WHIRLPOOL APPLE FORD HFeatureE WHATR IS THE RMANEAL VAluE OF DESIGN? -MILLER IBM INTUIT By Jeneanne Rae There is growing evidence to suggest that design-centric companies outperform their Newepeers.LL- Motiv StrategiesR andU DMIBBE explore RMAID NIKE somePRO of the reasons why.cteR & GambLE SAT RBUcks STARWOOD STEELCASE COca-COLA WALT Disney WHIRLPOOL DesiGN-COnsciOUS COmpanies: APPLE FORD HERMAN-MILLER IBM INTUIT NeweLL-RUBBERMAID NIKE PROcteR & GambLE SAT RBUcks STARWOOD STEELCASE COca-COLA WALT Disney WHIRLPOOL APPLE FORD HERMAN- MILLER IBM INTUIT NeweLL- RUBBERMAID NIKE PROcteR & GambLE STARBUcks S30 DMIT WINTERA 2013RWOOD STEELCASE COca-COLA WALT Disney WHIRLPOOL APPLE FORD Feature WHAT IS THE REAL VAluE OF DESIGN? HERMAN-MILLER IBM INTUIT Notes 1. “Design Delivers for Business: 2. Platt, Marjorie B., Hertenstein, 3. Jeneanne Rae, “6 Keys for Turning A Summary of Evidence from Julie H., and Brown, David R. Your Company into a Design the Design Council’s Design “Valuing Design: Enhancing Powerhouse,” Fast Company’s NeweLL-RUBBERMAID Leadership Programme” Corporate Performance Through Co.Design blog (fastcodesign. (online at www.designcouncil.org. Design Effectiveness.”Design com), April 2012. uk/publications). Management Review, vol. 12, no. 3 NIKE PROcteR & GambLE (Summer 2001). StaRBUcks StaRWOOD STEELcase COca-COLA What Is the Real WALT Disney WHIRLPOOL Value of Design? DesiGN-COnsciOUS COmpanies: APPLE FORD keptics ALWAYS WANT TO companies, we found they outperformed the S&P know why they should invest 500 by a significant margin.3 It quickly became HERMAN-MILLER IBM INTUIT in design. clear that there is a correlation between investing Even today, when the in design and extraordinary stock performance. business landscape is teeming Seeing this work, DMI president Michael NeweLL-RUBBERMAID with success stories that Westcott asked us to revisit the creation of a celebrate design as a powerful design-centric index that could be used to track strategic tool, the answer how design-centric companies perform relative NIKE PROcteR & GambLE Sto this question is not well understood by the to the S&P 500 over time. Partnering with DMI average businessperson—and understandably so. on this effort, we devised a portfolio of 14 publicly After all, design is notoriously difficult to define, traded US companies that made the cut for StaRBUcks StaRWOOD tough to measure, hard to isolate as a function, inclusion (see sidebar). The results supported and tricky to manage, making it challenging for our previous findings. While the S&P grew many non-designers to comprehend. 75 percent from 2003 to 2013, our Design-Centric Over the years, many organizations have Index grew an astonishing 299 percent. STEELcase COca-COLA attempted to tackle this issue, eager to make a The fact remains that although these results hard case that will make design-unconscious show a powerful return on investing in design, managers take notice. In 2005, the UK’s Design the index does little to explain the how of this WALT Disney WHIRLPOOL Council discovered that every £1 spent on design phenomenon. This article seeks to explain the led to more than £20 in increased revenue, £4 various ways design can add significant value to increased profit and £5 in increased exports.1 large and small enterprises alike. APPLE FORD HERMAN- An even earlier study, by Julie Hertenstein and Marjorie Platt, examined 51 firms in four Design-driven value industries, using 12 different measures of The diverse companies comprising the DMI MILLER IBM INTUIT NeweLL- financial performance across five years, and Design-Centric Index all understand the power concluded that firms rated as having good design of design, how to use it as a tool, and how to were stronger on virtually all measures.2 scale it in a way that will drive success for their RUBBERMAID NIKE PROcteR Several years ago, Motiv Strategies began businesses. So what is the value that broad conducting studies on companies that were deployment of design principles and methods consciously using design as an integral part brings to these companies? The following are of their business strategy. While tracking the eight ways in which design is helping these & GambLE StaRBUcks financial performance of these design-centric companies win big. StaRWOOD STEELcase DMI WINTER 2013 31 COca-COLA WALT Disney Feature WHAT IS THE REAL VAluE OF DESIGN? 