Can You Measure Design's Value?
It's a question that continues to stump designers and big business alike: How do you measure innovation? (See BusinessWeek.com, 9/25/06, Metrics Madness). The conclusion, according to attendees at the Design Management Institute's Conference in Copenhagen Mar. 14-16, is that you can't, or at least not in any standardized way. The focus of the conference was "Improving and Measuring Design's Role in Business Performance," but no one could agree on whether design metrics were meaningful and if so, which ones to use.
The one thing attendees did agree on is that designers need to do a better job communicating their value to business. Design and innovation are hot management buzz words now. But as Darrel K. Rhea, chief executive officer of Redwood Shores (Calif.)-based consultancy Cheskin noted, few CEOs really understand either. If the design industry is to capitalize on its newfound popularity it needs to explain what it does and what it is worth in terms management understands. "The central challenge of the design profession is to make ourselves relevant to business leaders," said Rhea.
It's obviously frustrating for all involved. Designers see themselves more as strategic visionaries or problem solvers, not spreadsheet analysts or bean counters. Yet management finds it hard to value something it can't quantify. "Businesspeople are from Mars and designers are from Venus," joked Hartmut Esslinger, founder of Frog Design. "But managing design for better business is what we as designers have to do." To do that, he urged designers to educate themselves about business issues in order to become more effective and better designers, noting that his own wife forced him to read the business press years ago.
It's not just about designers getting to grips with business issues and management jargon. Many speakers noted that if design is truly to play a major role in business performance, traditional silos separating design and the rest of the organization need to be demolished. Both Rhea and Jerome Kathman, president and CEO of LPK, the Cincinnati-based design and branding firm whose clients include Kellogg's (K), Pampers, and IBM (IBM), spoke of the growing convergence of research with design, for instance. He cited Procter & Gamble (PG) as a company that understands the importance of both disciplines and is doing a good job at integrating the two.
Kathman labeled the trend "synthesis" while Rhea dubbed it "synpathic research," his own coinage referring to the synthesis of multiple design/research methods with an empathy for users' needs. But the message was the same: The future direction of design requires a multidisciplinary approach: a blending of quantitative research and empathetic user-centered design.
That may sound good in theory but, as Rhea noted, very few companies have adopted such a balanced design management strategy. For this new model to take hold, a company must have visionary leadership, a collaborative culture, and the willingness to invest. The only problem, as Rhea and every speaker who followed him admitted, is that such a combination is hard to find. "There are very few Steve Jobs around," he said. "That's why it is incumbent on designers to educate management as to the value of what we do."
Designing a Strategy
The way to do that, said Harry Rich, deputy CEO of the London-based Design Council, is to have a clearly articulated design strategy. "It's not good enough to expect clients to have faith in the power of design," he said. Without a cohesive strategy, "every decision you make becomes a battle where you constantly have to justify yourself."
His advice: Make use of the growing body of data that shows design can have a positive impact on business performance.
He pointed to research conducted by the Design Council indicating that design can increase a company's revenues, profits, market share, and overall competitiveness. (See BusinessWeek.com, 10/12/06, Using Design to Pick Stocks?).
Moreover, he noted there is strong evidence that a sustainable design strategy allows a company to take a leadership position within their marketplace. He compared consumer electronics giants Panasonic and Sony (SNE). The latter is recognized for its innovation while Panasonic prefers to follow industry trends. Both enjoy sales of around $62 billion a year, Rich notes, but Interbrand put Sony's brand value ranking at $12 billion—three times the size of Panasonic's. Rich attributed this difference to the power and value of design.
Johnson Controls, a Cologne-based supplier to the car industry, was one of the few companies to offer a solid methodology for measuring design performance. The company's design-quality metrics look at everything from craftsmanship—to assess the product's perceived quality—to design, to cost ratio, to return on investment of the design process. But if attendees were hoping to glean a useful formula to use in their own practice, they were sorely disappointed. Johnson Controls' Operations Manager Roderique Duell noted that their metric for return on investment basically boiled down to asking internal customers if the design team was good in comparison with external providers.
Not surprisingly, Rich and many other speakers questioned the feasibility of providing detailed metrics on design's contribution to business performance. Rich pointed out that many investments are hard to measure—not just design. For instance, everyone agrees that staff training is valuable. But how do you put a number on it? Rich claimed designers are entitled to ask doubting management where else in their business they are gaining that level of sureness. "What about the millions spent on strategic management consultancy? Rich asked. "Where is the quantifiable return on that?"
But there were a number of designers in Copenhagen with interesting insights on how they are managing to prove their value to public and private sector customers. Lavrans Lovlie is a founding partner of service design consultancy Live/Work in London. Service design is an increasingly important area of design—rather than focusing on tangible end products, companies look at the design of entire business models and work to ensure that every interaction with a customer or client is both consistent and compelling. Lovlie described the "usability index" his company has developed to help clients understand how their business is experienced by customers.
The index starts with broad questions such as: do customers understand the service’s benefits; is the experience enjoyable, easy to use, and accessible? Then it drills down to assess how the customer experience ranks at every touch point, such as the Web, marketing materials, and call centers, to the service itself, scoring each step. The client is able to track the entire customer experience and figure out where improvements are needed. The client is supplied with a detailed analysis as well as two lists. The first offers the 10 main things the company needs to address to improve its service and the second suggests the 10 changes that are easiest to implement. "It allows clients to hone in on areas where they need to take action and prioritize projects," Lovlie says.
Live/Work used the service usability index with Streetcar, a car-sharing rental service in London. With other shared ownership car schemes emerging, Live/Work knew they had to create "service envy" to attract users. To do this, they ranked the company's service to find areas to improve (ease of Web site booking) and new business ideas (ditch the joining fee and let users pay as they go). Eighteen months after implementing Live/Work's action plan, the company began turning a profit.
Such models offer businesses tangible evidence of design's value but it's still clearly a frustrating area. Creating indices or tracking financial metrics may be too time- and capital-intensive for smaller design shops. But, on the other hand, there is more than one way to measure design return on investment. It's up to the individual design company to figure out what works best for them. As the Design Council's Rich noted: "There is no one magic formula."