Roberto Verganti’s work of design-driven innovation strategy is an example of how to pursue radical innovation – and thereby sustain a long-term competitive advantage.[1]
Verganti approaches innovation differently than the usual innovation strategies. These strategies often see innovation from a technological perspective, where the innovation is understood technological – and perhaps also market-wise (see for example innovation classifications for traditional classifications of innovation, which Verganti describes as 1-dimensional).
For Verganti radical innovation is not only a question about disrupting technology or market capabilities. Instead radical innovation is about innovating meaning – and how to propose innovations to customers that they did know they needed.
For Verganti it is necessary for companies to innovate more than the utilitarian dimension of products. Meaning, the second dimension of products, must also be innovated to sustain competitive advantage.
Verganti organizes his understanding of innovation around innovation in technology and meaning with either incremental or radical changes, and three different innovation strategies: market pull, technology push and design-driven innovation strategy (See below for the innovation framework).

The innovation of meaning is the factor that to a large extent drives sustained competitive advantage – and also what differentiate Verganti’s approach from many other innovation strategies.
According to design-driven innovation strategy all products have a meaning. This meaning evolves around symbols, identity, emotions, language, culture and more. Meaning in this context is the reason why people are using a certain product – reasons based on sociocultural, emotional and psychological foundations. This is related to the understanding of design as making sense of things.
The point of looking upon innovation of meanings is that this can create long-term sustained competitive advantages as new, innovative meanings can alter the entire marketplace – and make customers choose products based on other criteria than earlier. An example of radical innovation in meaning is Nintendo’s game console Wii. Nintendo changed what a gaming console meant for the users – from being an inactive activity in a virtual world, playing video games being a highly interactive and active activity in the real world. The user became the centre of the activity, which is visible in commercials for Wii where users are shown – and not the games.
The meaning of objects is a combination of symbolic (value for others) and emotional (value for yourself) value. This meaning is basically intangible, but has some tangible relations: e.g. language, story, design and materials. Language can be material, texture, smell, name or form.
Meaning is important for companies as people buy meanings – and not solely products for its utilitarian use. It is also worth mentioning that innovation of meaning does not need to be radical all the time. But to keep competitive in the long-term, incremental change of meaning is not enough.
As briefly touched upon above innovation of meaning is highly related to the sociocultural regime. And this relation is important for the process of design-driven innovation strategy – as the innovation process is becoming broader and more open towards the external society than many other innovation frameworks.
Design-driven innovation cannot take place independently and secluded – external relations are a necessity for successful radical innovation of meaning. It is impossible to present a proper proposal and modify the context without external relations.
If innovation of meaning is taking place within a current sociocultural regime the innovation is incremental, while it is radical innovation of meaning if the innovation of meaning creates an entire new sociocultural regime.
Sneakers and leather shoes have various meanings, though they both to a large extent provide the same utilitarian function. McDonalds change the meaning of restaurant and diners to become a place that could be counted on with regards to cleanliness, menu and reliability. While the FIAT Panda changed the meaning of a city car to transformability, adaptability and versatility. Swatch changed the meaning of a watch from instrument to a fashion accessory. Finally Apple changed the meaning of music with the introduction of the iPod and the iTunes platform. See Innovation framework examples for some examples of innovation inserted into the innovation framework – where Microsoft is appearing as the only example not performing a design-driven innovation strategy.
As mentioned above, design-driven innovation strategy can provide a sustained long-term competitive advantage.
Meaningful products can be sold with a premium, as consumers are willing to pay more when they can see a higher meaning (intangible value) than just a utilitarian function (tangible value). Here the point is that value is coming from differentiation, which is necessary in a global world of increased commoditization. See also this about value tangible and intangible.
