Is In House Design On The Way Out?

It's not sex, lies, and videotape, but the drama of CAD, cost, and cycle time that's generating a revolution in the business of design. Pressure to install computer-aided-design technology, cut project costs, and sharply reduce time to market for new products is revolutionizing in-house design departments, from IBM to Rubbermaid, from AT&T to Steelcase.

A new survey by BUSINESS WEEK and the Industrial Designers Society of America of 53 design departments in America's largest companies reveals that decentralization is in, budgets are up, staffing is down, high-tech spending is up, and time to market is down.

HARD-WON RESPECT. The survey, which asks corporate design managers to compare their business in 1990 to today, shows that after years of internecine warfare with marketing and engineering, design has finally won the respect of top management. "There is more recognition of the value that design brings to the product by the business side than ever before," says Lee Green, manager of corporate identity and design at IBM. "It's become a strategic tool."

The payoff is in rising design budgets, up by an average of 15% to 20% annually over the past five years. Some companies have seen even sharper hikes. Black & Decker Corp.'s North American design budget rose from $300,000 in 1990 to $1 million this year.

One clear trend is that most of the dollars are going for high technology. Tech budgets are growing 50% to 100% a year, according to the survey. Many are three times what they were in 1990--some, five times. For designers, CAD literacy is now a prerequisite. The largest sums are going for software, with Pro-Engineer clearly becoming something of a national standard.

Another unmistakable trend: Money is not going to build bigger staffs. In fact, the majority of corporations are downsizing their central design departments like crazy. It's all part of the great decentralization of the American corpmration. The need to get closer to customers and speed up the time from concept to finished product is pushing companies to get design out of headquarters and down into the basic business units. "We're committed to a `10X' [10 times] reduction in cycle time over the next two years," says Rudi Krolopp, director of industrial design at Motorola Inc. "We have to take design out to where the products are made, to the operating units. My function is not corporate. You die if you're at the corporate level."

Decentralization is leading to a massive outsourcing of design work by large corporations. Independent business units are increasingly turning to outside design consultancies. Sometimes it's in conjunction with in-house company designers and sometimes not.

That is changing the entire function of in-house corporate designers, who more and more are brokers for outside consultants. "Increasingly, designers in big corporations play two roles--internal champions for specific products and integrators who connect outside designer functions with inside functions," says Brian Vogel, chairman of the Design Management Group for the IDSA and senior vice-president of Product Genesis, a design shop based in Cambridge, Mass.

LOCAL TIES. Where are companies turning to farm out design work? Not surprisingly, to designers who know their culture. Often, these are people who used to work for them and have gone on to launch their own companies. They have the right software to connect with the parent company and can do it more cheaply than is possible inside the company. They also tend to be around. In an era of globalization, the localization of design has become important.

The scope of outsourcing is staggering. In the BW/IDSA survey, one multibillion-dollar company said it outsourced "everything that is needed to do product development." Another listed "model-making, prototyping, graphic development, computer services, market research, materials conversion." Yet another big corporation answered: "full-service product-development firms and small job shop firms, including illustrators, mechanical engineers, human factors, and industrial design."

In response to corporate demand, a growing number of independent design consultancies, such as IDEO and Product Genesis, offer everything from research and engineering to producing pilot products. Design Edge in Austin, Tex., is even manufacturing computer screens for clients after it finishes designing them.

In-house designers for big corporations were once "design managers." Today, they manage not design per se but a multitude of designers.

Back to the Drawing Board

How big corporations are managing design work


Staffs are being reduced or held constant while the workload is soaring.


It's way up for computers, software, and other high-tech gear. Literacy in computer-assisted design is imperative.


Design staffs are being dispersed to operating units to speed product development and time to market. Independent design shops are being brought in to team up with in-house groups to spark innovation and save money.


The cycle time from concept to product is being cut to beat the competition and save on cost.


The hottest technique to speed up input on a new product from customers, suppliers, marketers, engineers.

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