Skeptics always want to know why they should invest in design.
Even today, when the business landscape is teeming with success stories that celebrate design as a powerful strategic tool, the answer to this question is not well understood by the average businessperson—and understandably so. After all, design is notoriously difficult to define, tough to measure, hard to isolate as a function, and tricky to manage, making it challenging for many nondesigners to comprehend.
Over the years, many organizations have attempted to tackle this issue, eager to make a hard case that will make design-unconscious managers take notice. In 2005, the UK’s Design Council discovered that every £1 spent on design led to more than £20 in increased revenue, £4 in increased profit and £5 in increased exports.1
An even earlier study, by Julie Hertenstein and Marjorie Platt, examined 51 firms in four industries, using 12 different measures of financial performance across five years, and concluded that firms rated as having good design were stronger on virtually all measures.
Several years ago, Motiv Strategies began conducting studies on companies that were consciously using design as an integral part of their business strategy. While tracking the financial performance of these design-centric companies, we found they outperformed the S&P 500 by a significant margin. It quickly became clear that there is a correlation between investing in design and extraordinary stock performance.
Seeing this work, DMI president Michael Westcott asked to revisit the creation of an index that could be used to track how design-centric companies perform relative to the S&P 500 over time. Partnering with DMI on this effort, we devised a portfolio of 15 publicly traded US companies that made the cut for inclusion: Apple, CocaCola, Ford, Herman-Miller, IBM, Intuit, Newell-Rubbermaid,
There is growing evidence to suggest that design-centric companies outperform their peers. Motiv Strategies and DMI explore some of the reasons why.
Nike, Procter & Gamble, Starbucks, Starwood, Steelcase, Target, Walt Disney, and Whirlpool. The results supported our previous findings. While the S&P grew 75 percent from 2003 to 2013, our Design Value Index grew an astonishing 299 percent.
The fact remains that although these results show a powerful return on investing in design, the index does little to explain the how of this phenomenon. This article seeks to explain the various ways design can add significant value to large and small enterprises alike.
This is the author’s version of the work. It is posted here by permission of the Design Management Institute for personal use, not for redistribution. The definitive version was published in Design Management Review, 24:4, dmi.org/review