Deep Dive: Design thinking for distribution

Can we use the discipline of design thinking as a way to innovate distribution, for the gain of all stakeholders?

A few decades ago, the concept of “design thinking” busted out from the design community and became a fresh and powerful approach for innovators everywhere. I learned this reading an excellent article from the MIT Ideas Made to Matter series, Design thinking, explained, by Rebecca Linke. Moreover, design thinking’s breakout was prompted by a Harvard Business Review article by Tim Brown, then CEO of IDEO. All of this made me wonder: If a compelling process can break free from its traditional community and transform the minds of innovators everywhere, why not distribution? As the core players focused entirely on distribution, distributors create value in the traditional value chain, serving manufacturers and customers. Distributor business models are locked in place as intermediaries. Design thinking is a rigorous process for achieving breakout results. Design thinking begins with empathy, creativity, and ideas and pushes through with mockups, iterations, and thoughtful implementation. I wonder if design thinking can help usher in the future of distribution—as an innovation process for B2B innovators to adopt and make their own. For distributors, design thinking teaches that ideas matter, leading to freedom and consequential impact. In this edition, I explore the four design process steps with crucial insights from Linke’s article, many of which are attributed to MIT Sloan professor Steve Eppinger. Then, I offer a few ideas for distributors, distribution, and innovating B2B. I hope to start a conversation about design thinking, find experienced distributor practitioners, and accelerate progress.

What’s the matter with distribution?

Ideas matter. Process matters. When implemented as an innovation process and organizational capability, design thinking helps apply human creativity to solve real-world problems and realize better results than might otherwise be achieved. For many companies, a fresh approach may lead to new ways of doing business followed by new or improved products and services.

Distributors need design thinking. First, because they are caught in a trap imposed by others. Manufacturers authorize distributors to sell their products, assign territories, judge performance, and conceive discounts, rebates, and other forms of channel compensation as methods to lock the status quo arrangement in place. Customers source from distributors, judging all distributors to have mostly commodity-like capabilities and services, and make decisions on price.

But distributors are also in a trap of their own making. Many are highly skilled at continuous improvement and applying best practices. Both capabilities are valuable, but they seldom lead distributors to new or radical mindsets, solutions, products, or services. In Innovate to Dominate, the CEO of a leading distributor shared her company’s need for innovation and breakout change:

Distributors can’t just be suppliers of products anymore. They have to be willing to spend the energy and effort to bring both product and service innovations to market. For new product-related innovations, it’s important to partner with suppliers that have the right capabilities and programs to successfully launch new products that truly add value to target customers. For service-related innovations, success is dependent upon getting closer with customers, asking the right questions to uncover needs and understand expectations, and offering creative solutions that will benefit and move both businesses forward. We refer to this mindset of helping our customers to be more successful as helping our customer “shine,” and every decision we make is viewed through this lens.

Faced with the existential threat of disruption and the gradual erosion of supplier commitment through disintermediation, distributors are trying to break free, transforming digitally, but more importantly, reimagining their mindsets, purpose, culture, marketplace roles, customer relationships, and business models. Distributors are on the move, but they need help.

Design thinking starts with what distributors need most—ideas

For distributors, change is not a choice. It is an imperative. The world of business is changing at an accelerating rate, given the combined forces of digital technology, social and generational values, and the workings of global and local economies. If they don’t change, distributors will be left with whatever disruptors and disintermediators leave behind as they define the future of work. But it’s not all gloom and doom. Distributors can lead as individual companies and as an industry. There is strength in numbers, and the community of distributors can move forward together as a movement. And all movements start with an idea.

Design thinking starts with ideas and follows through with creativity, collaboration, confirmation, and conversion. But nothing is possible without ideas. Ideas matter. Ideas are powerful because they capture imaginations and call for progress. Accepting the dominion of ideas is essential for implementing the practice of design thinking. As explained at the start of Linke’s article: “Coming up with an idea is easy. Coming up with the right one takes work. With design thinking, throwing out what you think you know and starting from scratch opens up all kinds of possibilities.”

That’s why design thinking matters for distribution. Ideas can bust through deeply ingrained attitudes about limitations and possibilities, held consciously and subconsciously, by distributors, suppliers, customers, communities, industries, educators, legislatures, influencers, leaders, and more. Distributors can bust out and break free through ideas, followed by design thinking innovations. Design thinking may be what distribution needs most—big ideas and tools for doing them.

