DMIDESIGN MANAGEMENT INSTITUTEARTICLE REPRINTDesignManagementReviewThe Four Powers of Design: AValue Model in DesignManagementBrigitte Borja de Mozota, Professor, Université Paris XReprint #06172BOR44This article was first published in Design Management Review Vol. 17 No. 2Adding Value Through DesignCopyright Spring 2006 by the Design Management Institute . All rights reserved. No part of this publication may bereproduced in any form without written permission. To place an order or receive photocopy permission, contact DMI viaphone at (617) 338-6380, Fax (617) 338-6570, or E-mail: [email protected] The Design Management Institute, DMI, andthe design mark are service marks of the Design Management Institute.SMwww.dmi.org
S T R AT E G YThe Four Powers ofDesign: A ValueModel in DesignManagementby Brigitte Borja de MozotaThis analysis proposes a framework to bridge the gap between the world ofdesigners and the world of managers. Illuminating her thesis with examplesfrom Steelcase, Decathlon, and other companies, Brigitte Borja de Mozotaparallels design’s ability to differentiate, integrate, transform, and contributeto the enterprise and bottom-line results with a corporate focus on markets,processes, talent, and finances.In summer 2005, BusinessWeek published a 20-page special report on building innovative companies.”1 The reportcelebrates the emergence of a “creativityeconomy” in which managers are starting to discover “design strategy.” Inaddition, Innovation 2005, BostonConsulting Group’s second annual survey of 940 senior executives, ranked twoicons of the design community, Appleand Sony, in the top five of the world’stwenty most innovative companies.Taking their cue from the creativityeconomy, universities and businessschools from Toronto to Paris are takingup new collaborations with designschools.44Design Management Review Spring 2006Brigitte Borja de Mozota,Professor, ManagementScience, Université Paris X,ESSEC, France,DMI Life FellowAlthough the trend in favor ofdesign can be seen as a way to promotedesign as a qualified partner forinnovation and management, it’s atrend that tends to forget about designmanagement—a simplistic view thatrisks relegating design skills to thevague realm of creativity and the development of “wow” products, conveyingthe idea that merely collaborating withdesigners is enough.Instead, business managers shouldknow about design management’spower to create value in companies,1. “Get Creative: How to Build InnovativeCompanies,” BusinessWeek, August 1, 2005.
The Four Powers of Design: A Value Model in Design Managementwhich has been proven through research and canalso be demonstrated through management concepts such as Michael Porter’s value chain. In thisarticle, I hope to describe to design professionalsa research-based value model for design management and to convey to them how this model canbe implemented using Robert Kaplan’s andDavid Norton’s Balanced Score Card (BSC) decision tool2—a tool that should be familiar to allkinds of business managers.The Four Powers of DesignMy research on design-oriented European SMEsbecame the basis of a value model for design asdifferentiator, integrator, and transformer.3 Italso introduced the concept of the four powersof design, in the context of management science.These four powers are:processes (time to market, building consensus in teams using visualization skills);design as a process that favors a modularand platform architecture of product lines,user-oriented innovation models, andfuzzy-front-end project management3. Design as transformer: Design as aresource for creating new business opportunities; for improving the company’s abilityto cope with change; or (in the case ofadvanced design) as an expertise to betterinterpret the company and the marketplace4. Design as good business: Design as asource of increased sales and better margins, more brand value, greater marketshare, better return on investment (ROI);design as a resource for society at large(inclusive design, sustainable design)1. Design as differentiator: Design as a sourceof competitive advantage on the marketthrough brand equity, customer loyalty,price premium, or customer orientation2. For more information on the Balanced Score Cardmethodology, see R. Kaplan and D. Norton, “Linkingthe Balanced Scorecard to Strategy,” CaliforniaManagement Review, vol. 39 (1996), no. 1.2. Design as integrator: Design as a resourcethat improves new product development3. Brigitte Borja de Mozota, “Design and CompetitiveEdge: A Model for Design Management Excellence inEuropean SMEs,” DMI Academic Review, 2 (2002).DESIGNAS STRATEGYControling designROI & businessperformance andbrand value.Design leadership.Coherence of thedesign system anddriving the future“advanced design.”Design as resourcefor the challenges rise.DESIGNAS PROCESSDesign researchmethods—ethnodesign, etc.DM as managing thedesign function.Integrating designin other processes:brand, innovation,TQM.DM as improving theperformance ofprocesses.Integrating design inmanagement decisionprocesses.DM as inventing thefuture and “sensebuilding” in achangingenvironment.DM for the qualityof staff.DESIGNAS STYLINGIntegrating design inmarketing, R&D,corporatecommunications.DM as managing adesign project.MANAGEMENT ASART OF COLLECTIVEACTIONMANAGEMENT ASMANAGING CHANGEMANAGEMENT ASCOMMAND & CONTROLFigure 1. Design management is defined by what you think of design (vertical axis: the “learning ladder” of design), and by what you think ofmanagement (horizontal axis).Design Management Review Spring 200645
