2	  ACKNOWLEDGEMENTS 3INTRODUCTION 4CHAPTER 1 | WHAT IS DESIGN? 6DESIGN AS SUSTAINABLE COMPETITIVE ADVANTAGE 6FOR PRODUCTS...
3	  AcknowledgementsThe research for this paper was conducted over a short period of three months.Its aim was ambitious: t...
4	  Towards a Design Policy for QuebecIntroduction“The Obama presidential campaign was an innovation in American politics ...
IntroductionPhilippe-Aubert Messier, Towards a Design Policy for Quebec5Chapter 2 proposes an up-to-date survey of what we...
6	  Chapter 1 | What is design?“Certainly, without design, most goods and services would not exist or would fail tobe diff...
Chapter 1 | What is Design?Philippe-Aubert Messier, Towards a Design Policy for Quebec7estate developer Freed Development ...
Chapter 1 | What is Design?Philippe-Aubert Messier, Towards a Design Policy for Quebec8obvious endeavour. Interpretations ...
Chapter 1 | What is Design?Philippe-Aubert Messier, Towards a Design Policy for Quebec9Horst Rittel ..structuring argument...
Chapter 1 | What is Design?Philippe-Aubert Messier, Towards a Design Policy for Quebec1071.12 Engineering activities and r...
Chapter 1 | What is Design?Philippe-Aubert Messier, Towards a Design Policy for Quebec11argue further here that the drivin...
Chapter 1 | What is Design?Philippe-Aubert Messier, Towards a Design Policy for Quebec12construction and formulaic design ...
13	  Chapter 2 | The Design EconomyIn this chapter, we discuss the design economy. Readers will likely recall thatseveral ...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec14There are several difficulties ...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec15ones3. The results initially, a...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec16internal use, the Generally Acc...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec17Economic ImportanceThe 2009 cro...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec18demand for creative content – p...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec19• So called ‘Gazelles5’ are nea...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec20various design awards for which...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec21Table 2: Highs and lows of port...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec22and processes)Production Proces...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec23Sources: Global Design Watch 20...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec24We also see that Canada underpe...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec25One could question the communic...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec26Economic Importance in CanadaDa...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec27While many consider cities like...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec28industries must convert to more...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec29source new ideas from elite fas...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec30for failing to take sufficient ...
Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec31We erect buildings to fulfill a...
32	  Chapter 3 | Measuring DesignGetting accurate measurements of R&D investments and returns has beencrucial in raising i...
Chapter 3 | Measuring DesignPhilippe-Aubert Messier, Towards a Design Policy for Quebec33The Danish Design Ladder is a tre...
Chapter 3 | Measuring DesignPhilippe-Aubert Messier, Towards a Design Policy for Quebec34Creative Economy Report every two...
35	  Chapter 4 | Design PolicyIn the previous chapters, we established design’s importance to the economy, aswell as how i...
Chapter 4 | Design PolicyPhilippe-Aubert Messier, Towards a Design Policy for Quebec36gave rise to the Japanese consumer e...
Chapter 4 | Design PolicyPhilippe-Aubert Messier, Towards a Design Policy for Quebec37Design SystemsProposed by academics,...
Chapter 4 | Design PolicyPhilippe-Aubert Messier, Towards a Design Policy for Quebec38design system is a design policy tha...
Chapter 4 | Design PolicyPhilippe-Aubert Messier, Towards a Design Policy for Quebec39and presumably following Bitard and ...
Chapter 4 | Design PolicyPhilippe-Aubert Messier, Towards a Design Policy for Quebec40For SMEsDesign policy is not in itse...
Chapter 4 | Design PolicyPhilippe-Aubert Messier, Towards a Design Policy for Quebec41projects; their size makes them more...
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
Towards a Design Policy for Quebec
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Towards a Design Policy for Quebec

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Good design is more and more regarded as a sustainable competitive advantage as well a major contributor to innovation-driven economies. In this context, the first half of this paper surveys how nations throughout the world leverage this so-called "functional creations" sector and know-how with different policy tools. The second half focuses particularly on Canada's province of Quebec.

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  1. 1. 2  ACKNOWLEDGEMENTS 3INTRODUCTION 4CHAPTER 1 | WHAT IS DESIGN? 6DESIGN AS SUSTAINABLE COMPETITIVE ADVANTAGE 6FOR PRODUCTS 6FOR BRANDS 7DEFINING DESIGN 7SECTORIAL APPROACH 9DESIGN AS PROCESS 10DESIGN AS PROBLEM-SOLVING 10CHAPTER 2 | THE DESIGN ECONOMY 13METHODOLOGICAL DIFFICULTIES 13ENTANGLEMENT OF DESIGN 14DESIGN AS INTANGIBLE VALUE 15ECONOMIC IMPORTANCE 17MICRO LEVEL 19MACRO LEVEL 21ECONOMIC IMPORTANCE IN CANADA 26MARKET FAILURES 28INFORMATION ASYMMETRY 28KNOWLEDGE SPILLOVERS 28POSITIVE EXTERNALITIES 29SYSTEM FAILURE 31CHAPTER 3 | MEASURING DESIGN 32FIRM LEVEL 32NATIONAL LEVEL 32CHAPTER 4 | DESIGN POLICY 35A BRIEF HISTORY OF DESIGN POLICY 35DESIGN SYSTEMS 37FOR SMES 40MINI CASE STUDY: SOUTH KOREA 42CHAPTER 5 | DESIGN POLICY IN QUEBEC AND CANADA 44WHY A DESIGN POLICY? 44MAPPING THE DESIGN SYSTEM IN QUEBEC 45TOWARDS A DESIGN POLICY 49RECOMMENDATIONS 51CONCLUDING THOUGHTS 57BIBLIOGRAPHY 59
  2. 2. 3  AcknowledgementsThe research for this paper was conducted over a short period of three months.Its aim was ambitious: to understand the role of design in the competitiveness ofnations or regions, and in Quebec particularly. I spent most of my early professionallife in the creative industries, yet I am not a designer, nor am I directly involved withthis sector. My recent foray into formal management training, through the undertakingof an executive MBA, has sharpened my competitive intelligence skills. During theprogram, and thanks to a variety of stimuli, I developed a hunch that design couldpossess a relatively untapped power to make our firms more competitive. It is thishunch that I wanted to validate (or invalidate) at the outset of my research. To saythat I found more than I expected is a gigantic understatement. I found more globalawareness of the power of design, more insightful research, more groundbreakingfirms and, above all, more talented and dedicated people.I must thank all of the local and international actors in economy and design that Ihad the chance to speak to throughout this short but intense endeavour. They allowedme, a complete outsider, to peer into their world and helped me to make sense of it.My talks with them have shown that design stakeholders in Quebec are determined toleverage our immense local design talent, and are equally committed to pull theirweight in helping our province to prosper. With only modest means, Quebec’s designstakeholders work everyday miracles. Despite the important challenges that thestakeholders face, and insofar as design is concerned, this incursion leaves me with avery positive outlook on our province’s current and future ability to negotiate turnsand curves in the world competitiveness landscape.Specifically, I’d like to thank Alain Dufour of Mission Design, Béatrice Carabin ofthe Bureau du design (Ville de Montréal), and Pierre Cohendet, professor of economicsat HEC Montréal. I dare hope that, in one way or another, my outsider’s perspectivemay shed new light on your day-to-day business. My warmest thanks also goes toLouis Hébert and Alain Pinsonneault. Much like the design stakeholders I metthroughout my research, Louis and Alain choose to champion innovative ventures overhistorical antagonisms (Louis and Alain respectively represent HEC Montréal andMcGill University in a unique joint EMBA program). I also owe a big thank-you to PierreBalloffet for his trust and encouragements. Lastly, but by no means least, I’d like tothank my life partner, Maude Labelle, for her unconditional support and invaluablecheerleading throughout this adventure.
  3. 3. 4  Towards a Design Policy for QuebecIntroduction“The Obama presidential campaign was an innovation in American politics andAmerican design. For the first time, a candidate used art and design to bringtogether the American people—capturing their voices in a visual way.”This mention is found on the Designing Obama website, which promotes thebook of the same name. The book chronicles the implementation of the designstrategy that was devised for President Obama’s 2008 presidential campaign. Thepresident’s strategists had apparently deemed fit to explicitly leverage the power ofdesign—in this case graphic design—in order to achieve their electoral objectives. Thatdesigners would be commissioned to produce graphic design material for a politicalcampaign is not in itself extraordinary. However, the fact that design played such anexplicitly integral role points to a high-level acknowledgment of the power of design—or marketing aesthetics, as it is sometimes called—as a strategic tool. This is but one ofseveral unexpected design-related findings that are chronicled in this paper. Indeed,Chapter 3 examines recent studies and research papers that have successfullydemonstrated a surprising correlation between good design and such things as crimerate (Cozens et al., 1999) and businesses staff turnover (Backhaus and Tikoo).Moreover, it is not uncommon to witness sustainable design proponents and urbanplanners argue that good design is paramount to improving such broad measurementsas quality of life. The impact of good design practices is nowhere as well documentedas it is in business: “…there is a marked correlation between the use of design and theeconomic performance of companies and subsequent macroeconomic growth.”(Danish Business Authority, 2003). Using various methodologies and samples,numerous more studies conducted in the past fifteen years echo DBA’s conclusion,confirming a correlation between the use of design and markedly better businessperformance. Building on this diverse body of research and the latest reports, thispaper proposes an up-to-date survey of the substantiated linkage between design, theeconomy, and business performance. It does so using available global and local data,as well as theoretical frameworks. Furthermore, it explores how the province ofQuebec and its firms leverage design to increase their competitiveness.Design is a broad term that is used very loosely. Because of this, it must beappropriately defined before delving into the subject. That is why Chapter 1 is entirelydevoted to introducing the various angles from which design can be considered ordefined. Amongst countless definitions that have been advanced left and right, weretain a sampling here and sort them according to whether they are sector-based orprocess-based definitions. Moreover, special attention is given to the broaderproblem-solving concept of design. These various definitions are later deployedthroughout the paper, according to what the context best calls for. When relevant, weexplicitly state to which definition we are referring.
