Design's Return on Investment

Looks like China is getting it when it comes to design.
In a recent interview on the local Chinese CCTV, Chen Dongliang, Director of the Beijing Industrial Design Center, has highlighted the tremendous economic value of Industrial Design to China’s economy.

The output value of industrial design in Beijing reached 80 billion yuan in 2008. Now around 250-thousand employees are working for nearly 20-thousand design companies in the city. Beijing is also expanding technology service and high-end manufacturing industries, both of them can help boost the industrial design sector.

That’s just in 2008! While the job definition of an Industrial Designer in China is pretty broad, even if we discount their statistics, it is still a lot of people and money.
What is more interesting is their next set of statistics.

The global financial crisis has made more and more companies realize that it’s not sustainable to depend on cheap and low-end products. They must think more about added value. The central government has also called for more attention on industrial design, pledging to change “Made in China” to “Invented in China”.
Chen said, “Industrial design is the key point of the value chain. Figures show that in Britain, 100 pounds of investment in design can yield 225 pounds of output. According to our survey, in China, one yuan investment could bring 13 yuan of output. This is on average. The contribution rates are different in different industries.”

Those are some impressive numbers! If we consider these statistics as ratios, we can get a good insight on the amount of value-add a design investment can give to a product.
In detail we have:
In the UK, Design’s output is $1 invested is to $2.25 British Pounds.
In China it is $1 to $13 Yuan.
Of cause these are averages and possibly skewed, and I believe when we start bringing in buying power and exchange rates the numbers start to change. Regardless, this is something to ponder about when you next have to convince a client if he or she should invest in design.
Anyone else have some good statistics on the how much ROI you can get from investing in design?

2 Comments
  • yushi

    March 13, 2010 at 11:06 pm Reply

    I have a lot of friends actually working in Beijing design studios. As the statistic showed, it is a great ratio if we see it from here. However, the problem is designers in China are under paid. The awareness and perception of design value is not formed yet. If the value is not appreciated, how designers could work out some brilliant ideas. I am not saying money is the only incentive here, but a very important one, because they are in the bottom of the pyramid. For example, some small manufactures hired some designers. When their clients ask for a product to produce, they will give them the design for free. How to make everyone informed about the ROI on design is essential. There are huge potentials in design industry in China. When we see design industry in Beijing changed from several years before, it is incredible. Once some successful ShanZhai cell phone manufactures actually take advantage of design, their profit is going sky high. I want to see a design business model emerge from this. If you know TianYu in Beijing, they are a cell phone design firm; they also produce their own phones. They did pretty well. Only few domestic design firms in Beijing are doing well. Even Luo Ke Ke is struggling, that is what I heard.

  • DT

    March 14, 2010 at 11:26 pm Reply

    Hi Yushi,
    The ratio applies to people who use design, I’m sure there is a large number of companies that don’t use design or get around paying for it.
    It is really two separate discussions here. One is spending on design, the other is paying designers. Designers also need to understand their value in the food chain and doing work for free, very common by the way, is known as Spec work and devalues the profession. Designers should try not to do Spec work as much as possible.
    I supposed if designers are better paid, the ratio will be not as big, perhaps closer to the British ratio.
    Thanks for stopping by and commenting.

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