For more than two decades, Jay Greene has written about some of the most important companies, business trends, and top executives in the world. From 2000 to 2009, he served as BusinessWeek’s Seattle bureau chief, overseeing the magazine’s coverage in the Pacific Northwest. His primary reporting responsibility was Microsoft. He frequently spoke with Bill Gates and Steve Ballmer, covering the company’s battles with antitrust regulators both domestically and abroad and chronicling the company’s transition from scrappy upstart to bureaucratic giant.

Writing about technology at BusinessWeek gave Greene the opportunity to cover design just as it was emerging as a one of the key business strategies of the 21st Century, a way for businesses to differentiate themselves from increasingly commoditized rivals.

He traveled to Europe to learn about the creative process at the high-end consumer electronics firm, Bang & Olufsen, and visited Nike’s Innovation Kitchen just outside of Portland, Oregon, to learn the recipe for making its much sought-after shoes. That reporting led Greene to write his first book, Design Is How It Works, a look at the innovation process at such companies as Virgin Atlantic, Nike and Lego. His reporting shows that the best design isn’t merely about style and form. It’s about the way products and services work. Greene explains how the smartest companies place a premium on design because it helps them intuit what customers want often before customers even know they want it.

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Morris: Before discussing your brilliant book, Design Is How It Works, a few general questions. Within the past 12-18 months, I have read and reviewed a number of other excellent books that also discuss the importance of design in business, notably Roger Martin’s The Design of Business, Tim Brown’s Change by Design, and Thomas Lockwood’s Design Thinking. Here’s my question. How do you explain the recent and substantial attention paid to business design in these and other books as well as in countless articles?

Greene: More and more, executives are recognizing design as a critical business strategy for the twenty-first century. As the world economy becomes truly global, commoditization of markets is happening on a broad scale. Companies are learning that competing merely on cost is a dangerous game. The ones that have instead tried to compete by creating better experiences for their customers are often able to avoid the commoditization trap. The smartest executives are trying to figure out how their companies can use design to compete.

Morris: What seem to be the most common misconceptions about what design is…and isn’t?

Greene: Too often, executives think of design as the sheen that a bunch of creative types gloss on a product just before it goes to market. That’s not how companies that do great design think. To them, design, as the title of my book says, is how it works. A product can look great. But if it doesn’t meet the customers’ needs, if it doesn’t function the way it’s supposed to, if it’s manufactured poorly, aesthetics won’t matter. Well-designed products often look good. But they also create experiences customers crave.

Morris: I agree that “creating experiences that consumers crave” is important but what if consumers have no idea what they crave? Will they “know it when it happens”?

Greene: Sure, and the book is full of those examples. Take Porsche, which believed its customers would want a sporty, high-powered, off-road capable SUV. The automotive press hammered Porsche, suggesting that it stick to its sports car roots. But when the Cayenne debuted in 2003, it quickly became the company’s best-selling model. Or consider Clif Bar, which pioneered a women-specific energy bar, even when naysayers suggested it’d cannibalize its flagship product. But its Luna bars – designed to meet the specific nutrition needs of women athletes – created a new market and really a new brand that Clif Bar continues to mine. And neither the Cayenne nor the Luna bar was a product about which customers specifically asked.

Morris: Please explain why design isn’t something that can be benchmarked.

Greene: This is really one of the great challenges for design as a business discipline. Business consultants have perfected benchmarking manufacturing processes, supply-chain operations and customer-service departments. It makes it much easier for CEOs, many of whom rose through the finance ranks at their companies, to analyze new strategies in those areas.

Though some folks have tried, design doesn’t really lend itself to metrics that can be measured. You could look at something like cost per designer and measure that against rivals. But it’s painfully imprecise.

And trust me, none of the companies that do design well try to benchmark it. They recognize that some design processes will cost more than others, and they roll with it, understanding that the best design pays off not just in great sales, but also in consumer loyalty. Those are things you can benchmark and the companies that do design well generally fare far better in those categories than their rivals.

Morris: What is “conceptual hallucination” and what is its relevance to the design process?

Greene: It’s a phrase that David Merkowski, executive creative director at frog design, uses to describe his design process. Too often, companies take measured steps as they develop new products. They look at existing market data and ask customers what they want. The results are incremental improvements over existing products at best. Conceptual hallucination is about challenging convention. Designers often talk about the epiphanies they had conjuring up great products. For my book, I chatted with David Mydans, a senior product designer at the outdoor goods retailer REI. He tinkered and tinkered at a new design for a tent until one day, he visualized a novel new structure for the company’s Quarter Dome tent. The structure is altogether different than anything that came before it, reducing weight and adding space inside the tent. Mydans didn’t use the phrase “conceptual hallucination” to describe his design process, but it’s absolutely what he did. It’s that process that often leads to the biggest breakthroughs and best-selling products. The new tent won awards from the outdoor industry media and nearly tripled sales over the tent it replaced in REI’s portfolio.

