Design thinking in business: The knowlege funnel model


Design thinking is becoming a major new paradigm of innovation. One reason for this development is growing importance of user or client orientation in innovation processes. The previous and still dominating paradigm of innovation emphasizes ingenious inventions and their implementation in various applications. But the origin of innovation according to the design thinking is the need of people to solve wicked problems in their life and practice.


In a short period we have seen the publication of several important new books devoted to design thinking. At least three of them are extremely important and enthusiastic.


Tim Brown: Change by Design. See my earlier blog


Roger Martin: The Design of Business. (Harvard Business Press, 2009)


Roberto Verganti: Design-driven Innovation.

In this blog I will describe Martin’s book. Its subtitle is “Why design thinking is the next competitive advantages”. At first I thought that the book is too simple and dry. But then I started to realize the fine philosophical treatment of the topic. I would say that Martin is analytical if the word analytical were not reserved to denote to the attitude which Martin attributes to “non-design thinking”.


According to Martin design thinking is balancing analytical and intuitive thinking in a dynamic way. Analytical and intuitive thinking are oppositions consisting of several characteristics:


Analytical thinking: using deductive and inductive logic; reliability; repetition


Intuitive thinking: using abductive logic; validity; creativity and innovation.




The knowledge funnel


In an interesting way Martin combines these two thinking modes in his model of knowledge creation. He calls it the knowledge funnel. There are three stages in funnel:


  1. Mystery: it is a problem to solve; a question; a chaos of data; a surprise, a wicked problem..
  2. Heuristic: “a rule of thumb that helps narrow the field of inquiry and work the mystery down to a manageable size
  3. Algorithm: a fixed formula, a tested method or procedure,..


The knowledge funnel model is intended to be general model of knowledge creation. The challenge is how to drive through the knowledge funnel from mystery to heuristic to algorithm. The great promise is that “the firms that master it will gain a nearly inexhaustible, long term business advantages” (p. 6-7). And exactly the design thinking is the form of thought that gives this mastery.


Although Martin is mainly dealing with business, he refers also to the importance of knowledge funnel model and design thinking in science, too. I agree. Of course, scientific thinking includes other elements too, but problem solving and developing a heuristic and algorithm are essential part of scientific method.



Exploration and exploitation


Martin’s focus is in business applications. In this field the starting point seems to be the dichotomy of exploration and exploitation presented by James March in his classical article: “Exploration and Exploitation in Organizational Learning” (Organizational Science 1991). This article represents a paradigm shift in business thinking. Exploitation of existing knowledge is affordable and non-risky way to try to find useful knowledge. But in the long run firms lose new business possibilities if they are not searching new knowledge and innovation. In their knowledge strategies firms must find a balance between exploitation and exploration. This dichotomy provided the starting point also to Clayton M. Christensen’s “innovators dilemma” as well as to Nonaka’s SECI-model. Now we see its importance to design thinking (see Martin p. 20).


Reliability and validity


In Martin the exploitation and exploration distinction is expressed in his treatment of validity and reliability in business organizations. According to Martin:


“The goal of reliability is to produce consistent, predictable outcomes….The goal of validity is to produce outcomes that meet a desired objectives.” (p. 37).


This kind of definitions are familiar from statistics. There the issue is the status of measurement:  are our measures measuring the right things = validity. Although Martin’s points about validity and reliability are well and his analysis about “Reliability Bias” is relevant, I still feel that the use of reliability/validity-dichotomy in the context of innovation and design thinking is not the best one. Perhaps the dichotomy of past/future or similar/different, old/new or something referring to changing market might be more suitable.


In organizations reliability is dominating. It’s the normal logic of administration of business: reporting, productivity, analytical tools etc. Validity is relating to innovation, renewing of business. The challenge for many incumbent firms is dominance of reliability over validity. To reach balance organizations must develop new kind of leadership and rewarding systems.




For me the emphasis of abductive logic in design thinking is a wonderful opening. Abductive logic is non-standard logic invented by an American philosopher Charles Sanders Peirce. For him abductive logic is a logic of discovery. It’s a way to infer from a problem to its solution, or from a phenomena to its explanation. Unfortunately, there is no firm set of rules for abductive logic. But the point here is that standard deductive or inductive logics are not enough in innovation and knowledge creation. There you really need “logical leaps of the mind” as Peirce said.


The basic “formula” of abductive logic is:


[this] is so because [that]


Or in a more explicit form:


(*) B is the case and A causes B, therefore: A (is the cause)

Note that this kind of inference is only probable, because the conclution is not necessary true. Of course, to reach the conclution A in (*), you need knowledge of causal connections. Abduction is also called “diagnosis”. If deduction is an inference from general to specific and induction an inference from specific to general, abduction is backword inference form effects to causes.

A problem in the knowledge funnel model

In core, the design thinking is a way to drive thinking in knowledge funnel from mystery to heuristic to algorithm, by balancing reliability and validity, analytical and intuitive thinking. This is clear and useful definition of design thinking.


In the last I like to note a problem or challenge in Martin’s model. The knowledge funnel is a path from mystery to algorithm. But what happened when a firm has gone through the funnel: it has an algorithm like a successful set of products. In a continuously changing world algorithms are valid only a limited period. How to avoid an “algorithms dilemma”: a satisfaction to an algorithm working well so far? The general answer to this challenge is design thinking and validity orientation, of course. In the chapter The balancing Act Martin offers some “methods” to encourage design thinking in organizations.


Still I feel that Martin’s knowledge funnel model is too mechanistic. The crucial point is the continuous innovation and the capability of organization to meet and tackle wicked problems. The model of design thinking must contain some kind of “loop” back to mystery:

mystery-> heuristic -> algorithm -> mystery ->…

Or in creative organizations there must be several parallel processes in different phases:


M -> H -> A

M -> H -> A

M -> H -> A


For that a model of “abductive organization” have to elaborate. The design of business gives a guideline to develop such kind of theory. My own concept of sustainable innovation might be useful in this endeavor.