information relevant to the problem, the entrepreneur lists as many causes of the problem as possible. This is the step in which the largest variety of ideas are put forth. Each idea must be evaluated for feasibility and cost as a solution to the problem. If a farm does not have clean water, for example, the entrepreneur must list causes of toxic water and eliminate as many of those causes as possible. The entrepreneur must then move forward investigating solutions to bring the water back to a safe state. If, say, nearby livestock are polluting the water, the livestock should be isolated from the water source.

Step 3: Develop

To develop is the step in which the entrepreneur takes the list of ideas generated and tests each solution for feasibility. The entrepreneur must consider the cost of each idea and the obstacles to implementation. In the preceding example, adding a chemical to the water may not be a feasible solution to the farmer. Not every farmer wants additional chloride or fluoride added to the water due to the effect on both humans and livestock. These tradeoffs should be addressed in the feasibility assessment. The farmer might prefer a filtration system, but the cost of that solution might not be practicable. The entrepreneur should identify and assess alternative solutions to find one that is most cost-effective and feasible to the customer.

Step 4: Implement

To implement is the step in which the solution to the problem is tested and evaluated. The entrepreneur walks through the planned implementation with the client and tests each part of the solution, if a service, or thoroughly tests a developed good. The entrepreneur implements the solution and goes through a structured system of follow-up to ensure the solution remains effective and viable. In the water example, the solution would be reducing runoff from toxic insecticides by adding prairie strips, buffers of grass, and vegetation along banks of streams.

Step 5: Evaluate

To evaluate is the step in which the final solution is assessed. This is a very important step that entrepreneurs often overlook. Any fallacy in the implementation of the product or service is reassessed, and new solutions are implemented. A continual testing process may be needed to find the final solution. The prairie strips, buffers of grass, and vegetation along banks of streams chosen in the farming water example should then be analyzed and tested to ensure the chosen solution changed the content of the water.

Are You Ready?

Using Creativity to Solve Problems

Entrepreneurs are faced with solving many problems as they develop their ideas for filling gaps, whether those opportunities involve establishing a new company or starting a new enterprise within an existing company. Some of these problems include staffing, hiring and managing employees, handling legal compliance, funding, marketing, and paying taxes. Beyond the mundane activities listed, the entrepreneur, or the team that the entrepreneur puts in place, is indispensable in maintaining the ongoing creativity behind the product line or service offered. Innovation and creativity in the business are necessary to expand the product line or develop a groundbreaking service.

It is not necessary for the entrepreneur to feel isolated when it comes to finding creative solutions to a problem. There are societies, tools, and new methods available to spur the creativity of the entrepreneur that will further support the success and expansion of a new enterprise. Learning and using entrepreneurial methods to solve problems alleviates the stress many startup owners feel. The entrepreneur's creativity will increase using collaborative methodologies. Some entrepreneurial collaborative methodologies include crowdsourcing, brainstorming, storyboarding, conducting quick online surveys to test ideas and concepts, and team creativity activities.

Crowdsourcing

Professor Daren Brabham at the University of Southern California has written books on crowdsourcing and touts its potential in for-profit and not-for-profit business sectors. He defines it simply as "an online, distributed problem-solving and production model". Crowdsourcing involves teams of amateurs and nonexperts working together to form a solution to a problem. The idea, as cbsnews.com's Jennifer Alsever has put it, is to "tap into the collective intelligence of the public at large to complete business-related tasks that a company would normally either perform itself or outsource to a third-party provider. Yet free labor is only a narrow part of crowdsourcing's appeal. More importantly, it enables managers to expand the size of their talent pool while also gaining deeper insight into what customers really want. The challenge is to take a cautionary approach to the ‘wisdom of the crowd,' which can lead to a ‘herd' mentality".

