Morningstar

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Case study - Morningstar online 1998

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Morningstar

  1. 1. Institute of Design Illinois Institute of Technology Case Study # #0598-001 Morningstar: Using Design Strategically to Deliver Usable Information
  2. 2. The Institute of Design The Institute of Design (ID) is an international leader in teaching systemic, human-centered design. Its curriculum focuses on advanced design methods and theories. Together, faculty and students draw upon many perspectives to identify current and future needs affected by dramatic technological, social, and economic changes in our society, and to humanize the technology needed to solve those problems. The aim is innovative products, communications, and systems that simultaneously reduce product development time and cost. Two main approaches are used: Design Planning and Human-Centered Design. Design Planning fuses analytical methods from business, observation and evaluation methods from the social sciences, and design methods, to extend the work typically done by business consultants and strategic planners. The aim is to create design briefs that rigorously analyze business situations, propose and simulate many possible new directions, and recommend the best paths to follow. Human-centered design approaches focus on user-centered methods of designing products, services, systems, environments, and software. The goal is to understand how people comprehend and use the built environment, to evaluate their expressed and latent needs, and to add value to users’ lives. For more information on the Institute of Design, its philosophy, its mission, and its programs, call: 312 595 4900 write: Institute of Design Illinois Institute of Technology 350 North LaSalle Street Chicago, IL 60610-4726 USA or visit our Website at: http://www.id.iit.edu
  3. 3. Acknowledgments This case study was prepared from interviews and analyses by MDes and PhD students at the Institute of Design under the supervision of Professor John Heskett. Initial groundwork and interviews were conducted during the fall semester, 1997 as part of the course Case Study Development (ID571-052) , by participating students: Izabel Falcão Barros Kyung Ran Choi Martin Ebert Elizabeth Glenewinkel Diane Jacobsen Jooyun Melanie Joh Bill Kerr Ding Bang Luh Abel Monametsi Luís Pereira Guy Suesuntisook Further work and analysis was conducted in spring semester, 1998, as part of the course Case Studies of Advanced Design Projects (ID570-051) by participating students: Izabel Falcão Barros Elizabeth Glenewinkel Diane Jacobsen Bill Kerr Luís Pereira Guy Suesuntisook Our grateful appreciation is due to the following people at Morningstar who gave very generously of their time, and openly of their opinions. Since being interviewed, some have changed position and title, but for the sake of continuity their status at the time of being interviewed has been retained: Joe Mansueto, Founder and CEO of Morningstar Don Phillips, President Gary Silverman, Director of Marketing Catherine Gillis-Odelbo, Publisher at Morningstar Susan Dziubinski, Editor of the Morningstar Investor Professor Philip Burton, Design Consultant to Morningstar Martha Boudos, Business Marketing Manager John Tipton, Acting Director of Software Sylvester Flood, Software Development Manager Robert Soto, Production and Design Manager David Williams, Director of Design
  4. 4. Contents Introduction.......................................................................................................... 07 History.................................................................................................................. 09 Corporate Structure and Culture .......................................................................... 10 Markets and Products ...........................................................................................11 Competitors ......................................................................................................... 13 Design Organization ............................................................................................. 14 How Designers Work ........................................................................................... 16 Design Evaluation................................................................................................. 18 Design as Strategic Tool ....................................................................................... 20 Design as a Defining Feature of Morningstar ................................................ 20 Brand and Identity ......................................................................................... 20 Product Differentiation................................................................................... 21 Internal Integration ........................................................................................ 23 Product Development Driver ......................................................................... 24 Conclusions.......................................................................................................... 26
  5. 5. Introduction Morningstar is the biggest mutual fund information service in the U.S. It was described simply in USA Today in 1992: “What does Morningstar offer that has fund investors so excited? Morningstar collects as much information on individual funds as it can and then slices and dices and delivers it in packages that make it easy for individual investors to understand and use.” 1 1. (need reference) Just as a company evolves and changes, so to does the role of design within it. Design has been an important part of Morningstar from its inception. In many ways, it has become part of the fabric of the company, so tightly woven into how they operate, that it is difficult to imagine Morningstar without it. Yet, it is only one of many threads. This case study attempts to examine how design has both consciously and unconsciously affected different aspects of the firm. Set in the context of the history of the company, and through the insights of people from a wide range of disciplines who have helped it grow, this is a snapshot of the role of design at Morningstar – how it is valued, and what potential it offers them as they attempt to develop new products and services for emerging markets. The name Morningstar was inspired by the last line of Thoreau’s Walden: “The sun is but a morning star.” Its visual interpretation is based also on this quotation.
  6. 6. Company History A brief description of the background Morningstar’s founder, Joe Mansueto is necessary, since his beliefs and the circumstances under which he founded the company constitute the main “legend” shaping the company’s culture. From early childhood, he showed entrepreneurial initiative – once ordering 1,000 crickets to sell to neighbors as garden accessories. This business did not succeed as the crickets died before he could make the healthy profit on which he had planned. In a more successful, 6th- grade venture, he made money buyin and selling ham radios. Joe was an outstanding student in hig school, very interested in both math and science. He went on to study English at undergraduate level at the University of Chicago. Even before completing his bachelor’s degree, he enrolled in an MBA course, after a counselor convinced him that busines could be very creative. After completing the two degrees, he and his roommate, Kurt Hanson, established a firm, SSR, to do market research for radio stations. Mansueto left the company in 1982, selling his half to Hanson in 1985. In an effort to gain some experience working in a “real” firm, he found a job at the communications company Golder Thoma, but left after only four months Following his departure from Golder Thoma, Mansueto worked for 14 months at Harris Associates, a money management company. The rest of Mansueto’s story is the story of Morningstar.