Adding Value Through DesignDesign in the Value Management ModelDesign is thus fairly easily integrated into thevalue management model. So what is the problem? Why are designers still suffering from lackof recognition and support from managers? Ourinsight is that there are two missing links:1. Designers’ lack of knowledge of management concepts and of managementas a science2. Designers’ difficulty in implementing avalue model in their everyday practicesIn addition, the scope of design managementhas changed. This is the result of business’changed understanding of the place of design inan organization, as well as of designers’ changedunderstanding of the scope of business management (Figure 1 on page 45). In this way, designmanagement spreads from project design management to strategic design management in adynamic process.Before the value of design to a firm can bemeasured, it is crucial to measure that firm’s efficiency in relation to the efficiency of its industry.Each market sector has its specific growthpotential and its norms in terms of profitability.In other words, the first question to ask a designmanager is whether the superior product orservice achieved through design brings profitssuperior to the mean in the industry.Designers should keep in mind that there aremore differences among companies in the sameindustry than among companies across industries. In every industry, technology, distribution,and marketing tend to be similar. A companycompetes through inventing a combination ofthese resources that make its offer unique and itsEVA (economic value added) superior. Value inmanagement science happens by achieving aresult superior to that of the competition, not justby making a well-designed product. And a superior result is defined as a greater ratio between theprofits realized and the capital invested.Let us assume that your organization has aresult that is close to the mean of your industryand that you think design can bring better valueto your organization. Or perhaps you want toinvent a new business unit that boasts a superiorEVA. How do you teach managers and CEOs tobe better at their jobs because of the input ofdesign?You can explain that through design they candevelop a competitive advantage that will be valued by the market—truly, an objective of anymanager (Figure 2). But how do you build thatadvantage?First, consider that competitive advantage cantake two forms:1. Design as differentiator. External, marketbased advantage derived from the designbased differentiation of the company’s product or service (design of products, design asperceived value, brand design value, corporate image)2. Design as coordinator or integrator.Internal competitive advantage that comesfrom a unique, invisible, and difficult-to-imitate combination of organizational processesand resources (that is, a resource-based view:design as process, design as knowledge,design science, design as resource, advanceddesign for new business)Companies in the first camp are really thinkingof design in a reputational, or brand, context.Companies in the second camp understanddesign as a core competency.Now, consider that EVA comes from twotypes of value: financial and substantial.ECONOMIC VALUE ADDED (EVA)SUBSTANTIAL VALUECustomerValuePerformanceValueFINANCIAL VALUEStrategicValueCOMPETITIVE ADVANTAGE(External or Resource Based)Figure 2. A competitive advantage brings economic value added if both substantial value and financial value are created.46Design Management Review Spring 2006
The Four Powers of Design: A Value Model in Design ManagementFinancial value is the value created for thecompany shareholders, partners, or investors—or even society at large, in the case of companiesthat practice sustainable development—throughfinance, investment, or mergers. Designers oftenforget this financial perspective or think of itonly in terms of economic value (sales, margin,costs, market share)—forgetting the stock-market power of shareholders and the politicalforces of stakeholders and laws.Substantial value is the value created for thecompany’s suppliers, customers, and employeesfollowing two rationality schemes:1. Competitive rationality: The companyportfolio represents a value perceived by themarket (value chain, customer relation, competitiveness, future cash).2. Organizational rationality: The companystructure is the base of the value created andshared by all human resources—that is,process improvement, individual