Innovation of Meanings, Part 1

IdeaConnection interview with Roberto Verganti, author of Design-Driven Innovation
By Vern Burkhardt
"[Design-driven innovations] escape the law of imitation and obsolescence typical of functional products, simply because even though competitors may imitate and surpass the innovations' functions, they can not replicate their meanings."

Vern Burkhardt (VB): In addition to being Professor of Management of Innovation at the Politecnico di Milano, you are the founder and chairman of PROject Science. Would you talk about the consulting, coaching and education, customized studies and intelligence, and networking services you provide?

photo of Roberto VergantiRoberto Verganti: PROject Science is a small consulting boutique that applies what we have found from our research to help companies that are doing design innovations. We have been offering this service for about a decade.

We provide two types of services. We help companies build their capabilities to ask the right questions, to build their networking relationships, and to have a design process.

The other thing we do is help companies with their design processes to create new products with new meanings. We tend to be very selective because we want to be involved only in breakthrough projects and because we are a small consulting team with limited capacity.

When organizations and companies want to be innovative they won't have breakthrough results using standard methods that their competitors are also using. Leading firms are those that innovate the way they innovate by using the most unique, advanced, and proven processes.

VB: In Design-Driven Innovation you say, "…when I listen to professors and managers say that [incremental] design is a source of differentiation in mature industries, I think they are ten years behind." What happened, have they been asleep?

Roberto Verganti: I had been studying technology intensive innovation for about ten years before moving to design, so I was in touch with a lot of theories of technology management. Scholars who have been doing research in innovation in the past few years are interested in technologies. Almost all of the books on innovation talk about innovation driven by technologies. I'm an engineer so I love this type of innovation.

When these professors and technology managers talk about design they acknowledge that design can make a difference, but they tend to focus on quantum leaps in product performance that are enabled by breakthrough technologies. They assume that meanings are not subject to innovation, but instead are a given and you need to determine what they are by analyzing and understanding users' needs – the needs of your customers.

There is a famous model for innovation that says there are three phases in industries for innovation. One is the emerging phase, where a new technology emerges resulting in disruptive innovations of radically new products and even new business sectors. The information and biotechnology sectors are examples where new and sometimes small companies emerge that are able to exploit the new technologies in an uncertain new market. They often produce specialized products to meet the needs of a small number of customers. There are constant product changes as the new technology is developed.

Then there is a growth phase where you compete on the basis of product features. Companies focus on making changes to differentiate their products from competitors on the basis of features and performance. Sector-wide standards appear and dominant designs emerge.

The third phase, the mature phase, is when you compete on the basis of process innovation in order to reduce costs. The tendency is for markets to become more highly defined with entrenched firms and fixed distribution channels, all of which reduces the chances of further radical innovation or significant reform of the industry.

In Design-Driven Innovation I say this model of innovation may have been true in the past, but currently design is making a real difference at the beginning of a new technology phase. I discuss a number of new designs in the book, like the iPod, MP3, Nintendo Wii, and the MEMS technologies. These are all applications of new technologies that have created huge business because companies have been capable of applying design to these new technologies.

So, what makes the difference? Not the style of a product when the product becomes a commodity. It's the business idea behind the product. Design is becoming a key aspect of business success. Leveraging design enables organizations to innovate, and this is what gives value for a new technology to be successful in the market.

VB: How has Apple leveraged design?

Roberto Verganti: We could talk about Apple's iPod, iPhone and the recently released iPad. The success of the iPod has not been due only to its sleek style and unique functionalities such as its user interface. The main reason the iPod has been so successful is the meaning people associate with its business model, which includes iTunes and the iTunes Store. The iTunes Store accounts for about 90 percent of all legal music downloads in the U.S.!

VB: You observe that the innovative, successful companies "rarely use traditional market-testing techniques." "…people don't know what they want until you show it to them." Is showing people what they want different than meeting needs they don't know they have?

Roberto Verganti: If you want to do incremental innovation then you have to start by considering the needs of users. If you want to make improvements then you start from how people use their products, find out the weak spots, and improve on these. But if you want to radically change the meaning of things, you can't start from existing users; otherwise you are trapped into the current meaning of things and not the future. You have to follow different processes.