This new business prototype, similar to outsourcing, features an enterprise posting a problem online and asking for volunteers to consider the problem and propose solutions. Volunteers earn a reward, such as prize money, promotional materials like a T-shirt, royalties on creative outlets like photos or designs, and in some cases, compensation for their labor. Before proposing the solution, volunteers learn that the solutions become the intellectual property of the startup posting the problem. The solution is then mass produced for profit by the startup that posted the problem. The process evolves into the crowdsourcing process after the enterprise mass produces and profits from the labor of the volunteers and the team. Entrepreneurs should consider that untapped masses have solutions for many issues for which agendas do not yet exist. Crowdsourcing can exploit those agendas and add to the tools used to stimulate personal creativity. This type of innovation is planned and strategically implemented for profit.

For example, Bombardier held a crowdsourced innovation contest to solicit input on the future of train interiors, including seat design and coach class interior. A corporate jury judged the submissions, with the top ten receiving computers or cash prizes. Companies are often constrained, however, by internal rules limiting open source or external idea sourcing, as they could be accused of "stealing" an idea. While crowdsourcing outside of software can be problematic, some products such as MakerBot's 3D printers, 3DR's drones, and Jibo's Social Robot have used developer kits and "makers" to help build a community and stimulate innovation from the outside.

Work It Out

Amazon's Mechanical Turk is an online crowdsourcing platform that allows individuals to post tasks for workers to complete. In many instances, these tasks are compensated, but the payment can be less than one dollar per item completed. Mechanical Turk is one of the largest and most well-known crowdsourcing platforms, but there are a number of other more niche ones as well that would apply to smaller markets. In the case of innovation contests and outsourced tasks from corporations, those tasks may be hosted internally by the corporation.

Brainstorming

Brainstorming is the generation of ideas in an environment free of judgment or dissension with the goal of creating solutions. See Creativity, Innovation, and Invention to refresh yourself on this technique. Brainstorming is meant to stimulate participants into thinking about problem solving in a new way. Using a multifunctional group, meaning participants come from different departments and with different skill sets, gives entrepreneurs and support teams a genuine chance to suggest and actualize ideas. The group works together to refine and prototype potential solutions to a problem.

The setting for a brainstorming session should remain as informal and relaxed as possible. The group needs to avoid standard solutions. All ideas are welcome and listed and considered with no censorship and with no regard to administrative restrictions. All team members have an equal voice. The focus of brainstorming is on quantity of ideas rather than on the ideal solution provided in every suggestion. A classic entrepreneurial brainstorming activity, as popularized by business software developer Strategyzer, is known as the "silly cow" exercise. Teams come up with ideas for new business models pertaining to a cow, with the results often outrageous, ranging from sponsored cows to stroking cows for therapeutic release. Participants are asked to identify some aspect of a cow and develop three business models around that concept in a short time period, typically two minutes or fewer. The activity is designed to get creative juices flowing.

Storyboarding

Storyboarding is the process of presenting an idea in a step-by-step graphic format, as Figure 6.12 shows. This tool is useful when the entrepreneur is attempting to visualize a solution to a problem. The steps to the solution of a problem are sketched and hung in graphic format. Once the original graphic is placed, images of steps working toward a solution are added, subtracted, and rearranged on a continual basis, until the ultimate solution emerges in the ultimate graphic format. For many years, entrepreneurs have used this process to create a pre-visual for various media sequences.

Team Creativity

Team creativity is the process whereby an entrepreneur works with a team to create an unexpected solution for an issue or challenge. Teams progress through the same creative problem-solving process described already: clarify, ideate, develop, implement, and evaluate. The main advantage of team creativity is the collaboration and support members receive from one another. Great teams trust in other team members, have diverse members with diverse points of view, are cohesive, and have chemistry.

Team members should work in a stress-free and relaxing environment. Reinforcement and expansion of ideas in the team environment motivates the team to continually expand horizons toward problem solution. A small idea in a team may spark the imagination of a team member to an original idea. Mark Zuckerberg, cofounder of Facebook, once said, "The most important thing for you as an entrepreneur trying to build something is, you need to build a really good team. And that's what I spend all my time on".

