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Design in the DNA - How a design ethos can drive business growth

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Design in the DNA: How a design ethos can drive business growth is a UK Trade & Investment (UKTI) report commissioned from the Economist Intelligence Unit. The report seeks to examine how design …

Design in the DNA: How a design ethos can drive business growth is a UK Trade & Investment (UKTI) report commissioned from the Economist Intelligence Unit. The report seeks to examine how design thinking might shape corporate strategy and drive business growth over the coming decade. In particular, it focuses on the following sectors: professional services, energy/natural resources, creative industries (including technology, media and entertainment), infrastructure/construction, manufacturing, healthcare and pharmaceuticals.

To quantify this, the Economist Intelligence Unit conducted a survey of 633 executives in Brazil, China, France, Germany, Italy, North America, Mexico and the UK. All company sizes were represented: 51% of firms polled had annual revenue ofless than US$500m, while 32% had revenue of at least US$1bn. All respondents held management positions, with 59% representing the C-suite or board. All graphs and tables in this report are sourced from this global survey and other Economist Intelligence Unit data. To complement the survey findings, the Economist Intelligence Unit also conducted wide-ranging desk research and in-depth interviews with a range of organisations.

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  • 1. this report is brought to youby UK Trade & Investmentwith the Economist EIU.This page displays the UKTIlogo and the EIU logo HELPING YOUR BUSINESS GROW INTERNATIONALLY DESIGN IN THE DNA HOW A DESIGN ETHOS CAN DRIVE BUSINESS GROWTH
  • 2. © Crown copyright 2011You may re-use this information (not including logos, images andcase studies) free of charge in any format or medium, under theterms of the Open Government Licence. To view this licence, visithttp://www.nationalarchives.gov.uk/doc/open-government-licence/or e-mail: psi@nationalarchives.gsi.gov.uk.Where we have identified any third party copyright information you willneed to obtain permission from the copyright holders concerned.Any enquiries regarding this publication should be sent to us atenquiries@ukti.gsi.gov.uk or telephone +44 (0)20 7215 8000.This publication is also available on our website at www.ukti.gov.uk.
  • 3. About this reportDesign in the DNA. How a design ethos can drive To complement the survey findings, thebusiness growth is a UK Trade & Investment Economist Intelligence Unit also conducted(UKTI) report commissioned from the Economist wide-ranging desk research and in-depth interviewsIntelligence Unit. The report seeks to examine how with a range of organisations. Our thanks are duedesign thinking might shape corporate strategy to the following for their time and insight (listedand drive business growth over the coming decade. alphabetically, by organisation):In particular, it focuses on the following sectors:professional services, energy/natural resources, ■■ Mat Hunter, chief design officer, Design Councilcreative industries (including technology, media ■■ Jonathan Sands, chairman, Elmwoodand entertainment), infrastructure/construction,manufacturing, healthcare and pharmaceuticals. ■■ Charles Bezerra, executive director, Gad’Innovation ■■ Paul Lester, chairman, GreenergyTo quantify this, the Economist Intelligence Unitconducted a survey of 633 executives in Brazil, ■■ arl Liu, author and partner, at Idea Dao CChina, France, Germany, Italy, North America, Mexico Design Shanghaiand the UK. All company sizes were represented: ■■ r Mandy Savage, programme and technical D51 per cent of firms polled had annual revenue of operations director, Lockheed Martinless than US$500 million, while 32 per cent hadrevenue of at least US$1 billion. All respondents held ■■ ir John Sorrell, chief executive and chairman, Smanagement positions, with 59 per cent representing London Design Festivalthe C-suite or board. All graphs and tables in this ■■ Ken Shuttleworth, founder of Make architectsreport are sourced from this global survey and other ■■ Alex Laskey, president and co-founder, OPowerEconomist Intelligence Unit data. ■■ Paul Priestman, director, Priestman Goode The Economist Intelligence Unit bears full responsibility for the content of this report, and the findings expressed do not necessarily reflect the views of UK Trade Investment. Design in the DNA: How a design ethos can drive business growth 1
  • 4. EXECUTIVE SUMMARYWhat is the role of design ina 21st century business?For many people, that question may make them think The key findings include the following:about slick advertising campaigns and plush corporateheadquarters. But design is not, and never was, just Forward-thinking companies will alwaysabout image. bet on innovationDesign — as practised by the world’s most innovative Given a challenging economic environment, it is notcompanies — is a multi-skilled discipline that involves surprising that executives in the survey are somewhatengineers, product innovators, brand wizards, torn between prioritising cost control (44 per cent)technologists and even expert psychologists. Today, the and investing in innovation (56 per cent). RD is an“design thinking” that has turned the likes of Apple into expensive and unpredictable activity — cutting backa global leader is closely studied by top managers all in this area can help shore up the balance sheet inaround the world. the short term. A significant proportion of firms in the survey (22 per cent, rising to almost one-third ofNow, design is entering a new level of importance. Vast Chinese respondents and those in the logistics andnew markets are opening up, their populations hungry transport sector) intend to introduce cheaper versionsfor products and services that more closely reflect their of existing products, rather than develop first-of-a-kindspecific needs and circumstances. Demographic shifts innovations (9 per cent). Unfortunately, such a strategyare also changing the landscape, challenging business’s is unlikely to generate the kind of breakthroughsrecent obsession with the young. And always rumbling that spawn new businesses and markets. The beston in the background, the advance of technology companies will strive to become more efficient in thecontinues to open up new frontiers for the next way they deliver new products and services, but theygeneration of ingenious designers. also understand that their long-term competitiveness depends on backing bold design.Design is the discipline that fuses commerce withart, and technology with customer empathy. Emerging markets will make their mark inTomorrow’s innovative companies will excel in the design worldthese areas, while at the macro-level more countries China is already the world’s workshop, while Indiawill compete for the high ground in design. This is much admired for its IT services sector. But thesereport by the Economist Intelligence Unit (EIU), countries are no longer content to manufacture goodscommissioned by UK Trade Investment, seeks or offer basic services that were designed elsewhere.to understand how companies are focusing their They want to create the blueprint for the products andefforts in design and innovation. The EIU conducted services required by their burgeoning consumer markets.a survey of more than 600 business executives, and Executives to our survey have noticed Asia’s advance inalso interviewed a range of influential designers, this field — the region is now viewed by one-third ofbusiness leaders and other experts to establish how respondents as having better engineering capabilities,design thinking might shape corporate strategy and against respectively 23 per cent and 15 per cent ofdrive business growth over the coming decade. respondents for Europe or North America. However, Asia has further to go in other areas. The West still has strong advantages in terms of bringing innovative designs to market — for example, through better financing options and stronger capabilities in introducing cutting-edge science and technology to industry.2 Design in the DNA: How a design ethos can drive business growth