There are many examples in the book. Apple is not user-centered. They don't start with users. They teach users. What is unbelievable is that people are waiting for the next MacWorld Conference from Apple to understand how they will use computers in the future. It is Apple that is teaching users what they need to do.

There are many other examples. I interviewed people from Herman Miller for the book. There is the famous Aeron chair that every manager, every executive wants to have. The chair is neither upholstered nor padded – you can see all the levers inside. This is a radical change in meaning because usually chairs have upholstery because that's what most people have come to expect. The Aeron chair is made of a semitransparent pellicle synthetic material that conforms to each person's shape, and thus it minimizes pressure and maximizes aeration of the back.

This chair is a sitting machine. You sit like you are at the dentist. It is a sitting machine and the meaning is exactly that – a sitting machine because we have to sit. Comfortable doesn't mean you have to have upholstery, but you have to have the right posture. Herman Miller designed the chair so you can see all the levers. The levers are symbolic even though you know they are functional. You have to see the levers because this is a sitting machine.

When Herman Miller designers showed a prototype to people for the first time, the response was, "Yes, but this is a prototype. Can we see an upholstered version?" The reply would be, "No! There is no upholstery!" Initially people couldn't understand, but now people love it! If the designers had followed the suggestions of the people surveyed, they would have put upholstery on it. This illustrates design-driven innovation. You would have upholstery in the chair and all the functionality, but you would have lost the meaning of it being a sitting machine.

VB: You indicate that user-centered innovation leads only to incremental improvements. "Technology-push" innovations – radical innovation of technologies – often have a disruptive impact, which can have long-term impacts. The third innovation strategy, which is the focus of your book, is design-driven innovation. What is design-driven innovation?

Roberto Verganti: By design-driven innovation we refer to the innovation of the meaning of a product or a service. Let's consider how people – clients or customers – usually consider two dimensions when they buy products and services. One is its utility – the functionality and performance of the product. The other dimension is what the product means to them symbolically or emotionally.

For example, of course we buy a car because we have to move from A to B, but I'm sure that no one makes this major expenditure only on the basis of its price. People also don't only consider functionality such as engine size, acceleration, comfort, safety, history of reliability, and carrying capacity. Most people look for a certain minimum number of requirements, but there is more to the decision when choosing the car to buy. The final decision is usually related to many different aspects, some of which are for emotional or symbolic reasons.

For example, I have a BMW because a BMW means that I'm a rich person. But not as rich as those who buy a Mercedes! Let's say I'm rich but I feel very young inside and I like sports. And added to this maybe I'll buy a BMW because emotionally I'm committed to my family for my entire life. These kinds of things sometimes drive buying decisions much more than the pure function of the features offered by the various product or service options available.

When you compete on features after a month or two there will almost definitely be another company that will provide the same features with improved performance. Doing things that are more emotionally or symbolically connected with people is not as easily replaced and overcome. The competitive advantage is in the innovation of the meaning of a product.

It's not the innovation of the functionality that's important, but finding and creating new ways to give meaning to things. The concern is with symbols, identity, and emotions. This is as true in industrial markets as in consumer markets.

An example I usually use in the commercial market is the Nintendo Wii. The Nintendo Wii game console is not more powerful than the PlayStation®3. Actually it's less powerful. It's less expensive because it has less power in its integrated circuitry. But the Nintendo Wii has a completely different meaning than a traditional game console. A traditional game console usually has the meaning of entering into a virtual experience. Teenagers used to buy them because they wanted to enter into a virtual world.

The Nintendo Wii is a physical experience by enabling people to do the movements. Its meaning is that you don't enter into the virtual world, you stay in the real world. You sweat. You do a work out. You socialize with other people. Apart from functionalities and performance, people buy the Nintendo Wii because it is much more meaningful to them. The Nintendo Wii is an innovation in the meaning of the product, and that is the design-driven innovation.

The Nintendo Wii is a radical change in meaning. It's a complete overturn of what teenagers and people were looking for when they were buying console games. So design-driven innovation is a radical change in the meaning of things.

You can innovate meanings incrementally or radically. Incrementally changing the meaning of things means that slowly you understand people are looking for something, and you improve the symbols and the emotional set of the product.

For example, the fashion industry is a strong incremental industry. They understand that people want to have – I don't know, trousers with longer legs or with shorter legs – and they give people what they need.