  4. 4. IntroductionPhilippe-Aubert Messier, Towards a Design Policy for Quebec5Chapter 2 proposes an up-to-date survey of what we will call the designeconomy. Data from various studies illustrate the importance of design atmicroeconomic and macroeconomic levels, and highlight the macroeconomicimportance of design in Canada. The rest of the chapter explores how neo-classicaleconomics accounts for design, with a specific focus on market failure theory. As wewill see later, this is a critical concept to address, given that most existing designsupport programs—explicitly or not—rely on market failure-based arguments to justifytheir existence. The chapter opens with two of the most important methodologicaldifficulties in collecting economic data on design, namely the entanglement of designwith other activities, and its intangible quality.While measuring design is clearly challenging, it is no less indispensable, if onlyto satisfy the business mantra that, “one manages what he can measure.1” Chapter 3surveys the different frameworks and methods that are used to measure differentaspects of design. It covers theoretical methods as well as ad hoc industry practices.These fall into two broad types of measurements, namely firm level, and national-levelmeasurements.Chapter 4 covers the relatively new concept of design policy. This concept hasbeen gaining traction in the last decade: nearly half of the European Union countriestoday have an explicit design policy. We relate a brief history of such design policiesand explore its most fundamental tool, the design system. The chapter then goes on toshow how design policies especially benefit SMEs. We conclude with a concreteexample: a mini case study of South Korea. Due to a certain confluence of factors,South Korea has been a world pioneer in establishing design as a national strategicgoal—it drafted its first design policy in 1995—and is still to this day on the forefront ofdesign policy thinking.The fifth and last chapter is entitled Design Policy in the Province of Quebec. Itattempts to build on all of the notions previously explored in this paper to paint aportrait of the situation in la belle province. It starts by mapping the Quebec designsystem in order to provide a clear view of all of the different stakeholders. It pursuesby identifying the strengths and weaknesses of this system. The chapter concludeswith a series of eight recommendations, some of which are moderately straightforwardto implement while others are highly challenging. All the recommendations should beconsidered as the outcome of a survey of the available industry literature, both foreignand local.1From the Dutch “meten is weten,” attributed to Dutch Nobel laureate, Jan Tinbergen.
  5. 5. 6  Chapter 1 | What is design?“Certainly, without design, most goods and services would not exist or would fail tobe differentiated in the market place.”-Creative Economy Report, UNCTAD, 2008Design as Sustainable Competitive AdvantageBefore the 1990s, design was perceived in one of two ways. The first was toregard design as the process by which one addresses aesthetic considerations relatedto a product or a brand. This was understood to encompass typical design activities,such as graphic design, interior design and product packaging. The second conceptionof what conventionally constitutes design referred to the work of industrial designers,who deal with considerations of mass production as well as ease of use andergonomics (Bitard et. al). In both instances, design was treated as an expense—acostly and risky one in the case of aesthetics-driven projects, moreover.Beginning in the early 1990s, a number of practitioners and researchers began tolink design to firms’ competitive advantage: "Recently, business has grownincreasingly aware that design sells. U. S. companies, in particular, are rediscoveringthat good design translates into quality products, greater market share, and heftierprofits." (Kotler and Rath, 1984). What was then often called "competitive aesthetics"was beginning to be seen by managers as more than just another expense. Throughoutthe 1990s and the first decade of the 2000s, a body of research work furthersubstantiated this idea, among which the work of Nussbaum, 1988, 1997; Peters, 1989;Oakley, 1990; Veryzer, 1995; Page and Herr, 2002; Borja de Mozota, 2002; andHertenstein et al., 2005. Gradually, aesthetics and design became recognized for theirstrategic importance as “unequivocal sources of differentiation” (Montana et al., 2007)and, therefore, as potent tools by which to gain a sustainable competitive advantage.The bulk of this work focuses on the various ways in which a firm can better competethrough the use of design. Unsurprisingly, the power of design as a competitive tool ismost widely recognized in the practices of product design and brand management.For ProductsExamples of design-driven products now abound and many ‘star’ products fromthe past 15 years immediately come to mind. In the automotive sector, criticsoverwhelmingly attribute the tremendous success of the New Beetle, the Mini Cooper,and more recently the Fiat 500, to the cars’ aesthetics and overall design (Page andHerr, 2002), (Bitard and Basset, 2008). In the consumer electronics industry, Applehas been consistently delivering groundbreaking new products. Here again, consumersand analysts alike hailed the aesthetic qualities of Apple products and directly creditdesign for their success. (Page and Herr, 2002), (Heskett, 2009). Here in Canada, real
  6. 6. Chapter 1 | What is Design?Philippe-Aubert Messier, Towards a Design Policy for Quebec7estate developer Freed Development has been enjoying tremendous success withtheir design-based strategy for the redevelopment of the west end of Toronto’sdowntown core. The company’s motto, ‘Design-based development,’ encapsulates thefirm’s commitment to design. Clearly, they have made a strategic choice to leveragedesign to increase their ability to compete, as is the case with all of the above-mentioned firms. The 2002 investigation by Page and Herr on the interaction betweenproduct design and brand strength further argues that design can be leveraged byweak brands that wish to compete effectively with strong brands. In other words, theirexperiments show that a design-conscious David has a shot at taking down design-lazy Goliath. This is an aspect that we will look into further when we discuss designand policy making.For BrandsDesign and brands interconnect in several ways. Consumers react to brands inways that are largely conditioned by designers. Consumers will use design cues toevaluate brand and product categories, and an appealing design will lead to positiveassessments of brands (Kreuzbauer and Malter 2005). While marketers in theorycontrol a brand’s message, the language by which this message is conveyed is in largepart the vocabulary of design. Given that visual symbols hold greater value than wordsin the marketplace (Borja de Mozota 2003), fluency in the language of design is theability for a brand to speak to its consumers. Furthermore, with today’s ever-increasingmedia mix, design plays a crucial role as the coordinator of a brand’s image: “[…]design may serve as the cohesive factor for all elements that configure a brandexperience. Consumers can better understand what a brand stands for and what itdoes for them when all of its brand elements are consistent. This consistency can beachieved through design (Montana et al., 2007).”Granted, most technology firms still invest more in research and developmentthan in design, and will use design primarily as a differentiator. However, in sectorssuch as the hotel and restaurant business (the largest sector within the tourismindustry), “the intangible aspects of offerings are more important than the tangibleones.” (Montana et al. 2007). Thus, some industries are apt at leveraging design morethan others. Yet, it is more often than not outstanding product design that receives thelion’s share of praise. Indeed, beyond product development, it is not well understoodhow design benefits firms. The sectors where intangibles play a greater role, such asservices and retail, are perfect candidates for increased performance through design.We will return to this point later; in order to make such an argument convincingly, wemust first define exactly what design is.Defining DesignA logical prerequisite to an assessment of design’s role in the economic wellbeing of societies is the capacity to define what design is. However, this is not such an
  7. 7. Chapter 1 | What is Design?Philippe-Aubert Messier, Towards a Design Policy for Quebec8obvious endeavour. Interpretations vary wildly, which partly explains why design is stillsuch an exotic topic in economics and management. "Most business executives haveno idea what design means if it doesnt involve the iPod," quips Jeanne Liedtkajokingly in her 2010 paper about strategy and design. How can one study, compareand correlate things that have not been properly defined? How can one manage andteach what one does not fully understand? The confusion surrounding the nature ofdesign is great enough to have an impact on policy making, as Bitard and Bassetremark in their 2008 Pan-European study, entitled “Design as a Tool for Innovation”.They state that, “in policy oriented documents, definitions are often too vague formeasurement.” If ambiguity indeed hinders policy-making, achieving clarity about thenature of design should be treated as a strategic issue. Policymakers, like most people,are familiar with industrial or product design, but are often less well versed in thenotions of service design and public sector design. If a policymaking effort is to beendeavoured for Quebec, first it will be necessary to tackle the challenge of definingdesign.The UK Design Council offers these thoughts on defining design:“Good design isnt simply about the surface. Aesthetics areimportant, but only a part of a bigger picture […]. (Design is) anactivity that translates an idea into a blueprint for something useful,whether its a car, a building, a graphic, a service or a process. Theimportant part is the translation of the idea, though designs abilityto spark the idea in the first place shouldnt be overlooked.” .The aforementioned quote proposes a definition of design, but moreimportantly, it serves as an apt introduction to the difficulty that defining designposes. The UK Design Council begins by defining design by what it is not (“not onlyabout the surface”), and then moves on to suggest that we should not “overlook”anything when considering it. This dancing around the issue shows how design isinclined to evade definition. In laymen’s terms, design is an umbrella designation for awide variety of things, which commonly includes certain commercial activities(industrial design, interior design, etc.), a set of processes (service design, softwaredesign, etc.), as well as objects that abide by certain aesthetics principles (a designlamp, designer jeans, etc.). To understand how designers themselves think aboutdesign, Michael E., Atwood, and W. McCain, compiled a list of designers’ owndefinitions in their 2002 paper, entitled “How Does the Design Community ThinkAbout Design?” Here is a sampling of some of the definitions advanced by designers:J. Christopher Jones ...initiating change in man-made thingsChristopher Alexander ...the process of inventing physical things whichdisplay new physical order, organization, form, inresponse to function
