Creating and Sustaining Competitive Advantage through the Strategic Use of Design Thinking - Essay Example

Design thinking is used to describe a variety of factors, and fundamentally, it is commonly assumed a halfway house between analytical thinking or inductive and deductive thinking and intuitive reasoning and decision-making. By considering both extremes, design thinking has often been found to be more useful to corporations than analytical or intuitive thinking applied exclusively. Roger Martin (2009) argues that the field of strategic management has been dogged by imbalances over the years with analysis taking over the role of validated intuition, which breeds creativity and tenacity. Consequently, firms are more concerned about following rules and procedure than striking out and taking risk. To address this, he proposes design thinking as the best framework through which a business can reinvent itself in a strategic manner. Ideally, the design thinking approach in a contemporary company would require that it address emerging albeit poorly understood changes in customer desires changes in technology and the competitive environment so that the firm may strategically position itself and acquire a sustainable competitive advantage. The best way to illustrate the benefits that can accrue from design thinking is to take a case study of a firm that has over the years enjoyed continued growth in revenues and margins and it has ended up relying on rigorous analysis of performance based on past objectives and future expectations to project results. However, with time this model inevitably begins to become infective because it brings about predictability and inflexible schemata that gradually precludes innovativeness and results in consumer apathy as the firm fails to adapt to changes. In the past decades Microsoft Inc. an example of a firm that has retrospectively enjoyed immense success but are being forced by circumstance to adopt design thinking or risk losing competitive advantage in the face of changing customer taste and technological developments. Before the 90s, Microsoft had been enjoying considerable success in the software industry by making operating systems; however, with the dawn of the 21st century fast approaching they were beginning to lose their lustre. This is evidenced by the fact that as other firms were launching new innovative products such as video games consoles, Microsoft stood by the sideline watching its contemporaries and start-ups wade into a field in which it should have held competitive advantage. In 1999, Microsoft was faced with the reality of market saturation in its core products, which were office, and windows software and they realized that they had come to the peak of their growth curve. The reason they were at this point is primarily that they had grown too complacent with their market leadership in the software business and fell into a pattern of operating under the cocoon of predictable and “safe” conditions ignoring the new customer demands and changes in technology. However, in 1999, they were forced to abandon this myopic safe house and start exploring the possibilities of entering the video game market as a source of alternative growth. Design thinking is an especially pertinent for firms that have grown overcommitted and dependent on reliability instead of validity and innovation (Martin and Dunne 2006). Microsoft is an example of a firm that was pursuing exploitation of what they already had instead of exploration. The dichotomy between mastery versus originality or analytical versus intuitive thinking is poses a challenge for many firms. Notwithstanding, it is important that a balance struck on both sides so that opportunities are both seized and created and while taking care not to succumb to emerging competition. Martin (2009) proposes the aphorism that when one decides what they intend to do in advance; they are bound to discover only what they already knew of extensions of it. This idea tends to be received with hostility in firms where the managers are entrenched in predominantly analytical decision-making; however, to validity-oriented firms, sticking to the same routine cannot possibly bring about innovation. After years of analytical thinking in which Microsoft focused on improving their already successful product until they reached the plateau stage, they finally decided to try design thinking and branch out into the gaming market (Afuah 2009). Its entry was the embodiment of corporate implementation of robust and adaptive strategies, which are the underlying constituents of design thinking. Given that today’s gaming market is very competitive Microsoft should work on upping their competitiveness win over its competitors clients through the horizon 2 technique in which it would diversify even further out into the gaming field. It pursued a horizon 2 approach and launched Xbox (Frick, 2013); in order to underline the level of intuitiveness in this action, it is worth noting that the venture was extremely a high risk one with a stupendous initial cost although it was predicted that should success be achieved there would be a high return on investment. Given the relative stability Microsoft had been enjoying in the predominantly software oriented market; it is unlikely that an analytical management team would have advocated for such a radical and risky change. Today, Microsoft is faced with new competition as more customers move to the android market and access games through Google based android devices. To increase its advantage, Microsoft can make a deal with Google so that they also run the android platform on their consoles. In the near future, there is a real threat of massive loss of customers who will gradually come to depend on their android devices rather than game consoles since the latter unify their communication and entertainment needs. To this end Xbox should be provided with the faculties that are gradually causing the users to shift to android, and these include the capacity for holding simcards and making calls as well as accessing the internet in a more diversified way than they currently do. Ultimately, if the Xbox can perform as gaming console, tablet and even cell phone, there will be little incentive for the current clients to shift to android devices such as smartphones and tablets. In addition, Microsoft needs make these new and improved Xbox consoles much more powerful than they are currently and in the past have used this as means through which to distinguish themselves from their competitors (“Microsoft’s Xbox” nd). Retrospectively, the first Xbox was coolly receive and it came second from PS2 in terms of the number of unsold units, Microsoft went back to the drawing board and came out with the revolutionary Xbox360 (Flick 2013). The new Xbox was fitted with doubled bandwidth, 8 times as much memory and ten times more processing power than the first one. In addition, Microsoft created a virtual service of Xbox user known as Xbox live through which they could interact with each other stream and play multiplayer games online (Piven 