Together with Audun Farbrot, I published an academic article in the Norwegian scientific journal on economy and management Magma on how strategic use of design can be profitable for companies. Research shows that the economic effects are greatest for companies that look at design as a process or strategy. The success factor lies in bridging the gap between the company's strategy and design. You can read the English translation of the article here.
Design can be a strategic tool to position, create positive associations, strengthen and increase the value of brands. Design can reflect and materialise a company's strategy and values towards its customers. Studies show that strategic development and use of design can be a success factor for innovation and creation. Yet many companies develop designs detached from the company's strategy and goals. In doing so, they miss the potential of linking strategy and design to develop or strengthen brands and increase brand value. Based on research from relevant disciplines and practice, we present design strategy as a bridge between strategy and design and a six-phase model that shows how companies can link design strategy directly to the company strategy. Although brand building as a profession and practice is changing as a result of new technology and digital solutions, not everything is changing.
PART 1: Design - decoration or strategic tool?
More than 35 years ago, in 1984, Philip A. Kotler and G. Alexander Rath presented design as a strategic tool for gaining lasting competitive advantages, claiming that most businesses neglected using design strategically (Kotler & Rath, 1984). A lot has happened since 1984. How has the use of design changed?
Large companies are criticized in the media for the money they spend when they change their logo design. For example, the Norwegian railway company VY spent NOK 280 million to change its name and logo from NSB to VY in 2019. Why do some companies pay millions for a logo when they can buy it online for a few thousand? When companies invest millions in a logo, they're paying for more than the symbol you see. What costs is the entire process: gaining insight into competitors, target audience and market, ensuring alignment with the company's goals and strategy, designing the visual expression and rolling it out across all channels and surfaces. To develop a logo into a brand, the company must carry out a strategic process that will help to create meaningful associations with the branded product (see Figure 1). For any brand, its associations are at the heart of decision-making (Alba et al., 1991). Consumers use associations to process, organise and recall information when making purchasing decisions (Low & Lamb, 2000; French & Smith, 2013). Strong, advantageous associations that are unique to the branded product and imply superiority over other brands are critical to a brand's success (Keller, 1993).
A brand or logo identifies and differentiates a branded product through its name, characters and symbols (Walsh et al., 2010). If there is no strategic process underlying the development of the logo, the logo will only be a visual representation of a name, more towards illustration and art (see Figure 2). The logo will then be considered as garnish or decoration, detached from the company's goals and strategy. Decoration is an "after-effect" that may be superfluous to the object's function and purpose (Revell, 2012). In the best case, a logo can be developed to convey and support the company's business goals and strategies.
Businesses use design in different ways. “The Design Ladder”, a model developed by the Danish Design Centre in 2001, categorizes businesses into four levels according to how they use design: 1) no systematic use of design, 2) design is used primarily as styling, decoration and final finish, 3) design is used as a method and process, 4) design is used as a strategy (Danish Design Centre, 2018). Businesses also have different conceptions of what design is. The word design itself can be grammatically interpreted in different ways. Design is a noun in that it denotes a product, and a verb in that it describes an action, such as to design a product, or a design activity in the way the product is designed (Leerberg, 2009). Thus, design can be described as a process, as well as a result of that process (Olson et al., 1998). Christian Bason defines design as: 1) a plan for achieving a particular result or change, including graphical form, products, services and systems, 2) a practice with a particular set of approaches, methods, tools and processes for making such plans, 3) a particular way of thinking that informs these processes (Bason, 2017). Design can be explained as an attitude (Boland & Collopy, 2004), thought process (Mollerup, 1998) or a way of thinking (Buchanan, 2001; Brown, 2009). Design thinking has become a term for adding design principles to the way people work (Kolko, 2015). Design tasks can be divided into four main categories: 1. Traditional design; 2. Product, service, experience design; 3. System, organisation, industry; 4. Country, society, planet (VanPatter & Pastor, 2011). In the ultimate sense, a design task can involve solving complex problems of organizational, national and societal nature (Jones, 2014; Buchanan, 2001).