  7. 7. Corporate Structure & Culture Joe Mansueto compares his company to a California start-up, on the model of Silicon Valley. “It tends to be a young company, entrepreneurial, kind of fast moving, which is atypical in our industry. This is indeed true; the financial ” information business is predominantly composed of long-existing firms that are formally structured and exude an atmosphere of reliability, expressed in a respect for convention. In comparison, Morningstar has a very flat management structure, evident in an informal, open environment with no private offices, and everybody from the CEO to an entry-level employee sharing the same kind of desk. While there continues to be an absence of any rigidly specified hierarchy, however, one implicitly functions in practice. Major responsibilities at the executive level, are clearly defined. In what can perhaps be seen as an extension of his aversion to rigid definitions of organization, Joe Mansueto similarly tends to sidestep questions about Morningstar’s corporate culture. “The end of the company is not the culture, he ” emphasizes. “The goal of the company is to create great products that help people make better investment decisions, and, to me, that’s what the focus should be on. The lack of structure can therefore be seen as a very deliberate ” means of successfully fulfilling those aims. “I think that part of the goal is that you need to attract great people here, world-class people. We need to have an environment and a culture that, one, they’re going to want to stay at, and build a career at; and, two, be a culture and environment that brings out the best in them and supports producing world-class work. A key point in the company, therefore, ” is a very strong emphasis on the individual. Don Phillips, the President, points out: “We try to hire the person not the degree. He adds, “We try to create an ” environment where people can do their best work. We try not to micromanage. ” Many companies make impressive statements about their employees being their greatest asset, but fine pronouncements are more frequent than the reality of implementation. Nevertheless, when put into practice, such principles can be a powerful competitive element. The advantage for employees is summed up by one at Morningstar as: “I don’t get hassled. I used to have pretty long hair and nobody cared. I was able to do whatever I wanted to do in my personal life, as long as I got my job done. It’s a pretty loose atmosphere. But clearly, an effective ” one, as another employee emphasized: “I think people are inspired to think big. ” When asked how it feels to work for Morningstar, David Williams, Director of Design, sums it up as: “Chaotic. There is not a whole lot of structure, which I guess is something that attracts people here. People don’t think in terms of organizational hierarchy; although there is one. I think one of the original things that is still true here is: the company is young and there is a certain amount of energy and liveliness. Unusual – considering the financial industry that way. I think that always comes through in the products in some way. ”
  8. 8. Markets & Products Morningstar sells its products and services to three major markets: individual investors, intermediary investors, and institutional investors. Individual Investor Market The market for individual investor information is still very small, but growing rapidly as baby boomers reach their 50s and look for advice on how to manage their future finances and pay for children’s college educations. Morningstar serves approximately 70,000 households – or just 1% of the investment market. Individual investor customers are typically more affluent, with a base household income of $127 ,000, and slightly older than the average investor (59 years). The individual investor is primarily looking for information that: • is timely • detailed enough to allow them to make their own investment decisions • comes in a single source • comes from an unbiased source • includes additional training • offers easy-to-understand definition Morningstar tends to attract investors who really enjoy spending time investing their money and are not overly concerned with market fluctuations. They tend to be well-educated and self-employed. They predominantly prefer print information over electronic, although the majority of them own computers. Intermediary Investor Market There are a number of intermediary investors, from insurance brokers to banking officers. Morningstar enjoys high brand awareness and usage rates of 60.7% of the market. It sells half of its products through custom/direct data feeds and on- line sales. Morningstar’s primary customers are financial planners who are typically more affluent investors, willing to pay more for information from a preferred vendor. They are primarily interested in information that: • is from a reputable source • minimizes research time • is easy to use • gets to them before their clients
  9. 9. The Institutional Market Institutions value Morningstar for the ability to repackage overwhelming amounts of information in as many different ways as their needs require. Each institutional investor needs to be educated and designed for in different ways. Comparison of Markets The two markets share some concerns and have distinctive differences. Individuals are more concerned with price, report more problems with services, and are more dissatisfied with timeliness of information they receive. Intermediaries are willing to take more risks, are more concerned with convenience and reputation, and use on-line products and services more frequently. Both still use and prefer print-based information versus electronic, which may have implications for Morningstar as they develop their Internet products. Institutional investors tend to be less attracted to risk and require a higher degree of customization.
