1 Design Thinking-based Innovation: how to do it, and how to teach it? Carlos A. Osorio, PhD (carlos.osorio@uai.cl) Adolfo Ibanez School of Management Version 1.0. August 8 th , 2009. Abstract As innovation becomes the cornerstone for new problem solving and creation of private and public value, this paper explores two questions: (i) what methods and routines help teams to innovate better and faster? and, if there are such methods, (ii) can they be taught and learned? I focus on the theory converging from design thinking, new product development, and social sciences, and on experiments carried out with undergraduate and graduate students on courses designed to test the hypotheses that innovation can be taught to solve complex business and social problems. Findings have allowed creating frameworks and course structures that help teams to create, develop and enhance new sets of skills by focusing the natural chaos of innovation into solving complex problems. Keywords: design thinking, innovation, sustainable solutions, challenges, learning, risk, uncertainty, ambiguity, ignorance. 1. Introduction As innovation gains relevance in the world as source of value creation, there is increasing need to understand it better in order to better manage it and create it. For the purpose of this paper it is useful to differentiate between innovations as a result and as a process, and to introduce working definitions. I define innovation as a result as any new, or non-trivial change in, product, service, process, or business model, etc., that creates value for a market and payback for an organization. I also define innovation as process as an adaptive and structured development process that, while used consistently, allows a team or company to create innovations in a consistent and predictable manner (Osorio, 2007). Most early research on innovation focused on innovations as results, how to manage their evolution, their competitive effects, and strategy design. Many scholars have focused on the study of innovation from the perspective of the conception of technological change (Arthur, 1989; Dosi, 1982; Kuhn, 1970; Rosenberg, 1969; Sterman & Wittenberg, 1999; Tushman & Anderson, 1986), life cycle of new technologies, the emergence of dominant designs and survival of firms (Abernathy & Utterback, 1978; Anderson & Tushman, 1990; Huckman, 2003; Snow, 2004; Utterback, 1994). Other studies have focused on industry dynamics as response to innovation (Levin & Reiss, 1984; Nelson & Winter, 1982; Schumpeter, 1934, 1943), and on the impact of innovations in market structure (Bresnahan & Trajtenberg, 1995; Utterback & Suarez, 1991). The study of technology strategy has also focused on relevant innovation themes such as modularity (Baldwin & Clark, 2000; Ethiraj & Levinthal, 2004; Fleming & Sorenson, 2001), and the relevance of standards and network externalities (David, 1985; Shapiro & Varian, 1999), and the effect of markets for know‐how and licensing on market integration (Arora, Fosfuri, & Gambardella, 2001; Pisano, 1990; Teece, 1981, 1986).