Speech held at the Fraunhofer Innovation Forum:
Good morning Ladies and Gentlemen,
We need innovation to progress.
We need innovation to keep our economic cycle going, which is still based on consuming and renewing.
We need innovation to help us climb the ladder of human needs, on our way to reach the final step… Innovation is there to bring us this advantage: Like a seed it holds the key to continuity. For our economy and society it creates value and prosperity, and in our economic system it‘s a mean to sustain against competition.
With the access to capital, also the shift into the information technology rapidly progressed.
Soon the intellectual capital took over from the financial capital and from now the company with the patents could erect barriers to competition.
But today this is rapidly commoditizing as well – the value chains of today’s economy do not cater for absolute barriers, they need to be open to cross fertilization and enhancement to win the battle for the consumer‘s favor. Today we are living in a paradigm shift.
From the agricultural age, and thereafter the industrial age, we have come a long way and now are moving into the knowledge age. And with this shift, our society has become flatter and flatter – we are now living in a pancake world.
The hierarchical systems as we knew them from the old ages are falling apart and are rapidly taken over by flat- ter systems, with different kind of boundaries between social and economical systems.
Today the boundaries are less between classes, more and more between opinions. This also influences the behavior of the consumer: recommendation between peers takes over from a managed top-down distribution of opinion by the few… and at the same time brands increasingly provide meaning to people, substituting for lack of social structures.
So far, nothing new…
Let‘s have look back, to where we came from – to project where we might be going: In economy the dominant way to sustain success, is to erect barriers to competition.
As soon as we started to conquer technology, barriers to competition were created through mastering its very reproduction – innovation was all about producing commodities; the more, the better; the more efficient, the better.
The one with the better machines and better factory won the competition, and the favor of the consumer. As soon as these barriers were not distinctive enough and factories became commodities as well, access to capital made the difference. The issuing of shares and the growth of capital allowed companies to access new markets and achieve new means for marketing, in order to increase the effect of communication. With this, they could create new barriers to competition.
This phenomena is reflected in the development of economic progression in our society: Gilmore and Pine have stated, that economic progress will be mainly achieved by staging of experiences. Creating barriers to competition will be only possible, by providing differentiating and highly relevant propositions to consumers.
The fact that almost 80% of our GDP is in services shows that we are more and more entering into an immaterial world. All this has a strong impact on innovation, as we know it.
Where yesterdays innovation was about technology, about products, about management and risk management, it was mainly part of R&D and it was therefore closed.
Now we incrementally progress towards more relevant solutions. Today‘s innovation provides more meaning to the consumer, they have a higher level of designation and are more design driven. And subsequently they become more radical in their meaning: some solutions ‚designate‘ new meaning to existing combinations and therefore create new innovative propositions.
So innovation today is about all that carries value: it is about creativity, entrepreneurship and vision, it is part of culture and it is open.
That‘s why todays technological innovations are no longer centered around inventions. Inventions alone do not work as barriers in competition any more. Technology today is more and more becoming a facilitator to new combination, that are truly relevant to users in the experience age: today it‘s not about what technology can do for people – but about how it can be supportive!
Today the mental barriers within consumers are defining competition.
For the first time, consumers control these barriers. Based on the experience they make, they determine if they ‚invest‘ into a relationship with a brand, and therefore they become decisive in creating barriers.
As such the barriers to competition have moved from the physical and logical level, to an intellectual and spiritual level. And from the control from within a company to the control from outside a company.
In order to sustain in the economic battle for the con- sumer, companies have to invest in creating a relation- ship with consumers.
In this sense, innovation today is truly becoming open: creating relevant and differentiating experiences for and with consumers is now defining success – slowly but surely, humans are moving centre stage.
So wrapping up where we came form, we can say that the shift in economic progression is made from pro- ducts to relationships and from focussing on technology to focussing on human needs.
If innovation today is all about humans and their needs and experiences, the question remains how can we cater for this within an innovation process? In the end humans are not a controllable piece of technology… How can we put the human centre stage?
Today I want to elaborate on 3 dominant ways to approach this:
1. co-creation, 2. co-development, 3. being insightful
Co-creation is all about the involvement of the user after the basic proposition or carrier is generated. The user can generate an individual design: the designer as such is acting as a facilitator in this process; the brand acts as a host.
The provided base proposition allows the user to get involved in the arrangement of features and styling. He can alter, adapt, improve or design the final proposition to his liking.
