How to create innovations that customers do not expect, but that they eventually love? How to create products and services, which are so distinct from those that dominate the market and so inevitable that make people passionate? A major finding has characterized management literature in the past decades: that radical innovation, albeit risky, is one of the major sources of long-term competitive advantage. But is that really the case? Read more in this article by Roberto Verganti, Professor of Management of Innovation and author of the book “Design-Driven Innovation.

For many authors the phrase radical innovation is an ellipsis for a longer construction spells radical technological innovation. Indeed, investigators of innovation have focused mainly on the disruptive effect of novel technologies on industries.

Many of these studies forget that people do not buy products but meanings. People use things for profound emotional, psychological, and sociocultural reasons as well as utilitarian ones. In studies on radical innovation, an examination of meanings has been largely absent. They are not considered a subject of R&D.

People do not buy products but meanings

However, companies such as Nintendo, Apple, Artemide, Whole Foods Market, Alessi show that meanings do change—and that they can change radically. These therefore purse a strategy: design-driven innovation— that is, radical innovation of meaning. Think for example at the Nintendo Wii that transformed consoles from a passive immersion in a virtual world approachable only by niche experts into an active physical entertainment for everyone, in the real world, through socialization. Or at Whole Foods Market, which has radically changed the meaning of healthy nutrition from a severe, self-denying choice to a hedonic one, and shopping from a chore to a reinvigorating experience.

Creating new markets

These firms have not provided people with an improved interpretation of what they already mean by, and expect from, a console or an organic food store. Rather, they have proposed a different and unsolicited meaning, which was what people were actually waiting for. The design-driven innovations introduced by these firms have not come from the market but have created huge markets. They have generated products, services, and systems with long lives, significant and sustainable profit margins, and brand value, and they have spurred company growth.

I’ve been investigating these and other leading firms for 10 years. In my book, “Design-Driven Innovation – Changing the Rules of Competition by Radically Innovating what Things Mean”, published by Harvard Business Press, I unveil they have built an unbeatable and sustainable competitive advantage through innovations that do not come from the market but that create new markets, by competing through products and services that have a radical new meaning: those that convey a completely new reason for customers to buy them. The cases, data and stories in the book show how to create this new vision and how to successfully propose it to customers.

Redefining existing products or concepts

Radical innovation of meanings doesn’t come from user-centered approaches. If Nintendo had closely observed teenagers using existing game consoles, it probably would have improved traditional game controllers, enabling users to better immerse themselves in a virtual world, rather than redefining what a game console is. User-centered innovation does not question existing meanings but rather reinforces them, thanks to its powerful methods.

Design-driven innovations are instead proposals, which however, are not dreams without a foundation. They end up being what people were waiting for, once they see them. They often love them much more than products that companies have developed by scrutinizing users’ needs.

Which kind of experience would they love?

My research shows that these radical proposals come from a very precise process and concrete capabilities. Firms that develop design-driven innovations step back from users and take a broader perspective. They explore how the context in which people live is evolving. Most of all, these firms envision how this context of life could change for the better. Their question, therefore, is, “How could people give meaning to things in this evolving life context? Which kind of experience would they love?”

Take a step back and apply a broader perspective

When a company takes this broader perspective, it discovers that it is not alone in asking that question. Every company is surrounded by several agents (firms in other industries that target the same users, suppliers of new technologies, researchers, designers, and artists) 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.

Using a design-driven process

Companies that produce design-driven innovations are better than their competitors at detecting, attracting, and interacting with key interpreters. The process of design-driven innovation therefore entails getting close to interpreters. This process, described in detail in this book, consists of three actions.

The first one is listening. It is the action of gaining access to knowledge about possible new product meanings by developing a privileged relationship with a distinguished circle of key interpreters. Successful firms first identify overlooked interpreters, usually in fields where competitors are not searching. They search “outside of the network”.

The second action is interpreting. Its purpose is to allow a company to develop its unique proposal. This process reflects the profound and precise dynamics of research rather than the speed of brainstorming. It implies sharing knowledge through exploratory experiments rather than extemporaneous creativity. Its outcome is the development of a breakthrough meaning for a product family.

The third action is addressing. Radical innovations of meanings, being unexpected, sometimes initially confuse people. To prepare the ground for groundbreaking proposals, firms leverage the seductive power of interpreters. By discussing and internalizing a firm’s novel vision, these interpreters inevitably change the life context (through the technologies they develop, the products and services they design, the artworks they create) in a way that makes the company’s proposal more meaningful and attractive when people see it.

The key leaders in this process are not designers, but executives who identify the talented interpreters, lead the interpretation process and take responsibility in identifying and promoting a novel vision. You do not need to be creative or to be a guru. Every executive can promote innovations that clients will love, by implementing the proper process and capabilities.

By Roberto Verganti, Professor of Management of Innovation, Politecnico di Milano

About the author

Roberto Verganti is the author of “Design-Driven Innovation: Changing the Rules of Competition by Radically Innovating what Things Mean” published by Harvard Business Press in 2009. He is a Professor of Management of Innovation at Politecnico di Milano, where he directs MaDe In Lab, the laboratory for executive education on the MAnagement of DEsign and INnovation. He has been a visiting scholar at the Harvard Business School twice and is a visiting professor at the Copenhagen Business School. Professor Verganti serves on the Board of the EIASM – the European Institute for Advanced Studies in Management, and on the Advisory Boards of the Design Management Institute of Boston.
Roberto Verganti is also the founder of PROject Science, a consulting institute dedicated to helping companies achieve strategic innovation. He has served as an advisor, coach and executive educator to senior managers at a variety of firms including Ferrari, Ducati, Whirlpool, Xerox, Samsung, Hewlett-Packard, Barilla, Nestlè, Unilever, STMicroelectronics, Intuit, Microsoft, Bausch&Lomb, Vodafone. He has also helped national and regional governments around the world to conceive design and innovation policies.
Roberto Verganti has issued more than 150 publications, which include “Developing Products on Internet Time” published on Management Science, and “Innovating Through Design” and “Which Kind of Collaboration is Right for You”, both published on the Harvard Business Review. He has been featured on BusinessWeek, The Wall Street Journal, The New York Times.