Furthermore companies often struggle with appropriating their innovations and ensuring their products are not imitated. But meaning cannot be imitated as the meaning is closely linked to the company and the brand. An example is Alessi’s product Kettle 9093, which were designed by Michael Graves in 1985, but later imitated by the same designer in a collaboration with retail giant Target. Despite of the cheaper imitation by the same designer, the Alessi continued selling a large number of the Kettle 9093. Another example is how FIAT Panda was highly successful for many years despite the introduction of a cheaper imitation by SEAT.
Additionally investments might be smaller as a large part of the innovation and research is established and pursued together with the external network.
Finally meaningful products tend to have higher product longevity as the product are differentiated to a much larger extent as a result of their unique meanings. This is for example again a case of Alessi’s Kettle 9093 and the FIAT Panda. The FIAT Panda continued to be market leader for several years in the city car segment.
See more examples of the value of design-driven innovation here: model of value
Technology epiphanies are an interesting aspect of design-driven innovation strategy. This concept explores how technological breakthroughs cannot stand alone – but needs to be followed by a change in meaning too to be highly successful in the marketplace. In new technologies there is often a potential of ‘quiescent meaning’, which is awaiting discovery – a technology epiphany is this discovery. This ‘quiescent meaning’ could for example be found in MEMS, the technology inside the Wii controller produced by STMicroelectronics. STMicroelectronics struggled with selling their MEMS technology, which was perceived as effective, but perhaps with no use by other companies. But first with the discovery of its ‘quiescent meaning’ in relation to gaming, the technology became highly successful. Furthermore this case is interesting as the technology supplier (STMicroelectronics) moved first and not Nintendo. The implications of ‘quiescent meanings’ are that for example companies should be open for discovering the real value and meaning of new technologies and that this combination of technology-push and design-driven innovation should be explored further.
When dealing with innovation of meaning and design-driven innovation strategy it is necessary to take a wider look than just a product perspective. The company must acknowledge that it is a part of a larger context. The company needs to get involved with the surrounding environment and be a part of for example social and cultural development.
A company is never alone when trying to understand the surroundings. Other actors are also trying to make sense of society, culture and technology. Another key concept is the design discourse, which is exactly this external research process of these many various actors. Verganti calls these actors interpreters. All companies are surrounded by these (often non-competing) interpreters, who are interested in the same questions, contexts and design discourse and might also be trying to influence the future meanings of these aspects.
This can be as a collective research laboratory, where interpreters are exchanging insights, ideas, findings, visions and proposals of new meanings.
Interpreters are divided into two groups of production: cultural production and technological production. Interpreters into cultural production can for example be artists, cultural organizations, media, sociologists and marketers. Interpreters into technological production might be research and educational institutions, technology suppliers, participants in pioneering projects (which often are top interpreters), companies in other industries, designers, retailers, delivery companies and as well as users. As it can be seen here there is a room for users in design-driven innovation strategy, but they have the role and focus as many other actors. Users are not enjoying a unique favourable position.
It is also noteworthy that designers might be one of these interpreters, but they are not the only ones – and therefore it is crucial not to rely exclusively on them and thereby creating a designer-driven innovation strategy. This can especially be seen as a critique of design thinking.
This entire collection of interpreters in a form of collective research laboratory is showing how all companies are parts of a design discourse – though a company might not be aware of this. In design-driven innovation strategy it is crucial to have knowledge of how people might give meaning to things and products as well be able to seduce interpreters with a novel proposal for new meanings.
Every company has a unique network of relational assets to these interpreters. A reason for why design-driven innovation has difficulties in being outsourced.
For a company to understand which design discourse it is being a part of, it is necessary to look upon what essential life contexts they are into. This will perhaps assist in realizing that interpreters are much broader than firstly acknowledged – for example the case of Barillia (a manufacturer of pasta) who invited several heterogeneous interpreters to assist them in looking into how people use kitchens.
Without engaging with interpreters in the context of a design discourse, radical innovation of meaning cannot take place. In the engagement with interpreters and the design discourse three activities are introduced: Listening, interpreting and addressing. This is to some extent the how of design-driven innovation strategy.