This way of co-creation or mass customization is a
tool to increase the involvement of the user into the final part of the creation process and can increase the relationship between proposition provider and user. It allows the user to express individuality and personal taste.
But, this form of co-creation is mainly limited to the what‘s there, and it‘s not an innovation as such – it‘s an innovation toward the individual and a great way to provide end-user experience, or to grow the pride of ownership.
Co-creation is of a great value for the user, since it allows for deep participation and individualization. But, it needs a basis to build upon, a blank canvas to depart from…
Co-development is a second way is to integrate the human into the development process – it‘s set up to design around what humans desire.
Through user-centered design, joined development, focus groups and cross industry collaboration truly new innovative combination can be generated.
Here the designer mainly acts as a translator between the involved parties and is set up to articulate the outcome, or enrich the outcome of a co-development process.
This innovation process mainly serves as an idea gene- ration effort – asking, observing and interviewing the envisioned user can generate many potential ideas and can spin out new combinations and innovations.
When including the means of crowd-sourcing, manufacturers and developers can tab into a large amount of intellectual power, and with that, can generate huge an amount of intellectual asset…
But, the sheer amount of ideas is not relevant to create a truly successful innovation: Most apps in the apple app-store fail, 70% of market introductions turn out to be flops. And why is this; because there is a lack of re- sources, because the ideas are not innovative enough? In the end generating ideas over ideas is not relevant: what‘s essential is to have the right idea, but most importantly, it‘s crucial to have the right vision to realize the idea… The innovative combination has to conquer the barrier in the consumers mind, and therefore it has to fulfill some fundamental criteria: providing meaning and relevance.
And in this lies the true challenge – filtering out the relevant ideas… and having the right vision on how to execute them.
The challenge lies in assessing the relevance of the idea for the targeted user, and to determine whether the involved company or brand can provide this relevance to the user.
Some companies are getting lost in translating ideas into relevance – relevance for themselves and for their customers…
A way out is the third way to put humans centre stage: this way is set out to give a direction in translating the ideas, it is all about being insightful to what consumers might need, and then to give a proposal to them.
Here the focus in not on what consumers want, it‘s on what they might need.
The approach is to get under the skin of the consumer, and to focus on making the right thing, and not only on making things right. Insightful development works as a filter to skim through the vast amount of ideas: it helps to find out which idea fits best to the company or brand conceiving it, and to the person using it.
The innovation process uses abductive thinking: designers work as interpreters of what is right for a relationship between company or brand and user. Their aim is to make a proposal to an identified target group (the users) and provide them with a branded experience.
To be able to do this, one has to come from a clear point of departure, from a personal viewpoint so to say. It also needs a different approach to development: a more human approach.
The process of this design driven innovation is powered by design thinking, which provides a more empathic and holistic approach to creating a proposition. Design thinking is the process behind design driven innovation – it‘s the engine of a designful company.
As Herbert Simon, Nobel Prize winner, once defined: „everyone designs who devices courses of action aimed at changing existing situations into preferred ones!“ Design thinking starts with empathy for those involves in an experience and aims for creating preferred situations. It‘s about spotting the issue from another angle, with the goal to innovate the meaning of the proposition.
Like in the case I show, which is about improving the efficiency of pediatric examinations by creating an improved experience for the ones involved. The design process is based on observing and the interpretation of what impact the experience has on the involved stake- holders – in this case the patients, nurses, specialists, relatives and the investors/hospital owners.
As a result it envisions an experience, as it could be meaningful for all involved, planning out improvements to all stakeholders.
The design activity is centered on story telling and visualizing the experience as it improves the issues. The goal is to create a vision of the improved situation. The vision gives relevance to the idea in the context of the brand, the involved and the situational context. The proposed vision is aimed to improve the relation- ship between the involved and thus create economic efficiency as well.
Here the innovation is in the experience – not in the product as such. It builds a more meaningful relation- ship between the involved and therefore increases the value of the proposition as such.
In this case here, the examination takes less time, which is a benefit to the involved and the hospital – through an improved experience, the patients’ anxiety and stress can be reduced (specially in pediatrics) and the amount of patients per day for the hospital could be increased. This by itself also increased the recommendation for the staging brand – Philips in this case and the hospital ‚brand‘ as well – all adding to the prosperity and wellbeing of the involved stakeholders.
And with this shift in the purpose of technology, design can take it‘s most contributing role: design is the act of giving meaning, or designation, to how propositions are executed, shaped and articulated.