  • 5. Simple is the new beautiful What many companies now also need to consider is that their products are no longer simply products,New technology has made many products more but also need to have services wrapped around themcomplex to understand and use. A lot of companies — smartphones are a case in point. In the survey, thefall into the trap of producing items that bristle seamless integration of solutions and services for thewith features, but which are painful to use in greater convenience of their customers (28 per cent)practice. Others focus on aesthetics but forget about is viewed as a bigger priority than simply developingusability. However, a counter-movement is growing cutting-edge products (19 per cent) in terms ofin strength. At one end of the market, Apple is performance of functionality. Respondents also saya shining example of how powerful it can be to that one of the greatest challenges in introducing newcreate products and services that are beautifully products and services is providing customers with theintuitive and pleasing to use. At the other end of support to make them easier to use (27 per cent).the spectrum, a new breed of “frugal innovators”,focused on delivering products to the world’s poor,are teaching companies the old adage that less is Brands must be bold — not blandmore. In many ways, this is a return to design basics, Good design is also critical in helping distinguishbut it will be a significant challenge for companies companies from similar rivals. Louis Vuitton, Disney,operating in a technologically complex age. Virgin — all have powerful brands that foster a degree of loyalty. By contrast, the pharmaceuticalsDesign is key to tackling the big global issues industry has largely failed to achieve this distinction. Success is more than about smart packaging of aThere are many new challenges facing designers, product; the leaders in this space are also able toincluding developing green solutions (one of the top connect with their customers at an emotional level.areas where customers want to see better design, They do this by thinking deeply about their brandaccording to 39 per cent of respondents to our personality and ethos, a process that is arguablysurvey) and the need to tailor products or services the ultimate expression of how design thinking canto customers (some of whom survive on less than permeate every corner of an organisation.US$2 a day) in new and diverse markets. Anothergrowth area, which has been largely overlooked untilrecently, is the issue of population ageing. In Western Companies must learn when to listen, andcountries wealth is increasingly concentrated in the when to leadhands of the over 40s, and China’s population is There has been a growing trend in recent years foralso ageing. In addressing demographic shift, there companies to capture customer feedback and useis demand for smart thinkers who can apply their this to guide design. Cultural differences mean thatdesign skills to everything from simple products to some designs are appropriate in some countries, butcomplex services and even entire health systems. are unused and ineffectual in others. Behavioural psychology can also improve design, as can the use ofDesign thinkers will focus on the entire technology to grab customer insights. This is valuablecustomer experience work, but companies should be careful: breakthrough design is rarely produced simply by running customerAs individuals, the best designers have always focus groups. When asked where great design comesthought about customer needs and how people from, 48 per cent of executives to the survey sayinteract with products, processes and services. But “visionary thinkers”, compared with 34 per cent wholarge organisations can become inward-looking, and say that it comes from “listening to customers”.find this a struggle. Design in the DNA: How a design ethos can drive business growth 3
  • 6. COMPETING IN THE DESIGN ECONOMYThere is a rich and alluring prize on offer to the But of course growth in the BRIC markets (Brazil,countries, companies and individuals that excel Russia, India and China) brings opportunity forin design. design-oriented businesses in the West. Again, China is already a magnet for many of the great west EuropeanGovernments increasingly recognise that design designers. There are dozens of examples: in Beijingand creative thinking play an important role in alone, a tourist arrives at Norman Foster’s Terminal 3,driving economic growth. Many countries around catches an opera at Paul Andreu’s National Grandthe world have developed specific goals and targets Theatre, and reminisces on the great feats of the 2008to help support and grow their creative industries Olympics at Herzog and de Meuron’s extraordinarily(an amalgam of design, arts and performing arts). elaborate Bird’s Nest stadium.Ultimately, they see design not just as the preserveof the creative industries such as fashion, but across What many European designers are doing is usingall industries. Such creativity is seen as the key to their heritage to help them win work and secure salesproducing the next killer product, the next growth in fast-growing Asian and Middle Eastern economies.industry, the next springboard for economic growth. Ken Shuttleworth, founder of Make architects, pointsAnd of course, anything that paves the way to a new out that British urban designers now have officesphase of growth is sorely welcomed in the current across these regions as they win work by evokingeconomic environment. images of the great feats of Victorian engineers such as Isambard Kingdom Brunel.So national governments, but also the world’s globalcities, have begun to tout themselves as centres for Creative Hubsdesign and creative industry. Every year, the drumson design beat slightly louder. When Sir John Sorrell As countries compete for the high ground in design,launched the London Design Festival in 2003, it they are also promoting themselves as internationalwas a new initiative to showcase great ideas and centres for technology, design and creative talent.talent. Now 80 countries worldwide strut their design This is about their ability to produce home-growncredentials by hosting similar events. talent, but also to attract the best creative minds from abroad. To underpin all this, it is about havingBut perhaps the biggest signal of how serious this the education and environment in place to support acompetition has become can be seen in China. vibrant creative community.The country reportedly spent almost twice as muchbuilding and hosting the 2010 Shanghai Expo While no one would argue with the need for(a showcase for cutting-edge design) as it did on governments to create the educational systemsthe Beijing Olympics. The event attracted 70 million and support structures to enable design talent andvisitors — almost all of them Chinese — and featured communities to emerge, not everyone is convincedexhibitions and pavilions created by 240 countries and that the current policies they are pursuing will beorganisations from around the globe. For China, it was successful. One particularly thorny issue is how toa clear statement of intent: the country regards itself promote creativity, that elusive magic ingredient thatas a rising power in the field of innovation and design. enables individuals and businesses to come up withMeanwhile, other countries felt they couldn’t afford to something breathtakingly new.miss the opportunity to build bonds in this area withthe new economic titan.4 Design in the DNA: How a design ethos can drive business growth