With the power of ideas firmly in mind, it’s time to begin digging into the theory and practice of design thinking. I am not an expert, but I see the potential. And as an advocate for distributors, I hope to push the theory and practice of distribution forward, updated for the future by design thinking.

Step 1: Understand the problem

In an earlier edition, I reported the need to master the idea that humans are an essential requirement for B2B innovation. Often, we skip to a perceived answer, allowing our subconscious to filter ideas against what our experiences say works or doesn’t. The first step in design thinking calls for diligent effort with enough time and space to explore problems. Understanding problems requires work, as Linke’s article explains:

“Most people don’t make much of an effort to explore the problem space before exploring the solution space,” said MIT Sloan professor Steve Eppinger. The mistake they make is to try and empathize, connecting the stated problem only to their own experiences. This falsely leads to the belief that you completely understand the situation. But the actual problem is always broader, more nuanced, or different than people originally assume.

Understanding the problem means immersing yourself and your team in the problem. And immersion goes far beyond market research and analyzing data. Immersion is about diving in where the problem exists—in the real world. Linke calls for involving users. Moreover, it’s essential to think like humans, identify human needs, and drive for human solutions. Eppinger explains in the article: “We center the design process on human beings by understanding their needs at the beginning, and then include them throughout the development and testing process.”

Distributors must involve customers and then add more human perspectives. As players in B2B markets, distributors work with suppliers and customers, and within both, across many functions, including leadership, finance, marketing, sales, operations, customer service, technical support, and more. These functions are staffed with people in positions that may have perspectives on the problem at hand. All may benefit from distributor innovations. And all should be included in the pursuit of understanding.

It seems to me that for distributors, immersion is not just a “point in time” initiative, conducted only at the start of a design thinking project. Immersion must be every day and every moment, an activity embedded in processes, enabled by culture, and managed by managers. As design thinking kicks in to solve specific problems, distributors must slip into ready methods for immersion, working with customers and suppliers through relationships open to collaboration and deliberation. And distributors may go further for the most potent innovations by immersing with communities and stakeholders resident in the elements of society and the economy touched by distribution. (Dig deeper here, here, and here to plan immersions for your design thinking work.)

Step 2: Develop possible solutions

Developing solutions begins with brainstorming. It’s important to note that the goal of brainstorming is not to identify a single or small set of known solutions. Instead, for design thinking, brainstorming is about opening minds to possibilities, capturing them, and developing them. As Linke’s article explains:

“One of the key principles of brainstorming is to suspend judgment,” Eppinger said. “When we're exploring the solution space, we first broaden the search and generate lots of possibilities, including the wild and crazy ideas. Of course, the only way we're going to build on the wild and crazy ideas is if we consider them in the first place.”

As I dig deeper into applying design thinking for distributors and report my findings in future editions, I hope to gain insights into effective brainstorming. In my experience, most people think that brainstorming is easy, a process that can be jumped into without a plan. In an NAW Distributing Ideas Blog post, I reported on a three-step brainstorming process shared here not as the definitive approach, but to underline that brainstorming is a discipline that can be mastered:

• Create ideas alone. Working alone to generate ideas does not mean sitting alone in a room with an empty pad of paper. Working alone requires curiosity. It requires continually seeking ideas through reading, conversations and field trips so you can experience innovations. It’s sometimes hard to think about your business when you are in your business. Working alone to create ideas may best be done offsite at a coffee shop, park, museum or any other place away from work.

• Vet ideas as a group. As your company starts to use brainstorming as an innovation technique, the leader of the brainstorming effort should consider the make-up of the group and evaluate personal styles and agendas. It’s essential that the team work together effectively. Platitudes like “no idea is a bad idea” are not particularly useful for managing team dynamics. It may be necessary to have multiple vetting sessions before arriving at a final list of innovations to vet.

• Build on the best ideas together. Brainstorming team members should be involved in the ongoing process to see it through to the end. This approach is rewarding for all individuals and can promote a culture of innovation as people work on defining goals, gaining approval and executing changes. Some ideas will succeed and others won’t, but the goal of distributor innovations should be to create an ongoing process that acts as a virtuous circle yielding better and better results over time.

Going back to Linke’s article, Eppinger offers: “But if we want 100 ideas to choose from, we can’t be very critical.” In this way, design thinking’s second step is not intended as generating ideas quickly followed by filtering them. It’s about developing and exploring many ideas, putting aside those not prioritized for immediate attention, and then organizing relevant ideas for the work of the next step. Step 2 is not about judging; it’s about opening minds to new possibilities for solving problems.

