Design thinking is a process for practical, creative resolution of problems or issues that looks for an improved future result. It is the essential ability to combine empathy, creativity and rationality to meet user needs and drive business success.

(There are number of definitions out there, but I think the above serves the purpose)

There’s a lot of Buzz around the concept of Design Thinking at the moment.  A great deal of content has been produced, but I’m not sure how much has been directed toward the accounting and finance community.  During the past 2 years for us, listening to someone talk about “radical innovation” usually entailed mostly hand-wringing and, well, … expletives.  It’s understandable to have missed some of this.

So, I’m not sure how much about the topic has filtered in.  Maybe that’s a good discussion point for the comments:

• How much of the Design Thinking paradigm has filtered into the accounting and finance community?
• How applicable is this school of thought to accounting and finance?
• Do you believe there is a place for Design Thinking in accounting?

I’m interested in “jumping in” because I think there’s a natural connection between the way of thinking that underlies Design Thinking and the way of thinking underlying big parts of accounting.

The three main activities of Design Thinking are actually used extensively in our field.

I think we can all relate to:

1. The Mystery: pondering questions to enhance understanding of what is, or has, happened

2. Developing a Heuristic: a rule of thumb that helps narrow the field of inquiry and work the mystery down to a manageable size

3. The Algorithm: formal system for managing knowledge

We might consider this process when reviewing month end variances, or considering an asset’s useful life for amortization purposes.  Maybe we are reconciling transactions, ascertaining fair value, or while planning business combinations.  There’s an investigative nature to accounting that requires these critical thinking activities.  Maybe it’s something we wish we did more of.  Maybe these lessons bear repeating.

Viewing it from this perspective, the accounting and finance functions are subject to the same pressures affecting any other group as we try to balance the broader vision with our day-to-day routines.  When does the complacency of routine dull us to the level of engagement required to maintain the effectiveness of our critical thinking?

The choice is between being truly able to internalize this active, participatory way of thinking; or, just looking in the file for what was done last year.

Roger Martin (Thought Leader in the field and Dean of the Rotman School of Management at University of Toronto) cautions against casual use of the term, Design Thinking, when he was questioned recently by Nora Young on CBC’s Spark podcast.

She closes the interview with this:

Nora Young: The other part of me, the cynic, thinks ‘this is just another management buzzword’.  How do you get people to take this really seriously and do the kinds of stuff that’s really required to rebuild the organization rather than just paying lip service to it?

Roger Martin: Well, I think it already has passed into management buzzword; right so, and I think this has happened many times before, where the world of business gets excited about some concept and typically that concept has some validity and some utility; but then, it gets pushed far beyond what it should have… and lots of people who know nothing about it actually hop into the terrain and it gets diluted…

If it hasn’t already happened with Design Thinking, it will.  I don’t have rose-coloured glasses on about that phenomenon.

You can see that Martin differentiates between the inevitable decline into buzzword status of “Design Thinking” with the value of the concepts at its core.

Let’s look at the core stuff while accepting the dilution of the term.  And, if Martin has no illusions, neither should I:

I could be one of the very people Martin warns of.

In my view, the core concepts are more foundational, more universal; this construct of Design Thinking is just the shiny, new wrapper.  The way of thinking that underlies the theory is the critical component.  What it’s called tends to change, but what’s required to make it happen does not.

Peter Senge, author of the well known management book, The Fifth Discipline, and Director of the Center for Organizational Learning at the MIT Sloan School of Management sums it up in an exchange with another management guru, Bill O’Brien (deceased), ex-CEO of Hanover Insurance here:

Peter Senge: If everybody thinks this is so great, how come it doesn’t exist?

Bill O’Brien: We have no idea the kind of commitment required.

In this exchange, they are referring to the management paradigm of their day, Systems Thinking (circa 1990). The difficulty in achieving benefits from these theories turns out to be every bit as universal as the underlying concepts.

The equation is, easier said than done multiplied by talk is cheap.  Without action, nothing happens.  Without action, regardless of whether we talk about Systems Thinking or Design Thinking, it’s “just another management buzzword”.

In Systems Thinking, it’s about exploring patterns of interdependency, dispelling the myth that we are all highly independent.  A lot of it involves the same stuff as Design Thinking; asking questions, revising assumptions, understanding relationships.

Think: Action

The Design Thinking model is really well defined in this excerpt from the Noise Between Stations blog:

Based on a review of writing on the topic, I have synthesized for myself what I understand design thinking to be…

Collaborative, especially with others having different and complimentary experience, to generate better work and form agreement

Abductive, inventing new options to find new and better solutions to new problems

Experimental, building prototypes and posing hypotheses, testing them, and iterating this activity to find what works and what doesn’t work to manage risk

Personal, considering the unique context of each problem and the people involved

Integrative, perceiving an entire system and its linkages

Interpretive, devising how to frame the problem and judge the possible solutions

Read more: http://noisebetweenstations.com/personal/weblogs/?page_id=1688#ixzz0WPzb9vRa

This is all substance over form stuff.  How does stuff actually get done?  What happens when what something is called does not match what it is?  How does structure influence behaviour? And vice versa.

We know about this stuff, but don’t always think actively about it.

What’s our next move?

As a group, it’s our responsibility to take the lead on innovating our financial and managerial reporting and accounting systems.  I’m mainly referring to Operations Reporting here; but quite frankly, I think Financial Reporting could use a look too.  How can we more effectively achieve our reporting goals while enhancing value for users?  Where is optimal value and how does that value point change over time?

The following clip is Tim Brown, CEO of Ideo, discussing Design Thinking.  I encourage you to watch and then think about how Design Thinking can be applied in our field.

Roger Martin on Tim Brown:

“he’s great at designing relationships with his clients, ways of getting stuff to actually happen”

Share your thoughts in the comments!

Remember; the links throughout the article lead to additional content if you want to learn more.