Intercorp Group and Design Thinking
How to Use Design Thinking to Make Great Things Actually Happen
Introduction
Intercorp Group is one of Peru’s biggest corporations, controlling almost 30 companies across a wide variety of industries. Its CEO, Carlos Rodríguez-Pastor Jr., inherited the company from his father in 1994.
Ever since it became clear that smart design led to the success of many products, companies have been employing it in other areas, from customer experiences to strategy, to business ecosystems. But as the design is used in increasingly complex contexts, a new hurdle has emerged: gaining acceptance of the “designed artefact” into the status quo. In fact, the more innovative a new design is, the more resistance it’s likely to meet. The solution, say the CEO of IDEO and the Rotman School’s former dean, is to also apply design thinking to the introduction of the innovation itself.
This process, intervention design, grew organically out of the iterative prototyping that designers did to help understand customers’ reactions to new products. Not only did iterative prototyping create better offerings, but it was a great way to get organizational funding and commitment because it improved the chances of success and reduced fear of the unknown. Intervention design uses iterative prototyping to get buy-in too but extends it to interactions with all the principal stakeholders—not just customers.
When Intercorp Group devised a revolutionary concept for Peru’s schools, it needed to win acceptance for corporate-run education and for a very different role for teachers. Thanks to intervention design, it now has 29 schools in operation and is rapidly growing.
Complex new designs of products (say, an electric vehicle) or systems (like a school system) typically struggle to gain acceptance. Many good groundbreaking ideas fail at the starting gate.
New products and systems often require people to change established business models and behaviours. As a result, they encounter stiff resistance from their intended beneficiaries and from the people who have to deliver or operate them.
Methods
Winning social acceptability for this venture was the real challenge—one complicated by the fact that education is always a minefield of vested interests. An intervention design, therefore, would be critical to the schools’ success. Rodríguez-Pastor worked closely with IDEO to map one out. They began by priming the stakeholders, who might well baulk at the idea of a large business group operating schools for children—a controversial proposition even in a business-friendly country like the United States.
Intercorp’s first move was starting an award in 2007 for “the teacher who leaves a footprint,” given to the best teacher in each of the country’s 25 regions. It quickly became famous, in part because every teacher who received it also won a car. This established Intercorp’s genuine interest in improving education in Peru and helped pave the way for teachers, civil servants, and parents to accept the idea of a chain of schools owned by the company.
Next, in 2010 Intercorp purchased a small school business called San Felipe Neri, managed by entrepreneur Jorge Yzusqui Chessman. With one school in operation and two more in development, Chessman had plans for growth, but Intercorp’s experience in building large-scale businesses in Peru could take the venture far beyond what he envisioned. However, the business would have to re-engineer its existing model, which required highly skilled teachers, who were in extremely short supply in Peru. Rodríguez-Pastor brought together managers from his other businesses—a marketing expert from his bank, a facilities expert from his supermarket chain, for instance—with IDEO to create a new model, Innova Schools. It would offer an excellent education at a price affordable for middle-class families.
The team launched a six-month human-centred design process. It engaged hundreds of students, teachers, parents, and other stakeholders, exploring their needs and motivations, involving them in testing approaches, and soliciting their feedback on classroom layout and interactions. The result was a technology-enabled model that incorporated platforms such as the U.S online-education pioneer Khan Academy. In it, the teacher was positioned as a facilitator rather than the sole lesson provider.
The intervention design challenge was that parents might object to having their children learn via laptops in the classroom, and teachers might rebel against the notion of supporting learning rather than leading it. So after six months of preparation, Innova launched a full-scale pilot and brought in parents and teachers to design and run it.
The pilot demonstrated that students, parents, and teachers loved the model, but some of the assumptions were far off base. Parents didn’t object to the teaching approach; in fact, they insisted that the laptops not be taken away at the end of the pilot. Additionally, 85% of the students used laptops outside classroom hours. The model was tweaked on the basis of the insights from the pilot, and both the parents and teachers became huge advocates for the Innova model in nearby locations.
Word of mouth spread, and soon the schools were fully enrolled before they were even built. Because Innova had a reputation for innovation, teachers wanted to work there, even though it paid less than the public system. With 29 schools up and running, Innova is now on track to meet its goal of 70 schools by 2020 and plans to expand into every market in Peru and even markets outside the country.
