1 CHAPTER I INTRODUCTION I.1 BACKGROUND More than 20 years ago, Christopher Freeman in his famous study of the economics of innovation already wrote “innovate or die” (Trott, 2008). Peter Drucker, the late management guru once said: “Because the purpose of business is to create a customer, the business enterprise has two –and only two –basic functions: MARKETING and INNOVATION “ (Drucker, 1985). These statements are still valid and even stronger today. Innovation is the process whereby ideas for new (or improved) products, processes or services are developed and commercialized in the marketplace. Companies that want to deliver consistent organic growth to their shareholders, customers, and their employees, can do it only through innovation (Chesborough, 2003). Even during the global crisis like we are experiencing a few years ago, a globally CEOs survey by the Boston Consulting Group in April 2009 (Andrew et al., 2009) again shows that leaders in the companies clearly put innovation in the top 3 of their main priorities. Since long time ago, as described briefly above, innovation always stays at the top position in having an important role creating competitive or compelling products. Why it's always in the top position. Because innovation itself constantly renewed its way of doing things, and because it is an inherent built-in character in itself. The current state of innovation model (Rothwell, 1992) is already in its 5 th generation, where innovation is now mainly driven by the development in social networks. With these recent developments, innovation is no longer just mainly about science and technology. In recent years, new nature of innovation is emerging, as stated in the Preface of New Nature of Innovation Report to OECD (Prahalad et al., 2009), “co-creation, user involvement, environmental and societal challenges increasingly drive innovation today. Collaborative, global networking and new public private partnerships are becoming crucial elements in companies’ innovation process”. Firms now innovate in various ways, not just through science and technology. From this emerging trend, there come different new variations of the approach, i.e. open innovation, user-centered innovation, collaborative innovation network, design-driven innovation, and many others. Among them, design-driven approach has 2 its own interesting point. What makes design-driven innovation interesting is because people are increasingly turning to design and creativity as a new paradigm to understand the needs and desires of changing cultures and create new options that never existed before. It is the ability to generate new concepts today that lead to new products, services and even social systems of great value. In an era of cascading change that does not pause or end, design is providing a pathway to the future (Nussbaum, 2009).