Looking Good A portfolio of 63 design-driven British companies has beaten the broader market.
This issue is not only about stuff. Even beautiful stuff. It is also about cash and revenue and financial success.
What does design really contribute to an organization's bottom line? In a global marketplace where price competition and commodification have slashed margins and "reengineered" jobs, it can be easy to peg what designers do as an indulgence--style over substance, form over function. Committing business resources toward the tangible is just more efficient than--sniff--the soft world of design.
Many executives across corporate America embrace this ostensibly utilitarian approach, and many more pay lip service to the value of design without investing their dollars (or their psyches) in it. Sure, Steve Jobs may make design an advantage at Apple, this line of thinking goes. But what does that have to do with me?
Plenty. Studies have now shown that design-oriented firms in all kinds of industries outperform their more-traditional peers--that design and innovation go hand-in-hand with financial success. Research from Peer Insight has calculated a tenfold advantage in stock-market returns versus the S&P 500 for companies focused on consumer-experience design, as senior writer Linda Tischler explains in her profile of Yves Béhar. Across the pond in London, a portfolio of 63 design-driven companies has soundly trounced the FTSE 100 index over 13 years, according to a study by the Design Council.
CEOs of all stripes are beginning to take note, and the position of chief design officer is moving steadily up the hierarchy at major corporations. Those who get with the program--like Hewlett-Packard, where design chief Sam Lucente sold CEO Mark Hurd on the fiscal advantages of being streamlined (click here)--are separating themselves from the competition. "CEOs increasingly understand that design can help them grow the top line," notes Peter Lawrence, chair of the Corporate Design Foundation. "They're making the connection that design can help them get on their next growth cycle." Along with HP, he points to Procter & Gamble (where design VP Claudia Kotchka reports directly to CEO A.G. Lafley), IBM, Johnson & Johnson, and Whirlpool as places where designers have ascended the corporate food chain.
The real challenge, Lawrence notes, is infusing design thinking throughout a large organization. "It's not the senior executives--most of them get it," Lawrence says. "It's the middle management, which is charged with implementing the company's strategy, that wants everything proven to them." We hope the examples and stories in this issue provide some of that proof--and the inspiration to believe it.
Related Stories: | Topics:Innovation, editor''s letter, Peter Lawrence, Hewlett-Packard Company, Computer and Peripheral Equipment Manufacturing, Information Technology Sector, Manufacturing Sector |
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Recent Comments | 3 Total
September 22, 2007 at 8:38pm by Anand Sanwal
Robert - Have been and continue to be a big fan of Fast Company, but I'm always worried when corporate outperformance is said to be driven by one measure as in your latest issue. I've commented on this in my blog., but below is an excerpt of what I've written.
The media, people or experts rather will have you believe corporate outperformance can be driven by a single measure. In the last year, I've read about how a company's talent strategy, corporate social responsibility efforts, corporate governance, innovation, IT strategy amongst others drive outperformance usually as measured by total shareholder return (TSR) or PE valuation premium or some similar metric.
The latest entrant into the pick a metric to determine company performance is DESIGN. With Apple being the darling of the Street and consumers alike and with the "elegant, simple" website design of another high-flyer Google, everyone is clamoring to determine what drives the success of such companies and anoint the next great corporate hope. And design is the new anointee.
And so in line with this, Fast Company's October 2007 issue is dedicated to their "Masters of Design". While I usually like the magazine, they fell prone to the oversimplification manifesto from the beginning and did some overly effusive articles on a variety of "design-masters". And they pointed to the benefits of design right from the start with their letter from the editor, Robert Safian. Safian mentions a study by The Design Council (warning flag #1) that found that a portfolio of 63 design-driven British companies beat the broader FTSE 100 (warning flag #2) over a period of 13 years (warning flag #3).
Warning flag #1 - As I've said before, you need to look at the source of any such study. The Design Council performed this analysis. What are the odds of them coming out and saying that companies focused on design underperformed? Let me tell you -- ZERO.
Warning flag #2 - The FTSE 100 is amongst the largest companies so it is important to understand if the 63 companies of a similar scale. If small emerging companies in the early part of their growth curve are compared with older more established companies, the performance comparison is not 'apples to apples' and hence not fair.
Warning flag #3 - A period of 13 years? Quite a random time period. I wonder on what basis this period was selected.
What I am not saying is that design is unimportant. Obviously, it is. But attributing any outperformance to just one metric, whether it be design or any of the many hundreds that have been suggested in the past and which will be suggested in the future, is foolhardy. Nevertheless, enjoy the flavor until the next one comes along (I'd presume there will be another rage within a few months)
Regards,
Anand
co-chair, Corporate Portfolio Management Association
December 18, 2007 at 12:16am by Patrick
In my opinion this comment is just one more suit finding yet another reason to devalue design and its impact on business. I am not surprised however, this type of attitude is prevalent.
I hope at the very least the articles gave readers perspective as to how business must embrace GOOD design.
August 12, 2009 at 2:47am by marks twain
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