Morris: A great deal has been said and written about innovation in recent years. Here’s my opinion: The environment within which innovation thrives must itself be designed, established, and then sustained with innovative thinking in terms of its structure, leadership, management, authority, responsibility, division of labor, allocation of resources, etc.  What do you think?

Greene: That’s spot on. Great design flows as much from a culture that nurtures it as it does from the creative minds that often get the credit for it. The companies that do design consistently well have CEOs that embrace the importance of design, even if they’re not designers themselves. They give employees the mandate to take risks to come up with the most innovative products and services. They accept the occasional failure as the cost of being creative, and rather than bury that misstep, they use it as a tool from which employees can learn. Too many companies pay lip service to all of those characteristics. CEOs say they embrace risk, but shoot down the most creative ideas because marketing data doesn’t’ exist to support a business plan. That, in turn, leads employees to pursue more incremental advances.

Morris: Now please focus on Design Is How It Works. For those who have not as yet read it, you devote a separate chapter to each of several exemplary companies that include Porsche, Nike, LEGO, OXO, and Virgin Atlantic. However different these and other exemplary companies may be in most other respects, what do they share in common in terms of how they provide “singular experiences unobtainable anywhere else”?

Greene: It was important for me to focus on companies in a variety of businesses, companies that are large, medium and small, companies that are publicly traded and privately held, and companies from both the United States and abroad. I wanted to make the case that any company can do great design. And I wanted to show how there are several different approaches to doing great design. Apple, the design poster child of the day, does terrific design. But it’s not the only company that does design well, and its approach to design isn’t the last word in doing great design.

The traits the companies in the book do share tend to be at the highest level. They are companies that embrace risk and are willing to learn from the occasional failure. They trust their instincts, mostly because they are hardcore users of their products and services or, at least, spend significant time and resources understanding their customers. And they understand that design is about the experience that customers have with their product or service. Aesthetics matter, but all of the companies in the book show that great design is about how their products and services work.

Morris: In 1970, George Pake selected Palo Alto, California, as the site of a second research center for Xerox, what was to become known as “PARC,” located 2,000 miles from Xerox’s corporate headquarters in New York. Here’s my question: As a general rule if not an official policy, is it best to keep research activities apart from — and perhaps even protected from — corporate politics?

Greene: Actually, I think the best companies at design avoid the sort of corporate politics that corrupt innovation. I don’t think geography really matters. If you have a corporate culture that leads senior executives to consider moving research across the country, maybe you ought to revisit the culture rather than looking for new real estate.

Morris: In the book you cite examples of companies such as Bang & Olufsen and LEGO that “lost their way” insofar as world-class design is concerned. How does this happen? How to avoid it? How to get back on a proper course?

Greene: Bang & Olufsen’s problems came primarily from focusing too much on aesthetics and too little on how their products work. The company, which makes ultra high-end electronics, produced a beautiful $1,275 mobile phone, the Serene, in 2005. It’s an absolutely gorgeous device that has a circular key pad designed to evoke a rotary phone. But that made texting and writing e-mails painfully difficult. The company made a stunning portable music player, the BeoSound 2, that came without a screen, making navigating through song libraries nearly impossible.

LEGO really just got too big for its britches. Through the twentieth century, it became one of the best-known toy brands on the planet. By the beginning of the twenty-first century, LEGO executives focused more on extending the brand than innovating great toys. The company launched such poorly designed products as its Galidor figures that were created solely to augment a short-lived kids’ TV show. At the same time, it let designers of its brick toys go wild, creating complex models that drove up costs but shrunk business. To its great credit, LEGO renewed its focus on innovation, creating a structured design process that dictates product development at the company. It’s not something that will work at every company, but LEGO has turned its business around entirely, becoming one of the great design stories of the last five years. B&O is still working through its challenges.

Morris: Some of the most interesting people you discuss in Design Is How It Works are those who are centrally involved in their company’s entire design process. For example, Nike’s Tinker Hatfield, Porsche’s Michael Mauer, and LEGO’s Paal Smith-Meyer.  With all due respect to their talents and skills, I think much of their success is explained by the fact that they and their associates have the full support of senior management. Is that a fair assessment?