  8. 8. Chapter 1 | What is Design?Philippe-Aubert Messier, Towards a Design Policy for Quebec9Horst Rittel ..structuring argumentation to solve “wicked”problemsDonald Schön ...a reflective conversation with the materials of adesign situationPelle Ehn ...a democratic and participatory processJens Rasmussen/Kim Vicente ...creating complex sociotechnical systems thathelp workers adapt to the changing and uncertaindemands of their jobWe can see already that designers view their work as much more than merestyling. In the context of this paper, we will limit ourselves to two families ofdefinitions. On the one hand, we will consider those definitions that offer somerelevance to the world of business. On the other, we wish to explore a broaderreflection on the human capacity for altering our environment. With that in mind, wewill review briefly what we shall refer to as the sectorial and process approaches, andthen spend more time exploring what we shall designate design as problem-solving.Sectorial ApproachAs down-to-earth as it may sound, studying design as a sector is a thornyendeavour. The international classification of economic sectors does not provide aclass that encompasses all design activity, because designers are employed, to avarying degree, in almost all economic sectors. The European Commissionclassification of sectors (NACE Rev2, 2008) thus limits its scope to activities thatdirectly involve design:74.10 Specialised design activitiesThis class includes: - fashion design related to textiles, wearing apparel, shoes,jewellery, furniture and other interior decoration and other fashion goods as well asother personal or household goods - industrial design, i.e. creating and developingdesigns and specifications that optimise the use, value and appearance ofproducts, including the determination of the materials, mechanism, shape, colourand surface finishes of the product, taking into consideration human characteristicsand needs, safety, market appeal in distribution, use and maintenance - activities ofgraphic designers - activities of interior decorators62.01 – Computer programming activitiesCovers design and programming of web pages71.11 Architectural activitiesCovers architectural activities
  9. 9. Chapter 1 | What is Design?Philippe-Aubert Messier, Towards a Design Policy for Quebec1071.12 Engineering activities and related technical consultancyCovers engineering design, i.e. applying physical laws and principles ofengineering in the design of machines, materials, instruments, structures,processes and systems (Bitard et. al)Various reports and research papers use the so-called ‘creative industry’ as a proxy fordesign activities (Bitard and Basset). The British report “Creative Britain – New talentsfor the New economy” (DCMS, BERR and DIUS, 2008) defines the creative industry asfollows: “The creative industries include advertising, architecture, the art and antiquesmarket, crafts, design, designer fashion, film, interactive leisure software, music, theperforming arts, publishing, software and computer services, television and radio.” TheUNCTAD’s “Creative Economy Report” also uses a sectorial approach when assessingthe economic importance of design, with the added subtlety that it places design inthe ‘functional creations’ category. While we naturally recognize that suchamalgamation can be relevant and useful at times, it fails to account for some of theessential properties of design.Design as ProcessIndustrial design projects are typically conducted as a set of sequential tasks tobe performed, along the lines of: “establishing requirements, defining alternatives,validating and selecting solutions” (Hatchuel et al., 2003). Engineers and industrialdesigners ascribe to this process-based concept of design. Although this adequatelydescribes observable industrial design activities, this view of design does not accountfor the content input at each of the stages. The process is described as a series ofevents, independent of the designer’s intellect or any other form of cultural input. Inreality, each of these steps must be fuelled by ideas, culture, and human interaction.There is thus an argument to be made in favour of admitting the concept of ‘FuzzyFront End,’ broadly defined as the chaotic initial assessment phase of productdevelopment, as a helpful complement to such purely sequential depictions of thedesign process. Doing so would grant the process a notion of incertitude, which isfundamental to design, and upon which we now shall expand.Design as Problem-solvingAside from the word design, what do service design, software design, interiordesign, graphic design and architectural design have in common? One quickly sees thepitfalls of the sectorial approach in that these design practices do not have much incommon in terms of required skills and knowledge. Though there is a hint of acommon process in most of the activities above, this does not tell the whole story. Inhis 1986 “Report of the Research Briefing Panel on Decision Making and ProblemSolving”, Herbert Simon, the 1978 Nobel laureate in economics, wrote: “…ambiguousgoals and shifting problem formulations are typical characteristics of problems ofdesign,” He further qualified design work as addressing ill-structured problems. We
  10. 10. Chapter 1 | What is Design?Philippe-Aubert Messier, Towards a Design Policy for Quebec11argue further here that the driving force of what we call design, as well as the creativeeconomy, is a competency for solving such ill-structured or ill-defined problems, byleveraging information detained by a given collectivity. As we will see in chapter 5,policies that recognize design as a vector of economic growth will not aim to supportstrictly the design sector, but rather any initiative that aims to leverage abilities thathelp a given community to solve ill-structured problems. Take interior design as anexample. A given project will present itself as “refreshing the office floor of CompanyX.” This project is collective, because solutions will leverage knowledge from acommunity of stakeholders: employees, managers, contractors, tradespeople, cityofficials, inspectors and building administrators. It is ill-defined; what is it that thecollective really aims to do? Hide cracks in the walls, away from the view of clients?Boost employee morale? Convey a brand message? Improve employer attractiveness?Satisfy a manager’s vanity? Most of these questions will not be addressed explicitly inan offer of services. Yet it is these very issues that the interior designer will dig up,consciously or not, in order to execute his or her mandate. Choosing finishes andcolours is merely the observable technical aspects of his or her work. The designchallenge lies deeper: to understand the office floor occupants’ and managers’ ill-defined problem, and use collective and technical knowledge to address it.In his 2008 book, The Power of Design, Richard Farson argues: “on a larger scale,design can potentially contribute to solutions to societal and economic problems.” Wewould add that this concept of design could enable us to view business managers andpolitical leaders as designers. While this may sound a tad absurd, one could look at itthis way: would it be so far-fetched to state that the Minister of Finance has justfinished designing this year’s budget? Many already refer to the ‘designing’ of socialprograms. Isn’t there something that feels intuitively right in those arguably oddstatements? Budget drafting obviously has nothing to do with aesthetics or what onecommonly thinks of as creativity. Still, one could consider that budget planning on anational level is design because it is the mother of all ill-structured problems and itinvolves a collectivity. Simon made a similar argument in favour of a broad definitionof design:“Everyone designs who devises courses of action aimed at changing existingsituations into preferred ones. The intellectual activity that produces materialartefacts is no different fundamentally from the one that prescribes remediesfor a sick patient or the one that devises a new sales plan for a company or asocial welfare policy for a state. Design, so construed, is the core of allprofessional training; it is the principal mark that distinguishes theprofessions from the sciences,”(Simon, 1981).Furthermore, we can link this definition of design to the recent interest the issuehas garnered. In urban centres, we have been witnessing an increasing need for designas problem-solving, in particular within the field of architecture: “The skills of fine-tuning a complex building and fitting it into a difficult site are going to be neededmore in future, as pressures to build on urban brownfield sites, or adapt existingbuildings, continue and increase. In such circumstances standardised forms of
  11. 11. Chapter 1 | What is Design?Philippe-Aubert Messier, Towards a Design Policy for Quebec12construction and formulaic design simply do not work” (Worpole, 2000). Once adesign problem is well defined and remedied, it no longer requires a designer’s input.A solution is standardised and deployed, sometimes globally, until it is no longeruseful. Yet, the architectural example above shows how standardized deployment isseldom achievable in urban settings. The more complex things get, the more we needdesigners to solve problems. The energy sector is on a similar path: now that theecological impact of energy production has become obvious all around the globe,‘standard’ ways of producing it are often considered unacceptable and new ‘designs’must be put forward to accommodate this reality.While these theoretical definitions somewhat succeed at getting to the core ofwhat many authors think of as design, its broadness is yet another factor thatcomplicates attempts at design policy-making. We have yet to witness a localoperational definition of design that would allow us to collect statistics, addressperformance issues, and carry out effective industry-level monitoring and policy-making. While several research bodies have published studies with similar goals (theBritish Design Council, the Economic Research and Business Information, the City ofToronto, etc.), the resulting reports typically suffer from using other sectors, oraggregate data, as proxies, which arguably limits the effectiveness of any eventualintervention these studies might suggest. Bitard and Basset (2008) propose that wereconsider the very definition of research and development that is used in Europewhen collecting statistics, in order to isolate the design component, thus avoidingoverlapping and misleading data. If design is to be a vector for improving nations’competitiveness, as many prescribe, this definitional hurdle should be recognized and,if not addressed by further research, its complexities should be taken intoconsideration. Hatchuel, Le Masson, and Weil (2003) expressed a need for a betterunderstanding of design: “we need a framework coming from recent perspectives ondesign theory which define ““design” as the dual generation of concepts (innovations)and knowledge (competencies).” They further add that design “needs a complexlearning process in uncertain contexts and some forms of “mapping”, “guidingpatterns”, or “framing”.” Meanwhile, policy-making that focuses strictly on design as aset of economic sectors will miss the core competence of design, which we argue isthe solving of ill-structured problems, and its modus operandi, the pooling andleveraging of human knowledge and resources. This construct of design is a researchtopic in itself: firstly, because it is the least understood; secondly, and paradoxically,because it is arguably the one in which resides the most value as a competitive tool.