  10. 10. Competitors Morningstar competitors can be divided into two different groups: direct competitors and competitor-partners. The direct competitors are content providers, publishing mutual fund rankings based on fund surveys and aimed at investment advisors and financial professionals. Direct competitors include ValueLine Publishing, Inc., Lipper Analytical Services, Micropal and Standard and Poor’s. They produce a range of products that compete with Morningstar. Competitor-partners are those information distributors and Web-based brokers who, while competing with some Morningstar products, also use Morningstar ratings. An example is Disclosure, Inc., an information gatherer and distributor- provider of financial intelligence delivered via advanced on-line and CD-ROM- based research tools. Subscribers have access to a full range of proprietary and third-party company information, including company financial and management information. Other major competitors in electronic trade commerce in this category include Microsoft Investor, Charles Schwab, E*Trade, Fidelity funds, Kaufmann, Motley Fool, InvestIn and Quicken. Morningstar’s competitors in the market for individual investors have traditionally been Value Line, Money Magazine, Standard & Poors, and the Wall Street Journal. (With their launch of an on-line offering, Morningstar.net, Morningstar is facing a new kind of competitor, e.g., the Microsoft Investor site.) In this market, Morningstar faces several challenges: • Delivering information in an even more timely fashion; • Developing innovative ways for individual investors to make their own decisions; • Shifting target market’s preference for information from print-based to electronic (timeliness factor may be a big influence here); • Understanding how Morningstar.net can be developed to appeal to younger investors; • Maintaining a reputation as an unbiased source while accepting advertising on Morningstar.net In the intermediary investor market, Morningstar competes against Value Line, CDA Weisenberger, and Lipper. As with the individual investment market, Value Line appears to be their most serious competitor, but in this market Morningstar appears to have a dominant lead. Although they are ahead of the pack, users have made it clear that there is significant opportunity to make their products easier and faster to use. Other areas in need of improvement include: • understanding specific training benefits planners would like to see • how Morningstar’s products integrate with other financial tools Although competitors are launching more products to compete with Morningstar product lines, real and dangerous competition may come from within. Several of Morningstar.net features are similar to Morningstar paper based products – like Morningstar Investor and Morningstar Mutual Fund Reports. When asked about this dilemma in an interview for USA Today, Don Phillips replied: “You’ve got to make a choice. Are we going to cannibalize ourselves or let someone else do it?”
  11. 11. Design Organization The organization of design at Morningstar began in its early years with consultant designers playing the main role, as with Philip Burton, a professor of design at the University of Illinois at Chicago, who formerly taught at Yale under Paul Rand, one of the preeminent designers of the post-war world, and later responsible for Morningstar’s logo. Burton’s role continues to influential on several levels. He has greatly influence the company’s designers in through educating them in the course of projects, particularly in how to present their work to management and to how to be aware of the value of their contribution. At the highest level of management, he also sits on the strategy committee. As the company has grown, the in-house group has assumed an increasing proportion of responsibilities, particularly since the appointment of David Williams as Director of Design in 1994. Design consultants continue to be used for important supplemental work, as with packaging design by Fitch – a leading design company based in Worthington, Ohio – and with Philip Burton continuing to play a significant role as an éminence grise to ensure cohesiveness and consistency. As with other aspects of Morningstar, the organization of design can best be described as loose, following the entrepreneurial pattern of the rest of the company. There is an absence of defined departmental structure, little reliance on formal processes, and minimal role definitions in how design functions within the company, although, as Director of Design, David Williams’ overall responsibility is clearly acknowledged. Within this loose structure, different focal points of design work, can be identified: Publications Dealing with all paper media that leaves the company (except marketing-related materials) and including the Internet Website. Product Design Very small groups responsible for 2D and 3D products, software and interface design, such as data pages and the Morningstar report. Marketing Essentially writers and graphic designers set up to produce direct mail pieces, posters at trade shows, promotional communications, advertising in magazines, Web banners, etc. On the Website, they are responsible for the advertising element. The first three teams include a total of 12 designers and work in a close and integrated pattern, reporting to David Williams. Marketing has five full-time designers plus two interns and two writers, who report to the Head of Marketing. In terms of qualifications and experience, the majority of designers have a traditional design background – a grounding in the skills of developing two- and three-dimensional forms. However, on the software development and Internet teams, there are some designers with “interface and interactive media” backgrounds.
  12. 12. Currently, design does not have a separate budget but is included in estimates for products, services, and R&D. The total cost of design cannot therefore be estimated. Decisions on capital investment in design to enhance its capabilities are made at the project level, with people responsible for projects making collective decisions. Catherine Gillis-Odelbo observes that at the product level, “ design ... is accounted for, and it’s a negotiation between the business marketing manager and designer over how much time and money is going to be spent on design effort for that particular product or for that particular time period. Decisions about ” investment in design therefore have to be weighed against other needs influencing the purchase of equipment. Another consequence is that staffing of design functions fluctuates, depending at any point in time on the range of projects being worked on. “When someone wants to get something done, they just find a way to get it done.” – David Williams
  13. 13. How Designers Work Given the loose structure of the company, the absence of cut-and-dried procedures that can be simply described should not be surprising. David Williams sums up the essence of how designers work at Morningstar: “There is almost nothing built into the process here because we are so process weak. When someone wants to get something done, they just find a way to get it done. In” practice, therefore, design functions in serendipitous fashion in response to any project in which designers are asked to be involved. The division of design into two groups, one reporting to the design director, the other to the marketing director, also mirrors two very different views in practice of how design should function. They can be characterized as the strategic and the subordinate. Design at the strategic level in involved in decisions about future products, systems, and markets, indeed, how a corporation is to develop. The flexible organization of Morningstar has enabled David Williams to increasingly function at a strategic level, best exemplified by the Internet site project which marked an important expansion of the role of design into product development. The subordinate role refers to situations where design is used in executing decisions that have already been made. The way design functions in the marketing department, for example, is more on the level of a skill-based activity. This is justified by members of the marketing department in terms of the close integration it