  • 7. Today, the emphasis in many countries is onpromoting a greater focus on the so-called STEM skills(science, technology, engineering and mathematics)in education. Design should be seen as going hand-in-hand with all of these subjects. But the focus ondesign is often lost as governments and universitiesconcentrate on churning out more scientists andengineers. In August 2011, Google’s chairman, EricSchmidt, partly blamed a failure to nurture polymathsfor what he saw as the UK’s failure to capitalise onscience and technology innovation. “You need to bringart and science back together,” he told the annualMacTaggart lecture in Edinburgh.In the West, funding for what are viewed as “soft”creative skills, and indeed for the arts in general, isunder pressure in the current downturn. In emergingmarkets, the creative process has featured lessprominently in formal education. China is said toproduce 600,000 engineering graduates each year,but there is a shortage of trained designers (see boxon page 8, Why emerging markets are embracingsmart design).Our survey shows that the role which companies findmost difficult to attract and retain in their homemarket is that of business planner/strategist, namedby 46 per cent of respondents. This is mostly the casefor Germany, Mexico and the UK, where respectively66 per cent, 62 per cent and 60 per cent ofrespondents find it difficult to attract and retainbusiness planners and strategists who are able tounderstand market needs and bring products to market. Design in the DNA: How a design ethos can drive business growth 5
  • 8. Which region do you think is best in the following areas (excluding the region in which you are based)? Engineering prowess 32% 22% 15% 7% 23% 1%Application of science and technology to industry 22% 17% 25% 13% 20% 2% Marketing and brand-building of products 14% 16% 36% 11% 20% 3% and services Commercialisation of products and services 16% 15% 32% 13% 20% 4% Access to finance for innovative projects and ventures 23% 11% 32% 7% 19% 8% 0 10 20 30 40 50 60 70 80 90 100 Asia-Pacific North America Western Europe Latin America Eastern Europe Middle East and AfricaMore broadly, it is interesting to see how different Dr Mandy Savage, programme and technicalregions stack up in terms of their capabilities in the area operations director at Lockheed Martin UK, pointsof technology and design, as viewed by today’s business out that the US is generally ahead of its internationalleaders. One of the most striking findings is that when rivals in fields such as systems and softwareasked which region leads in terms of prowess in engineering, and is in a good position to attract theengineering, the Asia-Pacific is cited by 32 per cent of best and the brightest. Yet nearly twice as manyrespondents, followed by Western Europe (23 per cent) respondents from North America than respondentsand Latin America (22 per cent). To some extent it is from China say they struggle to attract and retainunsurprising that Europe, the birthplace of the creative thinkers in their home market (38 per centIndustrial Revolution, has a high reputation. Meanwhile, against 20 per cent).some of the economic powerhouses of the Asia-Pacificregion have built vast complexes and infrastructure onthe back of their increasing wealth.However, in other areas of the design process, theWest still holds some strong advantages. North America,for example, is still seen as by far the best region formarketing and brand-building of products and services(by 36 per cent of respondents), commercialisation ofproducts and services (32 per cent), access to financefor innovative projects and ventures (32 per cent),and application of science and technology toindustry (25 per cent).6 Design in the DNA: How a design ethos can drive business growth
  • 9. The survey also shows how important these For example, the UK has world strengths across theperceptions can be in determining where companies design sector and more than its share of world-classwill invest in the future. A total of 26 per cent architects, Italy is a powerhouse in fashion, furnitureof respondents say that the location of their and textiles, Germany excels in car design, Chinainnovation activities depends on access to a talent builds great technologies, and India is positioningbase. But it is also clear from these results that itself as a global leader in service design. Forcompanies gravitate to different locations and hot governments, it is crucial to plan and investspots depending on the area of design, but also for around areas where a country can derive long-termdifferent phases in the design process. competitiveness as part of the innovation landscape. Research and Development (RD) spending 3 USA 2.5 Germany 2.0 France UK 1.5 China Italy Russia 1.0 Brazil India 0.5 Mexico 0 Sum of 2000 Sum of 2001 Sum of 2002 Sum of 2003 Sum of 2004 Sum of 2005 Sum of 2006 Sum of 2007 RD spending (per cent of GNP) Source: Economist Intelligence Unit One way to measure a country’s standing in that landscape is by looking at its research and development (RD) spending. As the chart shows, some countries surge ahead. The United States invested 2.7 per cent of its GNP in RD in 2007, closely followed by Germany (2.5 per cent), France (2 per cent) and the UK (1.8 per cent). The real mover, however, is China, where RD spending rose by 56 per cent between 2000 and 2007, from 0.9 per cent to 1.4 per cent of GNP. Design in the DNA: How a design ethos can drive business growth 7
  • 10. Why emerging markets are next wave of Asian and South American economies than the leading experts in the well-establishedembracing smart design economic powers.The BRIC countries — Brazil, Russia, India and China There are, however, serious challenges to overcome.