Strategic development of design
We are witnessing a paradigm shift in the field of design (Muratovski, 2015). From being about shaping and styling, design has evolved into problem solving and strategic planning (Muratovski, 2015) and putting things into systems so that new possibilities emerge and lead to innovation (Sevaldson, 2011; Cooper et al., 2017). Designers must solve ever larger and more complex problems and increasingly work across disciplines (VanPatter & Pastor, 2011). The largest design firms are moving from focusing on the design of products, services and experiences to also working on change management processes at a strategic level (Brown, 2009; Rasmussen et al., 2012). Global companies are now putting design on the agenda, integrating design methodology into the organisation, building their own design teams and recruiting strategic designers as managers to remain competitive in the market (Muratovski, 2015).
Strategic design is a way of developing and using design that is aligned with the company's overall strategy and goals and that will help the company achieve its business objectives. In this way, strategic design can create lasting competitive advantages (Olson et al., 1998). Such an approach requires good methods for insight, analysis and strategy development, and the ability to incorporate the strategy into the design process to solve a task or problem. Strategic development of design has more purposes than the development of a logo, seen in isolation. It involves seeing the design project in a wider business context. The outcome can be as much an idea for redesigning and improving a product to increase its brand value, as a proposal for organizational or societal change. Strategic use of design brings design into the company’s management and boardroom as part of the business development and brand building process. Companies that are driven by a clear design ambition and include design in their overall strategy and business culture, are referred to as design driven.
What strategic design can contribute to
- effects and impacts
Strategic design can contribute positively to a company's success in many different ways. But measuring the value and return of design investments is challenging, in part because: 1) the links between design and business value creation are often complex (Braga, 2016), 2) there are different conceptions of what design is (Cooper et al, 2017), 3) it is difficult to isolate the contribution of design in value creation (Rae, 2013; Lockwood, 2007), 4) there is often a time lag between investments in design and potential impacts (Hertenstein et al., 2005).
Professor Brigitte Borja de Mozota argues that design can create value through four driving forces (Borja de Mozota, 2006): 1) Design that differentiates: source of competitive advantage through brand strength, customer loyalty, premium price and/or customer orientation, 2) Design that integrates: resource that can contribute to better product development, processes and innovation, 3) Design that transforms: resource to create new business opportunities, strengthen the business's ability to manage change and better understand the interaction between the business and the market, 4) Design for better business: source of increased sales, better margins, increased brand value, better return and contribution to a better society through inclusive and/or sustainable design.
Based on a review of the literature, we have identified seven areas where strategic design can have positive effects and impacts.
- Increased customer value. Design can help meet and satisfy customer needs by adding functionality, user-friendliness and better customer experiences (Lockwood, 2007). The economic impact of design is greatest when design is closely linked to solving problems, specifically customer problems (Micheli, 2013). A consistent focus on good design can increase customer loyalty and enable higher prices in the market.
- Strengthened competitive position. Design can be used as a tool to differentiate oneself from competitors to create competitive advantages (D'Ippolito, 2014; Borja de Mozota, 2006; Olson et al., 1998). Innovative design and new, smart design solutions can be a competitive weapon when a business enters new markets or wants to strengthen its position in mature markets (Bruce & Daly, 2007). Design can be used to achieve desired positioning (Stevens & Moultrie, 2011).
- Brand building and brand value: Design supports marketing and brand building (Cooper et al., 2017). Strategic design can support company identity (Kotler & Rath, 1984) and strengthen both product and business image (Trueman & Jobber, 1998).
- Improve internal processes. A number of businesses have applied design methodology as a tool for problem solving and creative processes (Jevnaker et al., 2015). Conscious use of design can reinforce a desired organizational culture (Stevens & Moultrie, 2011). Design can be used to achieve a holistic view of complex systems (Sevaldson, 2011).
