Summary of Concepts

Summary of Concepts MIIP Project

Management of Innovation and Intellectual Property

4/24/17

By: Akshay Acholkar

INDEX TOPIC

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LIST OF FIGURES

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Introduction

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What are Meanings?

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Strategy of DDI

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Process of DDI

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Building DDI Capabilities

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Value of DDI

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The Challenges of DDI

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References

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List of Figures Figure No

Caption

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Innovation and peoples need

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Aspects of DDI

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Three innovation strategies

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Nintendo’s Wii console

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Interpreters in DDI

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User centered design vs design driven innovation

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The process of DDI

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Strategies for building relational assets with interpreters

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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: 3

Function (Technology) Performance People (Needs)

Sense (Language)

Meaning

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:

Building DDI Capacity Process of DDI Strategy of DDI

Figure 2 Aspects of DDI

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Strategy of DDI The Figure below gives us a framework of innovation strategy to be followed.

Technological epiphany

Radical improvement

Technology Push

Performance (Technology)

Incremental Improvement

Design Driven (Design Push) Market Pull (User Centered)

Adaptation to the evolution of sociocultural models

Generation of new meanings Meaning (Language)

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

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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.

Radically New Technology

•The breakthrough technology used was MEMS accelerometers •Set of sensors which detected movement along all three axes.

Radically New Meaning

•Use of Natural movements of the body to play video games. •Wii transformed video games from immersion in virtual world to real world. 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.

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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. Design driven innovation User centered design

Interpreter Envisioned context of life

Current context of use

Firm

User

Firm

Person

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.

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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

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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: Value existing relational assets    

Building relational assets

s

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

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) 9

 

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 designdriven 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. 10

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

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