permits on their projects. The division of roles, however, is felt by some to be an obstacle to developing a fully unified set of design standards. For Gary Silverman, Director of Marketing, the arrangement is not problematic. He observes that on the corporate level, no hard line separates design from marketing; the relationship is close and integral. As an example, he cites the fact that marketing designers report to him in the marketing department, and also work with the design director to achieve appropriate standards. What is obvious at Morningstar, as in most companies, is that design can contribute on many levels, in many ways. In some cases, a valuable learning process has resulted from cooperation across disciplinary boundaries, from which designers also benefit. Gary Silverman feels the contribution of designers is very important as an idea is being formed. Early involvement means designers are often working on sketchy data, but he observes: “If the designers aren’t involved in the original research with the customers to find out who is the customer and how is it going to be used, it would be lot harder for them to design a great product.” What constitutes “a great product, however, in terms of market success is not ” clear, as there seem to be no processes for evaluating success. The nature of the company means there are no specific procedures for establishing basic standards in product development, and products are still launched into the market without criteria by which they could earlier have been screened. The absence of an effective filtering procedure can be problematic on another level. Gary Silverman astutely comments: “Saying no to a great product is as big a failure as saying yes to something that failed in the marketplace. We probably have done that just as often. ”
  14. 14. The situation for designers often tends to be fluid, however, due to the rapid pace at which new products are continually developing, requiring them to adapt to very different work. Few designers are specifically trained for the full range of products at Morningstar, and once they have become competent in a particular area, their loss for any reason can be a problem. If the contribution of design varies in its level of application, it is equally characterized by fluctuating inputs across the phases of product cycles. The design of products from scratch is a long process, requiring substantial time and resources. When completed, however, an on-going maintenance function is required that can be more intermittent and fragmented in the level of commitment. In addition, it often happens that a point is reached where a complete re-design becomes necessary, again requiring extensive input. Ideas for projects originate from various sources. For the most part, marketing managers are responsible for managing products, configuring them in a way appropriate for the audience, budgeting and developing the product to meet those expectations, deciding on distribution and circulation issues, and on how to support the product. Most ideas are generated in-house. Although market research is undertaken for the information it yields on trends in what is wanted, “Truly breakthrough product ideas, according to Martha Boudos, Business ” Marketing Manager, “come from us. They don’t come from market research; they come from inside. They happen because of a chat in the hallway. That’s how that kind of stuff happens. ” Some managers, such as John Tipton, appreciate the participation of designers from the beginning of projects. Commenting on the value of an interface designer knowing what works and what the pitfalls are, he pinpoints one of the major reasons for including design as an integral element from the beginning of projects: “They keep us informed and allow us to make things right from the start, rather than having to battle out changes later in the process. ” Other people observed, in contrast, that due to the lack of formal structures and processes, including design up-front as an equal partner in development processes does not happen evenly across the company. Clearly, the growth and evolution of relationships has not always been easy, but there is evidence of a substantial learning curve in understanding the levels at which design can contribute at Morningstar, which is confirmed by the reactions of numerous managers within the company. “Truly breakthrough product ideas, come from us. They don’t come from market research; they come from inside...” – Martha Boudos
  15. 15. Design Evaluation Evaluation of design can take place both externally and internally. In terms of the former, research played little role in the early history of Morningstar. As founder Joe Mansueto says, “It was pretty much intuition. Today, however, there is ” growing use of a variety of market research techniques. More resources are devoted to both quantitative and qualitative research, with an emphasis on its being market led. A variety of means are used to gain feedback, from quarterly meetings of the User Advisory Committee to formal market research and very informal personal contacts. Joe Mansueto admits that the connection between all the research undertaken and its use for improvement is not as strong as it could be. He also feels, however, that survey results should not automatically be used for change “without feeling some affirmation with your own thought processes that this is a good thing to do.” Design is not a specific topic in such research, although it might feature incidentally through questions to customers on such factors as usability and navigation of software which obviously have design implications. Comments on how easy products are to use, or on how well materials are presented are taken as signs that design is doing the job. David Williams particularly values an industry conference for mutual fund managers organized annually by Morningstar, which provides a big audience and a good opportunity for market research. There is an argument, however, for design to be featured more in external research, in terms of product evaluation, to know more precisely how customers are using information and what they want from it. Internally, the primary means of evaluation are design reviews. For the most part, therefore, reviews remain informal and vary in pattern. In terms of when they take place and who is involved in them, the process is typically, loosely structured. Here too, there is a case for a more formalized approach in order to maintain consistency in overall design. This is a difficulty characteristic of a decentralized rather than a centralized design department.
  16. 16. Exhibit 1: Visual Review of Products Mutual Fund Documents On Disc is a CD- A visual review of ROM, the design of which seems to be based on the design of the original paper product – Morningstar products with as few changes as possible. The content is a replication of the information and format used in the paper version and shipped in the reveals discontinuity same binder only on CD. and lack of a clear message as to the intended user of Principa is a Windows-based CD-ROM version the product; paper- of the complete Mutual Funds On Disc collection that targets the professional market. based products are The CD offers information in a layered format, allowing the user to choose the data for review through a search engine and to choose a the exception. specific layout. This makes the product more interactive and requires the user to posses more computer skills than does the Basic DOS based Mutual Fund Documents On Disc. The design of the graphics expresses the heightened understanding required: red and black pixel abstractions cover the CD’s reference manuals and companion pieces. Ascent targets the personal investor or “retail” market. Direct mail pieces offer, “software helping you to uncover invisible risks that may be lurking in your portfolio. ” Product identity is of a computer key with an arrow pointing up, as if to imply that one butto will get you there. The message is intended to be simplicity, however it is unclear as to exactl what the user will be getting for $23.75. The cover of the users guide has images of time (watch), money (dollar bill), a sharpened pencil, a photo of a family.... This collage of items seems to try to frame customers’ ideals.