1 THE WOW FACTOR DMI DesiGN-VALUE INDEX Great design helps make products and Selection Criteria services more aesthetically pleasing, more T he DMI Design Value Index by Motiv is value-weighted according to market capitalization data from the close of business on the last trading day of June compelling to use, and more relevant in a world and December in the years 2003 through June 2013. that seems to change at an ever-increasing What constitutes good design can be viewed as highly subjective; therefore, pace. This is one reason the world is currently the selection criteria developed for inclusion in our index focus on the following: in love with Tesla Motors, which has given us 1) PUBLICLY TRADED IN THE US FOR 10+ Years drop-dead gorgeous cars that help save the Only public companies were eligible for selection to ensure access to planet and get 200 miles on one charge. Or financial data surrounding share prices and stock performance. The 10-year timeframe was to select for companies that have maintained a consistent, think about how much of the public has been long-term focus on design. completely enamored with Apple products 2) SCALE OF design organization AND deploYMENT over the course of their introductions over the IS AN integrated Function AND organizational last decade. CATALYST FOR CHANGE The strategic use of design is employed in the organization, both within The wow factor can also draw consumers business units and as a centrally managed function with a high degree into supporting certain companies over time. of influence with its senior leadership team.T he use of design can have In the 1990s, for example, discount retailer outsized influences on a company’s bottom line that multiply as it is Target faced increasing competition from assimilated into the organization and its culture. similar stores such as Wal-Mart and K-Mart 3) GrowtH IN design-related investments and realized it faced three options: AND INFluence Have increased over TIME D esign has been well resourced through talent acquisition, appropriate “to specialize, to become the low-cost facilities, competitive technologies, and the application of design research producer, or to differentiate,” remembers as a tool, among other investments. Design cannot be expected to thrive Gerald Storch, Target’s vice chairman at the when proper resourcing is neglected. time. The first choice would have crippled 4) Design IS EMBEDDED WITHIN THE future growth; the second was already a ORGANIZATIONAL structure It is well understood where and how design fits within the organization. While battleground. So, the company decided to go there are several precedents set for successful operating models that can be used, with the third: differentiate through design. the common theme is that design is clearly built into the structure and processes That decision led to Target’s domination of of the organization (org charts, process maps, RACI charts, and so forth). the mass merchandising market as Tar-zhay, 5) Design leadersHIP IS present AT SENIOR AND DIVISIONAL levels the mass purveyor of stylish yet affordable D esign is given a seat at the table with an experienced executive or goods. It didn’t miss the mark—thanks to its executive-level head of design who can interface with senior leadership. Typically, design ethos, which can be found in everything this head of design has 15 to 20 years of experience managing design-related from its product offerings to its store layouts functions (strategy, organizational development, budgets, talent management, and so forth) that drive the company forward with design goals. to its commitment to innovation. Indeed, 6) THERE IS A SENIOR-level commitment TO design’S companies like Apple and Target have raised the USE as AN INNOVATION RESOURCE AND INTEGRATIVE bar so high in their use of design that the public is FORCE FOR positive CHANGE more aware than ever of what good design looks A corporation’s commitment to design shows up in many ways, including like and what design-led companies are capable the level of interaction the design executives and function have with other parts of the organization, and in how the CEO and other leadership team members of producing. There is no doubt that this factor is represent the importance of design in their day-to-day work and public relations showing up in company growth trajectories, as efforts as well as the extent to which the organization participates and wins design well as in their stock market results. awards, sponsors contests, fosters university affiliations, or other design-related activities such as encouraging its designers to speak publicly about their work. 32 DMI WINTER 2013 Feature WHAT IS THE REAL VAluE OF DESIGN? 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. Figure 1 A $10,000 investment in our design index of diverse design-centric companies would have yielded returns 228% higher than the same investment in the S&P over the same amount of time. $45,000 DESIGN CONCIOUS COMPANIES: DMI DESIGN-CENTRIC INDEX $39,922.89 $40,000 APPLE