Entrepreneur In Action

Design Thinking

Learning Objectives

By the end of this section, you will be able to:

• Explain the design thinking process
• Discuss some design thinking tools

David Kelley, founder of Stanford University's Design School and cofounder of design company IDEO, is credited as the originator of design thinking, at least within business and entrepreneurial contexts. You were briefly introduced to design thinking in Creativity, Innovation, and Invention, but we will delve into it in more depth here. IDEO grew from a merger of the creator of Apple's first mouse and the first laptop computer designer, David Kelley Design and ID Two, respectively. Almost a decade after the 1982 Apple creations, the 1991-merged company primarily focused on the traditional design of products, ranging from toothbrushes to chairs. Yet another decade later, the company found itself designing consumer experiences more so than consumer products. Kelley began using the word "thinking" to describe the design process involved in creating customer experiences rather than creating physical products. The term design thinking was born.

The current IDEO CEO Tim Brown defines design thinking as "a human-centered and collaborative approach to problem-solving, using a designed mindset to solve complex problems". Design thinking is a method to focus the design and development decisions of a product on the needs of the customer, typically involving an empathy-driven process to define complex problems and create solutions that address those problems.

A common core of design thinking is its application beyond the design studio, as the methods and tools have been articulated for use by those outside of the field, particularly business managers. Design practice is now being applied beyond product and graphic areas to the design of digital interactions, services, business strategy, and social policy.

Design Thinking Process

Business schools have typically taught a rational, analytic approach to thinking. It focuses on well-defined goals and constraints, and thought precedes action in a sequential process of planning and analysis. The design thinking process approaches problem solving differently. Thinking and doing are often intertwined in an iterative exploration of the design "space," and the process uncovers goals and constraints, rather than identifying them up front.

One design thinking approach that is taught at places like Stanford's Design School and organizations like the LUMA Institute (a global company that teaches people how to be innovative) is human-centered design (HCD). HCD, as the name suggests, focuses on people during design and development. This speaks to the Tim Brown definition of design thinking. Inspiration for ideas comes from exploration of actual people, their needs and problems.

Three spaces - inspiration, ideation, and implementation - compose the design thinking process (Figure 6.14). The process uses "spaces" and not "phases" because multiple spaces can happen simultaneously.

Nevertheless, inspiration usually occurs first. This entails identifying a problem or opportunity that motivates someone to search for solutions. Ideation is the process of generating ideas and solutions through various techniques such as brainstorming and sketching sessions. There are hundreds of ideation techniques available. A few examples of ideation exercises include Top Five, How Might We, Mash-up, and Co-Creation Session. In Top Five, everyone on the team writes down their top five ideas, shares them, and clusters similar ideas. In How Might We, the team looks at insight statements and reframes them as "How Might We" questions by adding that phrase at the beginning. The goal is to find opportunities for design that also allows for a variety of solutions. Mash-up involves combining existing brands or concepts to create something new. The team identifies those brands or concepts that represent a quality they desire in their solution, and they "mash up" those ideas to create a new idea. A co-creation session incorporates the desired market into the creation process by recruiting a group of people from the market to work on the design with the team. The goal is to capture the feedback the group provides by treating them as designers, not as interview subjects. Implemented solutions evolve from interactions with users and from the ongoing creation and refinement of possible solutions. Design thinking incorporates experience-based insights, judgments, and intuition from the end users' perspectives, while in a rational analytic approach, the solution process often becomes formalized into a set of rules.

