An exploration into why companies that lead with design outperform the market.
Skeptics always want to know why they should invest in design. Even today, when the business landscape is teeming with success stories that celebrate design as a powerful strategic tool, the answer to this question is not well understood by the average businessperson—and understandably so. After all, design is notoriously difficult to define, tough to measure, hard to isolate as a function, and tricky to manage, making it challenging for many non-designers to comprehend.
Over the years, many organizations have attempted to tackle this issue, eager to make a hard case that will make design-unconscious managers take notice. In 2005, the UK’s Design Council discovered that every £1 spent on design led to more than £20 in increased revenue, £4 in increased profit and £5 in increased exports.
Design driven Value
The diverse companies comprising the DMI Design Value Index all understand the power of design, how to use it as a tool, and how to scale it in a way that will drive success for their businesses. So what is the value that broad deployment of design principles and methods brings to these companies? The following are a few ways in which design is helping these companies win big.
1. The ‘Wow’ factor
Great design helps make products and services more aesthetically pleasing, more compelling to use, and more relevant in a world that seems to change at an ever-increasing pace. This is one reason the world is currently in love with Tesla Motors, which has given us drop-dead gorgeous cars that help save the planet and get 200 miles on one charge. Or think about how much of the public has been completely enamored with Apple products over the last decade.
The wow factor can also draw consumers into supporting certain companies over time. In the 1990s, for example, discount retailer Target faced increasing competition from similar stores such as Wal-Mart and K-Mart and realized it faced three options: “to specialize, to become the low-cost producer, or to differentiate,” remembers Gerald Storch, Target’s vice chairman at the time. The first choice would have crippled future growth; the second was already a battleground. So, the company decided to go with the third: differentiate through design. That decision led to Target’s domination of the mass merchandising market as Tar-zhay, the mass purveyor of stylish yet affordable goods. It didn’t miss the mark—thanks to its design ethos, which can be found in everything from its product offerings to its store layouts to its commitment to innovation.
Indeed, companies like Apple and Target have raised the bar so high in their use of design that the public is more aware than ever of what good design looks like and what design-led companies are capable of producing. There is no doubt that this factor is showing up in company growth trajectories, as well as in their stock market results.
2. Brand expression
People today want to connect with brands as extensions of themselves. We see them, hear them, and interact with them in more ways than ever before. Some of the most valuable work designers can perform lies in the interpretation of a company’s brand elements and how customers connect with them. “Connecting used to be, ‘Here’s some product, and here’s some advertising. We hope you like it,’” says Nike CEO Mark Parker. “Connecting today is a dialogue.” And Nike has put its money where its mouth is. Its spending on TV and print advertising has dropped about 40 percent in the past three years at the same time that its sales have increased to more than $25 billion—more than 30 percent greater than closest rival Adidas. How? Nike is going straight to where the customer is—the digital world. Nike has carefully crafted a multichannel digital presence that not only fosters open communication with customers, but also encourages those customers to connect with each other.
In 2010, the company launched Nike Digital Sport, a new division in charge of developing devices and technologies that help users track their personal statistics in whatever sport they pursue. By deepening relationships with (and among) its customers, Nike enables customers to amplify its signature “just do it” attitude. The result? Before, Nike could count its biggest brand audience as the 200 million people who tune in to the Super Bowl. Now, across all its sites and social media communities, it can match that figure any day. Nike continues to communicate the aspirational, active, can-do spirit that its customers crave across its product lines, and promotes it with platforms designed to amplify that energy.
3. Solving users needs
Design research emphasized the use of empathy, an instrument for encountering the world as others might. The importance of this tool cannot be overstated. After all, no matter whether one designs products, services, or processes, consciously keeping the end users in mind helps to reveal inspiration for category- killing products, as well as lower the risk of failure.
Further, being the first to find and develop solutions to latent needs, which one can uncover by studying what people do, think, and feel, provides the opportunity for first- mover advantage, provided the company can commercialize and scale the insight uncovered.
4. Developing better customer experiences
In every relationship we have with providers of goods and services in our society, there is an inherent end-to-end experience. When designers get involved in creating experiences, they use techniques involving empathy to uncover and optimize for both functional and emotional customer needs. Different types of designers (interaction, brand, package, product, service, graphic, and so on) contribute at various stages of the process to, in the best cases, build a seamless, branded, and differentiated experience. By definition, this work connects various parts of the company that in many cases had not previously even met. This is a critical byproduct of the top design-driven companies and a key value-added secret that best-practice companies in the Design Value Index share.
5. Rethinking strategy
Recently, design thinking has become popular with organizations that face murky, complex issues that are hard to solve using traditional business best practices. By employing such design tools as empathy, creativity, and rationality, organizations are able to reframe problems in ways that forge new pathways toward innovative solutions. In other words, designers don’t create solutions until they have determined the root issue, and even then, they pause first to consider the whole range of potential solutions.
IBM is working design thinking into its practices to build a new way of creating solutions for its customers. In addition to heavily recruiting designers and design experts, the technology giant recently launched an initiative to send product teams to Designcamp, a one-week design-thinking training camp at a brand-new studio in Austin, Texas, that was built for this purpose. Product managers, developers, and designers learn design-thinking techniques and put their new skills to use developing solutions for mobile, social, cloud, security, and big data.
What’s so big about design thinking is that it allows all comers to tap the right/creative side of their brains to think in new ways, create new connections, derive new insights, and create innovative solutions. With creativity a lost commodity in many business settings these ways, this practice builds that muscle.
6. Cost reduction
Design can also make great strides to help get the cost out of manufactured goods through rethinking the ways and means by which products come together. Procter & Gamble, best known for its household brands such as Tide and Pampers, has recently developed a process to develop plastics that are thinner, cheaper, and more environmentally friendly than the industry standard. It is estimated that this new technology could save the company up to $1B a year. Companies that harness design to curb costs can thus double design’s financial impacts by managing the bottom line while simultaneously growing the top line.
Source: The Design Management Institute and Motiv Strategies
Design is an investment in innovative thinking, positioning, branding and communication that creates value for businesses in terms of competitive advantage, customer trust and loyalty, and market share. In a rapidly changing global and local business environment, design thinking helps business counter the complexity of conditions with creative solutions. In a global economy in which production gravitates toward the lowest cost producer, human-centered design provides the competitive differentiation needed to gain market share. Design is a critical strategic asset that is most effective when employed early in corporate plans, not as a decorative finality.