VB: In the fashion industry, if there is radical new design by a fashion house, over time everybody is wearing similar designs and therefore it's no longer a radical innovation. Is that fair to say?

Roberto Verganti: I would say that the fashion industry usually tends to not be very radical. It tends to be incremental in the way the companies change and adapt to the existing style. Trousers, short or long, are always the same.

Maybe one of the most radical changes in the meaning of fashion has been the invention of the mini-skirt. That was a radical change because it was not simply a change in feature and performance of the traditional ankle length skirt. It was not simply a small, incremental change. It meant something different for women. It meant liberty, being proud, and showing your body. It was not simply a functional change. It was a symbolic and emotional change that was radically different.

VB: Has the move to business suits for women also been a radical innovation in meaning?

Roberto Verganti: Also, yes! That's another radical invention. Really! I don't know if Armani has been the first one to take this kind of garment to women. I'm not an expert in the industry, but that's definitely a radical change.

I don't know if the mini skirt is more meaningful for men but definitely it could be more meaningful for women!

VB: In your recent web log entry in the Harvard Business Review titled "Cut Costs Without Cutting Meaning" you say, "In these hard times, remember that people still love meaningful things."

Roberto Verganti: In the blog I mentioned that companies that are focusing on stripped-down "value" products risk making the mistake of assuming consumers care more about utility and low price than meanings. In the current 'Great Recession' meanings are becoming even more important, and companies should not think consumers care less about the emotional and social dimensions of products.

Although it is counter-intuitive, utility is not the only thing that matters to consumers. Even when they are hard pressed financially they don't want to feel poor.

Yes, they do care about prices and want to spend less. If you have a lot of money, who cares? If you have less money, you care a lot about how you spend the money. Every time you spend your money, it is a very emotional and symbolic act.

VB: You concluded your blog entry with, "Do not just design to cost. Design to mean." Is understanding and following this advice going to give companies a competitive advantage in today's market?

Roberto Verganti: Companies that are able to cut costs without cutting meanings are succeeding in the marketplace at the moment. A good example is IKEA, and there are many other examples such as Best Buy and Kanzen scooters. It is a killer for competition every time a company is able to give people something that is not expensive, is affordable, and is fully useful and meaningful.

Often in the attempt to cut costs, companies lose proximity to meaning. It is actually the other way around in that you should first think about what is meaningful for people. If you find something that is very meaningful then what happens, hopefully, is you can simplify your products. Because the products are meaningful per se you can avoid adding many unnecessary features that are expensive but don't add meaning.

For example, a Swatch watch probably does not have all the possible features, embellishments, and things that one might be able to include in a watch, but who cares? The Swatch is a fashion accessory. At forty dollars, it is worth much more than more expensive watches with all kinds of nuances.

VB: The concept of "design to meaning" and the importance of emotion applies to both men and women as consumers. Is that true?

Roberto Verganti: Yes, it's true. Women are much more sensitive than men to the emotional and symbolic side of products and services. But both women and men have a right and left part to their brains.

Most engineers are very emotional and symbolic; however, they express their symbols differently. They look for meaning in a different way than many other people, just as men look for meaning in a different way than women. But everyone is looking for meaning.

A typical example I give is when some people look for hi-fi audio systems for their house. They are often attracted by Bang & Olufsen because for them the meaning in the product is as pieces of furniture. As an engineer, I don't like Bang & Olufsen because a hi-fi audio system has to be something that speaks the language of a recording studio. I'm a musician. I want to see the buttons, levers, and tubes because for me they are the symbols that indicate they are part of the studio equipment. Everyone wants meaning; everyone uses symbols and meaning when they buy things.

VB: In 1998 Artemide radically changed the meaning of a lamp with the Metamorfosi lamp. Has Artemide made any other innovations in the meaning of a lamp since then, or modified the Metamorfosi in interesting ways that affected its meaning?

Roberto Verganti: There are two changes. One change in meaning in the lighting industry is that lamps at the moment are disappearing. Lamps are being increasingly embedded into the building systems because of the LED technology. LEDs don't need to be in a lamp lighted bulb. The reason for a lamp is that you need to put the bulb somewhere. You can incorporate LEDs into the building itself.

So Artemide's vision was correct. The lamp as an object is losing importance. What is becoming important is the light itself. What is happening now is that the light is created by the infrastructure where the LEDs are embedded.