  12. 12. 13  Chapter 2 | The Design EconomyIn this chapter, we discuss the design economy. Readers will likely recall thatseveral such new economies were recognized in recent decades. The so-called NewEconomy itself, but also the knowledge economy, and more recently the creativeeconomy. These last two obviously overlap in countless ways. This paper argues thatthe design economy is a better-suited proxy by which to survey economic endeavoursof a creative nature. The creative economy, through deliberate effort or not, has thearts at its semantic core (after all, art is the ultimate ‘creative’ act). However, art is notconcerned with economic output, and most artists would argue that art is not market-oriented, primarily because “creative integrity requires the artist or artistic director tobe essentially product-oriented”(Holbrook et al., 1985). Design, on the other hand, “fitsinto the “functional creations” category”(UNCTAD, 2008). It openly pursues “marketobjectives” (idem). Though the arts are an essential contribution to society and theeconomy, art’s lack of preoccupation with market demand makes it an odd choice forposter boy of a new economic growth engine. In terms of exports, design is the largestand fastest growing subgroup of all the creative industries. It is also one of the twosubgroups2of the creative industries that are of greatest economic and socialimportance for developing countries (UNCTAD). For these reasons, design, or thesolving of ill-structured problems—which includes creativity and art in its toolkit and isconcerned with market output—is a far more promising core around which to structureyet another new economy.Yet can we quantify design’s impact on firms and nations? How much value canit add to a product, or to society? Design supporters will naturally turn to economistsfor answers. Unfortunately, with remarkably few exceptions, the discipline ofeconomics does not acknowledge design. Herbert Simon indicates why: “Economics[…] works on three levels, those of the individual; the market; and the entire economy”(1981). Economics does not concern itself with what is going on at the firm level, nordoes it model design as part of the production of the wealth of nations. This chaptersurveys several means by which design nonetheless can be linked to economic output.It also addresses the various methodological difficulties inherent to doing so. The coreof this chapter aims to sketch a portrait of design’s impact at micro and macro levels,with a particular spotlight on Canada. Lastly, this chapter will examine so-calledmarket failures. This economics concept describes situations in which pricedetermination fails to abide by classical economic market efficiency rules, and willtherefore provide perspective on how the market values and rewards design.Methodological Difficulties2The other one is Arts & Crafts
  13. 13. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec14There are several difficulties with assessing the value of design. These difficultiesare possibly responsible for design’s relative absence in economic and managementtheory, despite its undeniable economic importance, as we shall see later.Entanglement of DesignIt is often challenging, if not impossible, to isolate the design factor from allother factors that affect market response and consumer quality judgments inreference to a brand or product. This entanglement of multiple perceptual stimulirenders design effectively impervious to quantitative studies. As North put it, “whenintegrated into product development processes it is virtually impossible to disentanglethe precise contribution of design, or any other discipline, to the final outcome”(North, 1990). While we can easily find quantitative studies on the effectiveness ofmany management tools, we have yet to read convincing studies on the effect ofdesign’s best practices on a firm’s profitability. Qualitative inquiries and case studiesabound, but they often preach to the converted, and bear neither the appeal nor theexplicitness found in quantitative studies. Granted, studies on many management toolssuffer from the same entanglement with other factors that plagues design research.Thus, such studies easily could be subject to the same form of reader scepticism.However, proponents of most new management tools and frameworks will oftenmanage to provide some quantitative data. While it rarely suffices to prove causalityon its own, quantitative data has the power to apply a veneer of credibility that mostqualitative studies on design seldom can offer.The comprehensive 2002 study by Page and Herr is one of the few thatsucceeds at disentangling aesthetics, function and brand strength. They recognized atthe outset that, “when both aspects of design are considered, it seems unlikely thatconsumers will respond to a product in a simple manner.” Their set of controlledexperiments aimed specifically to disentangle consumer responses to function,aesthetics and brand strength. These experiments succeeded in improvingunderstanding of this dynamic relationship, and provide several valuable insights. First,it blurred the lines that had previously been drawn by the affective-cognitive matchingframework proposed by Fabrigar & Petty in 1999. This framework suggests thatjudgments about likability are affected by aesthetics, while quality is primarily affectedby cognitive information such as product specifications and brand strength. Page andHerr’s experiments blur these lines by showing, for example, that aesthetics has apositive impact on both likability and quality judgments. In short, these findings furthersubstantiated the ‘what is beautiful must be good’ inference process, described in 1972by Dion et al.Another valuable insight revealed by Page and Herrs experiments concerns therelationship between aesthetics judgments and brand strength. Their findings suggestthat aesthetics influence quality judgments more for weak brands than for strong
  14. 14. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec15ones3. The results initially, and unsurprisingly, confirm the authors’ hypothesis that a“strong brand will positively affect the quality judgment of a product.” They go on toshow that, because it lacks the positive ‘aura’ of a powerful brand, a weak brand’sproduct quality judgment will instead be qualified by its aesthetics. This simple insighthas a wide range of implications for start-ups and small businesses that wish tocompete with stronger brands. Indeed, without a known brand as a clue to gauge aproducts quality, the experiments tell us that consumers will instead rely onaesthetics. Therefore, weak brands must leverage design in order to better compete; itis simply too powerful a lever to be ignored. Strong brands benefit from equity when itcomes to quality perceptions, and therefore are more impermeable to theconsequences of poor design. But herein too lies a warning for strong brands: whenweak brands leverage aesthetics, not only are they able increase their competivenessin terms of consumer likeability judgments (which one intuitively might have guessedwould be the case), but also in perceptions of quality. Returning to methodologicaldifficulties, Page and Herr caution readers that they conducted their experiments on a“high symbolism” product category (laptop computers), which is likely to affect theweighting of the different variables in consumers’ responses. These experimentsshould therefore be re-conducted with a product that is low in symbolism in order tosee if the results are consistent or not.Design as Intangible Value"…the gross national product does not allow for the health of our children,the quality of their education, or the joy of their play. It does not includethe beauty of our poetry or the strength of our marriages; the intelligenceof our public debate or the integrity of our public officials. It measuresneither our wit nor our courage; neither our wisdom nor our learning;neither our compassion nor our devotion to our country; it measureseverything, in short, except that which makes life worthwhile. And it tellsus everything about America except why we are proud that we areAmericans.4"- Robert Kennedy Jr., 1968As Senator Kennedy wisely put it, gross domestic product and other sucheconomic measures fail to account for all sorts of alternative sources of value that wetypically refer to as ‘intangible value.’ Cultural value and historical or spiritualsignificance are hardly measurable, and therefore provide little comfort to theempirical analyst. The recent work of Dr. Zec and Jacob from the red dot institute aimsto assign numerical values to what they dubbed design assets and design strength, butthis proprietary method has yet to gain acceptance. While it may be of interest for3Strong and Weak brands are used broadly in the original text. They can be readrespectively as recognizable brands and unkown brands.4Robert F. Kennedy Address, University of Kansas, Lawrence, Kansas, March 18, 1968.
  15. 15. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec16internal use, the Generally Accepted Accounting Principles currently limit its scope.Indeed, according to GAAP, investments in design will suffer the same treatment asthe research part of R&D projects, where research will only be considered a tangibleasset when it can be linked to a revenue stream. Because of design’s entanglementwith technology in product development, it will hardly ever show up a by itself as aline item on a firm’s balance sheet. At best, disentanglement and recognition of designinvestments and assets by GAAP would be treated by readers of financial statementswith the same form of scepticism that R&D investments and assets typically inspire,e.g. as highly subjective measures to be interpreted with caution. This aside,economists have realized since 1968 that economic growth tends to stem more andmore from investments in intangibles. Research and development have long been theholy grail of investment in intangibles. For decades, these activities mobilizedgovernments, who were told that support for R&D was the salvation of innovation-driven economies. As shown in Table 1, R&D has been supplanted by design in theUnited Kingdom, in terms of relative share of intangible investments.Bias is the final methodological hurdle that hampers design research. Indeed,openly ‘pro design’ bodies finance most of the studies that the discipline relies ontoday. Bitard and Basset caution that, “...professional organisations are often keysources and disseminators of the relevant and up-to-date data on design. This can beconsidered as having a mixed effect on the measure; they provide the latest accurateassessment, but may not be objective.” While it would be hasty to reject any and allstudies conducted by design professionals, independent studies would be welcomeadditions to the body of research, if only to bolster its credibility. As long as interestedparties continue to emit the lion’s share of design studies, these will leave themselvesopen to scepticism and criticism.SOURCE: NESTA Innovation Index 2009 (2009:11)Table 1: NESTA Innovation Index 2009: UK investment in intangibles   Investment  in  intangibles  (UK  –  2009)   £Billion    1   Training  &  skills  development   32.1   24.1%  2   Organizational  improvement   26.1   19.6%  3   Design   22.1   16.6%  4   Software  development   20.2   15.1%  5   R&D   14.9   11.2%  6   Advertising  &  market  research   14.5   10.9%  7   Other   3.5   2.6%     TOTAL   133.4   100  
  16. 16. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec17Economic ImportanceThe 2009 crowning of Steve Jobs as ‘CEO of the decade’ by Fortune magazinereminds us that, however defined, design exerts a considerable impact on the worldeconomy. The man who is credited for making the computer sexy was obsessed bydesign, down to the smallest detail of circuit board layouts inside the devices he built.Today, Apple is the largest company in the world, and aesthetics and design havebeen at the core of its competitive edge throughout this rise to dominance. Catchyheadlines aside, many of the world’s largest firms place design at the core of theircompetitive strategy. Design’s economic clout is undisputable. We can get a glimpseof its importance simply by sampling the language used by some of today’s top firmsin their annual reports:“The Company’s business strategy leverages its unique ability to design and developits own operating systems, hardware, application software, and services to provideits customers new products and solutions with superior ease-of-use, seamlessintegration, and innovative design.” (Apple)“Philips taps teams of futurists, cultural anthropologists, designers and scientists todevelop user centered products and services.” (Philips , first sentence of the annualreport, p. 2). ()Proctor & Gamble: Report subtitled “Designed to grow,” in which key chapters areentitled “Designed to Grow,” “Designed to Win,” “Designed to Deliver” and“Designed to Lead.” (Proctor and Gamble)As early as 1978, Herbert Simon pointed to design as a factor in economic theory.Further neglect of this subject can arguably be explained by the methodologicaldifficulties that we explored earlier, in addition to the fact that economics is primarilyinterested in markets, and less by issues at the firm level. Despite this, manyorganizations have found ways to assess the economic importance of design.The British Government has provided us with the largest quantity of studies andstatistics on design and design-related topics, though they are not alone in suchendeavours. Their New Talents for The New Economy study in 2001 (DCMS, BERR andDIUS) revealed that the creative industries in the UK generate revenues of around£112.5 billion and employ some 1.3 million people. Exports contribute around £10.3billion to the balance of trade, and the industries account for over 5% of GDP. A morerecent study conducted in 2008 further revealed that, “Two million people areemployed in creative jobs and the sector contributes £60 billion a year – 7.3 per cent –to the British economy. Over the past decade, the creative sector has grown at twicethe rate of the economy as a whole and is well placed for continued growth as
  17. 17. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec18demand for creative content – particularly in English – grows.”(DCMS, 2008). Since2006, the Design Council in the UK has been compiling design-specific statistics in itsannual “Design Industry Research”. The 2010 edition of the report states that, “theoverall annual earnings of UK design businesses are estimated at £15bn– this includesdesign consultancy and freelance fee incomes as well as in-house design team budgets– an increase of approximately 15% since 2005, taking inflation into account.” Thispegs the design-specific activities (design as a sector) in the UK at 2.5% of GDP, andbroader creative industries at 7.3%. Table 2 compares design with various sectors ofthe British economy.SectorsContribution toGDP (in billion ofpounds)% ofGDPYear ofreferenceDesign as sector £15 2.5% 2010Hotels andrestaurants£33 4% 2004Publicadministrationand defense£55 7% 2004Creative industry £60 7.3% 2008Financial andbusiness services£86 10% 2004Since 1995, studies on design have been conducted by the Design InnovationGroup, Britain’s Design Council, the UK Department for Culture, Media and Sports(DCMS) and Denmark’s National Agency for Enterprise and Housing. Together, thesestudies have long constituted the main body of empirical data on the design sector.Here are some of the most valuable insights from these studies:• Where comparisons with previous, less design-oriented, products were possible,sales [of design-oriented product] increased by an average of 41 per cent. (DesignInnovation Group, 1995)• Every £100 a design alert business spends on design increases turnover by £225.(Design Council – UK, 2007)Table 2: Relative Gross Value of the Design Sector and Creative EconomySources:United Kingdom National Accounts The Blue Book 2006.,UK Government Department for Culture, Media and Sports (DCMS), 2001, CreativeIndustries Mapping Document, Foreword.Design Council (2010) Design Industry Research 2010.
