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Summary of Concepts
MIIP Project
Management of Innovation and
Intellectual Property
4/24/17
By: Akshay Acholkar
1
INDEX
TOPIC
PAGE NO
LIST OF FIGURES
2
Introduction
3
What are Meanings?
3
Strategy of DDI
5
Process of DDI
6
Building DDI Capabilities
8
Value of DDI
10
The Challenges of DDI
11
References
11
2
List of Figures
Figure No
Caption
Page No
1
Innovation and peoples need
4
2
Aspects of DDI
4
3
Three innovation strategies
5
4
Nintendo’s Wii console
6
5
Interpreters in DDI
7
6
User centered design vs design driven innovation
7
7
The process of DDI
8
8
Strategies for building relational assets with interpreters
9
3
Introduction
Two major findings have characterized management literature in the past decades.
Radical innovation, although a bit risky, is one of the major sources of long-term competitive
advantage for firms.
People do not buy products, they buy meanings.
People use things for profound emotional, psychological, and sociocultural reasons as well as utilitarian
ones. Every product and service in consumer as well as industrial markets has a meaning attached to it.
Firms should therefore look beyond features, functions, and performance and understand the real
meanings users give to things. A common misconception, however, is that meanings are not a subject
for innovation: they are a given. One must understand them but cannot innovate them. Meanings have
indeed intensively populated the literature on marketing and branding. But, they are not considered a
subject of R&D.
Innovation has been by and large focused on two strategies:
Technology Push: Quantum leaps in product performance enabled by breakthrough
technologies, and
Market Pull: Improved product solutions enabled by better analysis of user needs.
But there exists a third strategy: Design-Driven Innovation (DDI)— that is, radical innovation of
meaning. Many companies such as Nintendo, Apple, Artemide, Whole Foods Market, Alessi, and many
others that were discussed in the book show that meanings do change and the change can be radical. A
few examples of firms competing through radical innovation of meanings are as follows:
Nintendo in 2006, launched the Wii, a game console with motion-sensitive controllers that
allows people to play games by moving their bodies.
o Until the moment the Wii was introduced, game consoles were considered entertainment
gadgets for children who were great at moving their thumbs; they offered a passive
immersion in a virtual world.
o The Wii overturned this meaning: it stimulated active physical entertainment, in the real
world, through socialization.
Metamorfosi Lamp by Artemide in 1998 was a lamp that would change the colour of the light
according to the owner’s mood.
o Traditional lamps were meant for lighting and its good looks.
o Artemide changed the meaning on why we use lamps?
o The lamp was hardly visible. Hence the beauty of the lamp was not under consideration.
In order to understand DDI one must first understand, what are meanings? The next section throws
some light on meanings.
What are Meanings?
Every product has a meaning. Yet many companies do not care about how to innovate meanings. They
strive to understand how people currently give meaning to things—only to discover that this meaning
has been suggested by an innovation designed by a competitor. Meaning has many formal definition,
but explaining it with models and examples will be apt. The model below shows that shows that
products appeal to people and their needs along two dimensions.
Function provided by product function
Meaning concerned with sense
The model is illustrated in Figure below:
4
Figure 1 Innovation and peoples need
Meanings indicate why people buy a product. It accounts for the profound psychological and cultural
reasons people use a product. Consider the example of Metamorfosi lamp from the previous section:
Individual motivation is linked to psychological and emotional meaning: One uses a
Metamorfosi lamp because it helps strengthen the parental bond and create poetic feelings while
I’m doing infant massage on my baby.
Social motivation is linked to symbolic and cultural meaning: what the product says about
me and others. That is, one buys a Metamorfosi lamp because it tells visitors that I like to
explore contemporary home lifestyles and philosophies.
A product’s language is its material, texture, smell, name, and, of course, form (style is only one aspect
of a product’s language). One example is sound: everyone knows that the distinctive language of a
Harley-Davidson motorcycle is the roar of its engine as well as its form.