Step 3: Prototype and test; repeat

Prototyping is the rapid creation and testing of solutions that might be conceived as services, products, processes, models, concepts, capabilities, metrics, and more. For distributors locked in a mindset as an intermediary in a value chain, it is vital to imagine solutions in unusual forms and commit to a rigorous development and testing process. Skipping ahead is not allowed, and prototyping is the opposite of flying by the seat of one’s pants. As Linke’s article explains:

We don’t develop a good solution just by thinking about a list of ideas, bullet points and rough sketches,” Eppinger said. “We explore potential solutions through modeling and prototyping. We design, we build, we test, and repeat—this design iteration process is absolutely critical to effective design thinking. … After several iterations, we might get something that works, we validate it with real customers, and we often find that what we thought was a great solution is actually only just OK. But then we can make it a lot better through even just a few more iterations.

For distributors, prototyping is crucial for breaking free of the traditional mindset shaped as an intermediary in a value chain—the previous steps required thinking and planning around concepts and possibilities. Prototyping is physical, and it involves constructing, deploying, observing, measuring, reworking, alterations, refinements, and sometimes, junking everything and starting over.

Just as wrestlers may push on their opponents’ heads to move their bodies, so may distributors use prototyping to change their minds. Prototyping undoes muscle memories of the mind. And by continuing to involve users and other stakeholders, distributors ensure that solutions are not just ready for the real world; they are created in the real world where they will create real value.

Distributors are skilled at measuring and acting on metrics, providing a foothold for adopting design thinking as a core process. In Innovate to Dominate, I reported on five methods for creating customer experience metrics. As distributors reimagine their business model away from taking orders for products and toward creating experiences for customers, these five methods provide a starting point for incorporating design thinking’s process for iterative prototyping in a distribution context:

• Directly align with your organization’s key performance indicators. Asking for a customer’s key performance indicators and understanding why they matter is an essential step for collaborative innovations. Measuring both and applying predictive algorithms are essential for creating breakthrough loyalty.

• Accurately quantify the quality of the experience. Utilizing a Net Promoter Score is a good idea. Brainstorming with customers may identify additional ideas specific to a distributor’s services and customers.

• Definitively provide intelligence to make better decisions. Where there are data, there are opportunities to leverage artificial intelligence. Distributors may want to recruit a full-time artificial intelligence partner for designing and executing the innovation process.

• Be agile and able to iterate and optimize. Organizational agility is essential at your company and the customer’s. Important steps to improve agility include continuously adjusting plans and strategies, putting employees in charge and letting them do their job, and addressing ambiguity or uncertainty quickly and definitively when something surprising happens (good or bad) and use it as an opportunity for more innovations.

Step 4: Implement

As a naval officer and engineer, I learned the power of alliterative acronyms in my early career. One jumps to mind nearly every time I hear or read the word implementation. In the navy, flawed executions cost lives and are often avoided by diligent adherence to the “five p” principle — proper prior planning prevents poor performance. Design thinking holds the same value, as explained in Linke’s article: “Implementation involves detailed design, training, tooling, and ramping up. It is a huge amount of effort, so get it right before you expend that effort,” said Eppinger.

In Innovate to Dominate, one distributor leader explained how implementation was critical for the solutions provided and experiences created:

When I think about innovations, I start with the idea that only a small portion of businesses are truly uniquely different. There are only so many Steve Jobs. The probability of our company being the next Apple is basically 0%. However, we can be the only, or one of a few companies that sees the next Apple coming down the road and jumps on the bus. So it’s important to work hard at staying very aware of trends and be ready to move at the speed of innovation and our customers. The collaborative robot space is an example where the industry is exploding. The goal of this technology is to create easy implementations [emphasis added], leverage data (especially from the Internet of Things), and, importantly, work side-by-side with humans, taking on difficult, repetitive, or unsafe tasks. The ultimate goal is for robots to work around people, not replace them.

Robots are at the leading edge of factory innovations, and every installation is a customized implementation of a design concept. In a sense, every distributor solution is a “robot” for customers. Every distributor’s value for customers and suppliers is about what robots do—take on complex tasks and perform them far better than pre-existing methods can do them. Our distributor's insight shared above is not exactly about design thinking, except that it is. For distributors, the true power of design thinking is achieved when adopted not as an occasional tool but as a way of doing business, recognized and valued by every distributor’s customers, suppliers, and stakeholders.

