4: Technology Epiphanies
Innovation of meaning and innovations of technology are not in conflict, though in many instances companies seem to focus on one aspect at the expense of the other. At the extremes, a firm may create technically sophisticated solutions that no-one understands or very appealing solutions that offer no functional benefit.
But in spite of the tendency to consider this an either-or proposition, the two approaches can be used simultaneously and in a manner that they complement and even amplify one another. Verganti cites breakthrough products such as the Apple iPod and the Nintendo Wii as examples of technology and meaning working in tandem.
Case Study: The Nintendo Wii
The console gaming industry represents a $30 billion market that was once dominated by Atari, SEGA, and Nintendo, only the last of which persevered as better technology overtook the market and Sony and Microsoft entered the scene. Even so, the Nintendo GameCube's sales paled in comparison to the Xbox and PlayStation consoles. Unable to compete with the power of the consoles and the development resources that these two larger companies were able to devote to developing compelling content, Nintendo took an innovative approach by focusing on the way in which players interact with games.
Specifically, Nintendo moved away from the push-button control devices and created a stick-like console with motion sensors that the player could use to control the game, involving their entire body in the motion while handling the controller like a golf club, a sword, a gun, a tennis racket, or any of a number of physical devices that were already familiar to them. Even though there remained a limited number of games and the games themselves had a very primitive quality compared to that of its competitors, the concept took hold with the market.
It's mentioned that the technology on which the Wii controller was based had been in existence for some time: devices that detected motion, orientation, and speed were in use in automotive safety devices (such as airbags) and were even used in laptop computers to detect when the device was in motion and might be falling (to lock the hard drive to prevent damage). Nintendo itself had used the technology in its Game Boy portable devices to allow the user to manipulate the device itself to control a game (tipping the device to roll a marble around a maze).
But the technology was merely a means to an end: to transform gaming consoles from a physically inactive experience to one in which playing involves a physically active experience for the player. Its competitors meanwhile played to their existing strengths, while remaining fixed on the paradigm of the inert thumbs-only player. The result was enormously popular, with the console selling double and quadtruple the number of units than its competitors, more than doubling the value of the company's stock.
Since then, the company has focused on adding additional motion-sensitive devices (such as a balance board) and moved more into the fitness and physical therapy markets. The author mentions a chain of health clubs in Canada that have heavily invested and cites a number of testimonials from physical rehabilitation clinics about the way in which the device makes physical therapy more engaging and enjoyable, hence more successful, for patients.
Case Study: Swatch
For centuries, Swiss watches were renowned for their technical superiority: their precision and durability far surpassed the products that were available on the market. But through the 1970s and 1980s, cheaper and better technology made Swiss workmanship obsolete: quarts movement and digital watches were even more durable and precise, and a great deal less expensive. While well-to-do individuals still favored Swiss watches as symbols of status, the majority of the market moved to cheaper competitors. As a result, more than half of the Swiss watch companies closed within a ten-year period.
It was in the early 1980s that Nicolas Hayek, a consultant working for two major manufacturers, recognized the solution: the wealthy market segment that they were still serving did not care if the watches they purchased were accurate - they wanted them to be stylish. It was likely that the low-end market felt the same. The result was a switch from the high-accuracy timepiece to a cheap plastic watch with colorful and decidedly un-watch-like designs that were marketed whimsical fashion accessories.
The Swatch challenged the assumption that Swiss timepieces were expensive, high-quality, precision devices. It also challenged the assumption that a person would only own one watch, as the Swatch was more of a fashion accessory than a timepiece, and customers would buy multiple watches in an array of colors to coordinate with their clothing.
The author carries on with sales, revenue, and earnings figures - which simply underscore the success of the product with the market. (EN: I was curious and checked to see whether the firm or brand still exists, and it does, though it has fallen out of fashion in US markets.)
The Myopia of Technological Substitution
Technology is given too much credit for innovation - in many instances, new technology is not innovative at all, but is merely a substitute for old technology. The product may have improved performance, better efficiency, or additional functions but it essentially the same product. A high-tech teakettle may heat water faster and afford more precise temperature control, but it is still a teakettle. The basic reason that people buy and use the product remain the same.
As a result, the majority of firms in any industry seek to use technology to make the same old products slightly better than the previous generation, ignoring any greater potential. The first make to employed a technology enjoys a slight competitive advantage to customers who value whatever quality the technological improvement provided (faster, cheaper, etc.) but this is soon lost when competitors adopt the same technology and the playing field is leveled again.
He mentions the use of plastic in furniture which was at first embraced simply as a cheaper alternative to metal or wood, so most manufacturers adopted it as such, creating the same shapes of a different material. It was the design firm that recognized that plastic could be used in a different way to metal or wood that was able to create innovative products,. in shapes and colors that were not feasible for wood and metal furniture. (EN: But it seems to me that this is also easily imitated.)
He then considers the early advertising for digital music (MP3) players. The earliest companies positioned their players as substitutes for portable music players that used cassettes or CDs - particularly Sony, whose WalkMan and DiscMan players had dominated the portable music player market. The MP3 player could hold more songs, had longer battery life, did not skip in motion, and the like. The Apple iPod emerged as the market leader not because it created a more powerful player, but a more useful and usable one, by pairing the device with its iTunes - its competitive advantage was not its capacity, weight, or battery life but the ability to easily select (and purchase) music for the device to play, which were capabilities its competitors neglected.
