Innovation Design

Elke den Ouden

Innovation Design

Creating Value for People, Organizationsand Society

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Prof. Dr.ir. Elke den OudenFaculty of Industrial DesignEindhoven University of TechnologyBuilding HG3.34, Den Dolech 25612 AZ EindhovenThe Netherlandse-mail: E.d.Ouden@tue.nl

ISBN 978-1-4471-2267-8 e-ISBN 978-1-4471-2268-5DOI 10.1007/978-1-4471-2268-5Springer London Dordrecht Heidelberg New York

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Preface

In October 2008 during the Dutch Design Week, an annual event in the city ofEindhoven, I held my inaugural lecture with the title of ‘Designing (added) value’.While preparing the lecture, it became clear that the term ‘value’ was widely usedbut barely understood. It has different meanings in different contexts, and differentdisciplines use different definitions. So how can we ever create the ‘shared value’for people, organizations and society that we aspire to so much? Growing numbersof people recognize that we are in a transition, in which ‘business as usual’ is nolonger possible. The industrial paradigm focusing on shareholder value and profitmaximization is being replaced by a new, transformational paradigm. One inwhich people are looking for ways to make meaningful contributions to addressingcollective issues in which society is not just a stakeholder, but a beneficiary.People also expect this kind of ethical behavior from others and from organiza-tions, both profit and nonprofit. At the same time there is a growing awareness ofthe tremendous business opportunities in ‘doing good’. Social responsibility is nolonger only about charity and philanthropy, but about creating value for people,organizations and society at the same time. Discussions with people in the industryand academia have clearly shown me that there is widespread recognition of theneed for a better understanding of value, and of how to use it to create moremeaningful innovations. Fortunately, my managers at Philips Innovation Serviceswere among those who recognized this need. That gave me the opportunity to takea nine-month sabbatical to explore the subject more deeply and to write a bookabout it.

This book is aimed at practitioners in the field who are actively involved in bothprofit and nonprofit organizations: innovation managers, product managers, pro-gram managers, design managers, project leaders, architects, designers and engi-neers. I hope it will give them an insight into what meaningful innovations are,what value is, and practical methods and tools that can be applied directly in theirown organizations. The scientific foundation also makes it suitable for (academic)educational purposes: academics at BSc, MSc and PhD levels studying innovation,design, business and/or engineering-related subjects, and in particular those aimingfor a professional career in innovation.

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Roughly the first half of the book explores ‘value’—its meaning from differentperspectives and in different contexts. This exploration is based on many years ofdiscussions in projects in the industry and academia, as well as an extensiveliterature study conducted more recently. It considers value from the viewpoints ofusers, organizations (profit and non-profit) and society, as well as from the per-spectives of economics, psychology, sociology and ecology. The resulting ValueFramework can serve as a map to create meaningful innovations that improve thequality of life of users, provide value for organizations, enable ecosystems toevolve and improve the quality of life for society as a whole. In other words,caring for both people and planet. The second half discusses how to get started oncreating meaningful innovations, and provides the practical tools needed to reallycreate the value that is aimed at for the various stakeholders.

It became clear at an early stage that creating meaningful innovations withvalue for organizations, users and society at large most often requires collaborationbetween different players. In fact it is not just the innovation itself that needs to bedesigned, but also the ecosystem to support it. These multiple players are neededto jointly contribute knowledge, experience and resources; to deeply understandthe societal issue being addressed; and to generate ideas that really solve that issuein a way that brings value to all the stakeholders. An issue like obesity in childrencannot be solved by a single organization. It needs the collaboration of parents,schools, the food industry, governments and many other people and organizationsthat, in one way or another, are all part of the system influencing children’s eatinghabits and activity levels. Failure to recognize this fact could lead to ‘innovations’and other measures that would be unlikely to achieve the desired goal of happy andhealthy children. Moreover, in many cases the solution is not just a single productor service but a system of combined products and services from different orga-nizations. This requires a sound business model to ensure a sustainable overallvalue proposition, as well as sustainable value for all the social and economicactors in the ecosystem. It may sound complex and challenging to address societalissues at this level, in creating innovations that really do bring value to multiplestakeholders. But I hope this book will provide the necessary insight and practicaltools to get started. It gives many inspiring examples to help readers take up thechallenge and contribute meaningfully to solving the societal and economicchallenges we are currently facing – challenges like the aging population, energyscarcity, environmental issues, social well-being and many more.