  18. 18. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec19• So called ‘Gazelles5’ are nearly six times as likely as static businesses to see designas integral to their activities. (Design Council – UK, 2007)Lately, Britain’s Design Council has been on the forefront of research anddistribution of information about design at large, and is also a leader in empiricalresearch on design’s importance in the economy. Here are more insights gleaned froma number of their studies currently published on their website:• In businesses where design is integral to operations, over three quarters say they’veincreased their competitiveness and turnover through design.• Businesses that see design as integral don’t need to compete on price as much asothers. Where design is integral, less than half of businesses compete mainly onprice, compared to two thirds of those who don’t use design.• Businesses where design is integral to operations are twice as likely to havedeveloped new products and services. In the past three years, four fifths of themhave, compared to a UK average of 40%.• Turnover growth is more likely for businesses that increase their investment indesign. Conversely, those that decreased investment cut their chances of growth.• Two thirds of UK businesses believe that design is integral to future economicperformance.• Rapidly growing business are three times more likely than the rest to considerdesign crucial to success.• Rapidly growing businesses are twice as likely as the UK average to have increasedinvestment in design. Over two thirds have done so recently.• Businesses that add value through design see a greater impact on businessperformance than the rest.Source: Design Council, UK, from their website.Micro LevelStock MarketThe Design Council carried out a study of UK FTSE-listed companies between1994 and 2003. In the ensuing report, entitled The Impact of Design on Stock MarketPerformance, the sixty-three companies that had been identified as effective users ofdesign were shown to outperform the FTSE 100 index by 200% over the entire periodof the stufy. A number of previous studies had shown similar results (Fitch, 1998; UKDesign Council, 1999; and subsequent review by Hugh Aldersey-Williams), but this wasthe first study of the genre to cover a full decade, and to include both bear and bullmarkets. This was also the first study not to be subsequently challenged about itsmethodology, sample size or breath. The methodology of the study is based on theidentification of ‘good performers’ in design, which is done by accounting for the5Gazelle is a term used to describe a small yet very high growth firm.
  19. 19. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec20various design awards for which FTSE-listed companies are laureates. As we will see inthe next chapter, when attempting to correlate firms’ use of design and their financialperformance, this approach is widely used. In this study, two portfolios were createdwith companies that had won at least one prize in the selected set of design-relatedawards shows. The ‘Design Portfolio’ and ‘Emerging Portfolio’ respectively representhigher scorers, and lower scorers, in terms of number of awards won.As Figure 1 shows, the study spans both the bull market of the 1990s and the bearmarket of the early 2000s. The Design index tends to outperform the FTSE indicesin the bull market. Table 3 also clearly shows that both the Design Portfolio and theEmerging Portfolio companies, despite the generalized slump, managed to preservetheir value through the bear market of the 2000s much better than their peers.Source: Design Council, February 2004Figure 1: Design portfolios performance over ten years(1994-2003)
  20. 20. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec21Table 2: Highs and lows of portfolio performancePortfolios & IndicesNb. ofCompaniesDesign Portfolio Emerging PortfolioLargest one-week fall -Bear marke Low-High-28 Feb, 2000* High-6 Mar 2000* 2012-09-10,2001*3 March 2003*Absolute PerformanceFTSE 100 100 +89.8% +92.2% +39.1% +2.1%FTSE All-Share 700+ +85.3% +87.5% +26.5% +0.2%Design Portfolio 63 +295.9% +292.4% + 168.7% + 135.6%Emerging Portfolio 103 +235.0% +245.8% + 121.1% + 110.2%Relative to FTSE 100Design Portfolio 63 +206.2% +200.3% + 129.6% + 133.4%Emerging Portfolio 103 +145.2% + 153.6% +81.9% + 108.1%Relative to FTSE All-ShareDesign Portfolio 63 +210.7% +204.9% + 142.2% + 135.4%Emerging Portfolio 103 +149.8% + 158.2% +94.6% + 110.0%Macro LevelGiven the impact that design has on individual firms, one would suspect that asimilar impact might exist for national economies. Yet despite design’s economicimportance, very few studies have addressed macro-level design competitiveness.Starting in 2005, Designium6in Finland compiled the Design Competitiveness Index asan attempt to assess macro-economical design competitiveness. For its most recentsurvey in 2010, researchers at Designium used the criteria below to compile it.Capacity for InnovationCompanies obtain technology (1 = exclusively from licensing or imitating foreigncompanies, 7 = by conducting formal research and pioneering their own products6DESIGNIUM - Centre for Innovation in Design ®, Helsinki University and the New ZealandInstitute of Economic Research (NZIER)• All figures relative to 29 December 1993• SOURCE: Design CouncilSOURCE: Design Council February 2004
  21. 21. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec22and processes)Production Process SophisticationProduction processes use (1 = labour-intensive methods or previous generations ofprocess technology, 7 = the world’s best and most efficient process technology)Extent of MarketingThe extent of marketing in your country is (1 = limited and primitive, 7 = extensiveand employs the world’s most sophisticated tools and techniques)Degree of Customer OrientationFirms in your country (1 = generally treat their customers badly, 7 = are highlyresponsive to customers and customer retention)Extent of BrandingCompanies in your country that sell internationally (1 = sell into commoditymarkets or other companies that handle marketing, 7 = have well developedinternational brands and sales organizations)Source: Global Design Watch, DESIGNIUM - Centre for Innovation in Design ®The results are published bi-annually in the report Global Design Watch. Thisreport is a welcome complement to the wealth of competitiveness data, which theWorld Economic Forum has already been publishing for more than three decades intheir Global Competitiveness Report. Figure 2 plots the Designium design ranking ofdeveloped nations against the Growth Competitiveness index published by the WEF.There is a clear correlation between the two indexes, which confirms the tendencyobserved at firm level, namely that nations that are apt at design are also morecompetitive.
  22. 22. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec23Sources: Global Design Watch 2006 and 2008, World Economic Forum, Global CompetitivenessReport 2009/2010, 2007/2008 and 2005/2006.According to these results, Canada is better at growth competitiveness than atdesign. This data supports the warning offered by Porter and Martin, when theyaddressed the manufacturing industry in 2000. The two scholars expressed concernabout Canada’s trailing position in terms of innovation. They argued that the country’scompetitiveness at the time was still due to elusive factors such as favourableexchange rates and the price of commodities. They further warned that a failure todrive innovation and entrepreneurship would hinder Canada’s transition into aknowledge economy. Individual country results from the Global Design Watch report,shown in Figure 3, supports Porter and Martin’s forewarning: Canada occupies anenviable 9thrank in growth competitiveness, but still ranks only 23rdin design, whichsuggests that innovation is trailing.Switzerland  United  States  Singapore  Sweden  Denmark  Finland  Germany  Japan  Canada  Netherlands  Hong  Kong  SAR  Taiwan,  China  United  Kingdom  Norway  Australia  France  Austria  Belgium  Korea,  Rep  New  Zealand  4  4.5  5  5.5  6  6.5  0  5  10  15  20  Design  average  2010  Growth  CompeBBveness  Index  ranking  2010  Figure 2: The relationship between design performance and growth competitivenessTable  6:  Growth  Competitiveness  Index  
  23. 23. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec24We also see that Canada underperforms on the ‘nature of competitiveadvantage’ criteria. According to Porter and Martin, this poor performance is due to “aweakness in strategy,” where Canada “has pursued replication, not distinctiveness.”In 1990, Korea became one of the first countries to directly invest in design toimprove its national competitiveness. At the time, the Korean government felt itneeded to compensate for the drop in demand for their goods (Diamond, 2008). Aswe will see in Chapter 4, Korea is also a world leader in design policy and designresearch. The Korean Institute of Design Promotion (KIDP) has improved on previousdesign research methods. It audaciously proposed “the first-ever framework toevaluate countries’ design competitiveness.” KIDP revealed the framework’s firstresults in 2008. Seventeen major countries were assessed under the heading NationalDesign Competitiveness Report 2008. The report proudly indicates on its front pagethat Korea ranked 8thin design competitiveness, compared with 9thin 2007 and 15thin2010 (according the Designium’s studies). Otherwise, results are difficult to comparesince the Korean so-called NDCP methodology relies on a three dimensionalframework. The framework’s three axes represent public goods level (design policy);design industry level (design industry), and consumers level (design culture) (KIDP).GrowthCompetitivenessIndexrankingCompanyspendingonR&DNatureofcompetitiveadvantageValuechainbreadthCapacityforinnovationProductionprocesssophisticationExtentofmarketingDegreeofcustomerorientationDesignAverageDesignRankingCanada 9 4.2 3.6 4.1 4.4 5.3 5.6 5.5 4.67 23 rrrUSA 2 5.6 5.5 5.4 5.5 5.9 6.4 5.7 5.71 5Germany 7 5.8 6.4 6.2 5.9 6.4 5.8 5.6 6.01 3Source: Global Design Watch, DESIGNIUM - Centre for Innovation in Design ®, Helsinki University and the NewZealand Institute of Economic Research (NZIER) and World Economic Forum, The Global CompetitivenessReport 2010-2011.
