Tough Love

1. Reckoning the Future: Prove It or Invent It?

Perhaps the most glaring difference between the worlds of business-as-usual and business-by-design is the way each side actually thinks. In traditional organizations, the dominant forms of logic are inductive (demonstrating through observation that something actually works) and deductive (reasoning from a set of existing principles to prove that something must be). For example, Costco might study the current cost structure of all of its outlets in order to set, inductively, future cost targets for the whole chain. Or Clorox might use a core operating principle--"build market share and profits will follow"--to deduce whether to launch a new kind of sanitizing spray. Corporate folks typically believe they can "prove" the future by applying rigorous inductive and deductive logic to the present.

Designers use inductive and deductive reasoning as well, but they also rely on a third type: abductive reasoning, the logic of what might be. A.G. Lafley, the chief executive of Procter & Gamble, understands the need to braid all three forms of creative thinking. While he is a true data hound, Lafley also pores over anecdotal research and allows customer comments to influence him even if they are not rigorously collected or statistically significant. Lafley was relying on that kind of anecdotal evidence when he championed the conversion from big-box to compact detergents--one of P&G's most important decisions over the past 15 years, and one that flew in the face of the available hard data. That decision opened a multibillion-dollar market for P&G and demonstrated that simply regressing the past isn't enough to bust a daunting challenge. As Bernard Arnault, chairman of the French luxury-products group LVMH once put it, "It is not enough to have a talented designer; the management must be inspired too."

2. The World of Work: Permanent Tasks or Temporary Projects?

Those different sorts of logic are also reflected in how work is typically organized in the business and design communities. Daily work at a tradition-bound firm consists of a series of permanent, ongoing tasks: Make the 30-day forecast, upgrade the core product, manage the next sales initiative. Each person's role is clearly staked out, and compensation is closely tied to the position's responsibilities, which vary little over time. In a design shop, however, everyone "lives in the projects," as the business-management strategist Tom Peters once said. All work is temporary and project-based, and people are judged by their ability to add value to it.

Both approaches to work are necessary, but insufficient. In the hurly-burly of day-to-day business, work is really a combination of ongoing activities and discrete, time-bound projects; the trick is to pick the style of work that best fits the problem. After all, company-defining products such as the iPod, the Razr, and the Mini didn't emerge from a fixed, standardized process--they were born in the projects.

And so, as a rough rule of thumb, when your challenge is to create value or seize an emerging opportunity, the solution is to perform like a design team: Work iteratively, build a prototype, elicit feedback, refine it, and repeat. Give yourself a chance to uncover problems and fix them in real time, as the process unfolds. On the other hand, running a supply chain, building a forecasting model, compiling the financials--these functions are best left to people who work in fixed roles with permanent tasks, people more adept at describing "my responsibilities" than "our responsibilities."

If that sounds like a schizophrenic way to run an organization--where one-half functions like an accounting firm and the other collaborates like a design shop--well, perhaps it is. But that's the way Google does it. CEO Eric Schmidt has said that the part of Google that looks like a normal company (sales, marketing, operations) is run like a normal company, but the part that defines what the customer sees and experiences (software coding and engineering) feels more like a design shop free from top-down control. Call it schizophrenic, but the challenge for CEOs like Schmidt is to manage the paradox of freewheeling innovation and buttoned-down operational discipline. (For more on reconciling the two, see "Design Intervention")

3. Source of Status: A Large Staff or an Outsize Success?