Chapter 1, ‘The Age of Transformation’, provides the context of the book. Theworld is currently going through a transformation. We face a number of tremen-dous societal challenges for which traditional approaches no longer work. Man-kind has gone through big changes before: moving from the agricultural economyto the industrial economy, and more recently into the ‘experience’ economy andthe knowledge economy. This chapter explores past and present paradigm shifts toset the scene for what follows. Most of all, facing the current societal challengeswill require collaboration between profit and nonprofit sectors as well as connectedindividuals, to create meaningful innovations that will guide people and societythrough the transformation.

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Chapter 2, ‘Levels of Value’, explains that the transformational solutionsneeded to tackle today’s societal challenges must create value not only for theirusers and the organizations that market them, but also for society as a whole. Theterm value is used frequently, but has different meanings in different contexts. Thischapter explores the different levels of value that are relevant for innovationsaddressing societal challenges: the user, the organization, the ecosystem andsociety.

Chapter 3, ‘Value from Different Perspectives’, takes a deeper look at themeaning of value. Value is a subject that has been studied in many contexts andmany scientific disciplines. Even within one discipline it has different connota-tions. This chapter gives an overview of ‘value’ from the perspectives of the socialsciences that provide a relevant context for innovation: economics, psychology,sociology and ecology. It also looks into the history and etymology of the termvalue, and the philosophical perspective, to provide a sound basis for furtherdiscussion throughout the book. The different views on value are integrated intoone overall Value Framework. This combines the value concepts from economics,psychology, sociology and ecology, and explains them at the four levels of theprevious chapter: user, organization, ecosystem and society. The Value Frame-work serves as a basis for design to create shared value with transformationalinnovations.

Chapter 4, ‘Meaningful Innovations’, builds on the Value Framework to showhow to define meaningful innovations. Finding solutions for today’s societalchallenges demands new value propositions for people, organizations and societyat large. Transformational innovations will only have an impact on society if theybring about changes of behavior and create long-term value for users. Moreoversuch innovations are likely to disrupt the current industry structures and ecosys-tems. The Value Framework shows how to define meaningful innovations thatcombine creating an ‘experience’ for the user, ‘doing well’ for the organization,‘doing good’ for the total ecosystem and creating a ‘transformation’ at societallevel.

Designing meaningful innovations that create value for users, organizations,ecosystems and society requires a holistic view to integrate seemingly conflictingneeds and requirements into compelling solutions. Chapter 5, ‘Creating Mean-ingful Value Propositions’, describes and shows through examples the way ofthinking, the process and the tools to reach integrative value propositions and theiraccompanying business or value models. It shows that innovation projects of thiskind typically have higher uncertainties. These translate into a need to integrateknowledge and experience from various disciplines, and to follow a moreexplorative approach in the initial phases of the projects. Building on the literaturefrom design, marketing, business and innovation management, as well as extensivepractical experience in projects in the field, a practical approach is defined thatdescribes pragmatically how to define and realize meaningful innovations. Itcontains descriptions of methods and ways of working, supported by examples.

The final chapter, Chap. 6, ‘Designing Ecosystems’, shows how new ecosys-tems can be designed for solutions that require combinations of products and

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services from different organizations. This will often be the case in definingmeaningful innovations that provide sustainable value for people and society.A number of organizations are needed to realize the innovation, hence apart fromthe products and services themselves, the total ecosystem needs to be designed.This has to include all the relevant social and economic actors required for asuccessful launch of the innovation on the market, but also for sustained service inthe long run. The design of the ecosystem needs to ensure a return on investmentof both tangible and intangible value for all the business parties and other stake-holders involved. This chapter shows how new ecosystems can be designed bypresenting the Value Flow Model as a method to identify the relevant stakeholdersand the values that are important to each of them, and to balance those values inthe total system. The method has proved to be valuable in enriching value prop-ositions, but also in gaining commitment from the different business actors tomake the investments required for implementation. The visualization of tangibleand intangible value flows enables the balancing of value across the differentparties to ensure sustainable value for all.

This book aims to provide a solid background on value creation and theprocess of defining new value propositions, business models and ecosystems formeaningful innovations. It builds on practical experience and an extensive liter-ature overview. Although I believe that the literature included is representative ofthe different fields, I do recognize that I am not an expert in all the fields men-tioned. So I would like to apply a ‘probe and learn’ approach to this book. I alsoinvite readers to contribute to the second edition by pointing out missing butrelevant topics and literature. If you would like to share your ideas on imple-menting my thoughts in practical projects, you are very welcome to do so. I willkeep a list of suggestions and examples of implementations online at:www.elkedenouden.nl/innovationdesign.

