The Avant Garde and Finance

These two disciplines seemingly couldn't be farther apart both in methods and in orientation to the world. But consider what they both seek to achieve. Finance attempts to look ahead into the future to determine the likely outcomes of investments that are dependent on the future performance of a host of variables including entire markets. Art makers attempt to make culture, which is a similar process of working towards a future encounter with a wider audience, attempting to interpret the impact of works that are also dependent on a host of variables, also attempting to create something of value. Each navigates exceedingly complex terrain using dramatically different tools.

The essential functions of finance are to determine what are, and what are not, worthwhile investments of money over time. The essential functions of design are to produce a superior user experience that also extends itself out over time, past the point of purchase and into the life of the product, process or service. The essential functions of art, or at least a major current problem being explored, is how to produce better culture and possibly better outcomes for everyone involved.

Over the past months I worked to build an iterative model that would give structure to innovation while maximizing realizable options. It is possible, with the right conditions and tolerances for innovation, to create teams that combine the strengths of all three disciplines. Bringing discovery driven planning in at the early focus stage of the design thinking process will apply profitable parameters early on. This focuses the idea generation by ruling out as many unprofitable avenues as you can, before you invest in exploring them. 

Let me try and explain how this works in plain English. First you assemble a design team to address a problem or need.  At the earliest stages in the design process, you create a set of financial statements that build on your ideas, only you build them in reverse. And this is the key. You in effect take your idea and create a ghost company or business unit entirely on paper, working backwards through all the calculations to arrive at a sense of what that idea would have to look like in order to be profitable. Within these reverse calculations will be a host of assumptions that must prove to be true in order for your idea to work profitably. With them laid out on paper, you can begin to test these assumptions upfront, working from the most consequential to the least consequential.

Testing concepts in this way has two significant benefits over implementing first and testing as you go. First it minimizes the cost of exploring a concept or idea by increasing the speed and accuracy of initially evaluating its viability. And second, by minimizing the cost and reducing the risk, it increases the number of ideas that can be explored without the expectation that every idea will be a success. By providing something of a safety net for your innovation efforts, this encourages your design teams to be more innovative, to push out to the edges of their own abilities and beyond.

This already happens in some combination in every successful venture, but it tends to happen latently and over time. There is a kind of Darwinian weening out of the weaker concepts as they are implemented. In this other model we are able to create a kind of three dimensional virtual model of an idea and back out it the assumptions that have to hold true in order for it to be a success. We are looking for the problems before they become problems.

Here we get finance and design working together at the very beginning. What happens is a very quick cycling of ideas that allows for the generation of the most possible solutions you can come up with the least possible cost in exploring how viable they are. What is absolutely critical for maximum success is to have someone in the middle who speaks both finance and design and can translate the concepts across disciplines. 

Design thinking is an extremely powerful tool for innovating. Its weakness though is that every step is very dependent on the outcomes of the previous steps. The end result is very dependent on the questions asked or problems raised at the start. Discovery driven finance adds the capability of focusing the early stages of the design thinking process to produce a greater likelihood of a profitable outcome. 

All innovators push the boundaries of their fields. By focusing design activity we actually encourage MORE innovation. When you have those kinds of people at work on your project, they are going to push the limits. Steering them in that activity increases the likelihood of smash hits and radical disruptive moves forward. 

Next week I will post one more time with a more concise how step by step description of how this works.