It used to be about “us” and “them.”
“Us” were the people who believed that design could add significant value when tightly integrated with other business processes. “Them” were the majority of managers who didn’t get what design was all about in the first place.
Today, however, the distance between “us” and “them” is getting smaller. And with good reason: From Target to Uber, business managers everywhere are starting to understand that the strategic use of design is making a difference in achieving outsized business results. At the same time, design is notoriously difficult to define, tough to measure, and hard to isolate as a function.
To better understand how design leads to returns, my company, Motiv Strategies, and the Design Management Institute worked together to produce a new tool that tracks the results of design-centric companies against those that are not. Called the Design Value Index, it shows that 15 rigorously-selected companies we believe institutionally understand the value of design beat the S&P by 228% over the last 10 years.
The index was constructed in the same fashion as other indexes that seek to isolate an industry sector (banking, biotech), geography (China), or size (large cap), for example. In our version, we sought to identify only companies that are design leaders. Starting with a list of over 75 publicly-traded U.S. firms, we found only 15 that met our six criteria: publicly traded in the U.S. for 10+ years; deployment of design as an integrated function across the entire enterprise; evidence that design investments and influence are increasing; clear reporting structure and operating model for design; experienced design executives at the helm directing design activities; and tangible senior leadership-level commitment for design. Corporations who made the index based on this criteria include Apple, Coca-Cola, Ford, Herman-Miller, IBM, Intuit, Newell-Rubbermaid, Procter & Gamble, Starbucks, Starwood, Steelcase, Target, Walt Disney, Whirlpool, and Nike.
The latter company is a great example of what it looks like to place design at the center of corporate strategy. At Nike, a large and well-resourced design function reports directly to CEO, Mark Parker, who early in his tenure was a designer himself. Virtually everything the company makes, and is thinking about making, is highly influenced by this huge team of footwear, product, fashion, store, graphic, interaction, and brand designers. Using human-centered design methods, inspiration for the company’s signature products is drawn directly from its cadre of famous and not-so-famous practicing athletes, with whom the designers directly interact with to devise authentic performance innovations and style updates.
In fact, no other company function is allowed to second guess the design team’s direction when it comes to the emotional and functional benefits for consumers, the interpretation of market trends, and, of course, aesthetics. Design is expected and trusted to lead Nike.
This is not to say that design “runs” the company, however. Rather, design is a highly influential force that, when effectively integrated with strategy, marketing, and so forth, can help the company stay out in front of its competitors by staying close to customers and commanding handsome price premiums. Of course, design also has a huge impact on the representation of Nike’s brand across the globe. Countless acts in the design details ladder up to one big, fat impression that Nike is the company for performance-minded athletes.
How can this type of commitment to design contribute to results? In Interbrand’s 2013 list of the World’s most valuable brands, Nike ranks 24th, two slots up from the prior year and a 13% increase in value to $17.085 billion. Next to Apple, Nike had the highest shareholder returns in our index — from 2003- 2013 Nike’s market cap increased from under $6 billion to $70 billion, or 1,095% over the last ten years. Further, Nike was ranked the #7 most innovative company by Fast Company in 2014, and the 13th most admired company by Forbes magazine.
The bottom line is that companies that use design strategically grow faster and have higher margins than their competitors. High growth rates and margins make these companies very attractive to shareholders, increasing competition for ownership. This ultimately pushes their stock prices higher than their industry peers. The returns in our Design Value Index were 2.28 times the size of the S&P’s returns over the last 10 years. Neither hedge fund managers, nor venture capitalists, nor mutual fund managers came anywhere close to these results.
And thanks to the exemplar companies included in our index, as well as many international firms like Samsung, Ikea, and BMW, consumers now recognize, expect, and will pay for good design. This goes beyond traditional consumer products; government and B2B marketing, notorious for not-so-great aesthetics and customer experiences, are starting to make design a priority.
As a person who has spent part of her career helping companies appreciate and use design to their advantage, I will be the first to tell you that making it a central part of strategy isn’t always easy. But now that we know a lot more about how integrated design drives returns, companies across sectors can start thinking about managing design strategically at the enterprise level. There is clearly much value to unlock, and the only way to do this effectively is to do it together. I want no more talk of “them,” just “us.”