Spreading the wealth.
If it followed conventional business wisdom, Intercorp would have focused on the richer parts of the country’s capital, Lima, where a middle class was naturally emerging. But Rodríguez-Pastor recognized that the provinces needed a middle class as well. Fostering one there obviously involved job creation. One way Intercorp could create jobs was to expand its supermarket chain, which it had purchased from Royal Ahold in 2003 and renamed Supermercados Peruanos.
In 2007 the chain began establishing stores in the provinces. Local consumers were certainly receptive to the idea. When one store opened in Huancayo, curious customers queued up for an hour or more to enter it. For many, it was their first experience with modern retail. By 2010 the chain was operating 67 supermarkets in nine regions. Today it boasts 102 stores nationwide.
Early on, Intercorp realized that retail ventures of this kind risked impoverishing local communities rather than enriching them. Though a supermarket did provide well-paid jobs, it could hurt the business of local farmers and producers. Since they were small scale and usually operated with low food-safety standards, it would be tempting to source almost everything from Lima. But the logistics costs of doing that would erode profit margins, and if the chain crowded out the local producers, it might destroy more jobs than it created.
Intercorp thus needed to stimulate local production through early engagement with local businesses. In 2010 the company launched the Perú Pasión program, with support from the Corporación Andina de Fomento (an NGO) and Huancayo’s regional government. Perú Pasión helps farmers and small manufacturers upgrade their capabilities enough to supply their local Supermercados Peruano. Over time some of these suppliers have even developed into regional or national suppliers in their own right.
Currently, Supermercados Peruanos sources 218 products, representing approximately $1.5 million in annual sales, from Perú Pasión businesses. One is Procesadora de Alimentos Velasquez. Originally a neighbourhood bakery serving a few small nearby grocery shops, it began supplying a Supermercados store in 2010, generating just $6,000 in annual sales. Today, thanks to Perú Pasión’s help, it supplies three stores for nearly $40,000 in annual sales. Concepción Lacteos, a dairy producer, is another success. In 2010 it began supplying its local Supermercados store for about $2,500 in annual sales. In 2014 it supplied 28 stores, including the chain’s upscale outlets in Lima, and generated $100,000 in sales.
Intercorp’s success in boosting the middle class in Peru depended on the thoughtful design of many artefacts: a leading-edge bank, an innovative school system, and businesses adapted for frontier towns across Peru. But equally important has been the design of the introduction of these new artefacts into the status quo. Rodríguez-Pastor carefully mapped out the steps necessary to engage all the relevant parties in their adoption. He deepened the skills of the executives on his leadership team, increased the design know-how of his people, won over teachers and parents to the idea that a conglomerate could provide education, and partnered with local producers to build their capacity to supply supermarkets. In conjunction with well-designed artefacts, these carefully designed interventions have made the social transformation of Peru a real possibility rather than an idealistic aspiration.
The principles of this approach are clear and consistent. Intervention is a multistep process—consisting of many small steps, not a few big ones. Along the entire journey interactions with the users of a complex artefact are essential to weeding out bad designs and building confidence in the success of good ones.
Design thinking began as a way to improve the process of designing tangible products. But that’s not where it will end. The Intercorp story and others like it show that design thinking principles have the potential to be even more powerful when applied to managing the intangible challenges involved in getting people to engage with and adopt innovative new ideas and experiences.
Key Highlights of the newsletter
Ever since it became clear that smart design led to the success of many products, companies have been employing it in other areas, from customer experiences to strategy, to business ecosystems
Many good groundbreaking ideas fail in the starting gate
Throughout most of history, the design was a process applied to physical objects
As it became clear that smart, effective design was behind the success of many commercial goods, companies began employing it in more and more contexts
He needed his managers to learn how to develop insights too so that they could spot and seize opportunities for advancing his broader ambition. He talked the analyst into allowing four of his colleagues to join the tour. This incident was emblematic of his participative approach to strategy making, which enabled Rodríguez-Pastor to build a strong, innovative management team that put the bank on a competitive footing and diversified the company into a range of businesses catering to the middle class: supermarkets, department stores, pharmacies, and cinemas
Rodríguez-Pastor concluded that Intercorp would have to enter the education business with a value proposition targeted at middle-class parents
Thank you for reading.
Shivani from DesignPlayStore.