Listening to the design discourse is about identifying the multiple voices that exists in the context of the company. There is a need to identify key interpreters that can give the company access to both knowledge and seductive power, so the design discourse can be opened up towards the vision of the company. These key interpreters are often forward-looking researchers who are exploring one specific vision in-depth. A key insight is that advances are based on achievements of others and therefore making it recommendable to learn from and build bridges to other industries. Here to types of bridges are visible: Brokers and mediators. Language brokers are looking into knowledge about meanings that is invisible and inaccessible for the company. Mediators provide access to other interpreters – and not knowledge as brokers. Listening also entails active participation – it is essential to immerse in the discourse (e.g. through workshops, projects etc.). When identifying interpreters, a company must be aware that a design discourse is both local and global and to attain competitive advantages it is often critical to find international interpreters. For key interpreters it is often not a matter of money to be involved in the design discourse. Instead they can be attracted through experimentation ground, seductive power and knowledge of meanings. It is here clear that a company needs to have vision by themselves so they become key interpreters with something to offer to other key interpreters. To sustain radical innovation in meaning it is necessary to keep refreshing ones network and relational assets.
Interpreting the design discourse is about sharing and turning knowledge into novel visions. One way to do this is through Design Direction Workshops (as done by Barilla). This is the process of creating proposals and visions based on the knowledge from interpreters
The key activities are first envisioning scenarios, visions and proposals, second sharing these insights, third connecting the insights, fourth selecting the ideas to pursue further (e.g. Alessi’s formula of success) and fifth to embody these new meanings that emerged.
Addressing the design discourse is about diffusing ones novel visions and proposals to interpreters and thereby prepare the market for new meanings. In other words, prepare the ground for changes. This can be done through cultural production (as Alessi) such as books. It is crucial that these productions are viewed upon as research outputs – and not marketing material.
As seen here it takes various unique capabilities to perform and pursue a design-driven innovation strategy. In short three capabilities are necessary: build relational assets with key interpreters, leverage internal assets (own knowledge and seductive power) as well as exploring the interpretation process.
It is recommended to establish a design-driven lab to drive some of these activities, but another is essential to perform breakthrough innovations of meanings and that is the role of the top executives.
Further reading:
- Brown, Tim. “Design Thinking.” Boston: Harvard Business Review, June 2008
- Danish Design Center – http://www.ddc.dk/case-cs/kriminalforsorgen-samarbejde-pa-tvaers-af-tremmerne – retrieved 22/1 2012
- O’Connor, E. S. (1996) “Lines of authority – Readings of foundational texts on the profession of management”, Journal of Management History 2(3): 26-49
- Søderberg, A. M. (2003). Sensegiving and sensemaking in integration processes: A narrative approach to the study of international acquisitions. Narrative Approach in Organizational Studies. Amsterdam: John Benjamin’s Publishing Company.
- Tidd, J. and Bessant, J. (2009). Managing Innovation: Integrating Technological, Market and Organizational Change (4th edition). West Sussex: John Wiley & Sons Ltd.
- Verganti, Roberto, “Designing Breakthrough Products”, Harvard Business Review, Vol. 89, Issue 10, 114-120, October, 2011.
- Verganti, Roberto, “Innovating Through Design”, Harvard Business Review, Volume 84, Number 12, 114-122, December, 2006.
- Verganti, Roberto, Design-Driven Innovation – Changing the Rules of Competition by Radically Innovating what Things Mean. Boston, MA: Harvard Business Press, 2009
- Walter Isaacson, ‘Steve Jobs’, Simon & Schuster, 2011
- Westland, J. C., (2008), Global Innovation Management, University of Illinois at Chicago: Palgrace Macmillan
[1] The following is based on Verganti, 2009, Verganti 2006, Verganti, 2011 and lecture by Verganti, 2011