UK Trade & Investment report design in the dna_

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DESIGN IN THE DNAHOW A DESIGN ETHOS CAN DRIVE BUSINESS GROWTH

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Design in the DNA: How a design ethos can drive business growth 1

About this report

Design in the DNA. How a design ethos can drive business growth is a UK Trade & Investment (UKTI) report commissioned from the Economist Intelligence Unit. The report seeks to examine how design thinking might shape corporate strategy and drive business growth over the coming decade. In particular, it focuses on the following sectors: professional services, energy/natural resources, creative industries (including technology, media and entertainment), infrastructure/construction, manufacturing, healthcare and pharmaceuticals.

To quantify this, the Economist Intelligence Unit conducted a survey of 633 executives in Brazil, China, France, Germany, Italy, North America, Mexico and the UK. All company sizes were represented: 51 per cent of firms polled had annual revenue of less than US$500 million, while 32 per cent had revenue of at least US$1 billion. All respondents held management positions, with 59 per cent representing the C-suite or board. All graphs and tables in this report are sourced from this global survey and other Economist Intelligence Unit data.

To complement the survey findings, the Economist Intelligence Unit also conducted wide-ranging desk research and in-depth interviews with a range of organisations. Our thanks are due to the following for their time and insight (listed alphabetically, by organisation):

■ Mat Hunter, chief design officer, Design Council

■ Jonathan Sands, chairman, Elmwood

■ Charles Bezerra, executive director, Gad’Innovation

■ Paul Lester, chairman, Greenergy

■ Carl Liu, author and partner, at Idea Dao Design Shanghai

■ Dr Mandy Savage, programme and technical operations director, Lockheed Martin

■ Sir John Sorrell, chief executive and chairman, London Design Festival

■ Ken Shuttleworth, founder of Make architects

■ Alex Laskey, president and co-founder, OPower

■ Paul Priestman, director, Priestman Goode

The Economist Intelligence Unit bears full responsibility for the content of this report, and the findings expressed do not necessarily reflect the views of UK Trade & Investment.


Design in the DNA: How a design ethos can drive business growth2

For many people, that question may make them think about slick advertising campaigns and plush corporate headquarters. But design is not, and never was, just about image.

Design — as practised by the world’s most innovative companies — is a multi-skilled discipline that involves engineers, product innovators, brand wizards, technologists and even expert psychologists. Today, the “design thinking” that has turned the likes of Apple into a global leader is closely studied by top managers all around the world.

Now, design is entering a new level of importance. Vast new markets are opening up, their populations hungry for products and services that more closely reflect their specific needs and circumstances. Demographic shifts are also changing the landscape, challenging business’s recent obsession with the young. And always rumbling on in the background, the advance of technology continues to open up new frontiers for the next generation of ingenious designers.

Design is the discipline that fuses commerce with art, and technology with customer empathy. Tomorrow’s innovative companies will excel in these areas, while at the macro-level more countries will compete for the high ground in design. This report by the Economist Intelligence Unit (EIU), commissioned by UK Trade & Investment, seeks to understand how companies are focusing their efforts in design and innovation. The EIU conducted a survey of more than 600 business executives, and also interviewed a range of influential designers, business leaders and other experts to establish how design thinking might shape corporate strategy and drive business growth over the coming decade.

The key findings include the following: Forward-thinking companies will always bet on innovation Given a challenging economic environment, it is not surprising that executives in the survey are somewhat torn between prioritising cost control (44 per cent) and investing in innovation (56 per cent). R&D is an expensive and unpredictable activity — cutting back in this area can help shore up the balance sheet in the short term. A significant proportion of firms in the survey (22 per cent, rising to almost one-third of Chinese respondents and those in the logistics and transport sector) intend to introduce cheaper versions of existing products, rather than develop first-of-a-kind innovations (9 per cent). Unfortunately, such a strategy is unlikely to generate the kind of breakthroughs that spawn new businesses and markets. The best companies will strive to become more efficient in the way they deliver new products and services, but they also understand that their long-term competitiveness depends on backing bold design.

Emerging markets will make their mark in the design worldChina is already the world’s workshop, while India is much admired for its IT services sector. But these countries are no longer content to manufacture goods or offer basic services that were designed elsewhere. They want to create the blueprint for the products and services required by their burgeoning consumer markets. Executives to our survey have noticed Asia’s advance in this field — the region is now viewed by one-third of respondents as having better engineering capabilities, against respectively 23 per cent and 15 per cent of respondents for Europe or North America. However, Asia has further to go in other areas. The West still has strong advantages in terms of bringing innovative designs to market — for example, through better financing options and stronger capabilities in introducing cutting-edge science and technology to industry.