creativity,knowledge management, performance ofprojects.To satisfy our stakeholders, how candesign help in the business processeswe excel in?1.2.DESIGN AS DIFFERENCE.DESIGN MANAGEMENT ASPERCEPTION & BRANDHow will we sustain, through design,our ability to change and improve?3.DESIGN AS VISION.BEYOND “ADVANCED DESIGN“MANAGEMENTStrategic valueVisionProspectiveChange managementEmpowermentKnowledge learning processImaginationDESIGN AS PERFORMANCE.DESIGN MANAGEMENT AS “A”AS INNOVATION PROCESSInnovationModular architectureTime to marketTQMR&DTechnologyVISIONMarket valueCustomer valueBrandConsumer researchVISIONVISIONImplementing Design as ValueUsing the Balanced Score Card ToolAlthough they know design bringsvalue, designers and design managersstill understand that one cannotmanage what is not measured. Someasuring the impact of designvalue is a key success factor fordesigners who want to successfullyimplement their design strategy—and for design managers who wantto present design as a tool for valuemanagement.In other words, designers anddesign managers make a biggerimpression on business managerswhen they use a value-basedmodel to measure the impact ofdesign. I suggest that designers anddesign managers use the BalancedHow should we appear, throughdesign, to our customers in order toachieve our vision?VISIONIn summary, there are many paths bywhich a competitive advantage canbe built, and the same variety appliesto design-driven value.Score Card (BSC) methodology mentionedearlier. For designers, the BSC is also easy toappropriate, because it is vision-based, as well asholistic (Figure 3).The four perspectives of the BSC model neatly coincide with the four powers of design, orthe four design values system: customer perspective (design as differentiator); process perspective (design as coordinator); learning perspective(design as transformer); finance perspective(design as good business).As I noted earlier, the BSC model is widelyknown by MBAs and often used by audit andstrategy consultants. It is a common languageshared and understood by most executives,whether they occupy the CEO’s office or work infinance, marketing, procurement, or R&D. Thismodel is strategic and long-term-driven, whichaligns it well with design thinking and designcoherence, also based on long-term thinking. Itoffers help in asking about the four issues thatare key to every design project: that is, client,performance, knowledge management, andfinances. It is also simple to apply to any designTo succeed financially, how shoulddesign appear to our shareholders?4.“GOOD DESIGN IS GOOD BUSINESS”.THE HISTORIC DM ECONOMIC MODELFinancial & accounting valueROIValue for societyStock market valueSocially responsible enterpriseFigure 3. It is crucial to explain in any design brief, and to measure in any design project, how design createsvalue from the four perspectives of the Balanced Score Card model. Source: R. Kaplan and D. Norton, “Linkingthe Balanced Scorecard to Strategy,“ California Management Review, vol. 39 (1996), no. 1.Design Management Review Spring 200647
Adding Value Through Designdecision, design policy, or design project.But more important, the BSC tool is a causeand-effect model, in that each perspective has animpact on the other three. Employee quality, forexample, drives customer value and financialvalue; process improvement affects financialvalue and customer value, and so on. Just as adesigner working on a project is used to thinking holistically, the BSC indicators are meantsystemically—improving the quality of productdesign improves employee satisfaction and creates new knowledge that can generate betterproduction process performance (and viceversa). In the same way, the BSC shows howeach design discipline is linked with other designdisciplines in a system based on a common, central vision.The cases starting on page 49 are examples ofthe implementation of this model in three companies, each of which focuses on a differentdesign discipline: Attoma (information design);Decathlon (product design); and Steelcase(workspace design).The Balanced Score Card for Running a DesignDepartment or a ConsultancyNow, how shall we apply the Balanced ScoreCard to measure the performance of a designconsultancy or a design department?Imagine that you are a design manager or aCEO. What issue faces you both when you comein to work each morning? Company performance. What is design’s responsibility in improving this performance? What indicators shouldyou measure on a continuing basis? How couldthat goal be expressed with the design valuemodel or the four BSC perspectives? Figure 4offers an example.For each of the four BSC perspectives, wechose indicators that are easy to measure andeasy to link with company performance indicators. Some indicators are used by many functions of the organization; some are specific tothe design function. It is important that designmanagers link their own indicators with the BSCindicators of the company’s performance, as wellas