  24. 24. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec25One could question the communication effectiveness of this three-dimensionalmodel (it is difficult to read and interpret). Altogether, the NDCP methodology doesmark a step forward in design research, if only by the fact that it includes input fromboth the public and consumer sectors in its assessment.Although research on the macroeconomic impact of design started as early as1990, data is still relatively sparse, especially when compared to other sectors ofsimilar economic importance. With the recent quasi-universal recognition of thecreative economy as a powerful growth engine, it is likely that we will see more studiesin the years to come. Methodological hurdles will remain, however. The entanglementof design within larger existing data sets, such as R&D investments, will still preventconvenient in-depth analysis. As Bitard and Basset put in in their 2008 study,“Measurement is the crux of the matter: without a clear operational definition of designactivity, which translates into an effective official statistic system (such as theEuropean Community Innovation Survey, CIS), policies in support of design lackfundamentals.” Therefore, research on the macroeconomic impact of design shouldnot only aim to collect and analyse new data, but also to refine existing sources byuntangling elements like R&D.Figure 3. Three-dimensional analysis of design competitiveness by countrySource: KIDP, 2008
  25. 25. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec26Economic Importance in CanadaData on design in Canada is, unsurprisingly, nearly inexistent. A 2006 joint studyby Concordia University and the University of Toronto paints a historical portrait ofdesign policy in Montreal, but it does not provide any numerical data on design’seconomic importance for the city of Montreal, the province of Quebec, or the countryas a whole. The same year, the City of Toronto’s Economic Research and BusinessInformation program published a report that argues for an increased leveraging ofToronto design capabilities. While the report does not directly address the economicimportance of design in the Canadian or Torontonian economies, it does put forwardcompelling statistics on design as a discipline that permeates every sector of theeconomy.Industry (NAICS name)AllDesignersArchitectsLandscapeArchitectsIndustrialDesignersGraphicDesignersInteriorDesignersOtherDesignersMining and Oil & GasExtraction0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0%Utilities 0.2% 0.7% 1.8% 0.4% 0.1% 0.0% 0.0%Construction 1.8% 2.2% 3.5% 3.1% 0.2% 7.0% 0.6%Manufacturing 14.8% 2.3% 1.8% 51.3% 13.4% 3.2% 20.4%Wholesale Trade 2.2% 0.3% 1.8% 5.7% 2.0% 2.2% 3.0%Retail Trade 6.0% 0.5% 1.8% 3.3% 2.8% 13.5% 23.0%Transportation &Warehousing0.3% 0.0% 0.0% 0.8% 0.4% 0.3% 0.0%Information &CulturalIndustries7.5% 0.3% 0.0% 1.5% 12.5% 0.3% 10.9%Finance & Insurance 1.2% 0.8% 0.0% 0.0% 1.9% 1.0% 0.0%Real Estate & Rental &Leasing0.4% 0.7% 0.0% 0.0% 0.3% 0.9% 0.9%Professional, Scientific &Technical Services58.6% 88.6% 60.2% 29.7% 59.6% 68.8% 28.1%Administrative & Support,Waste Management &Remediation Services2.2% 0.4% 21.2% 1.5% 2.1% 1.0% 3.3%Educational Services 0.6% 0.7% 0.0% 0.0% 0.8% 0.0% 0.7%Health Care & SocialAssistance0.2% 0.0% 0.0% 0.0% 0.4% 0.3% 0.0%Arts, Entertainment &Recreation2.2% 0.3% 1.8% 0.8% 2.4% 0.4% 7.6%Accommodation & FoodServices0.2% 0.0% 0.0% 0.0% 0.1% 0.7% 0.0%Other Services (ExceptPublic Administration)0.9% 1.2% 0.0% 0.8% 0.9% 0.3% 1.1%Public Administration 0.9% 1.9% 7.1% 0.8% 0.6% 0.6% 0.4%TORONTO(%) 100.4% 100.8% 100.9% 99.6% 100.4% 100.6% 100.0%Table 4: Employment by Industry and Design Occupation in Toronto CMA, 2001 (°/>)27Source: ERBIC, Making The Link, 2008.
  26. 26. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec27While many consider cities like Toronto and Montreal to be design clusters intheir own right, the statistics also clearly reveal that design is a key component ofmany other industries too. Table 4 shows how design pops up in almost every sector.This pattern resembles what we would observe if looking at information technology,e.g. a distinct cluster in itself, yet also as an “enabling service” (ERBIC) across theentire economy.Design and Non-Design SectorsTable 4 also shows that design is not particularly prevalent in many sectors.Indeed, it is not surprising that the mining and oil industries do not make extensive useof design. One can act on this discrepancy in one of two ways. First, it could be usedto orient design policy toward sectors that make extensive use of it. Alternatively, itcan be used to identify opportunities for improvement—for gaining a competitiveadvantage—where it is under-utilized. While infusing raw materials with designattributes may seem like an amusing idea, let us be reminded of the many productcategories that have gone from a very low degree of differentiation to anextraordinarily high degree, sometimes within a remarkably short timeframe. Beforethe 1990s, blue jeans bore a straight leg and were sold in denim blue, light blue, andblack. Levis sold them for around $40, and its classic design dominated the market. Inthe early 1990s, companies such as Guess Jeans decided that jeans were not just jeansanymore, but could now be considered a fashionable clothing item. They produced asteady stream of models throughout the 1990s and 2000s that totally awakened thedenim category from its commodity slumber, transforming it into the extremelydifferentiated, high fashion behemoth of a category that it is today. Jeans can still bebought at Wal-Mart for low prices, but the price range extends well into the thousandsof dollar for custom-order jeans, with every possible option between these twoextremes. In a similar fashion, two unlikely bedfellows turned the accommodationsindustry on its head: Ex-Studio 54 club promoter Ian Schrager and French designerPhilip Starck are together credited for launching the boutique hotel concept thattransformed hotel rooms and lobbies into fashion statements and lifestyle experiences.This created a whole new playing field on which to compete. Whereas hotelspreviously were selected based on their amenities and proximity to services andattractions, etc., ever since Morgans opened up in New York City, a new category oftravellers now chooses their accommodations based on design. Condominiumdevelopers have recently borrowed from this model and created the so-calledcondotel. This concept is mostly found in city centres and brings hotel-style servicesto condo living; and, more importantly, it offers a design-infused, modern citizenlifestyle modeled on the boutique hotel ethos. Returning to the subject of rawmaterials, Swedish furniture giant IKEA used design processes and aesthetics toleverage its considerable forestry resources. In that sense, it is not such a far cry tosubmit that the province of Quebec could use ingenious design in a similar fashion toleverage its own forestry or aluminum industries. In 2000, Michael Porter and RogerMartin argued that the road to Canada’s competitiveness and economic prosperity canonly be maintained and improved through an innovation-based strategy. Indeed, it hasbeen said so many times that it has almost become a cliché: Quebec’s primary sector
  27. 27. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec28industries must convert to more value-added offerings. What is scantilyacknowledged though, at least at the political level, is that design—both in a narrowsectorial sense, and in a broader ‘solving of ill-structured problems” way—cancontribute to meeting that goal.Market FailuresTo promote government intervention in support of R&D and innovation, itsadvocates often rely on the market failure economic theory. Its core idea is that, whenleft to its own devices—for various reasons—the market fails to reward firms thatinvest in innovative projects. This concept certainly applies to design. Indeed, we canobserve the market failing to value design in many ways. The most prominent causesof market failure in design are asymmetry in information, spillover of knowledge,positive externalities, and failure of the system. (EU, 2006), (Bitard et al. 2008),(EBRIC, 2006).Information AsymmetryInformation asymmetry refers to the absence of information necessary toproperly value a product, service, client, etc. This leads to pricing being affected—whether positively or negatively—in a manner that does not reflect the true value ofthe goods being exchanged. Hence, a “bad used car” will often be bought for morethan it is worth, because of the lack of available information about it. (Borooah)Conversely, someone selling a “good used car” might have trouble getting a fair pricefor it because of asymmetric information between himself and the buyer. Suchexamples illustrate how prices can become distorted in an entire sector. Much like thecase of the “good used car,” in nations that have little knowledge about the benefits ofgood design for their economy, the market won’t be able to appreciate design’s truevalue. As we have seen, at both the firm and national level, the strong relationshipbetween design and overall performance is well established. Yet results suggest thatCanadians at both levels—and possibly many designers too—underappreciate this fact.This partly explains why neither firms nor governments (with the exceptions of themunicipal governments of Toronto and Montreal) have shown significant commitmentto incorporating design into their growth strategies.Knowledge SpilloversIn most nations, intellectual property law protects innovations through elaboratemeasures for patent filing and enforcement. While this approach has been successfulat protecting countless scientific and technological innovations, most ideas stemmingfrom design are not eligible for patent registration. Aside from the occasional patentedindustrial design breakthrough, firms rarely pay compensation or give credit whenreplicating a designers idea. Many garment chains proud themselves in being able to
  28. 28. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec29source new ideas from elite fashion or furniture shows in New York, Paris or Milan, onlyto reproduce the design in a matter of weeks. Copyright law requires some minorchanges in the design, but the styles themselves are notoriously un-copyrightable.Hence, “innumerable companies around the world specialize in being "fast-followers,"adept at rapidly producing imitations of successful innovations at low cost.” (Heskett,2009).Positive Externalities‘The faces of buildings which are turned outwards towards the world areobviously of interest to the public, and all citizens have a property in them. Thespectator is in fact part owner. No man builds to himself alone. Let the proprietordo as he likes inside his building, for we need not call on him. Bad plays need notbe seen, books need not be read, but nothing but blindness or the numbing of ourfaculty of observation can protect us from buildings in the street. It is to be fearedthat we are learning to protect ourselves by the habit of not observing, that is bysacrificing a faculty.’- W.R. Lethaby, Architect, 1922Architects were early to recognize that the impact of their work goes far beyondthe utilitarian aspects of the roofs they design for us under which to work and live. Thecultural value of architecture to society is now relatively well acknowledged. Weunderstand, for example, that competitiveness in the tourism industry often relies onthe number of architectural artefacts that a city possesses and can proudly showcaseto visitors. Economists use the word externality to describe unintended or corollaryeffects of an economic activity, for which the economic impact is unforeseen, or at thevery least, not initially taken into account. For example, the cost of reconditioningcontaminated soil after a quarry’s ore has been exhausted is an externality. Throsby(2003) argues that designers and artists support a dual market: “(a) a physical marketfor the good which determines its economic price and (b) a market for ideas whichdetermines the good’s cultural value.” Countless authors credit design, architectureand art with the generation of extraordinary amounts of cultural worth, as well asmany other such side benefits, or positive externalities.On Well-Being and CrimeThe notion that ill-designed housing complexes in many ways favour alienationand crime has been the subject of many studies, dating as far back as the 1970s.Today, architects and urban planners carefully optimize spatial layout and use trafficand lighting as tools to reduce criminal incidents and procure a sense of security fortenants. The impact of design on crime is so well established that it has become aresponsibility for developers and landlords to manage these issues:“The design-affects-crime debate may well become increasingly important.Indeed, the courts in America are increasingly holding landlords and others liable