Meanings are not limited to products. They can be extended to services as well. A few examples of
innovation of meaning in services are given below:
New meanings to airlines by LCC (Low Cost Carriers)
Online banking
Mc-Donald’s changing the meaning of fast food by providing a place safe clean and reliable.
The following sections will deal with three aspects of DDI as illustrated in Figure below:
Figure 2 Aspects of DDI
Strategy
of DDI
Process of
DDI
Building
DDI
Capacity
Sense
(Language)
People
(Needs)
Performance
Meaning
Function
(Technology)
5
Strategy of DDI
The Figure below gives us a framework of innovation strategy to be followed.
Figure 3 Three innovation strategies
Market-pull innovation starts with an analysis of user needs and then searches for technologies that
can better satisfy them, or updates product languages to respond to existing trends.
Technology-push innovation reflects the dynamics of advanced technological research.
The third strategy of radical innovation of meanings design-driven innovation, or design push. This
strategy deals with innovating on meanings by means of an incremental or radical improvement of
technology. Here it is clear that in DDI the technology might not change significantly, but the meaning
does change significantly.
Companies can use Figure 3 to analyse their innovation strategy. Many projects fall within the domain
of market pull. These include modifications and expansions of existing product lines, adaptations of
product languages and styles to new market trends, and new models with improved performance or new
functions that satisfy existing needs. All these can be the source of short-term profit. However, sustained
Technology Push
Market Pull
(User Centered)
Design Driven
(Design Push)
Performance
(Technology)
Meaning
(Language)
Radical
improvement
Incremental
Improvement
Adaptation to the
evolution of
sociocultural models
Generation of
new meanings
Technological
epiphany
6
competitive advantage and long-term profit come from projects that embody radical innovation in
technology or meaning. Here is where companies build their future.
The interaction between the technology interaction between the technology push strategy and the DDI
strategy is called as Technology Epiphany. This is represented by the hatched area in the top right
corner of Figure 3. Mostly these two strategies do not conflict, companies usually focus on only one
aspect. But there are companies who have leveraged this technology epiphany to gain competitive
advantage over other firms. A good example of this is Nintendo’s Wii console launched in the year
2006. The Figure 4 below shows the technology and the meaning on which the console innovated.
Figure 4 Nintendo's Wii console
A company whose innovation portfolio has no projects in the domain of design-driven innovation can
be confident of one thing: it will soon witness a competitor introducing a radical change of meaning
and therefore leading the market.
Process of DDI
Every company is surrounded by several agents who share its interests. Consider, for example, a food
company that, instead of closely looking with a magnifying lens at how a person cuts cheese, asks,
“What meanings could family members search for when they are home and are going to have dinner?”
Other actors are investigating this same question: kitchen manufacturers, manufacturers of white goods,
TV broadcasters, architects who design home interiors, food journalists, and food retailers. All are
looking at the same people in the same life context: dinner with family at home at night. And all are
conducting research on how those people could give meaning to things. They are, in other words,
interpreters.
Interpreters are people who interpret the meaning of a product to the customer. DDI process therefore
entails getting closer to these interpreters. Various interpreters to the firms are shown in Figure 5 below.
Companies that produce design-driven innovations highly value their interactions with these
interpreters. Interpreters pursue their own investigations and are engaged in a continuous mutual
dialogue.
•The breakthrough technology used was MEMS
accelerometers
•Set of sensors which detected movement along all
three axes.
Radically New
Technology
•Use of Natural movements of the body to play
video games.
•Wii transformed video games from immersion in
virtual world to real world.
Radically New
Meaning
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Figure 5 Interpreters in DDI
Unlike user centered innovation where a firm directly interacts with users, firms using DDI interact
with consumers indirectly via interpreters. This is illustrated in Figure 6 below.
Figure 6 User centered design vs design driven innovation
User centered approach takes look at specific actions of users whereas DDI takes a broader perspective
into people’s lives.