  17. 17. Design as a Strategic Tool Design as a Defining Feature of Morningstar Joe Mansueto sums up his views on the strategic value of design as: “ ...design permeates everything, not just the products; it’s the environment; it’s the coffee cups, it’s the purchase order forms. Seen in that light, it is clear that the role of ” design is not accidental, but is a fundamental and vital expression of the whole nature and identity of Morningstar – of what it is and what it represents as a company. Brand and Identity On a more dramatic level, signalling a commitment to employing professional designers of the highest standards, the commissioning of the Morningstar logo was a defining moment, and a major design contribution that has become part of the company’s mythology. In 1991, Mansueto, spent $50,000 for a corporate logo created by the doyen of American corporate identity designers, Paul Rand, responsible for the logos of such established corporations as IBM, Westinghouse, and ABC. The payment of this considerable sum to a designer of Rand’s stature, rather than a much smaller amount to a local design shop, is not typical of a small, relatively unknown company. The continuing presence of Rand’s logo has enormous potency within the company, one of the stories employees constantly refer to when asked about the role of design. It also symbolizes, in a way many people repeating the story clearly do not comprehend, an important insight into how design is practiced and understood within the company. The influence of Joe Mansueto’s belief in, and commitment to, design is enormous, and in the absence of any precisely defined corporate role or structure for design, his personal influence must be seen as a crucial influence in its positioning. Sylvester Flood emphasizes: “There is a design element to all the projects that we work on. Then, consciously or unconsciously, ” he makes a comment that sums up the effectiveness of such championing of design: “It starts at the top and goes all the way to the bottom.” Beyond the distinctive Morningstar logo, however, a body of standards has not evolved. David Williams observes that some standards for the applications of the logo exist, but nothing is written down. “Four years ago, we talked about it, and decided, firstly, that it probably would be a waste of time, because as soon you are finished it is out of date. And secondly, we produce almost all our work “. . . design permeates everything, not just the products; it’s the environment; it’s the coffee cups; it’s the purchase order forms.” – Joe Mansueto
  18. 18. internally. That means people have to realize there has to be some sort of consistency. It is on the level of implicit understanding between the major ” designers at Morningstar, Philip Burton and David Williams, that consistency and compatibility of approach has been maintained, rather than being embodied in a manual. Williams points out that written standards become more important when working with outside firms, when a clear framework for standards becomes imperative. The company has therefore never had a corporate identity manual or set of guidelines. In fact, according to Joe Mansueto, they consciously resisted having one, feeling it might stifle creativity. He now feels, however, that it will be a necessary project in the near future. Don Phillips also feels the time is ripe for a change, particularly with a need to digitize standards. As Morningstar grows and the range of products expands, there is a feeling in some quarters that times have changed and greater definition of design standards would be beneficial. From the point of view of software development, Sylvester Flood comments that if standards exist, they are “in the designers’ heads, and that it would be useful for ” him as a project manager to have them specified. Product Differentiation From the beginning of Morningstar’s existence, a major objective has been to make complex financial information more accessible and easier to understand. Setting a page of Morningstar information next to a competitor’s immediately demonstrates the immediacy with which information can be understood when detailed attention has been paid to information design. The notion of making products that take complexity and translate it into simple, accessible information is inherent in all the products that Morningstar offers. How can design aid this process of clarification? Susan Dziubinski, Editor of Morningstar Investor gives some important clues in stating the most important insight she has derived from design is that people don’t always read the full text, but sometimes only skim the titles or browse the graphics. Realizing that stories could be told through words, pictures and graphics completely changed the approach to the publication. All stories are now told through different and complementary means: text, graphics, headlines and subtitles. “No matter how people ‘read’ their publication, she says, “they will get the information they want ” from it in a clean, clear and representative form. Design is helping us to make all this overwhelming information easier to understand. ” The company goes to great lengths in emphasizing design and utility in its products. The Morningstar binders, for example, that carry hundreds of sheets of information are patented. They were specially designed to protect the papers, but more importantly, to make them easier for people to access and use. Clarity of information is therefore a crucial element in differentiating Morningstar’s products from its competitors, and design has a vital role in making this tangible. Integrity and accuracy are essential qualities in any financial business, as is the foundation of trust between companies and clients. Careful attention to design can be an important factor generating this sense of respect.
