The Design Strategy Market Index

The last time we spoke about Design and the stock market in my post titled: Looks like Innovation moves Markets, not Design, I had a great response from Design Sojourn’s awesome readers.
So I think this little nugget, from the Design MBA Blog, might get an even bigger response as this chart (image above) makes our last stock chart look like a kid’s drawing! Heh-heh.
Briefly, in our last post we talked about innovation as a key driver for the stock market. This chart by the California College of the Arts: MBA in Design Strategy program, seems to show that companies that invest in design win in the long run as they the financial results to justify it.

The CCA MBA in Design Strategy program has compiled an index of the top 63 public companies internationally using design strategically in their organizations, for the 10 year period from January 1998 to January 2008. The index shows that for companies who invest in design and use it as part of their strategic management, on average, they’ve gained 274% of their value. This considerably beats all market averages and indexes for the same time period.

Wow! I honestly don’t really know how they manged to get 274%, as it seems to me that some of the big familiar brands on the list don’t seem to be doing that well. But if their calculations are correct, this should be a huge date proof point that will convince companies in the effectiveness of investing in a good holistic design strategy.
Oh, I also quite like their definition of Design Strategy that I have shamelessly reproduced here.

What is Design Strategy?
Design Strategy is the use of design processes, perspectives, and tools to create truly meaningful, sustainable, and successful innovation across a variety of design disciplines, including industrial, interaction, visual, experience, and fashion design. Organizations who use design strategically create lasting value beyond that of their peers. These organizations often hire high-level managers focused on design and innovation, include significant design input in strategic decisions, dedicate resources toward design-derived product and service development, and empower the design innovation functions with authority over development.
To be sure, the organizations which perform best don’t focus only on design in their product, service, and customer experience development and management. Many also create significant value through more traditional growth strategies, such as operational efficiencies, mergers and acquisitions, and technology research and development. However, each of the companies in this index places a high value on strategically using design processes to provide better customer offerings and experiences and integrate all functions of the organization more effectively.

Check out the full list of design savvy companies at their Design MBA Blog and I look forward to reading your comments below.

  • DT

    October 5, 2009 at 5:51 pm Reply

    Hi Gwen, Great question and I can see where your frustration comes from. As it is the definition of “Design” is so vague, that the constant reuse of the term further confuses.
    However from the flip side, you could write a thesis if you took the effort to distill what all the terms really meant. I also see that this definition as a reflection of who this course is targeted to and that is practitioners in design with a basic understanding in the terms and processes.
    If you like more information about design strategy check out this post where I try to explain it:
    Hope it helps?

  • gwen

    October 3, 2009 at 3:08 pm Reply

    forgive me i seem confused… dude to lack of sleep and overworked but i personally feel the design strategy definition is not clarifying enough for people outside of the realm of design. It is a battle i am dealing with when comparing big and large firms as well as individual’s statements of the definition and its value of design strategy.

    “Design Strategy is the use of design processes, perspectives, and tools to create truly meaningful, sustainable, and successful innovation across a variety of design disciplines”

    for the first segment, why use the word design so much? are we not articulated enough, it is a struggle and i will admit that i don’t have the best grasp of the English language but as a researcher i would use the dictionary/thesaurus or other means to an end to really divulged into the specs and derivations of how strategy is viewed from various backgrounds of engineering, business, law, etc.
    overall for the entire definition i begin to question what exactly do you do, cause the sentence structure presents the statement as being you are everything and yet nothing. And it is this type of logical that i am most troubled when either defending or not defending designers and their logic of strategic design, cause frankly i now work in a corporation that has no designer in the office, so their frame of thought patterns is in someways the opposite of design training.
    They perceive better value from the quality of certain types of words which is used in explaining ourselves (designers that do strategy/research) the more keen you use multiple words and stop repetition of over used words can help the foundation of the organization to gain the non design world’s trust and compliance to be willing to sit and listen to what you have to say.
    it is not about me being upset of what i just read, just more like i am expressing an internal battle of discussions I have for myself to how design plays a role that extends outside of products and cmf development.
    personally i love to challenge anyone that can think of the definition for design strategy without using the words design and strategy. cause i do this every time when i have time to ponder…

  • DT

    September 30, 2009 at 1:43 pm Reply

    Hi Nathan,
    Thank you for your reply and explanation on how you got 274%. It would help if you also listed the starting baseline you used in Jan 1998 to really capture how far Jan 2008 had gone.
    Also it might make sense to update this chart, as I am very interested to see if Design managed to help companies weather the Recession or at lease soften the blow. I can already imagine Apple as a shining example.
    I agree about the difficulty in picking the companies. The choice is quite large. Another point to also consider are non-listed companies that use design strategy. However that will just be such a large list it would be unwieldy.
    I look forward to your index update and please let me know why you have got it uploaded. Thanks.

  • Nathan

    September 30, 2009 at 11:52 am Reply

    Thanks for the link to our index. The 274% figure was based on the period of January 1998 to January 2008, when we first launched the DMSI. We’ve been remiss in updating the long-term reports and this, obviously, doesn’t reflect the last 12 months of the Great Recession. However, since this is almost October, you can see the effect of the bust over the last 12 months in the right-most figures tracking the last 52 weeks. It’s pretty extraordinary.
    The biggest problem we have in creating the index is in deciding which companies should be included. There are no common heuristics for this and, in addition, many of these companies produce many products and services, some of which may reflect more strategic design than others. So, it’s not a perfect index and certainly only works in the aggregate as an indicator that companies who use design strategically do better than those who don’t but this, of course, doesn’t hold for every single company.

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