Merging optimization and innovation

How to create a balance between discovering and delivering

In the 20th century the main goals of every manager were “efficiency and optimization”, companies hired consultants and business experts to analyze processes and reduce waste.

Management methodologies provided tools to improve the capability of business processes. A great example is provided by Dell, thanks to the Six Sigma methodology the company increased its performance and reduced its defects becoming the first computer vendor in the world. Dell started in the early 2000s and by 2004 the cost savings were $1.55 billion.

As explained by Peter Merholz and Kristin Skinner, authors of “Org Design for Design Orgs”, at the end of the 1990s the cult of innovation began: companies understood that optimizing processes and products was not enough.

When systems reached the limit of efficiency, companies started to innovate by looking for new ways to satisfy their users.

New Challenges

In the last decade we witnessed the rise of tech companies, software started to “eat the world” and it’s becoming clearer than ever that tech giants and small tech startups are disrupting well-established business.

No matter the industry, every company has to reimagine products and services by integrating software.

Unfortunately, working with software means redefining operations and struggling with some common aspects:

  • Uncertainty: working without previous proven results, clear guidelines, established paths. Managing uncertainty also means being ready to throw away “briefs” and to redefine strategy;
  • Changes: working with unfinished products, testing them without being afraid to show imperfections, getting used to receiving bad feedbacks and to changing everything again and again;
  • Failures: working with unexpected results, accepting failures, accepting them often and rapidly;
  • Systems: working with systems rather than with standalone products. Every artifact could not be considered as a standalone object. Getting used to understanding the system before designing a product.

Accelerating Teams

For many years companies have been organized in functional silos (also called business units). Structures similar to complex machines with bureaucratic procedures where low-level employees have to report to managers with higher roles.

On the contrary, agile organizations have no pyramid structures; they are more like live organisms where all cells are interconnected to each other (McKinsey). Companies are moving from fixed hierarchical structures to small autonomous teams often called “squads”.

Autonomous teams are not a new concept but there is still much work to do to integrate innovation and optimization. Small startups and well-established businesses are forced to move from a waterfall approach to iterative processes.

Design Thinking, Agile and Lean had been hugely adopted by companies, but how to combine them all together?

After several projects and critical issues I have found two main aspects that could facilitate Agile and Design Thinking integration:

  • Redefining the reporting lines.
  • Setting a “product” culture.

Redefining the reporting lines

Agile companies usually consist of small autonomous teams with a matrix organization. Instead of a single top-down reporting line, people have two different reporting ways: a capability line and a value-creation line.

“Chapters” are capabilities lines related to operations, tools and procedures. They are responsible for the “How”. Some chapter examples are Researchers, Web developers, UI Designers, etc. Chapter leaders are not in charge of approving people’s work: they are more like coaches who teach the best methods and techniques for reaching the best outcomes. Chapter leaders facilitate and stimulate daily work.

“Tribes” are value creation lines related to outcomes, user goals and business needs. They are responsible for the “What”. Tribe leaders are like managers focused on value creation, on a product or service, trying to understand and satisfy user needs. Tribes usually rent people from several chapters because they need multiple skills in a team to create a product.

Chapters and tribes define the HOW and the WHAT in a product.

Dividing the reporting lines helps team members to reach better results, improve operations, create a path of continuous learning and, in the meantime, deliver great quality.

Setting a “product” culture

From my experience, it’s more likely to get better results when team members and team leaders fully understand the concept of “product”.

According to the authors of Product Leadership, the word product leader was born in 1931 at Procter and Gamble when the company needed to hire more people with strong product knowledge but also with other management and branding skills. In the meantime, Toyota developed the Kaizen method, also known as Total Quality Management, and other companies around the world started customer-centric approaches.

With the rise of the tech world in the last decade, Internet companies merged several management methodologies starting to hire people with hybrid roles between design and development and with deep knowledge about process and tools.

A product leader’s main goal is to empower team members to deliver great products. The team must be composed of multiple people with different skill-set in order to have a broader view of the product. The product leader, sometimes called the CEO of the product, have to start with the “why” and constantly update team members with feedbacks.

Zhang Ruimin, the founder of Haier, global leader in smart appliances, has deeply understood the value of product leadership: he divided the company into 200+ “micro-enterprises”, small autonomous units with the decision-making power over the products. Ruimin has also invited employees to be at ‘zero distance to customers’, that means to have direct access to people’s feedback in order to understand how people use and interact with Haier products and services.


We live and work in an ever-changing era where product companies are forced to become software companies; where advertising has lost its impact; where objects and people are always connected in a multi-touchpoint ecosystem.

This scenario pushes companies to change the way they operate: moving from planning to continuous delivery, from big deadlines to small frequent releases.

In the last 20 years, many frameworks were created to reduce costs and optimize processes: among all the methods, Agile and Design Thinking proved successful to balance delivering and discovering: delivering great products while continuously discovering new ways to satisfy users’ needs.