Smart Business, By Design

Corporations looking to bolster their bottom lines might do well to seriously consider beefing up their product design operations. In an era when inflation is low and global competition fierce, good design can generate new products, cut costs, and best of all, fatten margins. If they are smart about it, chief executives can even design an innovation culture for their companies.

Here's how it works. As shown by the 1997 Industrial Design Excellence Awards for products from around the world, designers are creating not only hot commodities but product strategies for their clients. Their user-focused, anthropological research approaches allow designers to come up with products that solve problems, excite passions, provide identity, or jog conventional assumptions. Designers at John Deere & Co., for example, the farm equipment manufacturer, created an entirely new off-road vehicle that is finding markets in sports, construction, farming, and the military. Nothing else like it exists, and Deere has the market--and margins--to itself. Korean companies, desperate to break out of their low-margin, original-equipment-manufacturer status, are using design to build global brand identities and research new market niches for Korean products in the U.S. and Europe. Taiwan's Acer personal-computer maker has already made the transition out of OEM to name-brand producer around the world. Instead of being invisible, Samsung Group, LG Group, and other Korean chaebols are following Acer's example and may soon be selling more of their own brands, presumably with higher margins.

European companies have long used design as a competitive weapon. But they rarely make it part of a more general business strategy. In the U.S., consultants such as McKinsey & Co. are telling corporate clients that design is one way to boost top-line revenue growth. An increasing number of companies are focusing on design not only for new products but to inculcate an innovation process. Companies are designing "concept" products in much the same way that Detroit makes concept cars--to point the way to the future and test the boundaries of customer cravings. Mercedes-Benz's new "All Activity Vehicle" model shakes up the German auto maker's image and points it in new directions.

Design, in the end, is about creating better things for people. Along the way, it can generate better profits as well.