2001). This strategy proved to be hugely successful and as a result, it managed to hit record numbers in sales even during the 2008 recession when most of the gaming companies were counting their losses after people cut their spending on luxuries. From this experience, it is evident that users are often attracted to such radical change technological products and Microsoft should capitalize on the retrospective success to recreate its products to fit into the changing customer requirements. Since the online services worked well, Microsoft can borrow from google and provide its users with cloud storage where they can store not just their gaming data but also other work and entertainment related products. Xbox can be matured from a predominantly gaming device to an all-round entertainment device. This can be achieved through creating a site on which users can download music in addition to games, this way Microsoft will achieve a significant competitive advantage over not only competition like Nintendo but also Apple Inc., Google and Samsung among others that provided competing products and services. As expected when a firm pursues a design think innovation path, Microsoft found itself in different territories where it had to produce hardware something it had not had to do at an intensive level in the past (Huang 2003). Granted that they had been producing hardware in the form of keyboards mice and game peripherals, the Xbox was considerably more complicated affair since Microsoft would have to figure out how to manage component supplies as well as releasing of advanced hardware. As aforementioned, design thinking despite appearing to emphasize on innovation and breaking from the norm does not altogether imply that one should go entirely by gut or intuition. In fact, at its core the ideology demands that a balance should be struck between the two extremes. To improve their market position Microsoft should engender the design thinking ideology by gradually connecting the design of the game console with the PC, which is their main competitive advantage today. This way the Xbox can be designed on a PC model, which will serve to encourage users who were already acclimatized with the PC as well as infuse Microsoft’s considerable experience in PC market. Microsoft increased its expertise in the gaming field by buying out Bungie software and digital anvil as well as adopting a cooperative stance with game developers by exercising far more favourable terms than competing consoles with game developers. Once again design thinking is evinced in the fact that Microsoft did something no other firm had ever done before, in addition it away its game development kits and focus group research for which the competition charged. Microsoft continued to diversify its practices by re-writing the rules in the gaming world by using identical rates for minor and major developers, which was not as profitable as the practices of its completion in the short term. Moreover, design thinking is manifested in that they were doing something new and intuitive and which was not immediately guaranteed to bring immediate results nor had it been tried and tested. Analytical thinkers would have found the approach too risky to be practical, however Microsoft soon begun to reap benefits of its open minded polices for developers who dedicated more time and effort to its designs at the expense of the competition. The improved relations with the developers resulted in a considerable improvement the quality of its products giving it an immense competitive advantage although it was essentially the newest entrant in gaming (Afuah 2009). It is quite evident that Microsoft had learnt its lesson in avoiding the norm and reaching out to take risks in products and services whose profitability was not necessarily guaranteed and avoiding the pseudo security of the old tried and tested methods. To distinguish itself from the rest of the pack, can also adopt its system implementations in such a way that once a customer bought a console they are making and investment in the long term and would be bound to Microsoft’s products. This can be achieved by selling consoles at relatively high prices (Justified by quality) and availing new games on Xbox live such that instead of frequently releasing new consoles they can focus on new games that can be played on the same hardware. Apparently, after managing to enter the difficult to enter market, Microsoft was both making it even harder for later entrants as well as competitors to poach on its customers therefore significantly leveraging of its own competitive advantage. This is especially evident in the merger between the game developers for Electronic Arts and Xbox making is so that the only platforms on which the some of the popular games could be accessed were through Xbox Live. The same happened with the partnering of Microsoft with Netflix so that Xbox users could access movies from the former, ultimately, Microsoft’s propensity for innovation founded on the design thinking principle of balancing between analysis and institution have resulted in its gaming products being pre-eminently at the top of the field even though it was a latecomer. At the end of the day, it is apparent from the example set by Microsoft that design thinking is easily one of the most effective ways through which a firm can create and sustain a competitive advantage. Even before it joined the gaming race, Microsoft was still one of the world’s most successful companies, however they realized that success could be temporary and without continuous growth and innovation, and they risked being eclipsed by the competition. By using their skills in PC and software building, they managed to build a solid base for their high risk gaming ventures effectively balancing the risk of the unknown, with the predictability of their competence in software and eventually becoming a market leader in both gaming and software. Reference List Afuah, A. 2009. Strategic innovation: new game strategies for competitive advantage. London. Routledge. Dunne, D and Martin, R. 2006. "Design thinking and how it will change management education: An interview and discussion." Academy of Management Learning & Education 5, no. 4. 512–523. Frick, W. 2013. Three Strategy Lessons From the Latest Round of Xbox vs. PlayStation. Harvard Business Review. [online] Available from http://blogs.hbr.org/2013/11/three-strategy-lessons-from-the-latest-round-of-xbox-vs-playstation/ Huang, A. 2003. Keeping secrets in hardware: The microsoft xboxtm case study. Cryptographic Hardware and Embedded Systems-CHES 2002 Lecture Notes in Computer Science Vol. 2523,  pp 213-227. DOI 10.1007/3-540-36400-5_17 “Microsoft’s Xbox Gamble”. n.d. Xbox N 6-0011 Turk School of Business. [online] Available from http://digitalstrategies.tuck.dartmouth.edu/cds-uploads/case-studies/pdf/6-0011.pdf Martin, R. L. 2009. The design of business: why design thinking is the next competitive advantage. Harvard: Harvard Business Press. Piven, J. 2001. Follow the money: Microsoft gambles on gaming. Computer Technology Review Read More