Nesta is a UK-based innovation foundation that offers many design thinking tools and resources similar to IDEO. Named for the acronym NESTA, the National Endowment for Science, Technology and the Arts, the organization was established in 1998 with an endowment from the UK National Lottery and became an independent charity in 2012. Nesta's strategy focuses on health, government innovation, education, arts, and creative economy and innovation policy. Nesta offers a set of five criteria to ascertain that an occupation is creative:

1. Novel process
2. Mechanization resistant
3. Nonrepetitive or nonuniform function
4. Makes a creative contribution to the value chain
5. Involves interpretation not merely a transformation in the service or artifact

As the name implies, design thinking originates from design. As design is one of the identified creative industries, there's a clear connection between creative industries and design thinking. In fact, Nesta offers inspiration and ideation exercises that are freely available for users wishing to implement design thinking practices.

Human-Centered Design Thinking Spaces

The Stanford Design School uses human-centered design thinking (HCD) as its design thinking approach. HCD emphasizes the following spaces of the design thinking process:

• Empathizing: As illustrated by the human-centered approach, it is important to have empathy for the problem you are attempting to solve. Empathy, as the chapter on Creativity, Innovation, and Invention defined, means observing and immersing yourself in the surrounding environment to engage with and understand people's experiences and motivations.
• Defining: This aspect involves describing the core problem(s) that you and your team have identified. Asking "how might we?" questions helps narrow the focus, as the ultimate aim here is to identify a problem statement that illustrates the problem you want to tackle. "Frame Your Design" is one such challenge in what IDEO calls its "toolkit" that works well here. Frame Your Design asks you to write down your problem and then refine it by following specific steps so that you end up with a design question that serves as a starting point but leaves room for creativity.
• Ideating: This is where you begin to come up with ideas that address the problem "space" you have defined. There are hundreds of exercises aimed at the ideation process, ranging from brainstorming to "Five whys?" in the IDEO toolkit. The "Five whys" is a questioning method in which the researcher, in looking for information to solve a problem, asks a respondent a broad question, then asks "why" to get deeper into the respondent's thinking. IDEO puts it this way: "You'll use this method while you're conducting an interview and start with really broad questions like "Do you save much money?" or "How was your harvest this year?" Then, by asking why five times you'll get some essential answers to complicated problems. This can be a great method to use if you're trying to get at the human and emotional roots of a problem".
• Prototyping: In this space, the entrepreneur creates and tests inexpensive, scaled-down versions of a product with features or benefits that serve as solutions for previously identified problems. This could be tested internally among employees, a process known as dogfooding, or externally with potential customers. This is an experimental phase.
• Testing: Designers apply rigorous tests of the complete product using the best solutions identified in the prototyping space.

What Can You Do?

Design Thinking Tools

There are numerous design thinking tools aimed to aid or stimulate your design thinking activities. They stem from organizations dedicated to design thinking like IDEO and Google Ventures. While methodologies incorporate processes and techniques, tools are resources that enable such approaches. These may be activities, or templates that facilitate the approach.

• Innovation Flowchart: A sample innovation flowchart may map out the details of the process. The structured overview serves as an organizational tool in the development process.

• Question Ladder: A tool that helps you ask the "right" questions by refining your questions (Figure 6.15). Asking the "wrong" questions can yield meaningless or less-than-adequate results.

• Design Thinking Tool Kit: There are various tool kits for select audiences. For example, the "design thinking for educators" toolkit has design thinking resources related to education. A typical tool kit includes a wide assortment of resources with methods and instructions to help you put design thinking into action.
• IDEO Design Kit: IDEO offers an approximately 200-page free PDF, "The Field Guide to Human Centered Design," with activities on mindsets, ideation, inspiration, implementation and a few case studies: http://www.designkit.org/resources/1.
• Google Ventures Design Sprint: A five-day design-thinking exercise that helps resolve questions through design, prototyping, and testing: https://www.gv.com/sprint/.
• Design Thinking Mix Tapes: Stanford's Design School offers three "mixtapes" that serve as guides through a half day of design thinking work in the areas of understanding, experimentation, and ideation: https://dschool.stanford.edu/resources/chart-a-new-course-put-design-thinking-to-work.
• WE THINQ: Software designed to enable collaboration in innovation management: https://www.ideaconnection.com/software/we-thinq-258.html.