Again, there are sales figures to demonstrate the value of Apple's innovation - how it outstripped their competitors, took the majority of the market within a few years, and how the store accounts for 90% of legal music downloads in the United States. Apple did not ignore the technology of the device, but recognized that the value of the device to the customer was not all about technical sophistication.
Implications for R&D and Technology Strategy
Research is an investigation of the nature of things, observing their properties, tendencies, and capabilities without considering whether any of these have any meaning of value. Research may observe that a fluid is flammable, technology discovers that the flammable quality makes the liquid useful for generating heat, and design considers how one might develop an appliance that makes use of heat produced by the liquid. Whether it is sponsored by an academic institution or a commercial organization, research is entirely self-involved and of use to no-one until some application for its findings is developed.
Breakthroughs in technology seldom change a paradigm or result in the creation of anything new. Most often, technology makes an existing things more effective or more efficient: it is a faster engine, a better paint-removing solvent, and so on - it is not a new mode of transportation or a different approach to task of removing unwanted paint.
Technology also tends to be incremental: it makes things a little bit better, which grants a slight and temporary advantage to the company that pioneers a new technology. As soon as its competitors recognize the value of the technology and adopt it, products again become commoditized until there is another technological breakthrough.
Design has little to offer technology, though technology often results in design changes. A more efficient fuel may burn hotter, requiring changes to the design of the engine that consumes it, requiring changes to the vehicle that uses the new engine. It is only when design has made a change to the ultimate product that the value of the technology becomes apparent.
Conversely, technology offers options to design. When a need is recognized, technology is considered for its applicability to that need. Innovation occurs when a connection is made. The value of a technological advancement may remain unnoticed for a very long time before it is discovered.
In the present day, there are many companies who focus exclusively on technology innovation, and this is myopic. First, the pace of the firm's innovation is limited to the pace of technological research. Second, the technology is often considered in a very superficial manner so innovation is limited to negligible improvements to existing product, and any value that might lead in a different direction is ignored. Third, technology is based on scientific facts that are observable to anyone who is studying the same phenomena, so a discovery puts a firm only moments ahead of its competitors and the gap is closed as soon as they also make the same observation.
Return to the example of the digital music player: if Apple had focused on the technology, its product would be little different from the competition and competition would be based on factors that could be easily imitated (capacity, battery life, etc.) It required looking beyond the capabilities of a device to consider the way it was used to discover that there was a huge gap between customer needs and product capabilities that existing competitors failed to recognize because they were myopically focused on the gadget itself.
A radical innovation only occurs when a company recognizes that there is a significantly new and different meaning that can be served by a technology - that the advancement does not merely substitute for older technology, but opens up entirely new capabilities. To discover this, a company must look beyond the manner in which technology compares to its predecessors (faster, better, etc.) and consider the way in which the technology matches to the needs of the user.
This also points for a need for design to be more prominent in the research lab. The typical approach is to let the scientists discover a new technology and decide what it means before the designer is engaged - to say that this material makes the product more durable, and restrict thinking to durability when the material might also make it possible to fabricate the product in a different shape or make it suitable for a different purpose. Such things will not be discovered by scientific inquiry alone.
Implications for Technology Suppliers
The further a company is from the end-user, the less that it feels the need to innovate. Because they are not in direct contact with the customer (the supply materials to those who create consumer products), they have less insight, and they also assume that their only need to innovate is at the demand of their customers - that the firms to whom they sell will give them very specific indications of what they need. "If a client asks for a specific feature or component, it means that someone else has already created it."
More forward-thinking firms recognize that innovating to serve the end user will push their own products through the supply chain, creating demand for their customers, and ensuring that it is they, rather than another supplier, whom the customer asks for the materials (rather than assuming they must contact a different vendor to get better components).
Verganti also mentions the unusual phenomenon of suppliers who push through their customers to the end user: the "Intel Inside" campaign that created consumer preference for an internal component that most customers handn't previously considered of any importance, the various advertisements for artificial sweeteners that has pulled specific brands through the supply chain. The same can be done with innovation - if the vendor suggests the unique value of its materials to those who make consumer products, it can stimulate demand for its products and gain a strong relationship with its own customers.
The author mentions a firm few people have ever heard of: ST Microelectronics, which was proactive in selling its motion-detection components. This led to improvements in other consumer products, including vibration-control devices in Maytag washing machines, more durable Toshiba notebook computers that lock down the hard drive when the machine is dropped and, most famous of all, the motion-detection in the Wii gaming console's controllers. In these instances, their customers did not come to them asking for them to invent a solution - they went to the customer to teach them how to make their products better by using ST Microelectronics components.
After a few more examples, he then mentions the unfortunate case of Corning, a suppliuer of glass and related components, which has lost significant accounts to other firms. Corning's approach was very traditional: it replied upon clients to provide specifications and tell them what qualities they wanted - but it is exceedingly arrogant to take one's customers for granted. When a client wanted something that wasn't a current part of Corning's catalog, the client would put out an RFP and consider other vendors. And smaller more aggressive firms were calling on Corning's clients directly to show them better solutions - hence Corning became their "usual supplier" that was not considered when they wanted something unusual, and was constantly being shown up by younger and more innovative firms.