Valuing design: Enhancing corporate performance through design effectiveness

Design Management Journal, Summer 2001 by Hertenstein, Julie H, Platt, Marjorie B

It's an initial study, but the analysis indicates that good design is, indeed, good business. Julie H. Hertenstein, Marjorie B. Platt, and David R. Brown have devised a method for relating an organization's focus on design with bottom-line outcomes. They use 12 measures of financial performance and investigate 51 companies in four industries over a five-year time frame. Confirming a long-held belief-design-conscious firms generally do better.

What is the value of design? Leaving aside for the moment that anything and everything made by people had to be designed before it could be made, the question of what design is worth in the modern economy has been addressed in a hundred ways and in voices ranging from the coolly measured and metaphysical to the sputteringly impassioned. It has inspired philosophers, ethnographers, market researchers, museum curators, writers, critics, academics, thoughtful designers and design managers, and at times even CEOs-advocates all for greater sensitivity to, and understanding of, the potency of design's role in contemporary economies, the business enterprises that drive them, and the material-consumer culture that now pervades the globe.

When observers look at, analyze, and talk about design-the design of products, objects, vehicles, built environments, communications-they seem to us to do so from two basic stances. We'll call one curatorial and the other commercial.

The curatorial encompasses evaluation of and comment on design in many forms and forums: published notice, criticism, competitions, professional conferences and societies, awards and other honors, exemplification, selection for museum display and collection, and so on. This domain is well populated and growing, especially where publications are concerned. There is clearly a growing public understanding of design as culture and design as a shaper of both desire and behavior.

Design's performance within business enterprises and consumer culture-that is, design examined from a commercial stance-has historically been confronted by paradox. In a business world that is largely governed by the precise, measurable, quantifiable, and numerical, the contribution of design to a business's financial performance has stubbornly resisted quantification. While there are well-understood ways to calculate a firm's return on investment (ROI), there is not yet a way to calculate a firm's return on design (ROD), or even to determine what proportion of the I is really D. Instead, evaluation of design's effectiveness in the commercial world has typically fallen back on the curatorial (design awards and Time magazine covers), the anecdotal (conference presentations and business-school cases) and the purely assertive. "Good design is good business," said IBM's Tom Watson Jr., in a lecture at Harvard in 1974. Watson's comment quickly became a mantra and clad those in the design world with the shining armor needed to carry the holy war for "good" design onto the richly carpeted but still enemy grounds of the executive suite.

But is it true that good design is good business? Can it be shown, not with the theorems, vocabulary, and judgments of the curatorial, but with the more mathematically rigorous language of business and commerce? And if so-if it can be demonstrated empirically that good design contributes to good performance by the business enterprise that engages with it-then what?

The idea for this preliminary study came from several sources. First, through discussions with design managers and individual designers, we have found a long-standing interest in the general issue of the value/cost of design to the firm. Anomalies that have struck many designers, including one of the authors, include: Why do some poorly designed products sell so well? Why do some well-designed products strike out in the marketplace? Why have so many things from Germany and Italy, and later Japan and even England, looked and felt so much better designed than US products? Why doesn't American business get it?

Definitive research that would reveal the financial contribution good design makes to business performance has particular appeal for the design community. In 1996, Hertenstein and Platt developed a set of research priorities for the Design Management Institute (DMI). These research priorities, which highlighted the value of design as a primary research focus, were presented to the European Academy of Design Annual Meeting, in Helsinki. Based on the priorities and on data obtained from design managers working in firms that positioned design as a key strategic advantage, Hertenstein and Platt1 set forth a conceptual framework to guide continuing research on the value of design to the business enterprise.

Further, at a strategic visioning retreat two years ago, in Santa Fe, the Association of Independent Colleges of Art and Design-a group of 35 or so presidents of the nation's leading private art and design schools-commissioned this pilot study to answer the question of whether it could be demonstrated empirically and convincingly that, over a substantial period of time, companies that achieve a better performance in design earn a competitive advantage in their markets. To paraphrase Mr. Watson: "Is good design really good business?"