The Metamorfosi lamp played on colored light. Artemide is now working on systems that create white light, which can be customized according to the mood of people. There are many different tones to white light. You can have very cold white light which is typically blue, or you can have warm white light which is typically yellow. Artemide is creating systems that people can adjust according to their mood and needs to create different light atmospheres in their buildings.

VB: Do you think that Artemide's Metamorfosi that de-emphasized the lamp as an object of beauty and focused on colors of light changed people's interpretation of the meaning of a lamp just like Apple so often changes the meaning of their products?

Roberto Verganti: Yes, but not with the same disruptive power as Apple. The lighting industry is changing in that direction, but much more slowly. Computers have a much faster rate of change.

The use of light is changing, not only in lamps but also in many types of home products. I've seen companies include colored sources of light in shower caps, for example. The idea of color therapy has been moving into bathroom products such as whirlpools and showers in buildings. This idea has diffused a lot; it is not just with lamps.

VB: Are there any recent examples in Italy or other parts of Europe that illustrate that competition is rapidly moving from performance to meanings?

Roberto Verganti: Philips, the consumer electronic company in the Netherlands, realized that the effectiveness of medical procedures is strongly dependent on the psychological well being of the patient. It is doing an imaging system for cat scans or ultrasounds in hospitals – a beautiful project called "Ambient Experience for Healthcare."

The cat scan machine can be frightening to some patients, especially to children. Making patients calmer doesn't depend on design features such as whether the machine has smooth surfaces. It brings us back to the lessons from the Metamorfosi lamp. Philips has included the creation of ambient experiences through light in the design of their medical devices. It has made a system that allows hospitals to adjust the light, sound, atmosphere, and images in the hospital to make people feel more comfortable when they go through medical procedures and examinations.

It is a beautiful example of the application of light and design, a business-to-business product for hospitals which changes the meaning – and it's radical. It's not just about the machine or the procedure. It's about designing a different ambience for the cat scan and ultrasound procedure in hospital with these light technologies.

VB: Would you talk about how innovation of meanings also applies to competition in the provision of services?

Roberto Verganti: Yes, there are two great examples in the book. One is the Whole Foods Market, which is an example of a great change in meaning. It's a food retailer, which focuses on organic food. The feeling you get in a Whole Foods Market is very different than when you enter a traditional organic retailer.

When you enter a traditional organic store, you have the feeling that you belong to a sect, or are some kind of alternative living person who wants to eat organic food because you don't want to hurt the world. When you enter into a Whole Foods Market, you are not making a self-flagellation choice. It's a hedonic choice. You are going to a Whole Foods Market because you like the food they offer. It's not an ideological choice. It's a choice for good food. The food looks great, and eventually you discover it is also organic. This makes you feel even better. It's all about the goodness and beauty of food, which is completely different than traditional organic retailers.

Another example is a service provided by M-Pesa, a telecom service provider in Kenya, Africa. M-Pesa is a transfer service that allows people in Africa to transfer money to relatives in remote areas without having a bank account. It's a great example of innovation in meaning.

It's unbelievable for people living in the Western world, but people in Kenya have more trust in this telecom company than in the banks to send money using mobile phones. Also, more people in Kenya have mobile phones than bank accounts.

VB: They're transferring money through the mobile phone, not just time usage credits?

Roberto Verganti: Yes, it works through SMS with codes. Kenyans give M-Pesa the money they want transferred, and, in return, the telecom company gives them an SMS code. They send this SMS code to the recipient, a person in a remote area of Kenya. The recipient brings the SMS code to any M-Pesa office and is given their money.

VB: This started, as I recall, primarily to enable the Diaspora living in Europe to send money home to Kenya.

Roberto Verganti: Yes, it is now prevalent in Kenya. Within a couple of square miles the telecom company has 6 1/2 million subscribers, making M-Pesa a huge success.

VB: One of your friends at the School of Design at Politecnico di Milano told you, "Italian design is so unique, so radical because of the approach to innovation brought by architects instead of designers." You also quote artist-designer Ron Arad as saying, "There is no other place in the world, [other than northern Italy], where you can find such a vast array of manufacturers who know the value of design." Do you have any other thoughts about the reasons for the uniqueness of northern Italy's leadership in design?

