Here is how design can grow shareholder value
I’m surprised that I still meet many companies that do not see the link between design and good business. I felt compelled to write up my thoughts and highlight my 5 strongest arguments for how design can spur business growth.
Last year management consulting giant McKinsey & Company acquired Lunar, a top design firm in San Fransisco known for its work with clients such as Apple, HP and Coca-Cola. This is just one of the many examples illustrating how the business world is not only finding design an indispensable element to create success, but also one that is worthy of paying big bucks for.
They are of course not doing it on a whim. Studies show that they are definitely on the right track. Microsoft funded DMI (Design Management Institute) to create a ‘Design Value Index’ studying the performance of selected US publicly held design-led companies. The results are astonishing: from 2004 – 2014, the design-led companies outperformed the overall S&P 500 Index by a whopping 219%!
Source: Design Management Institute
It is therefore clear that companies that recognize design as a strategic asset (rather then just its aesthetic value) perform much better than companies that do not.
Both UK and Sweden follow the same trend as in the US survey. The Design Index studies conducted by the Design Council of UK tracked 61 design-led household brands and found that they outperformed FTSE 100 by over 200% in a 10-year period. The Swedish Industrial Design Foundation went further by placing companies on a “design ladder”, with those that place on the top strategic importance on design driving the highest shareholder value, in comparison to businesses that are ignorant of design lying at the bottom.
Source: SVID (design trappan)
Companies who have significant success usually have an appointed design director who is able to see and account for the business value of a design process, or have maintain long term working relationships with their designers. It is sometimes difficult to quantify design’s short-term impact on a business, and companies that lack the vision may find their hands tied when it comes to justifying their investment in design. Yet it is design that decides how to best position the product or service in a way that effectively addresses the target audience’s desires and needs, allowing the business to be strongly poised in the market and successfully grow.
Source: Blue Ocean – Strategy. W. Chan Kim and Renée Mauborgne. 2005
The reach of design extends not just to US conglomerates, but also to startups. Young entrepreneurs now start their own microbrands using crowdfunding platforms such as Kickstarter and Indiegogo, and design is vital to their success from the moment of inception. It is imperative for startup companies to incorporate design in their business strategy development, the earlier the better. In devising their strategies, bear in mind a design thinking attitude: how to engage our customers and enhance our competitiveness through design? Design should be the core of your business strategy, culture and day-to-day operations.
Source: Sharing Experience Europe
So what does this mean for China? Doing business in US and EU is of course different from doing business in China. The culture is different, the market is different. China is people-oriented; building relationships and trust is the impetus of building a successful business. Advertisements of products and services are inevitably endorsed by famous celebrities or public figures; design is important, but so is a trusted spokesperson. All is fine and dandy until most resources are being funneled into celebrity endorsement and trust is earned at the expense of product design and customer satisfaction.
It was rumoured that artist Ke Zhendong’s drug scandal caused companies he served as spokesperson for up to a billion RMB direct and indirect commercial loss. A celebrity’s personal life choices may severely jeopardize brand image and products endorsed by him.
Thankfully, Chinese new generation seem to be basing their purchase on other values, especially those living in the coastal areas. They are rapidly upping their demands on products and services and are more than willing to pay premiums for quality.
To meet this requirement, a company quickly need to learn how to incorporate a design process that enables the company to design products that customer actually care about. It starts with recognizing human intuition and feeding the ability to provide products and services that are based not on what you can produce with current manufacturing setup, but rather on a defined customer need. Incorporate three principles in your existing operations, products and services: inspiration, ideation and implementation.
Source: Design thinking process
- UK Design Council
- DMI Design Management Institute
- SVID Swedish Industrial Design
- Design Strategy Market Index
With a 20-year track record in brand and design management, I am well aware of how design can make or break a business. It requires you to step out of the echo chamber to find your unique voice that comforts the souls of your targeted converts. Functionality is never enough; design dedicated to improve user experience, engagement and usability is key to striking gold. Be it East or West, we all need to think out of the box, incorporate design in our business strategies and develop creative and innovative products that appeal to consumers’ real needs.
By Johan Persson – Design Director at C’monde Studios, Hong Kong