Entrepreneur In Action

Lean Processes

Learning Objectives

By the end of this section, you will be able to:

• Discuss the lean process methodology
• Understand the phases of the lean problem-solving process.

You have learned about different problem-solving approaches that entrepreneurs take to lead their startups and work with others. Most of these approaches have had to do with the entrepreneur's cognitive or creative mindsets. Now we will learn about an approach that is more rooted in process, called lean process. Lean problem solving has been used as an entrepreneurial methodology in new and emerging ventures, and it's interesting that it comes from a large corporate, manufacturing background that focuses on efficiencies. The Six Sigma methodology, pioneered at Motorola in the 1970s and 1980s, and adopted by many companies, is a disciplined, data-driven approach that provides companies tools to improve the capability of their business processes. According to the American Society for Quality, "Six Sigma views all work as processes that can be defined, measured, analyzed, improved and controlled. A set of qualitative and quantitative tools is used to drive process improvement. This increase in performance and decrease in process variation helps lead to defect reduction and improvement in profits, employee morale, and quality of products or services". GE copied it and created the "Process Excellence" programs that millions of managers and others have taken to get certified at various "belts". Although Six Sigma and Process Excellence do not fit strictly in terms of entrepreneurship, as they are used mainly by large, mature companies, many of the methods fit in the lean model.

Toyota pioneered the lean process in the 1980s. The term "lean manufacturing" is the most common, but it is much more than manufacturing. The lean process is a systematic method for the maximizing of continuous improvement and the minimization of surplus or unused material in the production of a process. The entrepreneur begins the startup with a sense the original product will be the product carrying the organization to success in the long term. In most cases, the good or service will require modification to maintain a process, technology, or up-to-date product offering. Lean problem solving means the entrepreneur's entire team scans both the company's internal and external environments for continuous improvement and methods for bringing additional revenue to the startup by cost improvement processes that promote sustainable value. The external environment encompasses customers, industry trends, and competition. The internal environment comprises the factors inside the enterprise, such as employees, and internal practices and processes. In lean manufacturing, for example, improving efficiencies in the internal environment should lead to advantages in the external environment (whether that be cost savings to customers, competitive advantage from more output/superior product, etc.).

For example, every mile saved per day per UPS truck driver results in approximately $50 million in savings per year, according to Juan Perez, the company's chief information and engineering officer. Using customer data and artificial intelligence, the company created a system dubbed ORION, which is an acronym for On-Road Integrated Optimization and Navigation. To date, the system has resulted in $400 million in savings to UPS. By applying the lean process, everything that UPS saves on the input (by reducing mileage) leads to savings on the output, which leads faster deliveries, lower costs for consumers, and more profit for UPS.

Lean Problem-Solving Process

The lean problem-solving process is a cycle of observation, assessment, and continual evaluation. As shown in Table 6.1, this cycle typically involves eight specific steps.

Are You Ready?

Lean Problem-Solving Phases

Observation is the phase in which the entrepreneur studies the challenge and notes all facets of the challenge requiring solution. In this phase, the entrepreneur asks questions and conducts research about the change needed for a successful product, outcome, or service. The entrepreneurs must determine why the change is needed. What is the purpose of the endeavor? Feedback is extremely important in this phase.

For example, a community asked a group of entrepreneurs to help address the youth obesity problem in a middle school. The entrepreneurs began to study the intake of food by the children and determined that both the content of the school lunch menu and the lifestyle of the majority of the children were affecting the obesity rate in the community. They then defined the purpose of the project as finding a low-cost, low-risk method of changing the lunch menu and agreed that the primary outcome would be a 30 percent reduction in the obesity rate of the children. The entrepreneurs began to assess the cost of changing the lunch menu and observing what else the kids ate. The entrepreneurs discovered that the lunch menu change required to reduce the obesity rate was beyond the financial capability of the school district. Research also showed that many of the children, products of single-parent homes, were eating high-calorie, high-fat, take-out foods for dinner. Further observation revealed that the children did not engage in physical activity after hours because the local surroundings were not safe. The community needed a process to transform the wellness of the children, and the entrepreneurs recommended using a lean process approach to help the children as quickly as possible.