Roberto Verganti: This is an interesting point. When I travel around the world and talk about the research I've been doing, I find that many people believe Italy is strong in design and very creative. When I say about 50% of the products that have been designed by companies in Italy actually have been done by foreign designers people are amazed. What is Italian is not the design. It is the manufacturing.

cover of Design-Driven InnovationThis is very important. Design-Driven Innovation is not about Italian design. It's a book about how firms, among them a lot of Italian firms, manage design to compete in the marketplace. It's a book about management. Our entrepreneurs and managers in Italy are quite unique in the way they do manufacturing, not in the way they do design.

VB: What's unique about the way Italian entrepreneurs do manufacturing?

Roberto Verganti: The point is that often people believe that Italy is the centre of the design world when actually that is not completely true. The top Italian manufacturers in the furniture, fashion, and many other industries usually work with foreign designers. For example, in the leading furniture firms only 50% of designers are from Italy.

What is Italian is the entrepreneurs and the managers of the companies. The reason why Italian design is interesting is not because of the design but because of the manufacturers. It's a good case study for entrepreneurs – for businessmen – not for designers.

The entire process of design-driven innovation is what makes them unique. They are great at transforming design into business. They are not more creative than other entrepreneurs. They simply know how to find and attract the most talented, creative people.

VB: Are they also able to recognize what will be a good design for the marketplace?

Roberto Verganti: Yes, good point. Their way of approaching the solutions that creative people have proposed is not simply looking at the functionality and utility of performance. Italian entrepreneurs are used to assessing ideas on the basis of what these ideas will mean emotionally and aesthetically for people – especially emotionally – determining which kind of symbols the ideas will stimulate. They are very good at assessing the intangible dimension of products.

This is because many of these entrepreneurs have not been educated in Masters of Business Administration. Actually, very few have but they have a strong background of education in the Humanities. They have been trained to consider not just the utilitarian dimension of life, but also the more emotional and symbolic dimension which the Humanities are all about. They know that consumers care for the utility, and for emotions and symbols that form part of products.

VB: Why in Italy?

Roberto Verganti: There are many explanations why this happened in Italy. One of them could be interesting, especially for leaders. Most Italian entrepreneurs that are strong in design and manufacturing do not have an education in business management. They didn't attend MBA's or business schools. I'm teaching in a business school so in a way I'm talking against myself!

Since the Italian entrepreneurs didn't take MBA's, traditional models of innovation didn't influence them. These models say you have to improve the functionality of the product, technology is the driver of innovation, and you have to start by asking users what they want. These Italian managers were not exposed to these models, and they did a lot of experimentation. They found a completely new way.

An interesting influence on these entrepreneurs is they have been more impacted by the humanities. While Italian education is weak in the technologies, it has a strong emphasis on the humanities. This has helped them think about the meaning of products and not simply the utility of them.

I draw an analogy with Steve Jobs. He also did not attend a business school. Sometimes business schools converge towards one model for innovation through the study of business case studies resulting in students acquiring essentially the same set of tools for solving business problems. This means there is no innovation in the way they go about innovating when they graduate and move into the business world.

VB: If somebody attends Politecnico di Milano and takes courses from you, are they going to experience the traditional approach for studies to attain an MBA?

Roberto Verganti: I teach in the MBA program at Politecnico, and in this program you have to comply with some rules. Otherwise it's not an MBA. So I have to bargain with my colleagues for some flexibility. We have a course on design management where I'm free to do whatever I want.

VB: What are some of the key messages you give your students in the course on design management?

Roberto Verganti: There are two key messages apart from the content and tools we discuss. One key message is students have to be able to complement the analytical tools they receive in all the other MBA courses with the intuitive and cultural processes I provide them in the design management course. This is the capability of understanding how people live and use their products and services, which is something that no single tool can provide.

And the second message is very important. Developing this capability doesn't require them to be a guru, be a Steve Jobs, or be a creative person. There are processes we can learn for being creative. The capability of understanding cultural processes is different than the typical user-centered or creative processes students have learned in the MBA program. But there is a process – they have to find and get close to key interpreters; they have to leverage the knowledge of these key interpreters to envision and influence how people could give meaning to things. It entails listening, interpreting, and addressing radical innovations of meanings – all the processes that I describe in the book.

Understanding these key messages and the design-driven innovation process is very important because otherwise MBA students believe they have to wear a yellow and green sock, for example, to be creative.

