Design Management Review: Four Powers of Design: A Value Model in Design Management, The

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Four Powers of Design: A Value Model in Design Management, The

de Mozota, Brigitte Borja

This analysis proposes a framework to bridge the gap between the world of designers and the world of managers. Illuminating her thesis with examples from Steelcase, Decathlon, and other companies, Brigitte Borja de Mozota parallels design's ability to differentiate, integrate, transform, and contribute to the enterprise and bottom-line results with a corporate focus on markets, processes, talent, and finances.

In summer 2005, Business Week published a 20-page special report on building innovative companies."1 The report celebrates the emergence of a "creativity economy" in which managers are starting to discover "design strategy." In addition, Innovation 2005, Boston Consulting Group's second annual survey of 940 senior executives, ranked two icons of the design community, Apple and Sony, in the top five of the world's twenty most innovative companies. Taking their cue from the creativity economy, universities and business schools from Toronto to Paris are taking up new collaborations with design schools.

Although the trend in favor of design can be seen as a way to promote design as a qualified partner for innovation and management, it's a trend that tends to forget about design management-a simplistic view that risks relegating design skills to the vague realm of creativity and the development of "wow" products, conveying the idea that merely collaborating with designers is enough.

Instead, business managers should know about design management's power to create value in companies, which has been proven through research and can also be demonstrated through management concepts such as Michael Porter's value chain. In this article, I hope to describe to design professionals a research-based value model for design management and to convey to them how this model can be implemented using Robert Kaplan's and David Norton's Balanced Score Card (BSC) decision tool2-a tool that should be familiar to all kinds of business managers.

The Four Powers of Design

My research on design-oriented European SMEs became the basis of a value model for design as differentiator, integrator, and transformer.3 It also introduced the concept of the four powers of design, in the context of management science. These four powers are:

1. Design as differentiator: Design as a source of competitive advantage on the market through brand equity, customer loyalty, price premium, or customer orientation

2. Design as integrator: Design as a resource that improves new product development processes (time to market, building consensus in teams using visualization skills); design as a process that favors a modular and platform architecture of product lines, user-oriented innovation models, and fuzzy-front-end project management

3. Design as transformer: Design as a resource for creating new business opportunities; for improving the company's ability to cope with change; or (in the case of advanced design) as an expertise to better interpret the company and the marketplace

4. Design as good business: Design as a source of increased sales and better margins, more brand value, greater market share, better return on investment (ROI); design as a resource for society at large (inclusive design, sustainable design)

Design in the Value Management Model

Design is thus fairly easily integrated into the value management model. So what is the problem? Why are designers still suffering from lack of recognition and support from managers? Our insight is that there are two missing links:

1. Designers' lack of knowledge of management concepts and of management as a science

2. Designers' difficulty in implementing a value model in their everyday practices

In addition, the scope of design management has changed. This is the result of business' changed understanding of the place of design in an organization, as well as of designers' changed understanding of the scope of business management (Figure 1 on page 45). In this way, design management spreads from project design management to strategic design management in a dynamic process.

Before the value of design to a firm can be measured, it is crucial to measure mat firm's efficiency in relation to the efficiency of its industry. Each market sector has its specific growth potential and its norms in terms of profitability. In other words, the first question to ask a design manager is whether the superior product or service achieved through design brings profits superior to the mean in the industry.

Designers should keep in mind that there are more differences among companies in the same industry than among companies across industries. In every industry, technology, distribution, and marketing tend to be similar. A company competes through inventing a combination of these resources that make its offer unique and its EVA (economic value added) superior. Value in management science happens by achieving a result superior to that of the competition, not just by making a well-designed product. And a superior result is defined as a greater ratio between the profits realized and the capital invested.

Let us assume that your organization has a result that is close to the mean of your industry and that you think design can bring better value to your organization. Or perhaps you want to invent a new business unit that boasts a superior EVA. How do you teach managers and CEOs to be better at their jobs because of the input of design?

You can explain that through design they can develop a competitive advantage that will be valued by the market-truly, an objective of any manager (Figure 2). But how do you build that advantage?

First, consider that competitive advantage can take two forms:

1. Design as differentiator. External, marketbased advantage derived from the designbased differentiation of the company's product or service (design of products, design as perceived value, brand design value, corporate image)

2. Design as coordinator or integrator. Internal competitive advantage that comes from a unique, invisible, and difficult-to-imitate combination of organizational processes and resources (that is, a resource-based view: design as process, design as knowledge, design science, design as resource, advanced design for new business)

Companies in the first camp are really thinking of design in a reputational, or brand, context. Companies in the second camp understand design as a core competency.

