Why Design Thinking Works, When It Works

A bakery owner is certain her customers want a loyalty app. She uses apps all the time, her friends love them, and a competitor down the road has just launched one. She spends three months and a good chunk of savings building it. Six months later, it has 41 downloads, most of them from staff.

When she finally asks her regulars, the answer is gentle but clear. They didn’t want another app on their phone. They wanted the bakery to open half an hour earlier so they could pick up bread before work.

This isn’t a story about a foolish business owner. It’s a story about something that happens to clever, experienced people all the time: we assume other people want what we would want, and we fall in love with our solutions before we’ve understood the problem.

That, according to one of the most useful pieces of research on the subject, is exactly where design thinking earns its keep. Not because it’s a magical creativity process, but because it’s a set of habits that protect us from our own predictable mistakes.

One Like insight: Design thinking’s real value isn’t generating ideas. It’s stopping you from falling in love with the wrong one.

The real enemy is our own assumptions

Jeanne Liedtka, a professor at the University of Virginia’s Darden School of Business, has spent years studying design thinking projects across business, healthcare and social services. Her conclusion is less about creativity than about psychology. As she and her co-authors put it, “Cognitive biases make most of us poor experimenters.” Design thinking works, when it works, because its habits push back against those biases.

Liedtka groups ten biases into three families, and the bakery story touches all of them.

The first family is about how innovators see the world. The egocentric empathy gap leads us to overestimate how similar other people’s values are to our own. The owner liked apps, so she assumed her customers would too.

The second family is about the people we design for. Asking customers what they want seems like the obvious fix, but Liedtka points to the say/do gap: people are poor at describing their own behaviour, let alone predicting it. They also tend to tell us what they think we want to hear, which produces false positives. If the owner had asked “Would you use a loyalty app?”, plenty of polite regulars might have said yes.

The third family is about how we handle what we learn. The endowment effect makes us attached to early ideas, so giving them up feels like a loss. Hypothesis confirmation bias makes us notice evidence that supports our favoured solution and overlook evidence against it.

Liedtka’s remedies are practical. Watch what people actually do rather than relying on what they say. Ask about past experiences instead of future intentions. Show rough prototypes so people react to something real. And test several options at once, so you’re less attached to any one of them.

Highlight: Don’t ask customers whether they’d use your idea. Watch what they already do, and test something small.

Does it pay?

The most widely cited evidence on the commercial value of design comes from McKinsey. In a 2018 study, its researchers tracked the design practices of 300 publicly listed companies across five years, collecting over two million pieces of financial data. Companies in the top quarter of their McKinsey Design Index achieved 32 percentage points higher revenue growth and 56 percentage points higher growth in shareholder returns than their industry peers over the period.

Those figures get quoted a lot, usually without the caveats. Three are worth knowing. First, McKinsey describes the link as a strong correlation, not proof that design caused the growth. Companies that are good at design may also be well run in other ways. Second, the differences between the bottom three quarters were marginal; the reward went to companies that were genuinely outstanding. Third, McKinsey sells design consulting, so it has an interest in the conclusion. And it’s worth noting that the index measures design practice broadly, including leadership and cross-functional teamwork, rather than design thinking workshops specifically.

What’s more useful for a small business is what the study found about ordinary practice. More than 40% of the companies surveyed weren’t talking to their end users during development. Only around half did any user research before generating their first design ideas. And almost 60% used prototypes only for internal testing, late in the process, rather than sharing early versions with customers.

In other words, the habits design thinking promotes, such as talking to users early and testing rough ideas with them, were missing in many large, well-resourced companies. That’s both a warning and an opportunity. The basics are rarer than you’d think, so doing them consistently can set you apart.

Highlight: The big numbers get the headlines. The more useful finding is how few companies talk to customers before they build.

Why it fails when it fails

If design thinking works by counteracting biases, its failures make more sense. A workshop can surface brilliant insights about customers, but if decisions are still made the old way, by the most senior person’s instinct, the biases simply return through the back door. As we explored in Design Thinking Isn’t Dead. The Sticky Notes Might Be., many organisations ran the rituals without changing how they decided anything.

Liedtka identifies a second organisational problem: many cultures treat a failed experiment as incompetence rather than learning. In that environment, nobody wants to test an idea that might not work, because a negative result looks like a personal failure. So people skip the testing, or quietly design tests they know they’ll pass. The method survives on paper while its purpose disappears.

There’s a third trap that’s particularly relevant to owner-led businesses. The person with the strongest attachment to an idea is often the person with the final say. The endowment effect Liedtka describes is at its most powerful when the idea is yours, the money is yours and the customers you’re asking are people you see every day. It takes deliberate effort to hear “no” clearly in that situation.

So design thinking doesn’t fail because talking to customers or prototyping is a bad idea. It fails when the evidence it produces isn’t allowed to change the decision.

Highlight: A test only works if you’re genuinely prepared for it to tell you no.

What this means for a small business

The most useful way to think about design thinking may be as a set of protections against your own confidence. Before you spend serious time or money on an idea, ask which of your assumptions you’re most sure about, and then look for the cheapest way to check whether it’s true.

In practice, that might mean spending a morning observing how customers actually use your shop or website before redesigning it. It might mean asking customers about the last time they had a particular problem, rather than whether they’d buy your proposed solution. It might mean offering two versions of a new service to a handful of clients and seeing which one they actually choose. And it means deciding in advance what result would make you drop or change the idea, so you can’t quietly move the goalposts later.

A few questions can help:

• What am I assuming customers want because it’s what I would want?
• Am I relying on what customers say they’ll do, or on what they’ve actually done?
• Have I tested more than one option, or am I only testing my favourite?
• What result would convince me to change course, and have I written it down?

Which brings us back to the bakery owner and her 41 app downloads. Her idea wasn’t foolish. Plenty of businesses benefit from loyalty apps. Her mistake was skipping the step that would have told her this particular idea didn’t fit these particular customers. A week of watching the queue at 7am, and a few honest conversations, might have saved her three months and given her customers the earlier opening they actually wanted.

Sources

1. Darden Report, “Design Thinking vs. Cognitive Biases: 10 Biases for Innovation to Overcome”, 10 June 2021. Excerpt from Jeanne Liedtka, Karen Hold and Jessica Eldridge, Experiencing Design: The Innovator’s Journey (Columbia University Press, 2021). See also Liedtka, “Why Design Thinking Works”, Harvard Business Review, September–October 2018, and “Linking Design Thinking With Innovation Outcomes Through Cognitive Bias Reduction”, Journal of Product Innovation Management 32(6), 2015.
2. Benedict Sheppard, Hugo Sarrazin, Garen Kouyoumjian and Fabricio Dore, “The business value of design”, McKinsey Quarterly, 25 October 2018.