Feeling overpowers qualities
By Heikki Rajasalo
There seems to be growing interest to measure, control and manage business development using data. Design has not been outside the scope of this development.
The Finnish Design Business Association (FDBA) conducted a joint research program called Design ROI. Its aim was to study and develop a tool and methodology to measure the economic impact of design before implementation. The program was managed with Aalto University and Tekes (the Finnish Funding Agency for Technology and Innovation). Other marketing related topics and disciplines, such as Knowledge Management, seem to focus on the same topic, to kill the test-of-time with data.
One of the outcomes of Design ROI was an indication that the immediate design impact can be evaluated in advance.
It is well known that the impact of design can be proven afterwards, and research finds financial proof of this. For example, the turnover of companies that invested in design grew by an average of GBP 225 per GBP 100 invested. Their share price was around 200 percent higher than that of the general stock market index (British Design Council, 2007). Furthermore, the difference in productivity between companies that had invested in design and those who had not invested in design at all was over 50 percent (Swedish Industrial Design Foundation, 2008). In addition the IDEA Award and investor expectations correlate in terms of the success of award winning companies in the stock market. Within a five year period the share price of companies that had received the award exceeded that of companies in the S&P 500 index by an average of EUR 6.50 per year (Stanford University, 2007).
For more than a decade research centers and design councils have indicated and shown the positive impact of design. For example, the Danish Design Center found, since 2003, that companies investing in design enjoyed a 22 percent higher turnover growth than non-investing companies. Interestingly, the decade since then includes economic instability of the eras 2003, 2009 and the ongoing recession of the present.
Did business development invest little in design, or couldn’t design accelerate growth? Finnish industries claim they invested in design at that point of time. In fact, 53 percent of companies invested in design in 2006 (Association for Finnish Work, 2012), though only 23 percent continuously since then (Lindström et al., 2006).
The general obstacles to apply design in business development seem to be rather strong and somewhat biased. For instance, 47 percent of Finnish companies claim they profit without design (Association for Finnish Work, 2012). Furthermore, 59 percent of Finnish companies cannot see any benefit brought by design (Association for Finnish Work, 2012). That is approximately two thirds! It indicates that companies just cannot believe design as a growth tool. Or perhaps Finnish companies simply think that design is a just beauty contest of the goofy.
All and all, a majority of companies seem to not have the capability to use design strategically. If the companies do not speak design, how do designers speak business?
According to Robert Bau, designers are not equipped with the business vocabulary for strategic business discussions. First of all, simple and well structured everyday problems get solved. Simple and well-structured problems, for example, are service offering development and regular branding issues. Secondly, the lack of structuring the problem seems to go along with uncertainty, and especially when discussing complex and open-ended problems. Designers and design teams fall into the touch-point design trap. It seems that very early in the creative process the designers focus their efforts in redesigning customer touch-points (Bau, 2011). Furthermore, it seems that designers skip over the strategic business discussion and move rapidly to realization i.e. to visualization phase. Bau’s other findings among service design development were:1) Designers lack the vocabulary to discuss and analyze services 2) Designers care too little about service operations 3) Designers do not know how to translate tentative solutions to value creation 4) Designers do not know how to frame strategic problems 5) Designers do not know how to identify business opportunities, and finally 6) Designers do not truly understand the strategic nature of services
There are perhaps two reasons for this. First, it may be so that designers think visually i.e. they need to encode difficult textual content and attributes into visual language very rapidly and early in the design process. On the other hand, it is possible that designers lack the skills to target business attributes.
If the reason is the first, designers and design teams, but also their clients should understand that the first sketches are not the solution, but made for better understanding difficult contents of the brief.
If the reason is the latter, the challenge is wider. If this is the case, I turn my attention to educational organizations, as they seem to put two disciplines under the same roof: expression oriented arts, and solution oriented design. During my educational and academic career I have faced it again and again: academic art and design education can still be accomplished without a single business lesson.
There seems to be a lack of strategic talent and lack of business capacity among designers.
Unfortunately, all the companies haven’t realized the impact that design can have. For such companies design is perceived as a cost. On the other hand, the need to control business development drives design towards more analytical fields. The day when the rest of the industry takes a step towards strategic design, which I see to be quickly approaching, there should be more designers who have taken a step towards business.
Creative solution-oriented thinking, when combined with analytics, results in better aims and more precise design investments. The opportunity of design analytics leads rapidly to design audits, which result in design business scorecards and data. This directly indicates the key performance of design. Think of it as a volume knob of experience.
In the markets where products are based on similar technological platforms, and sold in relatively similar environments the demand is for differentiation, rather than new technological features. Putting all of the above together, feeling overpowers technological qualities when products compete in the same price category. Furthermore, if looking for added value, invest in branding rather than a new product component. Investing in immaterial assets enables market dominance in every business sector.
Why does design need to be evaluated? There is a growing need to measure business development, and therefore also design in order to govern design better. The main target is to determine the quantitative and qualitative impacts of design. The current understanding of what is a design investment is poor. Companies seem to not have a firm grasp on the ROI of design and how it impacts their business (Jaakko Aspara, Aalto University, 2012). Seldom do companies have data to support whether their design ROI altogether positive or negative.
What explains the lack of data? Firstly, immaterial assets and property are rather abstract subjects. Secondly, the immaterial values have been noticed, but there is little insight into any evaluation procedures. And thirdly, there is a prolonged vision of one universal standard.
To any software company, I say, design is ready for Business Score Cards (BSC). To any manufacturing organization, I say design can be audited. To any service provider, I say design investment can be targeted better. To any family business manager, I say investing in immaterial assets pays back twice. Design is ready for business.– – –
For this project, my original aim was to gather insight by contacting senior brand and design executives. I intended to find out their relationship with the business of design and their views on the ROI of design. I was to ask whether they have implied design to any existing BSC. Unfortunately, the response rate was too poor to draw any firm conclusions. However, I did gain insight that there is an opportunity for profitable new business in design. This correlates well and strengthens the research findings mentioned above.
To end, I offer an anecdote. There were two shoe salesmen sent to an unexamined market area to gather insight about the business opportunities. The first one came back and reported to the CEO “There is no business opportunity there, because no one uses shoes.” The other waited his turn and when he gave his report to the CEO he said: “There is an immense opportunity. No one there has shoes.”
Heikki Rajasalo is a design management specialist from Finland. Having 25 years of experience in the field Heikki focuses to develop the governance of design of small and big companies. Heikki has a wide network in Europe, in Japan and in the States. Currently Heikki works in Hahmo Design www.hahmo.fi/en and wishes to get new friends through www.LinkedIn.com