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Does your company design new products or services?  If so, what is your design strategy?  Launch and see; see and launch; or wait and see?  Why is it that companies that are successful "radical innovators" do not listen to users when it comes to design?  Innovative product design is risky, but provides competitive advantage to companies that understand how a product "speaks" to customers.  And, because consumers appear increasingly willing to make purchase decisions based upon their emotions about a product—how it looks, or sounds, or makes them feel using it, a traditional design process based on user experience may fall short according to this article.  Read on to learn more about the research of Harvard Business School visiting scholar Roberto Verganti on the new world of "design-driven innovation."

When furniture designer Herman Miller presented a prototype of its sleek, mesh Aeron chair to a consumer focus group, many asked if they could see a finished, upholstered version.

Innovative product design can be a risky proposition. Yet as consumer purchases become increasingly driven by emotion, the competitive advantage gained by how a product "speaks" to a customer is clear. Just think about how Apple began its resurrection in 1998 with the unthinkable design of computers made of translucent blue, orange, and pink plastic, the original iMac.

Despite the importance of industrial design, little theory exists on how companies might go about creating a successful design strategy. In a recent article, "Strategies of Innovation and Imitation of Product Languages," published in the Journal of Production Innovation Management, HBS visiting scholar Roberto Verganti addresses this shortfall as part of a larger research agenda investigating how companies manage to succeed in this particular arena. Verganti coauthored the article with Claudio Dell'Era, his colleague at Italy's Politecnico di Milano.

"Researchers have been investigating technological innovation for decades, but we know almost nothing about how companies manage design innovation," Verganti says.

For their study, Verganti and Dell'Era focused on the Italian furniture industry, using a database (Webmobili.com) to classify 2,000 objects by shape, color, surface, and material. They also divided the corresponding sample of 100 manufacturers into innovators and imitators, identifying a company as an innovator if it had been selected for or received the coveted Compasso d'Oro, a prestigious international prize awarded to groundbreaking design products.

Uncertainty Increases

Verganti says that design innovation often involves a high degree of uncertainty in terms of market success.

"It's very hard to understand what people want," he says. "If I make a car that can brake in 10 yards instead of 50, that's a quantifiable advantage that is easy to understand. But if I decide to create a computer out of translucent, colored plastic, it's much more subjective. People will love it, or they won't."

Focus groups and market research can help to define a product, of course, but Verganti has found that design-driven innovation is not user-centered. Instead, it comes from within the organization. "Rather than being pulled by user requirements," he wrote recently, "design-driven innovation is pushed by a firm's vision about possible new product meanings and languages that could diffuse in society."

"Apple is a company that is pushed by a vision," Verganti says. "Steve Jobs has said that the market doesn't always know what it wants. Companies that do radical innovation do not listen to users; they eventually value market feedback, but first they propose things to the users."

In the face of this market uncertainty, Verganti has found that companies adopt one of three different strategies:

Launch and see. The company launches a variety of products, and then measures market reaction to each, relying on the selective capability of consumers to determine which products to focus on.

See and launch. The company employs some sort of research process and then launches products based on its findings.

Wait and see. The company allows others to experiment with various products, observes what is most successful, and reacts accordingly.

In Verganti's study of the Italian furniture industry, one would expect those who wait and see to have the least amount of variety in their product line. After all, if the imitators decide to stand back and observe what is most successful, wouldn't they choose to copy just a few, choice products? Conversely, it would seem that the innovative companies would probably have higher levels of variety in their products because of the experiments they conduct.

Instead, the results showed just the opposite.

While the cost of experimentation in the furniture industry is relatively low, Verganti and his colleague found that the innovator companies actually used a see and launch strategy, conducting research in order to understand what sort of product language might be most successful. (This research is less of the focus-group variety and more of a broad-based assessment of cultural trends and scenario building.)

"Companies that do radical innovation do not listen to users.""Innovators avoid proposing a wide range of product signs and languages as a way to protect brand identity," says Verganti. "They tend to adopt strategies that allow customers to easily reconnect specific product signs to their brands."

In contrast, imitators show a greater variety in their product portfolio. They observe what innovators do and how the market reacts. But the feedback they receive is initially so ambiguous, with several languages coexisting, that they eventually imitate everything.

"The confusion that this creates in the market is called semiotic pollution," Verganti says. "Imitators can be successful if they wait four or five years to determine what they should produce. But in the beginning it's not clear which product is the winner. So when it comes to product languages, imitation is a very expensive strategy."

Another key finding is that the innovators' products tended to be more homogeneous as a group. "It seems that the innovators understand and build off each other's ideas better than the imitators do," Verganti remarks. "They innovate in a circle; it's a similar dynamic to what occurs in a visual arts movement like Impressionism."

Lead or Suffer?

Do these findings have implications beyond the design-heavy world of the Italian furniture industry? Regardless of the product in question, Verganti believes that companies need to consider the importance of design.

"In every industry, sooner or later, there is a radical change in the language of its products," he says. "So the point for companies is, do they want to lead the change, or do they want to suffer the change?"

Verganti will present some of the secrets of strategy and process behind successful product language development in a book to be published by HBS Press in late 2008 or early 2009.

"It's a fascinating topic on many levels," he says. "Many of the Italian furniture companies I've studied are as small as 80 employees. They don't have the marketing muscle or distribution power of larger entities. Yet they're world leaders in the field."

Is Verganti a consumer of design himself? "If you come to my house you will find a lot of semiotic pollution," he laughs. "Having many different styles in one home is actually a trend, though; people today want to have their own look."

And that, of course, makes it even harder for companies to discern dominant trends.

By: Julia Hanna

Source: Harvard Business School Working Knowledge