EXECUTIVE SUMMARY

What is the role of design in a 21st century business?


Simple is the new beautifulNew technology has made many products more complex to understand and use. A lot of companies fall into the trap of producing items that bristle with features, but which are painful to use in practice. Others focus on aesthetics but forget about usability. However, a counter-movement is growing in strength. At one end of the market, Apple is a shining example of how powerful it can be to create products and services that are beautifully intuitive and pleasing to use. At the other end of the spectrum, a new breed of “frugal innovators”, focused on delivering products to the world’s poor, are teaching companies the old adage that less is more. In many ways, this is a return to design basics, but it will be a significant challenge for companies operating in a technologically complex age.

Design is key to tackling the big global issuesThere are many new challenges facing designers, including developing green solutions (one of the top areas where customers want to see better design, according to 39 per cent of respondents to our survey) and the need to tailor products or services to customers (some of whom survive on less than US$2 a day) in new and diverse markets. Another growth area, which has been largely overlooked until recently, is the issue of population ageing. In Western countries wealth is increasingly concentrated in the hands of the over 40s, and China’s population is also ageing. In addressing demographic shift, there is demand for smart thinkers who can apply their design skills to everything from simple products to complex services and even entire health systems.

Design thinkers will focus on the entire customer experienceAs individuals, the best designers have always thought about customer needs and how people interact with products, processes and services. But large organisations can become inward-looking, and find this a struggle.

What many companies now also need to consider is that their products are no longer simply products, but also need to have services wrapped around them — smartphones are a case in point. In the survey, the seamless integration of solutions and services for the greater convenience of their customers (28 per cent) is viewed as a bigger priority than simply developing cutting-edge products (19 per cent) in terms of performance of functionality. Respondents also say that one of the greatest challenges in introducing new products and services is providing customers with the support to make them easier to use (27 per cent).

Brands must be bold — not bland Good design is also critical in helping distinguish companies from similar rivals. Louis Vuitton, Disney, Virgin — all have powerful brands that foster a degree of loyalty. By contrast, the pharmaceuticals industry has largely failed to achieve this distinction. Success is more than about smart packaging of a product; the leaders in this space are also able to connect with their customers at an emotional level. They do this by thinking deeply about their brand personality and ethos, a process that is arguably the ultimate expression of how design thinking can permeate every corner of an organisation.

Companies must learn when to listen, and when to leadThere has been a growing trend in recent years for companies to capture customer feedback and use this to guide design. Cultural differences mean that some designs are appropriate in some countries, but are unused and ineffectual in others. Behavioural psychology can also improve design, as can the use of technology to grab customer insights. This is valuable work, but companies should be careful: breakthrough design is rarely produced simply by running customer focus groups. When asked where great design comes from, 48 per cent of executives to the survey say “visionary thinkers”, compared with 34 per cent who say that it comes from “listening to customers”.


There is a rich and alluring prize on offer to the countries, companies and individuals that excel in design.

Governments increasingly recognise that design and creative thinking play an important role in driving economic growth. Many countries around the world have developed specific goals and targets to help support and grow their creative industries (an amalgam of design, arts and performing arts). Ultimately, they see design not just as the preserve of the creative industries such as fashion, but across all industries. Such creativity is seen as the key to producing the next killer product, the next growth industry, the next springboard for economic growth. And of course, anything that paves the way to a new phase of growth is sorely welcomed in the current economic environment.

So national governments, but also the world’s global cities, have begun to tout themselves as centres for design and creative industry. Every year, the drums on design beat slightly louder. When Sir John Sorrell launched the London Design Festival in 2003, it was a new initiative to showcase great ideas and talent. Now 80 countries worldwide strut their design credentials by hosting similar events. But perhaps the biggest signal of how serious this competition has become can be seen in China. The country reportedly spent almost twice as much building and hosting the 2010 Shanghai Expo (a showcase for cutting-edge design) as it did on the Beijing Olympics. The event attracted 70 million visitors — almost all of them Chinese — and featured exhibitions and pavilions created by 240 countries and organisations from around the globe. For China, it was a clear statement of intent: the country regards itself as a rising power in the field of innovation and design. Meanwhile, other countries felt they couldn’t afford to miss the opportunity to build bonds in this area with the new economic titan.