— are becoming more ambitious and confident when As already noted, China has ambitions to become ait comes to taking a lead in different areas of design. global leader in design. Yet in one respect it faces aCharles Bezerra, executive director at Gad’Innovation, design crisis, just as it is becoming one of the greata Brazilian consultancy, argues that there is no longer glamour destinations for the world’s leading engineers,such a sharp divide between developed and emerging fashion names and product craftsmen. Carl Liu, aneconomies: “The technologies and the methodologies author and partner at Idea Dao Design Shanghai, saysare spread out globally” he says. that of 100,000 people who graduate from Chinese universities in design each year, only 3-5 per cent endIn some areas emerging market designers have a up in a practice. “Some students do not really have annatural advantage. In a recent paper, Design for interest in design when they enroll — they just wantBRIC: the new frontier, Mr Bezerra went further, to get a degree,” Mr Liu explains. “They think designclaiming that emerging market designers should is an easier course to get into, and they think that it ishave a competitive advantage in these fast-growing an easy course to graduate in.”economies: “The BoP [bottom of the pyramid,referring to those around the world who live on As more Western companies have opened up inless than US$2 a day] represents a big opportunity China, Mr Liu believes that domestic businesses havefor BRIC businesses. This is because in the logic of started to grasp the importance of design. However,traditional capitalism, multinational companies from he believes that Chinese businesses are still notthe developed countries create products directed at making design a top priority and that they will havetheir own national consumers and consumers like to improve their design standards if they are tothem; only as an afterthought are those products compete on the world stage. “Local brands that wantbrought to developing countries.” to go into international markets will soon realise just how weak they are and will then have to focus moreIf this is correct, Brazilian and Chinese designers on design,” he says.could be better prepared to create products for the Ten of the most innovative design stories from emerging markets■■ ndia’s Mumbai dabbawallas, who dependably I ■■ ndia’s Aravind Eye Care System, delivering I deliver by bicycle 200,000 meals per day high-quality eye care at minimal cost■■ ndonesia’s “SMS e-government”, a channel of I ■■ razil’s Embraer, the only aircraft manufacturer B communication between citizens and legislators based in an emerging market that competes with the likes of Boeing on price and design■■ enya’s M-Pesa banking service, which turns K millions of “unbanked” in Africa into users of ■■ ndia’s DBOP project, showing local communities I banking services through simple mobile telephones how design can help create innovations that improve people’s lives and create sustainable economies■■ ndia’s Hindustan Unilever’s Project Shakti, where I poor rural women become micro-entrepreneurs ■■ hina’s largest networking and C who teach their neighbours about basic nutrition telecommunications equipment supplier, Huawei, and hygiene and its installation box for optical cables■■ outh Sudan’s first beer brewery by SABMiller, S ■■ ndia’s Tata Nano, the world’s cheapest car, at I making beer accessible to eight million people US$2,0008 Design in the DNA: How a design ethos can drive business growth
  • 11. DESIGN THINKING IN BUSINESSThe importance of design in modern business can be So it is perhaps surprising to find that many toptraced right back to the Industrial Revolution. Back managers today remain diffident about the importancethen, there were plenty of entrepreneurs generating of design. This is one of the paradoxes of moderncheap and cheerful (but not always well designed) business: CEOs constantly espouse the need toproducts. Many achieved temporary popularity. But innovate, yet few seem obviously comfortable with thethe names that are remembered centuries later are the design ethos that is likely to produce such innovations.innovators that were able to harness new technologies As Sir John Sorrell notes: “Design is difficult to get aand production techniques to bring brilliantly handle on. It’s a word that provokes suspicion amongdesigned products to a new and burgeoning consumer many business leaders and civil servants.”market. These innovators came up with great ideasand managers brought the insight to design a processthat helped successfully commercialise those ideas. Where will you focus your design and development efforts over the next three years, in terms of creating better services or products? Providing seamlessly integrated solutions or 28% services for greater convenience of customer Providing a similar product or service but at a lower 22% price than the competition Providing products/services that are cutting edge in 19% terms of performance or functionality Adapting products, processes and services to meet 14%regulations and standards in home/overseas marketsCreating products/services or services that are a first 9% of their kindModifying products to meet customer preferences or 7% technological challenges of individual markets Other, please specify 0% 0 10 20 30 100 “ esign is difficult to get a handle on. It’s a D word that provokes suspicion among many business leaders and civil servants.” Sir John Sorrell Design in the DNA: How a design ethos can drive business growth 9
  • 12. Attitudes are beginning to shift. Most of the world’s Perhaps more worryingly, only 9 per cent of firms arefastest-growing companies are achieving success by striving for first-of-a-kind innovation, compared withembracing design principles. But the survey indicates more than twice the number (22 per cent) that planthat while some companies are ready to invest in to focus on creating similar products to competitorsinherently risky innovation or in the vagaries of the at a cheaper price. Apart from the 28 per cent thatcreative process, others are holding back. When asked say their priority is to work on integrating solutionswhether their priority is to invest in innovation or to and services to improve customers’ experience, thecut costs, only a slim majority (56 per cent) pick the remainder are content to fine-tune and improveformer (see table on page 9). This is at least existing products or services. This may well be a safeunderstandable in the current climate. and profitable course — until customers’ tastes change or a new entrant arrives to disrupt the market. Is it most important to increase investment in innovation and design or is cost control a bigger priority than innovation and design? China 52.6% 47.4% Brazil 50.7% 49.3% Mexico 57% 43% UK 49.4% 50.6% Italy 42.9% 57.1% France 24.5% 75.5% Germany 43.1% 56.9%N America 25.3% 74.7% 0 10 20 30 40 50 60 70 80 90 100 Cost control is a bigger priority than innovation and design It is most important to increase investment in innovation and design10 Design in the DNA: How a design ethos can drive business growth
  • 13. Three-quarters of respondents in France and Not that chief executives need to be trainedNorth America think it is most important to designers themselves, of course. But if they areincrease investment in innovation and design, serious about innovation, it can be argued, they needwhile respectively 57 per cent and 53 per cent of to take steps to elevate the status of design withinrespondents in Mexico and China think that cost the organisation. If the rest of the management teamcontrol is a bigger priority. In the UK, respondents isn’t design-literate, it helps to have someone to actare divided almost 50-50. as an adviser. Top management in most companies is disproportionately drawn from people with aIt would be too simplistic to divide companies background in roles such as finance and accountsbetween the innovative visionaries destined for or operations. And in general, management trainingsuccess, and the cost-cutters making short-term emphasises analytical discipline, rather than a creativeprofits but lacking a long-term plan. Designing new mindset. Sir John Sorrell’s advice to these managersproducts can be expensive. There are many failures, is that they should do what Apple did, and put itsand spending heavily on RD is no guarantee that a top designer — Jonathan Ive — on the board.product will even make it to market. It is not foolishfor chief executives to want to