With the shift to creating meaningful solutions, also design shifts in it‘s core function: from adding style to a product or piece of communication, it shifts to building a new innovation culture within companies. With that designers move from a silo approach, to become a facilitator in cross-departmental and open innovation processes, increasingly becoming a spider in the web. This way they are instrumental in finding the right balance between what‘s feasible from the technology side and what‘s desired from a consumer‘s perspective, in order to find viable solutions.
Those viable solutions are centered around the meaning these solutions have for users. The proposals that are relevant to consumers and users, balance how it‘s done (meaning), with what it delivers (performance). They invite the user into participation and interaction, but they mainly remain proposals by design: they carry a signature and personality and propose a new meaning (interpretation) of a performance.
This meaning is most optimally addressed, if people needs are met through a function that comes with a specific brand and language: here design is not an action to shape an identity, no, it‘s a process to create a relevant experience across all touch points a brand provides! Here design is the process to connect the technological side of innovation (inventions) and the brand side (branding) to create meaning for people.
Meaningful proposals have an author, a personality, a brand, and they have the user in mind. They cover the total experience and all touch points, but foremost they are designed to reflect a personality, and not to win a beauty contest.
But, design driven innovations are difficult to handle – they are against the conventions of logical, rational business making and they do poorly in tests, because it‘s beyond what consumers and manufacturers can imagine.
Therefore they need a strong drive to be brought to market and often they find the toughest battles within a company, and not in the market place.
On the other hand, they do generate lasting profits if they make it there – they earn high user loyalty due to the relevance they propose to the user. And due to the recommendation, which comes as a result, they have huge brand potential and therefore can earn large market shares. These innovations differentiate on the intellectual level of meaning, not on the feature level meaning and with that, steal consumers hearts and make them become loyal users.
This way of innovation very much depends on the brand, the personality behind the proposition – the brand or the personality conceiving the proposition. Brands are like personalities and can embody a companies effort to become meaningful for consumers. This is something we are accustomed by for ages, e.g. in the service industry… just ask yourself: what makes your favorite restaurant your favorite one, and why do you recommend it to your best friends?
The answer rarely is because of the food alone, it‘s mostly related to non-factual things, like trust, authenticity, atmosphere, the way you feel well served, the relationship…
For brands the basis for building a mutual relationship with consumers and users starts with being human oneself, assuming a personal standpoint. It is an inside-out approach, of having a clear standpoint towards issues and propositions that serve as the basis for conceiving and proposing new meaningful innovations. In the end the goal is to meet own needs with the user‘s needs, in order to create a mutual relationship based on trust.
Because innovation is truly successful in economic terms, when a rewarding relationship between brand and user occurs – in the end it needs to trigger economic transactions. The economic reward is most fulfilling if the meaningful relationship, resulting from the provided experiences, leads to deep and engaged user loyalty and motivation.
As mentioned: our flat and networked society will influence the way innovation comes about – less controlled, open, interactive and people driven.
Success is therefor less dependent on how industries manage their processes and say what it is, but on the consumers saying how it is. In the open networked society, brands have to be meaningful to be recommended and taken into consideration.
As such, recommendation has become the strongest growth engine in the networked society and moves centre stage in corporate strategies.
Meaningful innovations can drive user loyalty and trust to an higher level, and unleash the power of ‚word of mouth‘ – it can ignite strong advocacy for the brand and thus fuel the growth of the company.
Strong brand advocacy is on of the most differentiating elements in competition, because today, consumers define the barriers to competition!
If you start with design to drive your innovation activities and use design driven processes to create meaning for the brand‘s proposals, the resulting loyalty of customers will fuel long term profits. In making sure that meaningful innovation can lead to brand promotion, the resulting user experience and loyalty will fuel growth of the involved companies.
Innovation is about the application of combinations that make a difference, as Schumpeter said over hundred years ago: combining the strength of your brand, what ever it is, with the strength of your users loyalty, new market wining innovation can happen. By putting humans centre stage in the innovation process and by having a designful approach to create meaning for them, market leadership can be reached and kept!
Clarification of terminology: The consumer is the human not yet in close relationship with a brand; the user is in a close relationship (either customer, user or stakeholder).
Roberto Verganti: Design-Driven Innovation, 2009 Marty Neumeier: ZAG, 2007
Josephine Green: Democratizing the Future, 2007 Fred Reichheld, The Ultimate Question, 2006 Banny Banerjee, Design Thinking, 2010