- Contribute to innovation. Design can be a tool for business growth and innovation (Micheli, 2013) and play a critical role in the development of new products and services (Lockwood, 2007). Design as a process can speed up the development of new products and services, reduce the risks associated with innovative projects and bring new products to market faster (Cooper et al., 2017). Design thinking and other design-led approaches can be used in a company's innovative efforts (Wrigley, 2017), and good design management contributes to increased innovative ability (Kootstra, 2009).
- Contribute to increased profitability. Businesses that achieve the best financial results succeed in combining design and business operations through a design-centric vision that is incorporated into senior management's strategic discussions (Sheppard et al., 2018). Design management can lead to increased turnover (Kootstra, 2009). Research conducted by the Design Council in the UK shows that businesses that increased their investment in design increased the likelihood of turnover growth (Design Council, 2007).
- Contribute to society. Design is not only profitable for the individual business but can contribute positively to a country's overall economy (Benton et al., 2018). Design can be used to develop environmentally friendly and sustainable products and services, create a more inclusive society and promote social entrepreneurship (Muratovski, 2015).
Can the strategic use of design be profitable?
The consultancy firm McKinsey carried out a study of 300 listed companies over a five-year period to see if there was any correlation between the strategic use of design and profitability and shareholder return (Sheppard et al., 2018). The companies were selected from three industries: consumer goods, medical technology and retail banking. McKinsey mapped more than 100,000 design activities in the companies studied. These were grouped into four main themes, each with three key activities:
Analytical management of design: a) establish a strong, user-centric strategy, b) integrate design into senior management, c) use metrics for design.
Cross-functional talent development: a) cultivate design talents in the organisation, b) establish cross-functional teams, c) invest in design tools and infrastructure.
Continuous adjustments (iterations): a) balance qualitative and quantitative user research, b) integrate insights from users, market, competitors and technology development, c) test, refine, repeat. Quick!
User experience as the focal point: a) start with the user, not with the specifications, b) design a seamless physical and digital service and user experience, c) integrate products and services with products and services from other companies.
The McKinsey Design Index was developed based on the design activities described above. The study shows that businesses that score high on the design index and use design strategically achieve significantly better financial results than competitors with a lower ranking on the design index (Sheppard et al., 2018). The Design Management Institute and Motiv Strategies have found that a sample of design-driven companies achieved on average 211 percent higher returns than the average for all companies on the US S&P 500 index over the ten-year period from 2005 to 2015 (Rae, 2016).
Companies that work systematically with design have higher earnings and greater exports than companies that do not use design, according to research conducted by the Danish Design Centre (Dansk Design Centre, 2018). The economic effects are greatest in companies where design is embedded in the company's business activities and where companies view design as a process or strategy.
We have shown that businesses that use design as a strategic tool can achieve positive effects in many areas, including profitability and return to the company's shareholders. Nonetheless, fewer than one in six Danish businesses (15 per cent) say they have included design in their business strategy (Danish Design Centre, 2018). This means that more than five out of six Danish companies (85 per cent) do not use design strategically. There is little reason to assume that the proportion of other European businesses using design strategically is any greater.
PART 2: How to bridge the gap between
strategy and design
Businesses wishing to use design to drive business development, brand building or to solve complex problems must succeed in bridging the gap between strategy and design. This requires senior management to understand and recognize the strategic potential of design and design processes. If the business is to realize the full value of design, the use of design, like strategy, must be defined as a top management responsibility (Sheppard et al., 2018).
The challenge is to translate and transfer strategy to the way design is developed and used. We can see that strategy can be materialized through design. Design can be considered as a communicator and carrier of strategy. Design becomes strategy in action. How this is done will have consequences for how the design contributes to the achievement of goals. This provides an opportunity to transform the company's verbal strategy into visual design that create brand identities and brand experiences. This requires the transfer of knowledge between different areas of the business (Demir & Fjellström, 2012). The visual approach of the design process is a means of giving meaning to situations and creating collaboration across disciplines in strategic phases (Rasmussen et al., 2012). Design can help define strategy, as well as making it clearer. The approach is to get those involved in strategic planning to use design thinking (Lockwood, 2009).