find smarter, more The bare essentialscost-effective ways to design the next big thing.But the companies that embrace design thinking are Designers have often gravitated to the premium endmore likely to take a long-term perspective on these of the market, in search of a big budget to help fuelcrucial issues. their creativity. But one widespread current trend is to use design to produce simpler, more elegant and cost-effective solutions. This is especially true of frugalThe designer boss innovation, an exciting trend which sees companiesAll chief executives face the challenge of how to developing products for consumers who traditionallyembed innovation into their corporate culture. It could not participate in consumer society. But itis an uphill struggle given that organisations tend is also a trend which is equally apt for developingto create structures and hierarchies that discourage countries where cost-conscious customers, companiescreativity and risk-taking as they grow larger. and governments are looking for quality design at a cheaper price tag. Nearly two-fifths of respondents toMuch depends on the CEO’s own attitude to design our survey say that their customers would most likeand innovation. The survey indicates that chief to see them focus on cost and value for money whenexecutives are at least moderately involved in elements developing products or services over the next threethat make up their company’s design strategies. For years. This far outstrips the 22 per cent calling forexample, 96 per cent of respondents say that the CEO stronger ethical credentials, or the 17 per cent whoplays a hands-on role in tracking market trends and opt for more choices to suit personal tastes (see tableopportunities, while 87 per cent set strategic goals for on page 12).innovation. But setting goals is one thing; creating aculture that is capable of innovation or great designthinking is a much greater challenge. Design in the DNA: How a design ethos can drive business growth 11
  • 14. What do you think your customers would most like to see you focus on when developing products and services in the next three years? Greener/lower carbon footprint on products 39% and services Cheaper/better value 39% Reliability 34% Top-of-the-range performance or functionality 32% Brands that they are proud to own 26% Stronger ethical credentials 22% Simplicity and intuitive user experience 20%More choices to suit personal tastes or preferences 17% Better support and servicing 13% Other, please specify 0% 0 10 20 30 40 100Although designers have always had to consider cost The same year, Tata launched the world’s cheapestand affordability constraints, frugal innovation — a car, the US$2,000 Nano, in its home market. Almostform of product and service development that targets every aspect of automotive design was questionedconsumers too poor to afford traditional consumer as part of the Nano’s design, even to the extent ofproducts — has pushed the boundaries further. removing the passenger-side wing mirror and gettingFamously, General Electric (GE) and Tata, an Indian a single windscreen wiper to do the job of two.conglomerate, take a backwards approach, strippingout superfluous elements of existing technologies Successful examples of frugal design do not onlyto make their products more affordable. In 2009, apply to products but also to services. Witness theGE built an electrocardiograph machine weighing rise of M-Pesa, a branchless banking service thatsix pounds, half the weight of the smallest machine has turned millions of “unbanked” in Africa intoavailable at the time and 80 per cent cheaper than users of banking services by leveraging the simplestsimilar products. of mobile telephones.12 Design in the DNA: How a design ethos can drive business growth
  • 15. CASE STUDYAravind proves there’s richness These and similar initiatives have inspired designers around the world to think how great design can bein frugality delivered at much lower cost to the customer. There is a need for similar thinking in developed markets.India’s Aravind Eye Care System has shown that “It’s important to balance design with cost”, saystaking a frugal approach to the design of even Paul Lester, chairman of road fuel provider Greenergy.complex services does not have to mean skimping “No matter how fantastic a design is, cost has aon levels of service. Quite the opposite, in fact. major influence on how things look.”The organisation began life in the 1970s, when eye Mr Lester was previously chief executive of VT, asurgeon Dr Govindappa Venkataswamy established UK-based support services group that was involved inan 11-bed hospital with the grand ambition of the last government’s £45 billion Building Schools foreliminating avoidable blindness in India. Millions of the Future programme. The consortiums with whichIndians suffer from blindness, which in most cases VT was involved would typically ensure that the frontis caused by easily treatable cataracts. Since its small of the school had a distinct design, but would thenbeginnings, Aravind now provides 45 per cent of use standard designs behind that façade to keep oneye care in the state of Tamil Nadu, or 5 per cent budget. “There would be individuality for the frontfor India as a whole. Its success is due to a series of area, but modular design at the back,” he explains.innovations, in business models, products, processesand services. In another example of frugality in the West, Motel 6, a chain of more than 1,100 budget hotels in NorthFirstly, says Dr P Namperumalsamy, the company’s America, asked Priestman Goode, a London-basedchairman, Aravind recognised that the people design group, to look at redesigning its rooms.who most needed the service were those who felt Realising that many people do not use wardrobes intreatment was simply unavailable, and began to hotels, for fear of leaving their clothes behind whendeliver care to villages. Next, rather than import they check out, Priestman Goode created a furniturelenses used in cataract surgery, Aravind began to unit that held the television, a cubby for the remotemake its own at a fraction of the cost. Training control and valuables, and space for shelving andstaff is also a costly enterprise, so Aravind now hangars. A single unit replaced three or four piecestrains local villagers as paramedics for routine of furniture, reducing cost by a third. Clever designwork, which ensures it gets the most value out of offered great value for money, which Motel 6 couldits doctors. Finally, the company has designed a then pass on to their customers to become even morefee scale to ensure delivery of the highest levels of competitive on cost.treatment to as many people as possible. Its mostrecent innovation has been to partner with major “Manufacturing cost was reduced and it gave a mainmedical schools, such as Johns Hopkins University, focal point to the room, almost like a fireplace usedon telemedicine and education programmes. to be,” says director Paul Priestman. “With frugal design you can design an object to make it do several things, reducing waste, cost, weight, materials.” Design in the DNA: How a design ethos can drive business growth 13