  29. 29. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec30for failing to take sufficient security precautions to prevent criminal attacks ontheir tenants and guests. Third parties are being increasingly sued for premisesliability, especially if a criminal attack can be partially attributed to poor design(Cozens et al., 1999).Most police forces in England and Wales now have an ‘architectural liaison officer.’This agent can be called upon to consult with the police force on addressing crimeproblems through design solutions. This relationship between arguably odd partnershas been remarkably fruitful. This suggests that design could be put to use as part ofother such counterintuitive tandems, and provide similar benefits. Worpole furthersuggests that positive externalities of design may already include such hidden benefitsas a reduction in demand for health care provision, and possibly even an increase ineducation attainment.On Human ResourcesOffice buildings are the largest capital asset in the developed world. This is alsowhere half of the workforce is employed (Bole et al., 2006). The role of designers haslong been to cram as many cubicles as possible into an office floor plan, but this isshowing signs of changing. Indeed, the priorities in office design have shifted towardscreating efficient, employee-friendly spaces that encourage informality andcommunication. Human resources academics publish studies with titles such as “TheImpact the Physical Work Environment Has on the Professional Performance andPsychological Well-Being of Employees” (Earle, 2003). While human resourcesprofessionals link the quality of the office environment with employee performance,office design is also becoming a key differentiating factor when trying to attractemployees in the first place, a fact that is confirmed by Jeffrey Taylor, Chief ExecutiveOfficer of the Internet-based career centre Monster.com: "Our office design is a perkto clearly differentiate us from other companies."On Quality of LifeRobert W. Veryzer has published several studies that together demystify therelationship between product aesthetics and consumers’ affective judgments. In a 1993article entitled "Aesthetic responses and the influence of design principles on productpreferences," he concludes that, “Aesthetics/design has the capacity to influence thevery quality of life itself by literally shaping the products that make up so much of the"world" in which we live” (Veryzer, 1993). Design can improve access for the disabledand elderly; it can simplify complex operations, make optimal use of space, andminimize maintenance; it can improve civic pride and sense of identity. Design can acton countless little things that make up the wider notion of “quality of life.”On Tourism
  30. 30. Chapter 2 | The Design EconomyPhilippe-Aubert Messier, Towards a Design Policy for Quebec31We erect buildings to fulfill a function, such as housing families, businesses, orsporting events. These serve their function, but some of them, old and new, fulfill anentirely different purpose: to elicit gazes and awe from locals and foreigners alike. Ifthere is one common element in the activities of any type of tourist--whether it beyoung backpackers, retirees, or lovebirds—is that they will visit architecturallandmarks. Not only that, many will choose their destination based on one landmark, oran abundance of landmarks. Cities like Rome, Paris, and Florence support their tourismindustry through their established architectural heritage, while Barcelona, Berlin andChicago distinguish themselves by regularly proposing radical new designs. One of themost striking examples of an architectural project stimulating the tourism industry isFrank Gherys spectacular design for the Guggenheim Museum in Bilbao, Spain. Thispreviously run-down patch of industrial riverside now attracts 3 million visitors a yearand has become one of the richest cities in the country. In the words of HerbertMuschamp, the architecture critic for the New York Times:“Bilbao has lately become a pilgrimage town. The word is out that miracles stilloccur, and that a major one has happened here. The citys new GuggenheimMuseum, a satellite of the Solomon R; Guggenheim Foundation in New York, openson Oct. 19. But people have been flocking to Bilbao for nearly two years, just towatch the buildings skeleton take shape.” (Muschamp, 1997)Tourists’ spending power has changed the fate of Bilbao in this impressiveexample, but the same phenomenon is at play, to varying degrees, in cities throughoutthe world. Other prominent examples include Beijing ‘bird’s nest’ Olympic stadium byHerzog & Meuron, the Burj Kalifa in Dubai, and lastly the Millau Viaduct. Thisextraordinary countryside bridge is yet another stunning example. Sitting there alonein the valley of the river Tarn in southern France, the bridge alone attracts over600,000 tourists annually, on top of its 4-million strong automotive traffic (AFP, 2011).System FailureThe final aspect that can produce market breakdown when it comes to design isthe failure of any component of a so-called design system to function properly, thuspossibly affecting otherwise working components of the system. For example, a nationmight have considerable innovation skills, yet insufficient venture capital to properlyfund go-to-market strategies. The market would thus diminish the design output ofthis nation because its products fail to make it to market. We will examine eachcomponent of a design system in Chapter 5, but for now let us understand systemfailures as either missing links, or coordination failures, between collaborating partnersin design, thus preventing design from expressing its value.
  31. 31. 32  Chapter 3 | Measuring DesignGetting accurate measurements of R&D investments and returns has beencrucial in raising its importance. In the late 1980s in the United Kingdom, the House ofLords science and technology select committee urged increases in R&D. The ensuinginflux of new investments required new accounting procedures, customized financialreporting, and results measurements. This eventually led to the creation in 1992 of thefirst R&D scoreboard, which unleashed R&D policy (Design Council’s website). R&D,which had often been viewed as "too creative to measure" (Design Council), was nowunderstood sufficiently enough that firms and nations could invest in it. Design is atthis stage today, where R&D was in the early 1980s; there is growing awareness ofdesign’s ability to increase competitiveness, yet substantiating the design discoursewith significant empirical evidence is still challenging. This begs the question: whereare we when it comes to the measurement of design? This chapter will addressdifferent attempts at quantifying design, at the firm level and national level.Firm LevelIn keeping with the current gospel that managers should manage what they canmeasure, design managers look to implement performance indicators. Academics inthe field have promoted the use of the balanced score card to integrate notions ofdesign value into regular business performance monitoring. The vision-based, holisticapproach of the BSC is easy to appropriate for designers (Borja de Mozota, 2006).Another potential contribution to firm-level design measurement is the DesignValue methodology, put forward by Dr. Peter Zec and Jacob Burkhard for the Red DotInstitute. The guiding principles of this proprietary method, the full details of whichhave not been released to the public, were the subject of the eponymous book, DesignValue (2010). The aim of the authors was to devise a rigorous framework forquantifying a firm’s design value. As part of this framework, they devised a formulathat combines new concepts that they put forward, such as design assets and designstrength, and which together can be used to calculate a firm’s design value:Design value = Design revenue x (Design strength + Design continuity) + DesignAssetsThe method used to generate the terms of the equation remains unpublished for now,though it can be bought as a consultancy service by firms in need of such valuation.National Level
  32. 32. Chapter 3 | Measuring DesignPhilippe-Aubert Messier, Towards a Design Policy for Quebec33The Danish Design Ladder is a tremendously useful tool for conveying a nation’suse of design. This model originally stemmed from a study that aimed to benchmarkDanish companies on their investment in design. The study surveyed 1,000 companiesand tracked various metrics including revenue, employment, and exports. The survey’sreport concluded that firms that use design have an additional growth of 250%compared to others. Using the survey data, firms could be categorized into four stagesof “design maturity” that characterize each stage’s use of design. In 2011, the SEE usedthe Danish Design Ladder model to categorize nations using maturity stages, albeitslightly different ones than in the original Danish model, as shown in Figure 8.Other initiatives include the “International Design Scoreboard” produced by theUniversity of Cambridge. Measurement of design can also be found in the GlobalDesign Watch report 2010, which offerds qualitative benchmarking of national designpolicies. The World Economic Forum (Global Competitiveness Report 2012-2013) ranksnations according to a number indicators, including a few that are design-related. TheUnited Nations Conference on Trade and Development (UNCTAD) publishes TheSources: Design Creates Value, National Agency for Enterprise,Copenhagen, 2007 & SEE 2011.Figure  8:  Danish  Design  Laddder  (2007)  &  Design  Policy  Ladder  (2011)  STAGE&4:DESIGN&AS&STRATEGYDesignisakeystrategicmeansofencouraginginnova3onDesignisintegraltothedevelopmentprocessDesignisonlyrelevantintermsofstyleDesignplaysnoroleinproduct/servicedevelopmentSTAGE&3:DESIGN&AS&PROCESSSTAGE&2:DESIGN&AS&STYLINGSTAGE&12:NO&DESIGNSTAGE&4:POLICY&VISION&FOR&STARTEGIC&DESIGNSTAGE&4:POLICY&VISION&FOR&SERVICE&DESIGNSTAGE&4:POLICY&VISION&FOR&INDUSTRIAL&DESIGNSTAGE&4:NO&POLICY&VISION&FOR&DESIGNDK&/&FI&/&UK&/&EUEE&/&ES&/&SI&/&SEBE&/&CZ&/&FR&/&IE&/&IT&/LV&/&PL&/&PT&/&RO&/&SKAT&/&BG&/&CY&/&DE&/EL&/&HU&/&LT&/&LU&/&MT&/&NLDesign&Policy&Ladder&2011DanishDesign&Ladder&2007
  33. 33. Chapter 3 | Measuring DesignPhilippe-Aubert Messier, Towards a Design Policy for Quebec34Creative Economy Report every two years, which measures the economic importanceof different creative sectors, including many design-related sectors. Both the datafrom UNCTAD and the WEF studies rely on very narrow sectorial definitions of design.The data will show, for example, total revenues generated by a country’s architectureand interior design firms. These studies therefore fail to account for increased tourism,human resources benefits and other externalities that are generated by designprojects, nor do they account for the design-related revenues of the designers’ clients.These two notable omissions from such seminal publications demonstrate that we arenot yet able to provide quantitative data that captures the full scope of the economicimpact of design on a national level.