After the observation of the problem comes assessment, the phase in which the entrepreneur experiments and analyzes the potential process and its capabilities. The entrepreneur leverages creative tools and resources to arrive at a solution and assesses each step of a possible solution. Each step must add value to the solution, or that step in the solution is unnecessary. In addition, the step must be capable of solving the issue and add flexibility to the solution. How is the process or product being improved? In this phase, a prototype of the product is developed and delivered. The entrepreneur must ask the customer if all needs and wants are satisfied with the prototype. If the prototype is being developed for mass production, surveying customers about potential sales is essential. In the school lunch example, the school system would have been the customer of the new food menu (prototype) in the assessment phase.

Evaluation is the phase in which behaviors are analyzed to assess success. The entrepreneur continually studies each phase of the solution to observe the effectiveness of outcomes desired by the client. The entrepreneur ensures that transformation is built into the habits of the school to obtain, maintain, and develop the desired outcomes.

In a real-world example of a company applying lean processes, the New Balance Company, which designs and manufactures both athletic and casual shoes, used a batching approach in the early 2000s that organized production by departments, so that all of the cutting took place in one department, all of the stitching took place in another, and so forth. While it seems that batching tasks would improve efficiency, at New Balance, it meant that production of one pair of shoes took nine days. Executives observed piles of inventory sitting between floors and departments, and noticed employees waiting while there were delays in the production line. They also noticed that the pay structure contributed to the piles of works in process because employees were paid by the piece, which encouraged them to produce as much as possible.

The company applied lean principles to rearrange the production floor by value streams, or the making of a product by sharing similar processing steps. On one side was "cut and stitch" products using US materials of leather and mesh, while another side used premade products from overseas for soles, inserts, and kits. This change cut the time to make a pair of shoes down to four hours, meaning that domestic plants could ship some orders in twenty-four hours, while competitors may need as much as 121 days to ship when they outsourced manufacturing to Asia.

An often-used lean problem-solving tool is whiteboarding (Figure 6.16). Whiteboarding is a type of graphing that permits the entrepreneur to plot each step in a process to build comprehension and detailing of the process. The entrepreneur draws each step on the whiteboard using a linking-type diagram, and draws arrows to show how processes affect other processes. Seeing the flow of the process allows the entrepreneur to note where functions in the process are duplicated or inconsistent.

For example, in a community garden, storing tools, such as hoes and hand trowels for weeding, in different sheds wastes time when preparing to begin the process of weeding. These tools should be stored collectively to eliminate multiple trips and wasted time. Seeing the process on a whiteboard or other medium brings awareness to how processes can be improved. After the process is changed, it is graphed again for further scrutiny.

Entrepreneur In Action

Key Terms

adaptive model
method of entrepreneurial problem solving that seeks solutions in ways that are tested and known to be effective

assessment
lean problem-solving process phase in which the entrepreneur experiments and analyzes the potential process and its capabilities

brainstorming
generation of ideas in an environment free of judgment or dissension with the goal of creating solutions

clarify
first step of the creative process, which involves recognizing the existence of a gap between the current state and a desired state

communication skills
skills entrepreneurs use to pool resources for the purposes of investigating solutions leading to innovative problem solving and competitive advantage

creativity
development of original ideas

critical thinking
complex analysis of a problem or issue with the goal of solving the problem or making a decision

crowdsourcing
teams of amateurs and non-experts working together to form a solution to a problem

data analysis
process of analyzing data and modeling the data into a structure that leads to innovative conclusions

decisiveness
ability to make a quick, effective decision, not letting too much time go by in the process

design thinking
method to focus the design and development decisions of a product on the needs of the customer, typically involving an empathy-driven process to define complex problems and create solutions that address those problems