  • 16. CASE STUDYThe pharma sector and the search for One issue facing the industry is that although pharma companies are well known, their medicines are not.emotional branding In this regard, Mr Sands argues, pharma is its own worst enemy — the portfolios at GlaxoSmithKline andThe pharmaceuticals industry is bland, defensive and AstraZeneca, for example, include Adartrel, Zyban,fails to foster loyalty among its customers. These were Accolate and Zomig. “These may have meaningsome of the thoughts going through the mind of brand internally in the corporation but are meaningless to thedesign guru Jonathan Sands, chairman of Elmwood, end user, and nobody can identify one drug from thea design consultancy as he sat through the Economist next from the packaging,” Mr Sands argues.Pharma Summit earlier this year. Mr Sands believes that brands are like friends. “You can“The more I listened to guys from big pharma the buy all sorts of smartphones, but you buy an iPhone formore I heard a recurring theme,” says Mr Sands, whose more than its functionality — you are part of the Appleconsultancy has worked with some of the world’s best- Club. The iPhone 4 had antennae problems, but peopleknown retail, consumer and corporate brands. “They still want to be part of the club.”were worried about their patents running out, the riseof generic drugs.” In many of their largest markets, pharma companies are prohibited from marketing directly to patients,Worse still, Mr Sands observed, was that the major and regard doctors and governments as their primarycompanies appeared somewhat paranoid about their targets. But patients — the ultimate consumers ofpublic image. “They thought that they were almost seen medicine — are better informed than ever about theiras being worse than bankers. I found it quite incredible conditions and treatment options, and are playing an— here was an industry doing research to help people increasingly important and active role within healthcarehave better lives, a front-foot industry talking on the systems. Pharma firms, Mr Sands says, could do worseback foot, relying on patents to protect their revenue than learn how to emulate companies in other sectorsstreams,” he says. that have become successful because their customers love the brand.Keeping it simple Only one in five respondents believes that their customers want them to focus on simplicity andA cost-driven trend to pare back design could also intuitive user experience. And yet, customers in focusbe good news for customers and clients in terms of groups or in online feedback constantly expressmaking products and services more pleasurable to use. frustrations about the difficulty in using technology-Technology-based products arrive rammed with an array based products – and the companies that lead inof features and functions, many of which will never be consumer electronics are increasingly working hardused by the customer, or even understood. to create both a simpler human interface and support services that wrap around the product.Executives in the survey give apparently contradictoryviews on this issue. As previously mentioned, 28 per The same could be said of pure services such ascent say that a high priority is to provide integrated banking. Where services have been shifted online or tosolutions and support that make life easier and more outsourced call centres simply to save cost, the resultconvenient for customers. At the same time, they do has often been deterioration in service quality and anot see simplicity as being particularly high on the backlash from customers.agenda for customers.14 Design in the DNA: How a design ethos can drive business growth
  • 17. Smarter players think about service designs that join Dr Savage at Lockheed Martin points out that designthe dots between different customer touchpoints. In has always been intrinsically important in the defencethis way, banking feels like a friendly and informed industry. “But things have become more complex,” sheconversation with a bank that values its customers. says. “When I joined as an engineering graduate, there would be tens of hundreds of lines of code but nowTechnological complexity is not only a problem for there are thousands upon thousands.”designers in the consumer electronics sector. Fordefence companies manufacturing high-tech weapon As technology changes, so designers must keep systemssystems, getting the interface right could be a matter simple for the user — while not overlooking veryof life and death. basic problems that would be noticed quickly in less advanced products.CASE STUDYSmart design for an ageing market Some businesses are finding that designing products with older consumers in mind offers a degree of recession-proofing. OXO, a kitchen tool maker, hasThe world is getting older. In Europe, for example, recorded growing sales numbers since the economicthe median age in 1950 was 30 years. Today, it is 40. downturn, prompting Bloomberg Businessweek toOver 65s will make up almost 25 per cent of the UK point out that the company had “built a following bypopulation by 2034, according to the Office for National designing everyday items so people of almost any ageStatistics, and by 2025 almost 1.5 million people in the or physical ability can easily use them.”UK will be living with an age-related disability. But applying smart design to solutions for ageingMat Hunter, chief design officer at the UK’s Design populations is not only about developing new products.Council, says that while the public sector sees this Services aimed at older citizens will also benefit fromchanging demographic as a problem, businesses design innovation. The UK’s Design Council hasshould spot a chance to develop new products. “If the launched a competition inviting designers to devise wayselderly become seriously unwell, then the state has to of ensuring that older citizens do not become recluses.pick up the pieces,” he says. “But the private sector This could be a matter of applying simple design tweaksshould see this as an opportunity: a well-educated, to a product or service. A dating website, for example,perhaps the wealthiest, demographic in which to pick could offer options more relevant to needs or retireesup new types of customers.” than people in their 20s or 30s.Car manufacturers are among the pioneers in this Service and process design elements will becomefield. Mazda has introduced sliding doors on its M5 especially important when addressing the next bigmodel to make access easier for their less supple challenge facing ageing societies dementia, whichclients, and Toyota has introduced larger typefaces already costs the UK £20 billion a year, more thanon dashboard instruments. cancer, heart disease and stroke care put together. Telecare services, for example, are now widely availableSometimes, the challenges facing citizens as they age as a way of allowing dementia sufferers to stay at homeare being addressed by ageing designers themselves. for longer before requiring full-time supervised care.Kenneth Grange, a multi-award winning designer who isin his 80s, recently designed an oversized chair for HitchMylius, a furniture manufacturer, after noticing howmuch more difficult it was to rise from a chairas he grew older. Design in the DNA: How a design ethos can drive business growth 15