with design briefs, as a measure of the everyday performance of design staff.Continued on page 53How should we appear through1.THE CUSTOMER VALUE PERSPECTIVEdesign to our customers in order toToour stakeholders how can2. satisfyTHE PERFORMANCE VALUEdesignhelpin the business processesPERSPECTIVEwe excel in?How does the design department2.DESIGNtheAS processPERFORMANCE.improvewe excel in?PERCEPTION & BRAND.Increase market share/% products orMarket valueservices above mean price.Customer valueImprove brand image/% products orBrandservices sold under our brands.Consumer researchImprove customer satisfaction/Useroriented design: customer satisfactionsurvey.VISIONachieve our vision?How should we appear, through1.DESIGNAS DIFFERENCE.design,to ourcustomers in order toDESIGNASachieveourMANAGEMENTvision?VISIONHow does the design department3.DESIGNVISION.to change andsustainourASabilityBEYOND “ADVANCED DESIGN“improve?MANAGEMENT.Recruit high potential petent staff/Improving learningProspectiveabilities through design.ChangemanagementMotivatedand empowered staff/EmpowermentWorking through design on transversalKnowledge learningmulticulturalteams. processImaginationVISIONVISIONHowwillwe sustain,through design,3.THELEARNINGPERSPECTIVEour ability to change and improve?DESIGN MANAGEMENT AS PROCESS.projects conducted per year.InnovationImproving production process/fewerModular architecturedefects.Time to marketImplementing CRM/TQMDesign in information systemsR&Dmanagement: fewer complaints.TechnologyTofinancially,should4. succeedTHE FINANCIALVALUE howPERSPECTIVEdesign appear to our shareholders?To succeed financially, how o ISourshareholders?THE HISTORIC DM ECONOMIC MODEL.Increase turnover/% sales of newFinancialproducts&orAccountingservices. valueROIImprove intangibles/Number ofValuefor andsocietylicensedprotected designs.StockmarketvalueImproveROI/Improveresults versusSociallyResponsibleEnterprisecapital investedin designprojects.Figure 4. The Balanced Score Card for a design manager. Create your own BSC for measuring the performance of yourdesign department or your design consultancy in a dynamic way. In each quadrant, choose for a company objective thepertinent indicators for the input of the design activity. And check your BSC results regularly.48Design Management Review Spring 2006
The Four Powers of Design: A Value Model in Design ManagementCase Study 1. Attoma: The value of information design for business performanceompanies are facing increasingly complex environments. Models for managingcomplexity are needed, and mental visualization models can help. With its horizontaland systemic approach, information design iscapable of bringing concrete answers to an intelligent management of complexity. AttomaDesign is an information design consultancybased in Paris, founded by Giuseppe AttomaPepe, board member of the IIID (InternationalInstitute for Information Design).One of Attoma’s recent projects was done forRATP, the Paris Métro subway, which was implementing a contactless smart-card system calledNavigo. If Navigo was to be successful, it wouldbe vital to humanize the technology. Attoma wasasked to design the graphic user interface for theNavigo vending machine. Chief among themethods Attoma used were visualization toolsfor prototype, test, and reduced time to market.The whole project was a success in sales growthand customer satisfaction, but also in the way ithelped to spread the new technology among thegeneral public. It also changed the way in whichRATP viewed new product development. CGraphic User Interface (GUI) for a Ticket Vending Machine:Four Perspectives of the BSC MethodValue for the customer Learning to cope withteleticketing as a seamlessexperience through an intuitiveinteractionMeasure Customer satisfaction surveyValue for the process Accompanying a multidisciplinary project group through thebuilding of a common mentalmodel using visualization toolsfor decision makingMeasure Minimizing change duringthe project NPD project members’satisfactionValue for the employee Gaining knowledge ofuser-oriented design methodsMeasure Capacity to develop futureversions using the knowledgegained in this project, eventually developing a distinctive signfor the RATP brandValue for the stakeholders Facilitate and support teleticketing in the general public as astrategic issue for the Parisregion; develop expertise in theParis population, with no classdistinctionMeasure Exponential growth ofcustomers using the digitalinterface of Navigo systemDesign Management Review Spring 200649