  34. 34. 35  Chapter 4 | Design PolicyIn the previous chapters, we established design’s importance to the economy, aswell as how it can procure competitive advantage for firms as well as nations. We alsoidentified the ways in which classical economic theory fails to account for design’s truevalue to society. From positive externalities that procure tremendous value to society,to systems that fail to deliver economic value, we are seeing that leveraging design’spotential can be a tricky task. Yet we know that innovation-driven economies mustrely on “Business Sophistication” and “Innovation,” both of which already dependheavily on design, to further their competitiveness. (World Economic Forum, 2012Global Competitiveness Report). In light of these facts, a question remains: how are weto overcome the challenges in valuing design, in order to harness its power to delivercompetitiveness and growth? Several nations have run into the same challenges, andmost have responded with what we now refer to as a national design policy. In thissense, design is following in the footsteps of R&D, which had sustained the samemarket failures as we now see for design. The overbearing evidence of the importanceof R&D for nations’ competitiveness spurred governments to step in with innovationpolicies that aim to correct market failures, often by subsidising R&D. We should notethat R&D, on its path to universal acknowledgement as a growth tool, suffered thesame methodological difficulties that plague design research today. Indeed, beforeR&D funding became widespread in the developed world, R&D investment advocateshad to overcome the challenges posed by vague definitions, scarce data, anddifficulties establishing causal links.A Brief History of Design PolicyCharles and Ray Eames are the designers behind many iconic chairs and objectsthat we still see around in both museums and living rooms today. In 1958, the Indiangovernment asked Eames to visit India and write what was later to be called TheIndian Report. The Indian government wanted the designer to “recommend a programin the area of design that would serve as an aid to small industries.” (Eames, Charlesand Ray, 1958). The Indian government sensed that its population did not possess thedesign skills (the report would confirm that) that would enable them to address thepoor quality of the consumer goods that the country produced. While modest, thisinitiative likely was nonetheless the world’s first attempt at a national design policy.At that time, there were virtually no trained professional designers in Japaneither. Just like India, Japan had judged that design professions were key to theircompetitiveness and took on the task of creating a design workforce. By 1992, Japanhad 21,000 industrial designers as a result of the policies introduced by the Ministry ofInternational Trade and Industry. Just as Japanese designers were acquiring these newskills, the semiconductors industry was exploding. Those two trends dovetailed and
  35. 35. Chapter 4 | Design PolicyPhilippe-Aubert Messier, Towards a Design Policy for Quebec36gave rise to the Japanese consumer electronics industry that would take soon take theworld by storm.In 1993, the Design Management Institute dedicated an entire issue of the DesignManagement Review to design policy (Design and National Policy). The following year,a new issue of the same journal tackled the question of measuring design. By then, theimpact of design on micro and macro economics had been identified and severalnations were actively creating policy to better leverage design’s potential. In 1993,Korea launched its first five-year national design policy, which it has updated everyfive years since. By 2011, 17 of the 27 EU member states (SEE, 2011) had explicitlyincluded design in national policy, with prominent regional design policy initiatives inCatalonia, Flanders, Lapland, Silesia and Wales. (Whitcher et al., 2012). A 2010 reportentitled Global Design Watch by Finland’s DESIGNIUM, the New Centre for Innovationin Design, compared different national design policies and programs. These policiesrange in scope and depth. In Korea, for example, the national policy favours designpromotion over direct investment in firms (Raulik et al., 2010), while the US devotesmore energy to education in design at managerial levels and the creation ofmultidisciplinary courses (Designium, 2010). Most countries that have a design policyalso will have a formal body to coordinate the different stakeholders.
  36. 36. Chapter 4 | Design PolicyPhilippe-Aubert Messier, Towards a Design Policy for Quebec37Design SystemsProposed by academics, design systems arearguably the most powerful tool available to thosecreating design policy. This structural modeldelineates the different components that interact toeventually output design. Beyond simply mappingthe sector, design systems help to “emphasise thecomplex and dynamic nature of design activitywhich involves many stakeholders in an interrelatednetwork”(Raulik, 2009). Proponents of the designsystem suggest that governments use this analysisframework to identify which component(s) of thesystem might be underperforming. This informationcan in turn be used to develop policy instrumentsthat address those weak links, thus enabling thesystem to maximise its output. In short, this tool canbe used to address all types of market failures thatwe identified earlier:Information asymmetry: by spotting where knowledge is absent;Knowledge spillovers: by spotting weaknesses in intellectual propertyprotection;Positive externalities: by integrating them into planning;System failure: by spotting where communication is blocked.As initially defined by University of Wales professor Gisele Raulik-Murphy et al, (2009),design systems should comprise a minimum of 4 components, e.g.: design promotion,design support, design education and design policy (see figure 4.). Design promotionrefers to any initiative that aims to increase public awareness of design, such as awardshows, exhibitions, etc. Some cities, including the city of Toronto, endowed themselveswith design museums as a means to promote design. Design support is usuallyprovided through government programs that assist businesses in leveraging design toincrease their competitiveness. Design education obviously refers to the training ofdesigners; however, more and more we also see design education showing up inmanagement education curriculum. Design education is therefore not seen strictly assectorial education, but rather as something that spans various disciplines. Forexample, The Australian Governement Public Sector Innovation website reports thatsome of its staff members recently enrolled in an eight-week design course that willteach them about designers’ methods and processes (2012). Lastly, at the centre of aDESIGNPOLICYPROMOTIONEDUCATIONSUPPORTdesigners+managerspublicbusinessesSource: Raulik-Murphy et al.(2009)Figure 4. Generic representationof a National Design System in2009
  37. 37. Chapter 4 | Design PolicyPhilippe-Aubert Messier, Towards a Design Policy for Quebec38design system is a design policy that provides governance and coordinates thesystem’s various components.Of course, such design systems representations serve only as a basic frameworkto which nations or regions add various components, based on their specifics needs,issues, and priorities (see Figure 6.). A more recent generic design system put forwardby Whicher et al., (See Figure 5) adds a further level of detail. It identifies—and therebyhighlights the importance of—components such as the design sector itself, regulations,and design clusters. This model alsodissociates design funding (public andprivate) from design support. Regardlessof the specific components of the system,the goal remains the same, namely toidentify the components of a system sothat one may in turn ensure that thesework cohesively. There are also designsupport and policy initiatives that gobeyond national borders. One of the mainactors in the European Union is the SEEproject. SEE stands for SharingExperience Europe –Policy, Innovation &Design and is “a network of 11 designorganisations sharing knowledge andexperience in order to develop newthinking, disseminate good practices andinfluence local, regional and nationalpolicies for design and innovation.” SEEstarted in 2005, and has been at theforefront of research and publicationabout design ever since. In the first fewyears following its inception, SEEidentified design programs throughoutEurope that were working in isolation andset out to remedy this. In particular,communication gaps were revealedbetween design organisations andgovernments that undermined the proper functioning of the different design systems.The SEE project’s various publications and networking contributed to EU-wideawareness of design issues amongst all stakeholders. While speaking at the SEEconference in 2011, Peter Dröll of the European Commission proposed the followingvision: “by 2020, design is a fully acknowledged, well-known, well-recognised elementof innovation policy across Europe.” Another noteworthy, Europe-wide, initiative fromthe now-defunct INNO-GRIPS (Global Review of Intelligence and Policy Studies), is the2008 research conducted by Pierre Bitard and Julie Basset entitled “Design as a Toolfor Innovation.” This ‘outsider’ inquiry is still one of the most comprehensive surveys todate of issues surrounding design in the competitive landscape. More recently in 2011,Source: Whitcher et al., 2012Figure 5. A more elaborate representation of ageneric National Design System in 2012.DESIGNCENTRES,ASSOCIATIONS&CLUSTERSDESIGNINVESTMENT(PRIVATE&PUBLIC)DESIGNSUPPORTDESIGNCENTRES,ASSOCIATIONS&CLUSTERSRESERACH&KNOWLEDGETRANSFERDESIGNEDUCATIONPROFESSIONALDESIGNSECTORPOLICY,GOVERNANCE&REGULATIONDESIGNFUNDINGSUPPLYDEMAND
  38. 38. Chapter 4 | Design PolicyPhilippe-Aubert Messier, Towards a Design Policy for Quebec39and presumably following Bitard and Basset’s findings, the commission awardedfunding of €4.8 million to six projects that proposed to advance the European DesignInnovation Initiative,’s mission, which is “to exploit the full potential of design forinnovation and to reinforce the link between design, innovation and competitiveness7.” The projects are:EuroDesign – Measuring Design ValueSEE Platform: Sharing Experience Europe – Policy Innovation DesignIDeALL – Integrating Design for All in Living LabsDeEP – Design in European PoliciesEHDM – European House of Design ManagementREDI: When Regions Support Entrepreneurs and Designers to InnovateSource: EC’s website, Projects supporting the take-up of the Design in Innovation Policy7From EDII’s website, 2012.
  39. 39. Chapter 4 | Design PolicyPhilippe-Aubert Messier, Towards a Design Policy for Quebec40For SMEsDesign policy is not in itself targeted towards one sector or another. It aims tomake better use of design across all company sectors and sizes. That being said, thereis reason to believe that design policy is of greatest benefit to SMEs. As we stated inChapter 1, research by Page and Herr shows that weak brands may be able to competeeffectively against strong brands, as long as the weaker brand’s offering exudessuperior design. In other words, while strong brands provide some protection from thedisadvantages of poorly designed products, SMEs with weak brands do not have thatluxury. In the high symbolism product categories that Page and Herr studied, SMEs arein a sense compelled to produce good design, because otherwise they risk beingcrushed by stronger brands.However, there is a long list of reasons SMEs fail to invest in innovation anddesign. Raulik et al. in their 2009 paper entitled “National Design Systems” compiled,from various research, the following hurdles that SMEs face with regards to usingdesign. First, SMEs are not able to absorb the risk inherent to design and innovationSource: “National Design Systems”, (Raulik-Murphy et al. 2009)ministryofeducaNonministryoftradeandindustrycitycouncilsdesignforumfinlanddesignstartprogramtekesdigesdesign2005(research)designroundtableacademyoffinlandint.designbusinessmgmt.prog.polyVtechnicsgraffianat.assoc.ofg.designersministryofforeignaffairsinsNtuefordesignresearchresearchinsNtuteofthefinisheconomyuniversityoflaplandornamofinnishassoc.ofdesignersfoundaNonsfinishindsutriesdesigniumuniversityofartanddesigndesign2005(technology)FUNDINGSOURCESDESIGNPOLICY DESIGNPROMOTIONDESIGNEDUCATIONPROFESSIONALASSOCIATIONSDESIGNSUPPORTRESERACH&DEVELOPMENTNaNonalDesignSystemFINLAND(asof2007)private&nonprofitsectorFigure  6:  National  Design  System  in  Finland,  as  of  2007.      
  40. 40. Chapter 4 | Design PolicyPhilippe-Aubert Messier, Towards a Design Policy for Quebec41projects; their size makes them more conservative. Second, SMEs often do not haveinternal design resources and rely on consultants. The difficulty in managing designconsultants is said to be a key reason for the failure of design projects (Roy, 1994).Such design management problems are “much more likely to occur in companies withunder 100 employees, and especially affected the smallest companies with under tenemployees.”(Roy, 1994). Third, SMEs are not connected to the rest of the system. Theymight not take advantage of all available grants, support projects, or new markets,because the manager hours needed to do so are often simply not available (Johnsonet al., 1990). Fourth, SMEs tend to foster “efficiency, cost cutting, incremental changesand a focus on day-to-day business. Innovation is not likely to flourish in such aculture.” (von Stamm, 2004). Lastly, SMEs generally rely on simple organizationalstructures. “Typically, they are managed in a personalised way that directly reflects theknowledge, skills and attitudes of their owners or managers.” (Bruce et al., 1999).

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