Now, consider that EVA comes from two types of value: financial and substantial.

Financial value is the value created for the company shareholders, partners, or investors-or even society at large, in the case of companies that practice sustainable development-through finance, investment, or mergers. Designers often forget this financial perspective or think of it only in terms of economic value (sales, margin, costs, market share)-forgetting the stock-market power of shareholders and the political forces of stakeholders and laws.

Substantial value is the value created for the company's suppliers, customers, and employees following two rationality schemes:

1. Competitive rationality: The company portfolio represents a value perceived by the market (value chain, customer relation, competitiveness, future cash).

2. Organizational rationality: The company structure is the base of the value created and shared by all human resources-that is, process improvement, individual creativity, knowledge management, performance of projects.

In summary, there are many paths by which a competitive advantage can be built, and the same variety applies to design-driven value.

Implementing Design as Value Using the Balanced Score Card Tool

Although they know design brings value, designers and design managers still understand that one cannot manage what is not measured. So measuring the impact of design value is a key success factor for designers who want to successfully implement their design strategy-and for design managers who want to present design as a tool for value management.

In other words, designers and design managers make a bigger impression on business managers when they use a value-based model to measure the impact of design. I suggest that designers and design managers use the Balanced Score Card (BSC) methodology mentioned earlier. For designers, the BSC is also easy to appropriate, because it is vision-based, as well as holistic (Figure 3).

The four perspectives of the BSC model neatly coincide with the four powers of design, or the four design values system: customer perspective (design as differentiator); process perspective (design as coordinator); learning perspective (design as transformer); finance perspective (design as good business).

As I noted earlier, the BSC model is widely known by MBAs and often used by audit and strategy consultants. It is a common language shared and understood by most executives, whether they occupy the CEO's office or work in finance, marketing, procurement, or R&D. This model is strategic and long-term-driven, which aligns it well with design thinking and design coherence, also based on long-term thinking. It offers help in asking about the four issues that are key to every design project: that is, client, performance, knowledge management, and finances. It is also simple to apply to any design decision, design policy, or design project.

But more important, the BSC tool is a causeand-effect model, in that each perspective has an impact on the other three. Employee quality, for example, drives customer value and financial value; process improvement affects financial value and customer value, and so on. Just as a designer working on a project is used to thinking holistically, the BSC indicators are meant systemically-improving the quality of product design improves employee satisfaction and creates new knowledge that can generate better production process performance (and vice versa). In the same way, the BSC shows how each design discipline is linked with other design disciplines in a system based on a common, central vision.

The cases starting on page 49 are examples of the implementation of this model in three companies, each of which focuses on a different design discipline: Attoma (information design); Decathlon (product design); and Steelcase (workspace design).

The Balanced Score Card for Running a Design Department or a Consultancy

Now, how shall we apply the Balanced Score Card to measure the performance of a design consultancy or a design department?

Imagine that you are a design manager or a CEO. What issue faces you both when you come in to work each morning? Company performance. What is design's responsibility in improving this performance? What indicators should you measure on a continuing basis? How could that goal be expressed with the design value model or the four BSC perspectives? Figure 4 offers an example.

For each of the four BSC perspectives, we chose indicators that are easy to measure and easy to link with company performance indicators. Some indicators are used by many functions of the organization; some are specific to the design function. It is important that design managers link their own indicators with the BSC indicators of the company's performance, as well as with design briefs, as a measure of the everyday performance of design staff.

Conclusion

Design offers four powers or directions through which to create value in management, and these four directions can be seen as a system with the vision in the center. The design value model and its application through the Balanced Score Card toolkit provide a common language for designers and managers and this can help the design profession effect a change from project-based to knowledge-based.

Hence, this value model gives a conceptual framework to the emerging trend toward design leadership and explains the potential of design thinking for analyzing the challenges faced by managers (such as, sense building, complexity, user-oriented innovation, building a socially responsible organization, and so on). In this way, it facilitates the convergence of design and management.

Acknowledgement

Thanks to Giuseppe Attoma of Attoma Design and to Yo Kaminagai at RATP. Our warm thanks also go to Philippe Picaud and Philippe Vahé at Decathlon Design and to Catherine Gall and Thierry Coste at Steelcase Inc.

1. "Get Creative: How to Build Innovative Companies," Business Week, August 1, 2005.

2. For more information on the Balanced Score Card methodology, see R. Kaplan and D. Norton, "Linking the Balanced Scorecard to Strategy," California Management Review, vol. 39 (1996), no. 1.

3. Brigitte Borja de Mozota," Design and Competitive Edge: A Model for Design Management Excellence in European SMEs," DMI Academic Review, 2 (2002).