The visual tools of the design profession can help create a common understanding of strategy for those who will put it into practice (Kumar, 2004). By making even intangible concepts visual, designers can prevent misinterpretation and create a common platform for discussion that helps to build a common understanding (Bruns et al., 2006). Visual strategy tools, such as a visual representation of a business model, can help turning silent assumptions into clear information. This makes strategy and business models more tangible and often leads to clearer discussions (Osterwalder & Pigneur, 2010, p. 148). At the same time, the transfer of strategies into designs and solutions is simplified. The key to creating unique, targeted design solutions is found in the gap between the verbal and the visual. Therein lies the gold. It is about linking strategy and design, and transforming insight, goals and strategy into visual images, identities and experiences, which together with slogans and other communication will help to build the desired brand associations in the recipient's mental awareness.
In the rest of this article, we will present two tools for bridging the gap between strategy and design:
Design strategy: The company develops a design strategy to transfer strategy into the design process.
Design process: Based on research from relevant disciplines and practice, we present a six-phase model that ensures effective interaction between strategy and design to achieve business objectives.
Design strategy as a management tool
Good design is not a result of chance or design investments per se, but of design work being strategically grounded and well managed (Chiva & Alegre, 2009). A design strategy can help create sustainable competitive advantages for a business and be an effective control and management tool for design investments (Olson et al., 1998). The design strategy should ensure effective allocation and coordination of design resources and activities to achieve the company's goals (Olson et al., 1998) and specify direction and guidance for how the design efforts should be carried out, with the aim of integrating design to achieve continuous improvement (Lockwood, 2009). What strategy and design have in common is that they should contribute to the achievement of the business objectives of the company. However, in most companies there is little collaboration between those working with strategy and those working with design. A design strategy helps to ensure that those involved in the design process have a common understanding of the company, what it does, its values, its competitive advantage and its objectives, so that this is communicated through the design, as much as possible .
Developing design strategy requires a committed engagement from management and investment over time (Florida, 2014). Design strategy can be used at an overall strategic level in the company and be a tool to ensure targeted design processes and provide guidance for how the company should manage its design investments over time. Design strategy can also be a sub-strategy for completing individual design tasks. It will then act as a management tool in the design process to ensure strategic and targeted alignment of the design.
Companies often operate with several strategic levels: overall strategy, business strategy (competitive strategy) and functional strategies (Roos et al., 2013). The design strategy is based on the company's overall and competitive strategy, as well as functional strategies such as brand and communication strategy, in order to clarify and define the strategic and design implications this shall have for the design task(s) to be accomplished, as well as how the design is to be used (see Table 1). When developing a brand, a design strategy will be necessary to generate a strong and reliable brand that differentiates itself from competitors (Konradsson & Laudon, 2010) and expresses the right associations and image. In its critical essence, the focus of design strategy is to communicate the appropriate image to the world (Olson et al., 1998).
Six-phase strategic design process
We here suggest how the design strategy can be directly linked to the company's strategy through a design process that includes both strategy and design development.
Studies of design processes reveal a wide range in how design processes are used and understood within different disciplines and for different purposes. Many existing models of design processes lack an explicit link to strategy (Jones, 2014). Strategy and design processes have numerous similarities in that they require initiation, insight, analysis, planning, setting of goals, development, implementation, quality assurance and a future perspective. We argue that the design process should include both strategy development and design development in order to achieve an effective interaction between strategy and design. A common process will involve design thinking in strategy development and strategy thinking in design development. The design strategy is at the intersection, and it defines the implications of the company's goals and strategies for the design task to be accomplished. If the strategy is already defined as a visual model, strategy map or narrative, the path to concept development processes and visual design will be shorter.