Greene: It’s true they have the full support of senior management. It’d be hard to imagine design flourishing in an environment where senior managers don’t embrace the concept. There has to be a willingness to take risks and to accept occasional failures. There has to be a commitment to understanding customers and creating new business categories. That said, Hatfield, Mauer and Smith-Meyer have shown themselves to be extremely talented. Chances are they could work for just about any company they’d want. The three of them are working for Nike, Porsche and LEGO in large part, I suspect, because they have the support of their managers.

Morris: When explaining Richard Branson’s success, you suggest that he did what Ferry Porsche, Gary Erickson, and Alex Calderwood (Ace Hotels) had done: By catering to his own needs, Branson realized “he’d address the unspoken desires of other travelers.” That seems so obvious and yet so few founder/CEOs seem to “get it.” Why?

Greene: I think it’s because many executives are running businesses in fields they struggle to understand. Plenty of CEOs are hired because they’re terrific managers, great cost-cutters or savvy sales executives. It’s always surprising to me how little time and money companies spend trying to understand their customers. Often, they’ll drop some cash on a customer survey. Or they’ll host focus groups to see what folks think about their products.

 

The companies that design products customers love have a deep understanding of what their customers want often before the customers even know they want it. Some, like Branson and the others you mention, can intuit those needs because they are hardcore users. But plenty of other companies, run by executives that don’t have that instinct, put resources behind ethnographic research. They don’t just ask customers questions; they often go to their homes and study their lifestyles. They observe pet peeves that consumers accept because there are no alternatives. The reason why it’s so hard is that it’s expensive and the payoff is often hard to quantify.

Morris: In your opinion, in years to come, will consumers play an even greater role in the design process for products and services that will compete for their attention, their preference, and their loyalty?

Greene: I think they might. I also think involving consumers in the design process has to be done thoughtfully. Some companies might think that involving customers is largely about asking them what they want. The reality is, most design breakthroughs are products that customers never really realized they needed. Think about the iPhone, perhaps the most iconic design device of the day. Before it existed, you’d have been hard-pressed to find consumers who could tell you that they wanted a touch-screen phone that offered thousands of applications from an online store. There’s a danger in turning the design process over to consumers, expecting to get the next iPhone, because most customers would never know to ask for it.

That doesn’t mean, though, that companies should cut consumers out of the process. To the contrary, companies need to understand their customers deeply. Companies need to focus on their habits, learn their pet peeves, understand what they want even when they don’t ask for it. There are times where that puts customers into the design process. LEGO is one of the few companies that’s really mastered this. It has adult customers that border on fanatical. They attend LEGO conventions and subscribe to LEGO magazines. So when it was time for LEGO to update Mindstorms, its robotics modeling kit, it asked the most hardcore of those customers to help. Those customers were honored to help and offered valuable insight. LEGO didn’t use every suggestion. But those extreme users knew the product so well that they came up with ideas that more mainstream users would appreciate even if they didn’t know to ask for them.

Morris: After I re-read your book, the single most valuable insight for me is the reassurance that I don’t have to be a designer to think like one. In fact, I am now convinced that everyone within an organization – at all levels and in all areas – should think like a designer, both in terms of WHAT they do and HOW they do it. Only then can they understand the WHY that gives purpose to their efforts.

Greene: It really goes back to one of your first questions about the misconceptions about design. It’s not just about the sheen a company puts on a product. It’s about how its works. And to have a product or service that customers crave comes more often than not from companies that have great design cultures. Earlier, you mentioned Roger Martin’s new book, The Design of Business. His first book, The Opposable Mind, was really one of the first books to lay out the strategy you describe. He calls it “integrative thinking” and it’s the idea that executives should approach business problems the way designers do, with creativity that allows them to come up with ideas not previously considered. Typically, executives consider business strategies tried by others, figuring earlier success can be replicated. Maybe. But Martin argues that the most innovative companies create new business models in the same way that designers conjure up new products. They come up with new models, ones that previously didn’t exist.

That’s really why I wrote the book they way I did. There isn’t one simple way to do great design. Companies can’t just follow by rote Apple’s design process hoping to come up with the next iPhone. There are a myriad of approaches to doing great design, but each company has to find its own way. There may be clues for some companies in the way Nike solves its design challenges, and ideas for others in LEGO’s approach. But in the end, the most successful companies will commit to design, as each of these companies has, but find their own way.

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You are cordially invited to check out the resources at http://www.jaygreene.com