By Matthieu Mingasson, head of design transformation

A staggering 70% of business transformations fail, according to McKinsey. From a dearth of sufficient research and insights to an overemphasis on top-down processes that hinder the necessary research and experimentation to drive strategic thinking, the reasons for these failures have been studied at length.

In Images of Organisation, Dr. Gareth Morgan argues that organisations operate like machines - if we can framework and tabulate everything, we can tweak and change it. Despite serving as the guiding ideology for many businesses, this approach ignores the fact that organisations are made up of intangible components, like culture, interpersonal relationships, and shared behaviours.

It is through design-led thinking - or the practice of generating value for customers and businesses by bolstering an organisation’s ability to identify problems, experiment with solutions, and operate change - that these ingrained biases can be mitigated. Three main biases sabotage transformation initiatives:

1. Status Quo Bias

When William Samuelson and Richard Zeckhauser coined the term 'status quo bias' in 1988, they characterised it as “when people prefer things to stay the same by doing nothing or by sticking with a decision made previously.”

On an organisational level, this status quo can be shaped by any number of factors: internal politics, culture, biases held by leadership, etc. Whether consciously or unconsciously, these biases prevent organizations from giving problems the clear-eyed analysis they require and can create a pervasive fear of blame if the context for researching solutions isn’t properly set up.

Research conducted to identify problems and bring objectivity to decision-making tends to be fraught with a confirmation bias that unwittingly maintains the status quo (e.g., only tracking KPIs that teams know will generally perform well). When problems are identified, finding the solution typically falls to other parts of the organisation or leadership teams without taking any individual accountability.

2. Risk Avoidance

Try this thought experiment: Imagine you are standing on a grassy hill in the wilderness, and you’re trying to get back to civilisation. You see a well-trodden path heading down the hill in one direction and untouched grass in all others. Which path do you take?

According to renowned behavioural economist Daniel Kahneman, most would take the well-trodden path. A split-second decision made by the limbic brain tells us this is the least risky choice because we know others have been down this road. Of course, this decision also leaves most of that hill unexplored.

This propensity toward the safest choice tends to influence critical business decisions; we avoid risk and fall into the trap of 'best practices' and 'paths well-trodden.' Too often, businesses fail to unlock new value and facilitate a successful transformation because they are so risk-averse.

This bias is magnified in a closed organisational culture that incentivises success without recognising the benefits of failure. During user testing, it’s beneficial to employ a 'failing fast' approach where failure is valued as a crucial step in gaining knowledge. This stage entails actively looking for problems in testing because solving them provides valuable insights that would have been impossible to glean otherwise.

3. Hyperbolic Discounting

'Hyperbolic discounting' (aka short-termism) is the cognitive bias that encourages us to ignore the value of future results compared to immediate results. We focus on the short-term because it offers instant gratification, deterring us from long-term investments in time and effort to analyse problems and generate potential solutions.

Within organisations, this laser focus on immediate outcomes undermines the point of transformation initiatives: building capacity and capabilities while delivering results. Ideally, organisations should generate an institutional experience derived from a substantial time investment and resources spent experimenting, potentially failing, and course-correcting.

Overcoming Cognitive Biases
Fall in Love With Problems

Yes, you read that right. Fall in love. Embrace problems. That means studying what drives them and how they came to be. Spend time and resources to conduct objective qualitative and quantitative research. Seek diverse perspectives.

Only after fully immersing yourself in a problem should you start to design, test, and iterate on solutions. And remember, your understanding of a problem will likely evolve as you prototype and test solutions.

How We Approach This Strategy

While financial client services remain anchored in tradition, today’s business relationships are driven by digital and extensive data usage, prompting one of the largest global investment management firms to reconsider its digital relationships with clients. Code and Theory partnered with them to bring digital excellence into the firm’s client relationships and improve customer loyalty.

Our initial business audit showed a dearth of client data capture, relevant synthesis formats, convenient delivery channels, and a lack of systematic information structure, organisation, and sharing mechanisms. We analysed several information-processing streams before developing our approach, from content creation to client profiling.

Because we fell in love with our client’s business problems and obsessed over all the pain points, we were able to construct a successful strategy. After defining and discussing the problems, we built hypotheses and prototypes to support our strategic rationale.