Students learn that Italian entrepreneurs are not designers. They know how to make money with designers, and with talented people. There is a process you can deploy to make business with creativity without being creative yourself.

VB: Do you keep in touch with students after they graduate?

Roberto Verganti: Yes. I always ask them to send me their addresses, what they are doing, and to keep in touch. I love to receive their feedback so I can improve my contributions to them building their careers. I love getting this feedback.

VB: As a professor, it must make you proud to be in contact with your former students.

Roberto Verganti: The main reason I decided to work at the university was because teaching gives me feedback that I am doing something useful. This contact with students is very important.

There are many things you do in life that are especially rewarding. With the book I had the same kind of rewarding experience, because I have received comments from people I've never met who say it was very inspiring. When I receive this type of feedback it's very rewarding.

VB: Has the nature of Italian culture been a major contributor to industries in northern Italy becoming and remaining worldwide leaders of design in domestic lifestyle industries, such as furniture, lighting, bathroom fixtures, kitchen appliances, and food?

Roberto Verganti: I don't know. I'm Italian so it's hard for me to comment objectively. Sometimes you have to look at this type of question from the outside to judge objectively. My theory is most of it has had to do with basic primary education.

I studied Latin for 8 years, but only studied 3 years of physics in college. I'm an engineer and I was not studying science in public education, so it's unbelievable! Maybe this attention in Italy to the humanities is related to our history. But definitely this strong education in the humanities has been beneficial in helping people in this country try to find the meaning behind products.

Of course we pay our dues – we are stronger in the humanities but we are weaker in technologies. Italy has a lot of problems in technological innovation. The real trick is to find the right balances between these two – in technology and design.

VB: You say that even though competitors may be able to imitate a product's function and form, they're not able to imitate its real meaning. What is "real meaning?"

Roberto Verganti: This is interesting. As I anticipated before, if you are inventing a new mobile phone and you are able to develop a battery that lasts for 8 hours I wouldn't be surprised if after a month you will have a competitor with a new battery that will last for 9 hours. Competing in functionalities forces you to keep on innovating, and you are trapped into an acceleration of competition in innovating new technologies.

If you only compete with technology to improve performance you will realize only incremental change in the meanings of your products. This will limit your potential for profitable growth. This is the case when you are responding to what customers in the marketplace are saying, and even when there are radical changes in technology. Radical changes in the meanings of products occur only through design-driven innovation, even when there are radical changes in technology.

If you design a Nintendo Wii or create a new iPod that looks like Apple's version the imitation will mean nothing. There are many imitations of the iPod. There are now many imitations of the iPhone. But of course if you are the first company that has been able to create and design a radical new meaning, as occurred with Apple and the iPod and iPhone, then the advantage is that you are the authentic design.

Real meaning is really connected to the concept of authenticity. You can make a 'look alike' with more or less the same functionality, and the same form and look. How many mobile phones are exactly like the iPhone? Yes, people will buy them, but they are not willing to pay the same price. They're not the real meaning. They're not authentic.

VB: Does that relate to brand recognition as well?

Roberto Verganti: Exactly. The best way to create brands is to innovate the meanings of products. Apple is a great example. The brand of Apple is strong, not because of advertising or tricks. It's because Apple innovated the meanings of computers, mobile phones, portable music players, and, most recently, a device to enhance access to the Internet – the iPad. They are educating users instead of listening to users, and that has created strong brands.

VB: It's also created a lot of passionate Apple users.

Roberto Verganti: Yes. They are willing to learn the meanings of Apple's new devices.

VB: "In any industry, design is therefore crucial to competition, because innovation of meanings is critical to competition." Would you talk about this?

Roberto Verganti: Yes. Given that design is the innovation of the meaning of things, this is relevant because competition is increasing due to globalization and advances in technology. Instead of competing on performance the focus is moving to competing on meaning.

This is especially true in this period of economic turmoil when many people want to spend less money. It doesn't mean that they actually spend less. It means that every time they buy something they're thinking a lot about what they're buying – they want to obtain a great value.

A great value doesn't mean you have to have the best in performance. If you buy something that lasts for two, three, or five months when you replace it you usually don't buy the identical thing. As incremental products are introduced to the marketplace you can't always buy the product with the next step in performance improvement. So you want to buy something in life that is meaningful regardless of the performance considerations. This means competition is rapidly moving to meanings instead of simply competing on performance. That's the reason why companies want to be the first to create the next meanings rather than just the next incremental improvement, such as an increase in power or memory.