Adding Value Through DesignCase Study 2. Decathlon: Designing value into the processince its foundation in 1976, Decathlon hasalways had a very clear goal: make sportmore enjoyable for everyone. In everycorner of the globe, this purpose is expressedthrough two complementary areas of expertise:S1. The design and manufacture of in-housebrand sporting goods covering about 65sports2. Retailing sporting goods (350 stores worldwide, 22,000 store employees, 35,000 different articles on average per store, and 100million customers every year)Decathlon’s in-house design team is made up of90 multi-disciplinary designers sharing the samevalues: honesty, fraternity, and responsibility, allused toward making the pleasure of sport accessible to all. Many of these designers are practitioners of the sport for which they design.Nine Decathlon products receivedInternational Forum design awards in 2006. Oneof these was the Tribord Inergy wetsuit for surfing. The Inergy was designed for women. It suitsthe female morphology and enables women tosurf more comfortably and easily. In doing so, italso invites more women to discover the pleasures of surfing. This was a strategic approach forTribord, and is currently being duplicated inother products.Case Study 2: continued on next pageDecathlon’s Tribord Inergy surfing wetsuit for women.The Tribord Inergy Woman’s Wetsuit for Surfing: Four Perspectives of the BSC MethodValue for the client Surfing is a question of balance. A rigid structure reduces unwanted movements that spoil the balance. The Tribord design actually reduces elasticity incertain directions, making balance much easier. The chest area of the Tribord is designed to support each breast independently. This area is similar to a bra, but the two cups are visually integratedin the wetsuit pattern.MeasureValue for the process Staying true to a user-oriented innovation process, Tribord as a Decathlonbrand has moved its research location close to user practice areas on theFrench Côte Basque, in Hendaye, where nautical sports are practiced. Technology value: Use of silicone on neoprene to control movement; matteareas and shiny areas visually differentiate the functional areas.Measure Number of new products launched Value of Tribord brandValue for the employee and knowledge management Empowering female employees and improving knowledge management inunderstanding women’s needs and desires. Well appreciated by EmmanuelJoly, five-time Olympic gold medal winner and technical partner for Tribord,as well as by female design team members.Measure Employee satisfaction, especially among female employees New market positioning for all Decathlon brands50Design Management Review Spring 2006Value for the shareholders and society Design as a resource for shareholder value through the democratizationof sports Innovation provides exclusivityMeasure International Forum design awards improve the company’s intangible value.
The Four Powers of Design: A Value Model in Design ManagementCase Study 2: continuedAnother award-winning Decathlon productwas the Quechua Two-Seconds tent, whichradically reduces the time needed toerect a tent. This tent can literally be thrown intothe air and will open on its own before it reachesthe ground. The idea was to pre-assemble thetent’s various elements (room, double roof,hoops) to simplify the camper’s life as much aspossible. Once the tent is up, the camper hasonly to put six tent pegs in the ground to secureit. Roomy enough for two, the Two-SecondsTent is reasonably priced at 49 euros, offeringeveryone the chance to go off and camp, even ifhe/she has never put up a tent. At the same time,it is a real tent, with all the technical features of,for instance, a coated double roof with waterproof seams and anti-condensation, or breathable, fabric. Decathlon’s Quechua two-seconds tent literally pitches itself.Quechua Two-Seconds Tents: Four Perspectives of the BSC MethodValue for the client Spring hoops allow this tent to be thrown into the air and to open up on itsown before it reaches the groundMeasure Customer satisfaction in Quechua brand; product used in television campaignValue for the process Better integration of marketing and design upstream in focus groups Process innovation: the (patented) process that allows the automatic opening of the tent to include a room and a roofMeasure Fuzzy-front-end NPD process and expertise in design research New process for development of future range of tentsValue for employee and knowledge management Development of new innovation processes and progression in the capacity todevelop prospective designsMeasure Growth of new concept development in the company (new business opportunity)Value for shareholders and society Sustainable design (longer lifespan; no packaging—the cover acts as carrying pack) Enabling Quechua to move up on the range of 10-inch little dome tentsMeasure 78 percent growth in number of tents sold and 51 percent revenue growthin tent sales in the first year Patented model of tent peg Design awards in 2006: International Forum and Red Dot design awards,Annual Design Review (USA), Observeur du Design (France)Design Management Review Spring 200651