  19. 19. It is possible, however, to discern an even more fundamental differentiating role of design. It signals a clean break with all the pre-existing practices and conventions of presenting financial information, and presents a new, young and entrepreneurial image to the public and competitors. Joe Mansueto points out that historically, Morningstar’s competitors have paid no attention to design, so he now tends to look beyond a narrow set of competitors within the financial information area, to companies outside the field, like Crate & Barrel, Esprit or Nike. His competitors’ reactions to Morningstar’s emphasis on design, he believes, is mixed: “I think some of them think it’s unnecessary, that we’re spending money needlessly. And I think others perceive that we do a really good job of marketing and packaging our stuff and they might not articulate it as design, but they perceive us as doing a really good job of that without knowing exactly how or how that came to be. Don Phillips’ comment on the competition ” is much more succinct: “It seems that firms either get it or they don’t. ” In standards of design, Morningstar has a clear advantage over early competitors such as Value Line and Lipper, according to Philip Burton, who describes their work as “terrible and ugly. Contrasting their products with Morningstar’s, he ” comments: “You can compare the quality of editorial design, typography, logotype, layout, contents, etc. They cannot compete with us.” Some try to do so by copying. David Williams sees many attempts by competitors to imitate Morningstar, both in general look and even to the extent of directly imitating specific details such as typographic elements. He attributes this to Morningstar’s perceived position as the best of its class. Although their competitors’ use of design might not measure up to Morningstar’s, it cannot be assumed that design alone will create competitive supremacy. Indeed, many users still value functionality over aesthetics. Sylvester Flood comments: “One of our main competitors right now has a really ugly graphic user interface, but, his product does something that ours does not do. That is what the users really care about in that case. Overall, though, I think they have realized that our products are much more user friendly than our competitors. I do not think our competitors think design is that important. Otherwise, they would have copied us more. ” However, the competitive scene is changing, and if its former competitors provide poor benchmarks for Morningstar to assess its performance, it needs to adjust its sights to compete on a higher level. Don Phillips points out: “We’re going up against big firms. Increasingly we’re facing firms that do take design more seriously than some of the smaller challengers we’ve had historically. He cites ” Microsoft as a company that does pay attention to design, with a distinct advantage in technology that Morningstar will have difficulty matching. Phillips stresses three elements as the core competencies of any company in the business of financial information: investment knowledge, technology and design, and it is necessary to be very good at all of them to compete effectively. He believes Morningstar’s strong suit can be investment knowledge. “That can be our strength relative to them. But Morningstar cannot afford to be deficient in ” either design or technology.
  20. 20. “Information that would have put you at an advantage two years ago is now widely available.” – Barron’s October 17, 1997 Internal Integration In addition to being a key differentiator in distinguishing Morningstar from its competitors, design has another, equally important role as a means of integrating employees into the company. It is not always easy to maintain a sense of what in fact constitutes a corporate culture – a living bond of unifying values, rather than pretentious mission statements. With the rapid growth of the company in recent years, from 100 to 400, many new employees bring to Morningstar different levels of experience with, and understandings of design (or a lack of them). Their experiences do not necessarily correspond with the role design plays in the company, and a common understanding among the expanded workforce is therefore neither universal nor automatic. Robert Soto, Production and Design Manager, comments: “All those people coming from different cultures are hard to integrate. There is a clash of new and old values that influences the culture and promotes knowledge loss. John Tipton, Acting Director of Software, points out ” that although Morningstar is much more design-conscious than similar companies, he thinks “the big design fans” in the company are a minority, and that can be a problem. Maintaining and adapting a vision through the shifts of emphasis and culture resulting from growth, is perhaps one of the most difficult stages to negotiate in the evolution of a company. From the standpoint of designers, there is a constant need to demonstrate the value and the importance of design inside the company, particularly as numbers and turnover increase. An interesting feature of Morningstar is that given the enormous emphasis placed on design, the cost of integrating it into all aspects of corporate activities, and the few structured means of evaluating its performance, there is a general vagueness about exactly why design is important and how it contributes. Joe Mansueto highlights a very real problem in evaluating the contribution of design to any company, when he states that design essentially defies quantitative measurement. The benefit of design in a product being one part of a combination of many factors, it becomes self-defeating to try and disaggregate it. “I think the cost/benefit payoff is very, very high, he comments, ” “but I can’t give you a specific number or way to measure it. ” Other managers similarly found difficulty in answering specifically and tended to fall back on the factor of intuitive feel or the intangible nature of design, despite the fact that its function is precisely identified by some in terms of its capacity to make products tangible. Don Phillips makes the point that any company placing major emphasis on what can be measured will inevitably underestimate design since it is not easy to measure. John Tipton gives another slant to this point, equating design with quality: “The cost of design is the cost of quality, the cost of doing something right. ” Design is therefore valued in a variety of ways, but still more on the level of belief, rather than as something that can be clearly articulated or calculated.
  21. 21. “The cost of design is the cost of quality, the cost of doing something right.” – John Tipton Product Development Driver Design is important to Morningstar, but in the past its functional placement in product creation and development processes has been in the later stages, rather than in helping to initiate projects. Joe Mansueto recalls that editors used to get together and map out what they wanted to do and then, toward the tail end of the process, bring in designers. The development of the company’s Website, however, marks a substantial break with that pattern. Design was not only involved from the beginning, but provided much of the driving expertise and energy. David Williams points to the development of the Internet site as an example of how design and marketing are intermeshed. Joe Mansueto was interested in developing a site and a team formed around him, including members from marketing, editorial, programming/technical and design. Together they decided what Morningstar.net was going to be. Designers then began to produce sketches and pages, handing them off to programmers. Marketing worked in close cooperation to coordinate the three main contributory components of content, design and technology. Williams sees this integral team approach on the Internet project as a new model for development, which he contrasts with the more typical procedure: “What often happens here is that people come to design with solutions. They feel it is their job to come up with a solution and then it is design’s job to implement it. The problem with that is, sometimes you don’t know what the solution is until you start working with the content. You have no idea until you start working with it and realizing where the content meets the technical constraints. ” The shift in consciousness resulting from the Internet project is confirmed by Joe Mansueto, who was closely involved with the project. Morningstar.net is considered an important experiment for development processes and design integration and is being watched carefully. Its success is critical both internally and externally. It reaches out to new customer segments and acts as a primary communication link between Morningstar and its public. The experience of successfully working with designers has, in Mansueto’s opinion, changed the notion of design among managers. “It’s a much broader idea of design that exists today than existed five years ago. This does not mean that ” design will not continue to contribute on other, previously existing levels in the same way, but that a product development role and a deeper strategic involvement has been added to design’s range of activities at Morningstar. In terms of design’s role, it is clear that it is still ultimately viewed as a strength in Morningstar’s future competitiveness, but what is perhaps most interesting is the manner in which it has emerged as a crucial strategic element that is growing in importance, precisely at the point where Morningstar is beginning to compete in more complex and sophisticated ways at the top of the market.