I hope this book will inspire readers to embark on the journey of designingvalue propositions that bring value to people, organizations and society. And that,through them and their ideas, it will contribute to making the world a better place!

May 2011 Elke den Ouden

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Acknowledgments

A book like this is the result of the thoughts, experience and efforts of many. Mycolleagues at Philips and the university and the many people I have met overtwenty years of working on innovation projects have all contributed to the grow-ing insights that provided the background for this book. But I would not havestarted the process without the encouragement of Allard to follow my heart andtake the time to dive deeply into the subject. I am grateful to my managers atPhilips Innovation Services, Iason Onassis and Ruud van Vessem, to give meconfidence and allow me a sabbatical for this purpose.

I would like especially to thank Rianne Valkenburg for the discussions that wehad at moments when I lost confidence in my ability to complete the job. After Ihad read over 600 books and articles on value from different perspectives, andsometimes couldn’t see the wood for the trees, she helped me tremendously increating the first rough version of what was to become the Value Framework. I amalso grateful for her feedback on the draft text, and for the in-depth discussions onwhat makes transformational design different from more traditional design pro-cesses. I would also like to thank my colleague Dirk Snelders for his valuablefeedback on the draft text from a scientific and educational perspective. And myfriend Pauline van Hezik, who has been an inspiration over the years in looking atdeeper levels of being more mindful.

Nigel Morrison has been a great help in improving the readability of the text,and I appreciate his patience in cutting my long sentences into bite-size pieces. Iwould also like to thank my sister Sofie, for her help with the graphics, and espe-cially the cover design. Anthony Doyle and Claire Protherough of Springerdeserve special thanks for guiding me through the publishing process, which wasnew to me.

Grateful acknowledgement is made to Philips and the Design Initiative for thepermission to use their material. I would also like to thank the individuals andpublishers that gave me permission to quote or use illustrations from their work.

I owe a lot to my close friends and family for their support and understandingduring the months in which the book affected their lives as well. Thank you for all

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your support in the past, for the great things that we have done together, and forbeing there.

Last but not least, I would like to thank all those people who are working onmeaningful innovations, and by doing so are creating more value for society. Youmake writing a book like this a worthwhile endeavor.

x Acknowledgments

Contents

1 The Age of Transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Threats... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2…Are Opportunities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Paradigm Shift . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Towards the Transformation Age . . . . . . . . . . . . . . . . . . . . . . . . . . 6References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

2 Levels of Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Value for the User . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Value for the Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Value for the Ecosystem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Value for Society . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

3 Value from Different Perspectives. . . . . . . . . . . . . . . . . . . . . . . . . 21Etymology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21The Philosophical View . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Integrated View. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23The Economic View . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Economic Value Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . 29The Psychological View. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Psychological Value Concepts. . . . . . . . . . . . . . . . . . . . . . . . . 34The Sociological View. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Sociological Value Concepts. . . . . . . . . . . . . . . . . . . . . . . . . . 42The Ecological View . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Ecological Value Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . 51The Value Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

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4 Meaningful Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61Defining New Value Propositions . . . . . . . . . . . . . . . . . . . . . . . . . . 62Value Propositions for the User. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73Value Propositions for the Organization . . . . . . . . . . . . . . . . . . . . . . 75

Doing Well . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81Value Propositions for the Ecosystem . . . . . . . . . . . . . . . . . . . . . . . 82

Doing Good . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85Value Propositions for Society . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90Meaningful Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

5 Creating Meaningful Value Propositions . . . . . . . . . . . . . . . . . . . . 97Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97Innovation Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99Inspiration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108Ideation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122Designing Business Models for Transformational Innovations. . . . . . . 127References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

6 Designing Ecosystems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143Defining Ecosystems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145Innovation in Ecosystems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149Designing New Ecosystems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

The Value Flow Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154Select Parties for Ideation and Enrich the Value Proposition. . . . 162Identify Stakeholders and Their Interests . . . . . . . . . . . . . . . . . 164Define Roles and Value Flows . . . . . . . . . . . . . . . . . . . . . . . . 171Selecting Parties for Realization and Implementation . . . . . . . . . 181

Evolution of Ecosystems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193

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