Creating design-driven innovation requires two assets: knowledge of how people could give meanings
to things and the seductive power to influence the emergence of a radical new meaning. The design
driven innovation process is rooted in three different phases:
Listening: This action consists on accessing knowledge about possible meanings and languages of new
products. Companies are involved in understanding where this knowledge is and how to internalize it.
It implies identifying and involving key interpreters of the design discourse.
Interpreting: This phase entails generating the unique vision and elaborating new proposal for a radical
change in meanings and languages. It implies collecting and reinterpreting information gathered and at
the same time elaborating internal researches and experiments in order to produce radical innovation.
Firm
User
Person
Firm
Interpreter
User centered design
Design driven innovation
Current
context of use
Envisioned
context of life
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Addressing: Addressing the design discourse implies diffusing the new vision to the variety of
interpreters. At the same time in consists on defining the most appropriate means through which
interpreters can discuss and then internalize those new proposals.
These three actions aim at securing privileged access to external assets: knowledge and seductive power.
Generating design-driven innovation does not imply sharing knowledge with interpreters, but instead it
is a proactive process that entails generating new proposals and meanings. There are some reasons why
this approach is significantly different from the user-centered process. First of all, it implies a deep
research process and an action of developing and sharing knowledge instead of a mere brainstorming
mixed with extemporaneous activities. Secondly it implies participation rather than observation. The
aim is defining new meanings and languages rather than simply observing what is going on in the
society. Thirdly the process is based on the ability to build an external and internal network of
relationships rather than following a defined sequence of steps. Figure 7 shows how interpreters who
do research interact and it finds out how the two main assets of design driven innovation (knowledge
and seductive power) are shared and the role of the executives in the generation of design-driven
innovation.
Figure 7 The process of DDI
Building DDI Capabilities
Three capabilities support design-driven innovation:
Relational assets with key interpreters
Internal assets (your own knowledge and seductive power)
The Interpretation process
Building Relational Assets:
The relational assets that back design-driven innovation are of a completely different nature. They are
embedded not in tools but in relationships among people. Relational assets rest on how one or more
people in your organization know the interpreter, his skills, his attitude, and his behaviour; know how
9
to attract him; have built trust over time; and also know where to look for new talent. Building relational
assets deals with the following factors:
Valuing the existing relational assets
Searching for and acquiring new relational assets
The strategies for building relational assets with customers are illustrated in the Figure 8 below:
s
Figure 8 Strategies for building relational assets with interpreters
The Design-Driven Lab:
So far we have seen the capabilities critical to design-driven innovation. The next obvious question is
next question is, Who? Who should drive, support, and monitor the process of building and renewing
these capabilities?
Firms often have the seeds of design-driven capabilities. But they fail to recognize them or transform
them into organizational assets by nurturing them, modifying them, crossbreeding them, and using
them. The processes to be mentioned next do not happen spontaneously. They need to be led.
Leadership by functional units
Leadership by a dedicated lab
In some companies the role of enhancing DDI is played by one or more of its functional units. A few
examples are given below:
R&D (for example, at Barilla),
Business development (at Bayer Material Science)
Strategy (at STMicroelectronics and Intuit)
Design (at Philips, Nokia, and Samsung)
Innovation (at Coca-Cola)
Building
relational
assets
Value existing relational assets
Define the life context
Identify the categories of interpreters
Find existing internal contacts with
potential interpreters
Select and attract key interpreters
Search for new relational assets
Conduct research projects.
Acquire relational assets
Hire connected people
Acquire connected organizations
Leverage mediators
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Product development (at Lego)
Marketing and branding (at Ducati motorcycle company)
Other companies, finally, have created a dedicated design-driven lab: a small unit whose mission is
specifically, to support the development and monitoring of design-driven capabilities. The roles of the
design driven lab are listed below.