  22. 22. Exhibit 2: Morningstar Website Morningstar.Net Reviewing the Design Joe Mansueto, the company founder and CEO, investors need, and presenting the information Morningstar.Net does a nice job of avoiding describes his foray into publishing mutual in more useful and compelling ways. many of the typical Website gimmicks such fund reports in 1984 as an attempt to meet Morningstar.Net appears to be off to a good as meaningless animations and confusing the needs of individual investors: “A lot of start with positive reviews from the business frames. The pages load fairly quickly and do no information on mutual funds was available to media, and 100,000 registered users as of require any obscure plug-ins. The newspaper- institutional investors, but nothing for the August 1997 Yet the competition is fierce and . like layout of the pages contributes to the general public. With Morningstar.Net, the ” highly diverse – from college kids posting sense that visitors are getting the latest firm’s free Website, they face the opposite financial tips from their dorm rooms to financial information. problem – a positive glut of financial Microsoft’s Investor site. Morningstar is well According to Williams, the firm made a information. Anyone with a modem connection aware of the changing landscape. According to strategic decision to “divide the content into and a free Web browser can access, 24 hours Design Director David Williams, “We find six steps that define the investment process. ” a day, the world’s stock, bond, and futures ourselves competing with Microsoft now. It is The resulting categories include: Learn, Plan, markets, corporate profiles, government filings, up to the editorial content to communicate Research, Invest, Monitor, and Socialize. historical charts, the latest financial news, and what Morningstar is and why somebody would Structuring the content in this fashion not only personal investment advice. pick Morningstar over Microsoft. ” makes sense, it offers a refreshing alternative Critical tasks for Morningstar’s Website The competition is soon to get even tougher as to other investment sites that stick to business designers include attracting attention in the the firm launches a subscription-based section terminology or worse, the over use of catchy crowd, integrating the essential resources of the site in addition to their free content. Internet jargon. One of the most interesting sections of the site is the Socialize area. It is a relatively simple and straightforward chat area that is easy to use and equipped with a secret weapon, Jenni Barrie. Although her title isn’t immediately clea she seems to be the site’s “Webmaster, ” charged with responding to user queries. As the “voice” of Morningstar.Net, she does a great job of striking a friendly and helpful tone. One quibble with this area is its name. While “Socialize” is better than “Chat, it still does ” not quite sum up the power of the section. Something along the lines of “Brainstorm” or “Share Ideas” might get closer to what this section really offers. In addition, this area could be an excellent venue for testing new additions to the site. Morningstar.Net could more activel engage visitors in helping to build and customize the site and its services to their needs, thereby establishing deeper loyalty. The site has definitely evolved for the better, but the placement of banner advertising on the page is still extremely awkward – especiall when compared to Microsoft Investor’s elegan solution. Figuring out how to meet the visibility demands of site advertisers while still making the Morningstar brand the dominant presence “The design of the site is consciously responding to the Internet itself.” will continue to be a major challenge – and a significant place for design to play a strategic role. Morningstar’s presence on the Internet – David Williams, Design Director should continue to give them a leg up on the competition.
  23. 23. Conclusions There are many features of Morningstar’s use of design that command respect and admiration. Clearly, design competence has been an important element in the company’s success due to the top-down commitment of founder Joe Mansueto, and it has resulted in products that are in many respects distinctive and superior. A feature of the rapid expansion of Morningstar, however, is that many new people have been drawn into the company who do not readily understand design. Until a clear understanding of its role and potential become embedded into procedures and attitudes, there is always a danger that design will slip back into a minor service role. Indeed, the relationship of design with marketing indicates that there are still problems in accepting design as a significant contributor to corporate success. In this respect, the problem is not just Morningstar’s but one that is evident across a wider spectrum of business, especially service companies. Morningstar is structured as an entrepreneurial company, and although this approach has affected the organization of design, the way design functions is still based on the model of a studio company, with Philip Burton and David Williams playing the role of masters to apprentices. This seems to work very well at the project level. The role of design in the company’s strategy is unclear, however, and there seems to be no mentorship to allow designers to function at this level, where the only substantial voice is that of Philip Burton. He points out that while, in his view, the strategic role of design is important, designers in general are not trained to regard it as part of their responsibility. Again, a problem of wider origins and implications impinges upon Morningstar. Exhibit 3: Forces of Change Affecting Morningstar FINANCIAL Systemic financial deregulation Mutual fund explosion Globalization of investing (cultural barriers) New rules for banking changes the Morningstar caught the first wave landscape of the marketplace. in the early 1980s, which grew into US citizens can invest in just about Most notable is the merger-mania larger ones throughout the 1990s anything, anywhere. As Morningstar among large financial institutions. with the growth of the Asian moves into new countries, the Bigger banks are offering more market. Another wave is coming critical issues of culture and habit services to become “one-stop- as further deregulation in foreign must be carefully studied, shops” for any financial need. This markets makes investing understood and integrated into often includes investing and more viable. any new international product. investment information. Small banks are enjoying a renaissance as well. Using the distrust of large banks as a competitive advantage, smaller institutions are focusing on relationships and educating customers in managing their money and making investments.