  • 18. SERVICES AND CUSTOMER EXPERIENCECompanies are seeking to place the customer Customers are playing a more active role in shapingexperience at the heart of their product and service next-generation products. Customer focus groups,designs. There are examples right across almost every the traditional way of finding out what customerssector, from online shopping services such as Amazon want from products, is now augmented by technologyand Ocado, to smartphones — and even customisable allowing companies to collect a vast amount of datacars. We see evidence of this thinking in the survey: on how customers spend their time and use particular28 per cent of respondents aim to focus their design products in their daily routines. The trend towardsand development efforts over the next three years on customer-led design, in which companies captureproviding seamlessly integrated solutions or services this data and feed it back into the design process, isfor greater convenience of customer. 22 per cent say an attempt by companies to harness these tactics tothat they plan to focus on creating similar products improve the hit rate on innovation.to competitors at a cheaper price.CASE STUDY In addition to customer-led design, there is also anBankSimple’s back-to-basics approach enthusiasm for a parallel trend: customer-focused design. The survey also shows how companies are moving beyond the design of objects (the traditionalRather than focussing on products, which would product for many firms) to focus on the entiresee BankSimple competing in an already crowded customer experience. Sometimes the “product” itselfretail banking space, its founders decided to partner is a service (such as online banking). At other times,with chartered banks to provide the products and it is the service wrapped around a product (such asinstead concentrate on designing a complete support services for mobile phones). In either case,consumer banking experience, accessible via web companies are trying to apply design principles toand smartphone. the creation and delivery of services.According to BankSimple’s founder, Josh Reich, It is a challenge that involves many different corporatemany banks only design their customer offerings functions, from HR skills and training to process andat the surface level, rather than at the foundation, workflow design, to the technology infrastructure thatwith gimmicks like 3D bank statements. Instead, underpins these services and so on. It is not difficultBankSimple’s focus is on the basics of user to think of companies that do this very badly, and farexperience design. harder to find those that do it well. But the goal for companies across all sectors is to design around theThe goal is simple: to effectively use the data customer, and to hone everything about customer-already held by banks to help consumers facing services in order to create a seamless, helpfulbetter manage their money. For example, one and pleasurable experience.functionality displays customers’ “spendingcushion”, which is determined by setting asidetheir savings, factoring in their typical monthlyexpenses, predicting their upcoming income andbills and calculating what is left over. BankSimplealso automatically moves funds between savingsand credit to help customers pay less and earnmore interest.16 Design in the DNA: How a design ethos can drive business growth
  • 19. W hich of the following is most important to the success of your business over the next three years? Service or solution design: 48% Design and delivery of services for customers Product design: 36% Developing innovative products for customers Business process design: 16% Efficient organisational practices and systems 0 10 20 30 40 50 60 70 80 90 100This may help to explain why customer service and Design goes glocalsupport looms as such a big issue for executives in If companies are genuinely committed to designingour survey on design. Nearly one-half of respondents around the needs of customers, what does this(48 per cent) see design and delivery of services for mean when companies are targeting customers andcustomers as key to the success of their business clients in an array of new and relatively unfamiliarover the next three years. This is particularly true in markets? Western companies are seeking to designthe financial services industry, where two-thirds of products and services that need to reflect the needs,respondents see design and delivery of services for aspirations and — of course — price expectations ofcustomers as key to the success of their business over the vast consumer markets opening up in the BRICthe next three years. economies. Meanwhile, home-grown champions in those same countries are increasingly seeking toRespectively 48 and 44 per cent of respondents from transform themselves into global brands.Mexico and the UK believe that customer serviceand support strategy are essential in designing andlaunching a successful product or service. Meanwhile,57 per cent of respondents in the logistics, transportand travel industry believe this as well, while two-thirds of respondents in financial services think it ismore important to focus on what customers want. Design in the DNA: How a design ethos can drive business growth 17
  • 20. W hat does your company find most difficult when developing new products or services? Bringing products to market 28% Creating a better user experience 27% Building good support services around your 27% core offering Tracking changing patterns in customer 26% demands/needsWorking with third parties on innovation projects 19% Recruiting talent 17% Getting management backing and focus 15% Getting funding 12% Adapting products or services to specific needs 10% of different global markets General lack of understanding of design issues 4% Other, please specify 2% 0 10 20 30 100Only 10 per cent of respondents to our survey say that Every customer is unique, but differences are eventheir company’s biggest struggle when developing new greater due to varying cultural and social normsproducts or services is adapting products or services to across markets. This is most obvious in the leap fromthe specific needs of different global markets. Perhaps developed to emerging markets, but actually everythis is because there is a widespread view — among market and customer segment has its quirks.34 per cent of respondents — that great designcomes from listening to customers. However, this Priestman Goode, among other projects, has workedopinion varies between country and industry. About on transport systems around the world. “You must40 per cent of respondents in the UK subscribe to have cultural understanding,” says Mr Priestman, whothat view, for example, compared with only 27 per is now setting up an office in Qingdao, China, wherecent of respondents in China. Meanwhile, 42 per cent his company works with Sifang Locomotive. “If you’reof respondents in the IT, telecommunications and manufacturing trains for a country, the key is it musttechnology industry say that great design comes from look like something that belongs to that country.”listening to customers, but only 25 per cent in thelogistics, transport and travel industry share that view.18 Design in the DNA: How a design ethos can drive business growth