Adding Value Through DesignCase Study 3. Steelcase: The value of workplace design for business resultsAs businesses experience new dimensions ofcompetition, more organizations see howworkplace design affects bottom-lineresults. Using the workplace as a leverage point,organizations can better facilitate structuralrealignment; implement new technology;redesign business processes; and reinforce theorganization’s values, culture, and image.Measurements related to the workplace havetypically focused on cost per workspace, spaceefficiency, reconfiguration costs, and energy use—the cost side of the cost/benefit equation. Theworkplace, however, significantly affects an organization’s people, processes, and technology. In thebusiness results model shown below, the workplace is one of four key factors that drive businessresults. Efforts in all four areas must be integrated,balanced, and measured. Using the balanced scorecard model, let us take two examples:Steelcase Workplace A: Improve workerinteraction and workplace flexibility.The workspace at this high-tech electronics firmwas allocated based on hierarchy, status, andrank. As the firm reengineered and moved to amore fluid, team-based work process, the designof the workplace impeded progress. Team members were located on multiple floors; conferencerooms were unavailable on short notice; andmoving a person took as long as 12 weeks.When the firm redesigned the workplace,members of each team were co-located to encourage informal communication. Collaborative spacewas integrated into the teamwork setting to facilitate interaction. Freestanding furniture withinpanels cut the time required for personnel movesfrom 12 weeks to 12 hours. A modular networkand lay-in cabling sharply reduced changes tonetwork connections.Using the four categories of the BSC method(financial value and value for market position,personnel, and process) gives us the result seen inthe chart at the right.Case Study 3: continued on next page52Design Management Review Spring 2006Steelcase logotypeSteelcase business results modelSteelcase Workplace A: Four Perspectives of the BSC MethodValue for the market position: Increase market shareMeasure: Percent of market sharecontributed by new productsValue for the process: Accelerate productdevelopment process Implement self-directedwork teamsMeasure: Time to market (beforeand after)Value for personnel andknowledge management: Increase worker interactionwithin product developmentteamsMeasure: Workplace flexibility tosupport frequently changingwork teamsFinancial value: Move people and equipment,not furniture and cablesMeasure: Time and costs requiredfor workplace moves,adds, changes reduced by72 percent. ROI in five years (i.e., infive years, the company willhave recouped its investmentin design)
The Four Powers of Design: A Value Model in Design ManagementCase Study 3: continuedSteelcase Workplace B: Implement newtechnology and improve the balance sheet.The leaders at an international building products firm were on a mission to expand theiroverseas markets through the improved use oftechnology. Goals for the new workplace weresimple but radical—reshape the workplace toalign with a flatter, more horizontal organizationand provide ready access to a global communications network. There was one catch. With anexisting multi-million-dollar investment in systems furniture, it had to be accomplished withintelligent redesign and reuse.In the new environment, multiple hotelingworkspaces support mobile workers who carrycomputers instead of briefcases. Teleconferencing rooms connect workers from all over theglobe. Every workspace, from lobby to privateoffice, features plug-and-play capability andmodem access. Steelcase Workplace B: Four Perspectives of the BSC MethodValue for the market Increase revenue forinternational customersMeasure International sales volumeValue for personnel Allow easy connection oflaptops to power and dataMeasure Speed acceptance of newtechnologiesValue for the process Implement globalcommunications networkMeasure Number of laptop connectionsto networkFinancial value Will contain operational costsMeasure Minimize new capitalexpenditure and maximizeexisting furniture investmentContinued from page 48ConclusionDesign offers four powers or directions throughwhich to create value in management, and thesefour directions can be seen as a system with thevision in the center. The design value model andits application through the Balanced Score Cardtoolkit provide a common language for designers and managers and this can help the designprofession effect a change from project-based toknowledge-based.Hence, this value model gives a conceptualframework to the emerging trend toward designleadership and explains the potential of designthinking for analyzing the challenges faced bymanagers (such as, sense building, complexity,user-oriented innovation, building a sociallyresponsible organization, and so on). In t
design as process, design as knowledge, design science, design as resource, advanced design for new business) Companies in the first camp are really thinking of design in a reputational, or brand, context. Companies in the second camp understand design as a core competency. Now, consider that EVA comes from two types of value: financial and .