  24. 24. Some evidence of the inevitable dilemmas accompanying growth are already evident. With the expansion of the company and its product range, the subject of corporate identity standards is a source of tension. On one hand there is a belief that new circumstances require some definition of standards, and on the other hand, an unwillingness to lose procedures and principles that have proven intensely valuable. Standards can be regarded as the negation of creative possibility. They need not be an all-encompassing straightjacket requiring “design police” for enforcement, but can instead be a flexible framework providing basic consistency and preventing designers from having to reinvent the wheel on each project. On the level of product development procedures, there is evident a great diversity of approaches, with a strong emphasis on individual initiative. It might also be necessary to implement basic criteria for development procedures to ensure that the flow of projects satisfies strategic goals appropriate to their markets and establishes a basis for evaluation. Again, it is possible to introduce a degree of structure without imposing unnecessary and unwanted constraints on individual initiative. The need for some greater clarity of the role of design and its potential at the strategic level would also seem to be highly relevant, given recent developments at Morningstar. The company is having to evolve rapidly to meet new competitive conditions at higher levels of its markets. In an effort to anticipate some of these problems, Morningstar has recently been reorganized into four strategic business units: retail, professional, institutional and international. This is, in part, an LIFESTYLE Demographic shifts Legal changes Wired America Do-it-yourselfing (IRA, Roth, 401k, etc.) The US adult population is Building on the notion of ubiquitous We are accepting more getting older. The market is Changes in tax codes and technology, more personal responsibility and empowering offering a bevy of new products investment options have fueled computers are going into homes. ourselves more than ever. and services tailored to this the growth of our trading markets. Where homes once shared one Witness the rise of Home Depot, population. Morningstar should computer as a luxury item, now dad Martha Stewart. The most popula pay attention to this factor in has a laptop and a PC at work; there computer software titles are the design of its products. At the is a computer for the kids, one for programs that simplify CAD for same time, younger people are the college-bound senior, and one would-be home architects to desi being drawn into investing. for the home... their dream homes, and Barbie Does Morningstar have specific fashion designer for the kids. products that fit the diverse Do-it-yourself investing is already needs of these groups? on the move with the infamous Beardstown Ladies and even an entry from MTV for Gen Xers.
  25. 25. acknowledgment of problems in addressing such issues as: What products are appropriate for various audiences? To what extent can there be standards across the spectrum of products or to what extent is customization necessary? What brand identity is appropriate for each category? New developments need new arguments and new concepts. In using design capability at the strategic level it becomes possible to conceive of its having a broader role than hitherto evident. Design seems to have been extensively used in a problem-solving role at various levels, but its potential as problem finder, or problem framer, does not yet seem to be generally understood. The mstar.net Website development process exemplifies a breakthrough in terms of how design can move into a role of facilitator, helping to create an understanding of how things can be done better. The lessons, however, do not seem to have yet been widely absorbed. There remains considerable opportunity for design’s role in defining various characteristics across different product lines and markets; in making sense of product lines by testing new products at the conceptual stage in terms of user understanding; and in being a crucial element in the communication chain, involved up-front on all projects as a means of maintaining consistency of standards within whatever degree of flexibility is desired across the SBUs. Exhibit 3: Forces of Change Affecting Morningstar TECHNOLOGY Online/electronic Ubiquitous technologies trading/commerce Moore’s Law tells us that computers 30% of stock transactions are now will inevitably get cheaper and faster electronic. That could grow to 50% with time. They will also be by the millennium. Mstar.net everywhere. Stock trades on represents a foothold in a rapidly cellphones, real-time market data growing market. Mstar’s business is relayed through pagers, and financial no longer just about investment portfolios dynamically updated on a information. It now includes PalmPilot are technologies all anything online. E-commerce and available now. Morningstar should online advertising is projected to be a part of this revolution. grow to $41.2 billion by 2002.
  26. 26. In suggesting additional roles for design at the strategic level, it must be emphasized that this is not in any sense a suggestion that existing design practices and procedures are inadequate or should be replaced. Rather, innovation will continue to drive Morningstar as it explores new horizons, and the contribution of design should be extended to include involvement at the strategic level to further enhance Morningstar’s innovative capability. This could also help enhance the role of design at other levels of competence and responsibility – which will continue to be necessary – with the aim of making them even more effective in contributing to innovative thought and practice, not just in adding value, but above all, in helping create new value. MARKET CONTEXT Speed and the 24/7 marketplace Branding Competitive shift(s) Morningstar is in the business of The Morningstar name has strong Morningstar has recognized that information. The way that investors brand cache. But, it’s reach is it competes with many other work today has changed. Have limited to investing. Other entities. In its early life, its major Morningstar’s products changed companies are using their names to competition was Value Line and to reflect the speed of change promote new kinds of products and Lipper. It now faces Microsoft and and transactions? services. Coca-Cola sells clothing, Intuit in new markets everywhere and clock radios as easily as its soft As Morningstar grows, the marke drinks and stock. in which it competes grows as well, becoming increasingly interconnected to other markets. New, broader criteria are needed to identify and assess competitive threats.

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