  • 21. Even multinationals that standardise their products In 2006, a French interior designer, Philippe Avanzi,to cut cost can benefit from tweaking designs. was hired to redesign more than 6,000 McDonald’sFor example, burger giant McDonald’s noted that stores in Europe, introducing leather chairs andEuropeans liked to eat in chic-looking restaurants, wooden features. He also created a portfolio ofbut still enjoyed a Big Mac. designs for each country to reflect their slightly different tastes.CASE STUDYWant to boost green thinking? Apply a OPower works with utility companies to help customers cut down their energy consumption.little behavioural science The firm takes a series of complicated data — from energy meters, local land registries, utilities andToday, businesses ignore sustainability and green other sources — and turns it into easy-to-understandissues at their peril. According to nearly 40 per cent information that allows households to see how muchof our survey respondents (60 per cent in France and energy they use compared with their neighbours and43 per cent in China), consumers today would like those in the local community.to see companies reduce their carbon footprint onproducts and services. The issue is more important, OPower’s presentation of simple bar chart and graphicthey say, than designing cheaper, better value or comparators of energy consumption of customersmore reliable products. against their neighbours has proven to be a great motivator to switch off lights and improve insulation.But consumers themselves have a big role to play On average, customers with utilities using OPowerin reducing greenhouse emissions — not simply in have cut their bills by 2-3 per cent as they try to savethe product choices they make, but in being aware more energy and money than their neighbours.of their own behaviour, especially regarding energyconsumption. Encouraging citizens to become Mr Laskey compares the company’s methodologygreener has not always been easy. to Amazon’s. Amazon has more than one million products, but does not email customers random listsOPower, a US-based company which aims to reduce of what they can buy. Instead, it looks at what theyglobal carbon emissions, has grown rapidly since its have previously bought and what they have browsed,founding in 2007. But the success of the company and creates a tailor-made list of products customers— which has been feted by Barack Obama and David seem most likely to want to purchase.Cameron — is based entirely on the simplest ofpremises: a good understanding of human behaviour. OPower is now expanding internationally. First Utility, its UK partner, believes that £400 million could be“Nearly everyone says saving energy is a good thing,” saved by consumers each year if such a system weresays OPower president and founder Alex Laskey. deployed on all British households. As Mr Cameron“But it’s not the first thing people worry about when told an audience in 2010, “That sort of behaviouralthey get up in the morning. The challenge is getting economics can transform people’s behaviour in apeople interested in something that is boring.” way that all the bullying, all the information, all the badgering from government cannot possibly achieve.” Design in the DNA: How a design ethos can drive business growth 19
  • 22. CONCLUSIONThe desire to create a better experience for customers Meanwhile, advances in technology mean thatgoes right back to the most basic design principles. companies now have new, more precise waysWhether they are developing a product, process or of understanding customers’ needs. When thisservice, the best designers always want to make is combined with visionary or creative thinking,something well, to ensure it is fit for purpose, and companies can dramatically improve their abilitythat it is delightful for people to use or interact with. to bring great ideas to market more effectively.If only it was as simple as listening to customers — As veteran brand designer Ivan Chermayeff has said,but more often than not, customers can only talk “To design is to solve human problems by identifyingabout their current experiences. This is all well and them, examining alternate solutions to them,good when you are trying to improve an existing choosing and executing the best solution.”product and service, or to tailor it to differentcustomer needs. But that will only take you so far. To do that well, this report suggests, designers alsoThe goal is to think ahead and outside perceived need to know when to listen and when to lead.boundaries, enabling the company to introduce aground-breaking product or service.Henry Ford is once said to have remarked: “If I askedcustomers what they want, they’d ask for fasterhorses”. Customer-led design is limited by the fact thatbuyers often don’t know what they want until they seeit. There is still a need for design-oriented companiesto make the leaps of imagination. Our surveyrespondents seem to understand this point, with themajority saying that great design comes from visionarythinkers, rather than listening to customers.20 Design in the DNA: How a design ethos can drive business growth
  • 23. UK Trade Investment The Economist Intelligence UnitUK Trade Investment is the government department that helps The Economist Intelligence Unit is the world’s leading resourceUK-based companies succeed in the global economy. for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies,We also help overseas companies bring their high quality investment government agencies, financial institutions and academicto the UK’s dynamic economy—acknowledged as Europe’s best place organisations around the globe, inspiring business leadersfrom which to succeed in global business. to act with confidence since 1946.UK Trade Investment offers expertise and contacts through its The Economist Intelligence Unit is headquartered in London,extensive network of specialists in the UK, and in British embassies UK, with offices in more than 40 cities and a network ofand other diplomatic offices around the world. We provide some 650 country experts and analysts worldwide. It operatescompanies with the tools they require to be competitive on the independently as the business-to-business arm of The Economistworld stage. Group, the leading source of analysis on international business and world affairs.For further informationplease visit www.ukti.gov.uk For more information please visit www.businessresearch.eiu.comor telephone +44 (0)20 7215 8000
  • 24. HELPING YOUR BUSINESS GROW INTERNATIONALLYA range of UK Government support is available from a portfolio of initiativescalled Solutions for Business (SfB). The “solutions” are available to qualifyingbusinesses, and cover everything from investment and grants through tospecialist advice, collaborations and partnerships.UK Trade Investment is the Government Department that helps UK-basedcompanies succeed in the global economy, and is responsible for the deliveryof the SfB product “Helping Your Business Grow Internationally”.We also help overseas companies bring their high-quality investment to the UK’s dynamic economy – acknowledged as Europe’s best place from whichto succeed in global business.UK Trade Investment offers expertise and contacts through its extensivenetwork of specialists in the UK, and in British embassies and other diplomaticoffices around the world. We provide companies with the tools they require tobe competitive on the world stage.For further information please visit www.ukti.gov.uk or telephone +44 (0)20 7215 8000.Whereas every effort has been made to ensure that the information given in this document is accurate,neither UK Trade Investment nor its parent Departments (the Department for Business, Innovation andSkills, and the Foreign and Commonwealth Office) accept liability for any errors, omissions or misleadingstatements, and no warranty is given or responsibility accepted as to the standing of any individual, firm,company or other organisation mentioned.The paper in this document is made from 50 per cent recycled waste pulp with 50 per cent pulp fromwell-managed forests. This is a combination of Totally Chlorine Free and Elemental Chlorine Free. The inks are vegetable oil-based and contain resins from plants/trees and the laminate on the cover issustainable, compostable and can be recycled.Published September 2011 by UK Trade Investment© Crown CopyrightURN 11/1278