Positioning design-driven innovation within your innovation framework
Enable the development and renewal of relational assets
Nurture the interpretation process
The design-driven lab also enables a firm to acquire and improve the methodologies and tools of design-
driven innovation, such as learning how to conduct a Design Direction Workshop or how to select
concepts to pursue. Such a lab is also in a privileged position to champion downstream product
development, acting as an interface between interpreters who participated in the initial design research
and engineers who will take care of implementation.
The Value of DDI
DDI can generate four kinds of values for a firm:
Profits
Corporate assets
Investments
Profits:
DDI can act as a major source of profit for a firm. If successfully realized, it creates products with a
strong and unique personality that stands apart from the crowd of undifferentiated competing products.
Such innovation often boosts a company’s sales volume.
An example of this is of the Wii controller, though it is the cheapest in the market, it is the only one
providing a profit on unit sales.
Corporate Assets:
It most significantly contributes to the brand equity. If a firm is first to create a new meaning for the
consumer, it can define the rules of the game to suit its own core competencies. Knowledge is the most
important corporate asset which DDI contributes. Again taking the example of Wii console, Nintendo’s
brand equity grew significantly after its launch.
Investments:
DDI firms in the book (like Alessi, Artemide, Kartell, etc.) have managed to become innovation leaders
in their industry, inspite of the fact that many of these firms did not have a design department. DDI as
explained from Figure 3 can also be achieved with minor modifications or research on a technology.
Higher profits, higher asset value, and limited investments in creating and sustaining an external
network of key interpreters eventually produce significant growth in a company’s share value and
market capitalization. These results can be amazing: witness the 165 percent rise in Nintendo’s stock
price during the year after the Wii’s release (and a market capitalization that topped that of giant Sony)
and Apple’s explosion in share price from $10 to almost $200 in less than four years.
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The Challenges of DDI
Although the benefits of design-driven innovation can be significant, many companies neglect this
abundant source of competitive advantage and simply wait for a competitor to introduce the next
dominant meaning in their markets. Though, there are no apparent drawbacks of DDI as concept, the
fault lies in its implementation. A few of the problems associated with implementing DDI are explained
below:
Believing that meanings don’t change:
Many companies simply do not ask themselves the right questions i.e., “What is the profound, ultimate
reason people buy our product? Belief of companies that design drives the industry and not meanings,
is a major challenge DDI faces. Some companies may realize the importance of meanings, but their
scope might be limited. They think that meaning cannot be innovated and is given by market. These
firms therefore consider meanings only as part of a market-pull strategy, and not as the object of radical
innovation.
Fearing risk:
DDI as much risky as it is rewarding. Managers are uncomfortable to take such risk because of lack of
consumer data as in case of market pull model.
Lacking the needed capabilities:
An important reason why firms often avoid design-driven innovation is simply because they do not
know how to implement it. Their processes and abilities are framed around incremental innovation.
DDI is based on interaction with a network of interpreters. Research and knowledge, these interpreters
provide insights on how people could give new meanings to things. Many companies, however, have
no relationship with interpreters. Companies might have relationships with interpreters, but may not
value them.
Locking a firm in to Obsolete Capabilities:
Alternatively, a company may have strong relationships with a network of interpreters, but this network
is obsolete and focuses on translating past sociocultural models rather than anticipating changes. It is
the failure of such firms to deal with disruptive technologies.
Take the example of Bang & Olufsen, a Danish company that has been a radical innovator of meanings
in audio and video products, as well as a great interpreter of apartment lifestyles, for several decades.
But the advent of digital media technologies has dulled its cutting edge. The way people listen to music
and watch shows is changing and will change even more radically in the future. However, the challenge
is not technological. Bang & Olufsen has acquired electronic technology in the past without focusing
on its innovativeness.
References
1. “Design Driven Innovation” by Robert Verganti, Harvard Business Review, 2009.
2. “Innovation Management and New Product Development, 3rd Edition” by Paul Trott, Pearson.
3. http://www.designdriveninnovation.com