develop
stage in which the entrepreneur takes the list of ideas generated and tests each solution for feasibility

entrepreneurial problem solving
process of using innovation and creative solutions to close the opportunity gap by resolving complex societal, business, or technological problems

evaluate
stage in which the final solution is assessed

evaluation
lean problem-solving process phase in which behaviors are analyzed to assess success

external environment
outside the enterprise and encompasses customers, industry trends, and competition

hackathon
event, usually hosted by a tech company or organization, which brings together programmers and workers with other degrees of specialization within the company, community, or organization to collaborate on a project over a short period of time

human-centered design
focuses on people during design and development

ideate
stage of the creative problem-solving process leading to the detailing and formation of idea generation by the entrepreneur

implement
means to enact the plan and test for success

innovative model
method of entrepreneurial problem solving that uses techniques unknown to the market and that bring competitive advantage to an organization

internal environment
comprises the factors inside the enterprise, such as employees, and internal practices and processes

lean process
systematic process for the maximizing of continuous improvement and the minimization of surplus or unused material in the production of a process

need awareness
occurs when the entrepreneur notes a gap between societal or customer needs and actual circumstances

observation
lean problem-solving process phase in which the entrepreneur studies the challenge and notes all facets of the challenge requiring solution

petitioner problem solvers
problem solvers who see a problem and ask others for solution ideas

resourcefulness
ability to discover clever solutions to obstacles

self-regulating problem solvers
problem solvers who are autonomous and work on their own, without external influence; they have the ability to see a problem, immediately visualize a possible solution to the problem, and seek to devise a solution

storyboarding
process of presenting an idea in a step-by-step graphic format

team creativity
process of a team creating an unexpected solution for an issue or challenge

theorist problem solvers
problem solvers who see a problem and begin to consider a path toward solving the problem using a theory

whiteboarding
type of graphing that permits the entrepreneur to plot each step in a process to build comprehension and detailing of the process

Summary

Problem Solving to Find Entrepreneurial Solutions

Problem solving involves more than making decisions. Problem solving is a necessary component of entrepreneurial genesis, used to manage your business and helpful in addressing everyday personal situations. Entrepreneurs must know their personal strengths and capitalize on applicable problem-solving methods to create innovative products. Moving a startup ahead of the competition requires the entrepreneur to use all problem-solving sources and skills in the entrepreneur's tool box. Problem-solving models can be adaptive or innovative, the latter being more common among entrepreneurs. Problem-solving skills include critical thinking, communication, decisiveness, resourcefulness, business and industry awareness, and an ability to analyze data. There are various types of problem solvers, including self-regulating, theorist, and petitioner problem solvers.

Creative Problem-Solving Process

The creative problem-solving process is a logical process. The steps to the creative problem-solving process are clarify, ideate, develop, implement, and evaluate. Each step is an aid to creating a solution. The steps are repeated cyclically until the entrepreneur develops an innovative solution. When entrepreneurs experience creativity block, tools to alleviate the block are available. These tools include crowdsourcing, brainstorming, and storyboarding. Each of these tools assist the entrepreneur in innovative thinking.

Design Thinking

Design thinking in business and entrepreneurship was made prevalent by David Kelley, founder of Stanford University's Design School and cofounder of design company IDEO. Design thinking, which espouses an HCD approach, can be applied beyond product and graphic design to include the design of social policy, business strategy, services, and digital interactions. The five stages as espoused in Stanford's design thinking model are empathizing, defining, ideating, prototyping, and testing. There are numerous design thinking tools that help develop and carry out these processes from various organizations and companies, ranging from IDEO to Google.

Lean Processes

Lean process is a systematic process for maximizing continuous improvement through minimizing surplus or unused material in the production of a current process. With origins in manufacturing, the lean process can be applied to internal organizational processes as well as external product development. Lean process uses observation, assessment and evaluation, and whiteboarding techniques to solve problems.