Strip a problem back to what must be true, then rebuild — instead of copying what exists.
Use when Use it when an industry's costs or practices have been stable for a long time without obvious justification, when you are entering a field as an outsider and lack the incumbents' assumptions, or when repeated incremental attempts have all failed and the problem may be framed wrongly.
Avoid when Avoid it for routine decisions — it is slow, effortful, and analogy is right most of the time. It is also a common vehicle for arrogance: reasoning from first principles while lacking domain knowledge tends to rediscover why the convention exists, expensively. If experts cannot explain why a practice exists, that is worth investigating; if they can, listen.
Understand the person, frame the real problem, build something rough, and learn from their reaction.
Use when Use it on ill-defined problems where the need is genuinely unclear, where the people affected are not you, and where the cost of building the wrong thing is high. It is strongest early, when the framing is still open and cheap to change.
Avoid when Avoid it when the problem is well-specified and the answer is known — it is expensive ceremony for work that needs execution. It struggles with problems whose constraints are technical or regulatory rather than human. And it is the most ritualised framework in common use: workshops, sticky notes and a five-stage poster routinely produce the appearance of the method with none of the substance, because nobody left the building to observe anyone.