VB: "…people do not buy products but meanings." Are emotions, symbols, and identities significant in consumers' buying decisions?

Roberto Verganti: Yes. Think about the two most important things you buy in your life. These typically are your house and your car. Buying your house can be a very painful experience in some countries. You are supposed to be very rational when you buy your house because it's a lot of money.

But what happens instead? Of course you're rational to a point. You have a short list of some minimum requirements, because if you need four bedrooms you need four bedrooms. But when you have found some houses that meet the minimum short list of requirements, then everything moves into emotions and symbolism. For example, you want to have a house in a certain neighborhood because you want to be in that neighborhood for status, perceived safety, amenities, or general feel when you are there. When you experience a certain arrangement of the rooms, you feel better in some houses more than others. You know you will have to live in your house not for two months, but for ten or more years, so you want it to give you a positive experience.

So even for the things that are the most expensive in your life, you are driven by emotions and symbols. Think about it. If that's true for your house, it's also true for an item like a computer or a mobile phone.

VB: "This [Franco Fornari's] theory implies that all objects communicate a message to people through five possible codes: paternal, maternal, childish, erotic, and birth/death." Should all people involved with innovation become aware of this Italian neuropsychiatrist and psychoanalyst's theory of affective codes?

Roberto Verganti: Yes, this is a theory that Alessi used to create a new line of kitchenware in the early nineties. He understood that people buy corkscrews or nutcrackers because they need a tool. But he also understood that sometimes these kinds of objects have a very affective value, so he tried to transform the meaning of his products from considerations of kitchen utility use to being an affective product.

Rather than buying a corkscrew simply because you need to pull a cork, it might be because you want to give a present to friends. Alessi's new line of kitchenware was a very successful innovation even though people didn't ask for these products. When Alessi designed these new meanings consumers were crazy to buy them.

VB: "When it comes to radical innovation of meanings, a product's culture reflects the culture [values, norms, beliefs, and aspirations] of the executive who has launched it." Is it that important?

Vern's Note: We will hear Dr. Verganti's response to this question, and also talk about customer value, excessive functionality in products, technology epiphany, listening to whispers, Italian entrepreneurs' design-driven innovation skills, and much more in Part 2 of this interview.

Roberto Verganti's Bio:
Dr. Roberto Verganti is a full Professor of Management of Innovation at Politecnico di Milano, where he teaches at the School of Management, at the School of Design, and in the Doctoral Program in Management. He is a Visiting Professor of Design Management at the Copenhagen Business School, and Adjunct Professor of Design Innovation Management at the University of Vaasa, Finland. He is also Scientific Co-Director of the Master Degree in Strategic Design of Politecnico di Milano.

Roberto Verganti is Founder and Chairman of PROject Science, a consulting institute for strategic innovation of businesses, organizations and products. He is Director of MaDe In Lab, the laboratory for advanced education on Management of Design and Innovation of MIP-Politecnico di Milano.

He was awarded the "Compasso d'Oro" 2001, the most prestigious design award in Italy, for the research project Sistema Design Italia, Best Paper award at the EIASM International Product Development Management Conferences in 2002, 2003 and 2004, and Best paper award at the EurOMA (European Operations Management Association) Conference in 2000.

He has been a keynote speaker in sevents such as the World Business Forum and The Economist Big Rethink, and scientific conferences, including the International Product Development Management Conference and the European Academy of Management.

Roberto Verganti is the author of more than 150 publications on management of innovation including more than 50 articles on scientific journals such as the Harvard Business Review, Management Science, and the Journal of Product Innovation Management. He is also co-author or author of 14 books including Gestire l'innovazione e innovare la gestione (2000), Organizzare le PMI per la crescita. Come sviluppare i più avanzati modelli organizzativi: gestione per processi, lavoro per progetti, sviluppo delle competenze (1999), L'impresa dell'innovazione. La gestione strategica della tecnologia nelle (2004), Design Driven Toolbox – A Handbook to support companies in Radical Product Innovation (2006), Design-Inspired Innovation (2006), and Design-Driven Innovation – Changing the Rules of Competition by Radically Innovating what Things Mean (2009).

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