The Results:

Our problem-validation and concept-testing research phase provided proof to validate our approach, and our problem-mapping methodology and solution definition created a shift in the executive leadership’s perception of how design can solve complex business problems. Together, we orchestrated a successful digital transformation in a highly sensitive, traditional business environment.

Focus on Experimentation

There’s always more to learn, and this can only happen through doing. A focus on action and experimentation ensures that you fail fast and iterate even faster, gleaning valuable insights throughout each cycle and refining your understanding of the problems you’re trying to solve.

How We Approach This Strategy

A large financial institution wanted to reimagine the future of consumer banking across several audience segments. To accelerate innovation, Code and Theory developed a bespoke digital incubator to work with 50 unique product teams within the company to co-create products through mass experimentation and creativity.

The Results:

With each experiment in the digital incubator, we catalogued our learnings in a custom database and synthesized them for executives and product teams. For over two years, we brainstormed, crafted, and tested ideas to inform new opportunities for the bank. Some examples include:

• Tapping into customers’ passive and active behaviours to reduce debt, save, and grow funds
• Analysing how different demographics manage assets to maximise deposits
• Optimising experiences to increase financial literacy, engagement, and decision-making

The incubator program’s success prompted the bank to create an innovation department - where our culture of experimentation proved how design-led processes reduce the fear of failure by rethinking opportunities in portfolio gaps.

At least five teams (10%) went to market with standalone products.

Create a Safe Space for Discourse and Discovery

These mitigation strategies will be effective without the right environment; a safe space for experimentation and learning needs to be established. Encourage open listening and diverse discourse. Explore unconventional ideas. Go back to the drawing board early and often. Consider every possibility until you’ve decided how to narrow your focus.

How We Approach This Strategy

An auditing firm wanted to revolutionise its processes, workflows, and tools to evolve from a fragmented environment where tasks are still manual. They started by launching a series of targeted initiatives where design takes centre stage.

Code and Theory partnered with the firm to pioneer the next generation of auditing tools via an accelerated program by creating a space for experimentation. The program involves several layers of discovery and execution work, from blue sky proof of concept to advanced prototyping and research to mapping and simplifying business workflows to creating an entirely new design system based on a global system architecture.

The Results:

By utilising cloud-based technology, AI, and automated processing, we developed the most advanced auditing business and workflow tool on the market. It evolved the company’s capabilities and solutions and transformed its culture, establishing true transversal and collaborative thinking and delivery mechanisms.

Prime With a Long-term Vision

Transformation is a journey that begins by priming teams to embrace a long-term mindset and focus on building an ambitious future state.

How We Approach This

One of the largest manufacturers of PCs and mobile devices wanted to pivot from commoditized offerings to higher-value solutions and services. But highly siloed teams with competing priorities ballooned into 80+ digital experiences, making it nearly impossible to serve B2B and B2C customers well or adopt new sales models.

Code and Theory partnered with the brand to build an integrated digital ecosystem that would entice key players in this highly complex organization to buy in. Our design-driven process helped the organisation see the solution’s future potential, helping to create an ambitious mindset among the team. Through in-depth research and collaborative workshops, we developed prototypes of the organisation’s future state, started productive conversations, broke down organisational silos, and galvanised a shared mission to transform a sprawling organisation.

The Results:

We helped the brand create short and long-term roadmaps to achieve its business transformation goals and recommended initiatives like clarifying its brand strategy, making smart infrastructure investments, and bringing different teams together to work on this future vision.

Start Tackling Cognitive Biases in Transformation Initiatives

As a leader, you set the culture and context within your teams. That means implementing new project mindsets starts with you. Here are our beginning steps to guide your team through transformation initiatives using a design-driven lens:

Step 1: Accept that cognitive biases exist.

Step 2: Create a safe space for your team to understand and explore these biases.

Step 3: Don’t be afraid to fall in love with problems.

Step 4: Walk down the unexplored part of the hill. Be open and generous to experimentation and creativity.

Step 5: Take action. Start small. You don’t have to have a grand plan to kick off the transformation. You can learn along the way.

To get started, check out our practical guide to structuring Design Transformation initiatives: Facing the Future: A Guide to Design Transformation