We present here a strategic design process from the book Design og Strategi [Design and Strategy] (Grimsgaard, 2018), based on empirical data and research from relevant disciplines, including interviews and conversations with designers from different professions, social scientists, brand builders and strategists. Design is used both as a process and as a result, an approach that can strengthen the competitive position of a business (Olson et al., 1998). The process consists of six phases: 1) Initiation, 2) Insight, 3) Strategy, 4) Design, 5) Production, 6) Management (see Table 2). The process can be used in any project. The primary objective is to solve the problem or task, meet the needs of the business and its customers, and help the business achieve its business objectives. The interaction between strategist, designer and user is key.
Phase 1: Initiation - strategy check at the start of the project. The project is initiated with a description of the task that includes the business’s overall objectives and strategy, and any sub-strategies. This simplifies the process of defining how the design is to contribute to the achievement of objectives. It also becomes clearer which strategies are missing and need to be developed in the project, as well as which skills are needed to accomplish the task.
Phase 2: Insight - fact check to clarify the situation. Knowledge of the current situation is necessary to choose the desired situation (objective) and define a strategy. Insight helps to clarify which problem the project is to solve. A situational analysis is based on studies and research of e.g. the target group, the market and the competitive situation. The results are used to clarify which factors impact the business/brand internally (in the organisation) and externally (in the market). It provides a basis for success when choosing a strategy (Porter, 1980).
Phase 3: Strategy - definition of goals and course. A competitive strategy determines how the business must compete in the market. The use of visual strategy tools will be a bridge to the design development. We are here talking about a design-led strategy process (Wrigley, 2017). How should we differentiate the brand and create the right brand associations? What unique qualities and values should the brand signal? Such factors will influence how the design should be solved. The design strategy clarifies what implications the strategic choices should get for the design.
Phase 4: Design - create and visualize the solution. The design strategy provides guidance on how the unique characteristics and values of the brand can be translated into visual images and concepts. We here refer to the strategy-driven design process (Olson et al., 1998). Visual maps like customer journeys, mood boards and GIGA-maps (Sevaldson, 2011) as well as design methodologies like design sprint, Lean and Agile can be used to transfer the strategy to the concept development process. User centric, iterative and incremental processes, knowledge of technology and interaction, interdisciplinary collaboration and the use of visual means are all essential to the design process.
Phase 5: Production - realization of the solution. Objectives and strategies influence visual, functional and ethical choices in the production and implementation phase. If the business has sustainability as part of its strategy, this will influence the choice of production processes and materials. These choices will affect the perceived brand value and the intangible value of the brand.
Phase 6: Management - securing values. A brand is an intangible value that needs to be managed over time. This means ensuring legal protection and continuously oversee the market to examine whether the brand is perceived as up-to-date and attractive and to identify needs for change. Measurable goals provide a possibility of measuring the impact of the design and decide when changes are needed in the strategy or the design to maintain the brand value.
Brand building in the age of digitalization
Brand building as a profession and practice is changing, partly as a result of new technology and digitalization. However, not everything is changing. In particular, we think of the company's overall goals and strategy as an essential management tool for how brand building and marketing should be practiced. The work of gaining insight and developing strategies is less affected by the technological changes and digitalization requirements, compared to the activities that take place in the last phase of the marketing efforts. In brand building, there is a risk that companies, in their efforts to become as digital as possible, may lose sight of strategy. Strategic alignment of brand development and brand building are crucial for success.
Reference: Magma No 6-2020 “Marketing and branding” [«Markedsføring og merkevarebygging»].
“How strategic use of design can increase brand value” [original title: "Hvordan strategisk bruk av design kan øke merkeverdien”] was published in Magma paper edition 27.10.2020, p. (59-67). Authors: Wanda Grimsgaard and Audun Farbrot.
Econa is the publisher of Magma. © Econas Informasjonsservice AS, Rosenkrantz' gate 22 PO Box 1869 Vika N-0124 OSLO E-mail: email@example.com. Phone: 22 82 80 00. Org. no 937 747 187. ISSN 1500-0788.
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