Thinking big means making ‘no little plans’

Stepping out of our exploration of design thinking’s four steps, my last encouragement and warning for distributors is to think big. Daniel Burnham, the American architect and urban planner, played a critical role in rebuilding after the great Chicago fire of 1871 and made essential contributions to building and advancing skyscrapers. Burnham is reportedly famous for saying: “Make no little plans, they have no magic in them to stir men's blood.” Strong sentiments, indeed, and entirely appropriate for distributors as they apply design thinking for breakthrough innovations. Linke’s article also explains:

Design thinking isn’t just for “things.” If you are only applying the approach to physical products, you aren’t getting the most out of it. Design thinking can be applied to any problem that needs a creative solution. When Eppinger ran into a primary school educator who told him design thinking was big in his school, Eppinger thought he meant that they were teaching students the tenets of design thinking.

In our recent history, distributors stepped forward with confidence and made a difference, not in the pursuit of big ideas but through the heartfelt need to make a difference. Distribution Leans In: Stories of Resiliency and Innovation During the COVID-19 Pandemic opens with this distributor leader’s story of how all distributors were smashed in the face with an existential battle for survival:

Day zero. The pandemic hit. Like every distributor, we were just trying to figure out what to do. It was almost like starting a business from scratch. Will we have any customers? Will we be able to get products from suppliers? Will we have revenue? Will we have employees? Will they be able to show up for work? Will we be able to conduct business? The presence or absence of business was uncertain. It was like stepping off a cliff. We were all disoriented. And then we moved forward.

And move forward, distributors did. I can think of no better case for the power of innovation that distributors can unleash for customers and suppliers, and our society and economy, than what was done by distributors during the pandemic. As I explained in the opening of the piece:

As the COVID-19 pandemic crisis kicked into gear, distributors responded by shoring up cash flow, liquidity, supplier commitments, and customer relationships. Then, with their people safe and their business protected, leaders turned to help their customers survive the pandemic. Distributors stepped up, as the quotation above suggests. And as they did, distributor leaders, teams, and employees came to understand something new about their business. Distribution can make a difference. More than that, distribution is essential.

During the pandemic, distributors leaned in. Going forward, armed with the creativity and power of design thinking, distributors can do more. Distributors can become the essential community for maintaining, restoring, and advancing innovation as a core competency, not just of their businesses or as an industry, but for us all. I have found that as B2B leaders, distributors’ ultimate purpose is to help us all do our work and live our lives.

The future of work does not define distributors; distributors are the future of work.

Join our community by asking questions

Design thinking is universal. Distributors may apply the philosophy and discipline of design thinking and make it their own. By doing so, distributors will set the standard for B2B innovation and design the future of distribution. Eppinger offers encouragement, as described in Linke’s article:

Applying design thinking techniques to business problems can help executives across industries rethink their product offerings, grow their markets, offer greater value to customers, or innovate and stay relevant. “I don’t know industries that can’t use design thinking,” said Eppinger.

This edition is a foundation for distribution, my work as an NAW Fellow, and my investigations and reporting in this newsletter. This edition is not a solo effort but the beginning of a collaboration. With this in mind, I have three questions for my subscribers and any reader of this edition:

• Do you have feedback, corrections, or additions for this edition? If so, please send them my way. 

• Do you have knowledge or expertise of design thinking in your work or company? If so, please reach out.

• Can you point to sources of expert knowledge for design thinking, perhaps in books, podcasts, classes, or workshops? If so, please share.

This is the point in every deep dive where I write: as always, please share your comments, ideas, experiences, and direction below. Don’t be a stranger. Click here to schedule a call or send me a note at mark.dancer@n4bi.com.

In this edition, I offer something new—resources. The following assistance is provided at the end of Design thinking, explained. I’ve ordered the books below and will look into the classes and I encourage you to do the same.

Resources

Read The Designful Company by Marty Neumeier, a book that focuses on how businesses can benefit from design thinking, and Product Design and Development,  co-authored by Eppinger, to better understand the detailed methods.

Register for an MIT Sloan Executive Education course:

Systematic Innovation of Products, Processes, and Services, a five-day course taught by Eppinger and other MIT professors.

Leadership by Design: Innovation Process and Culture, a two-day course taught by MIT Integrated Design and Management director Matthew Kressy.

Managing Complex Technical Projects, a two-day course taught by Eppinger.

Apply for Mastering Design Thinking, a 3-month online certificate course taught by Eppinger and MIT Sloan senior lecturers Renée Richardson Gosline and David Robertson.