But of course growth in the BRIC markets (Brazil, Russia, India and China) brings opportunity for design-oriented businesses in the West. Again, China is already a magnet for many of the great west European designers. There are dozens of examples: in Beijing alone, a tourist arrives at Norman Foster’s Terminal 3, catches an opera at Paul Andreu’s National Grand Theatre, and reminisces on the great feats of the 2008 Olympics at Herzog and de Meuron’s extraordinarily elaborate Bird’s Nest stadium.

What many European designers are doing is using their heritage to help them win work and secure sales in fast-growing Asian and Middle Eastern economies. Ken Shuttleworth, founder of Make architects, points out that British urban designers now have offices across these regions as they win work by evoking images of the great feats of Victorian engineers such as Isambard Kingdom Brunel. Creative Hubs

As countries compete for the high ground in design, they are also promoting themselves as international centres for technology, design and creative talent. This is about their ability to produce home-grown talent, but also to attract the best creative minds from abroad. To underpin all this, it is about having the education and environment in place to support a vibrant creative community.

While no one would argue with the need for governments to create the educational systems and support structures to enable design talent and communities to emerge, not everyone is convinced that the current policies they are pursuing will be successful. One particularly thorny issue is how to promote creativity, that elusive magic ingredient that enables individuals and businesses to come up with something breathtakingly new.

COMPETING IN THE DESIGN ECONOMY


Today, the emphasis in many countries is on promoting a greater focus on the so-called STEM skills (science, technology, engineering and mathematics) in education. Design should be seen as going hand-in-hand with all of these subjects. But the focus on design is often lost as governments and universities concentrate on churning out more scientists and engineers. In August 2011, Google’s chairman, Eric Schmidt, partly blamed a failure to nurture polymaths for what he saw as the UK’s failure to capitalise on science and technology innovation. “You need to bring art and science back together,” he told the annual MacTaggart lecture in Edinburgh.

In the West, funding for what are viewed as “soft” creative skills, and indeed for the arts in general, is under pressure in the current downturn. In emerging markets, the creative process has featured less prominently in formal education. China is said to produce 600,000 engineering graduates each year, but there is a shortage of trained designers (see box on page 8, Why emerging markets are embracing smart design).

Our survey shows that the role which companies find most difficult to attract and retain in their home market is that of business planner/strategist, named by 46 per cent of respondents. This is mostly the case for Germany, Mexico and the UK, where respectively 66 per cent, 62 per cent and 60 per cent of respondents find it difficult to attract and retain business planners and strategists who are able to understand market needs and bring products to market.


More broadly, it is interesting to see how different regions stack up in terms of their capabilities in the area of technology and design, as viewed by today’s business leaders. One of the most striking findings is that when asked which region leads in terms of prowess in engineering, the Asia-Pacific is cited by 32 per cent of respondents, followed by Western Europe (23 per cent) and Latin America (22 per cent). To some extent it is unsurprising that Europe, the birthplace of the Industrial Revolution, has a high reputation. Meanwhile, some of the economic powerhouses of the Asia-Pacific region have built vast complexes and infrastructure on the back of their increasing wealth.

However, in other areas of the design process, the West still holds some strong advantages. North America, for example, is still seen as by far the best region for marketing and brand-building of products and services (by 36 per cent of respondents), commercialisation of products and services (32 per cent), access to finance for innovative projects and ventures (32 per cent), and application of science and technology to industry (25 per cent).

Dr Mandy Savage, programme and technical operations director at Lockheed Martin UK, points out that the US is generally ahead of its international rivals in fields such as systems and software engineering, and is in a good position to attract the best and the brightest. Yet nearly twice as many respondents from North America than respondents from China say they struggle to attract and retain creative thinkers in their home market (38 per cent against 20 per cent).

Which region do you think is best in the following areas (excluding the region in which you are based)?

Engineering prowess

Application of science and technology to industry

Marketing and brand-building of products and services

Commercialisation of products and services

Access to finance for innovative projects and ventures

0 10 20 30 40 50 60 70 80 90 100

Asia-Pacific North America Western Europe

Latin America Eastern Europe Middle East and Africa

32% 22% 15% 7% 23% 1%

22% 17% 25% 13% 20% 2%

14% 16% 36% 11% 20% 3%

16% 15% 32% 13% 20% 4%

23% 11% 32% 7% 19% 8%


The survey also shows how important these perceptions can be in determining where companies will invest in the future. A total of 26 per cent of respondents say that the location of their innovation activities depends on access to a talent base. But it is also clear from these results that companies gravitate to different locations and hot spots depending on the area of design, but also for different phases in the design process.

For example, the UK has world strengths across the design sector and more than its share of world-class architects, Italy is a powerhouse in fashion, furniture and textiles, Germany excels in car design, China builds great technologies, and India is positioning itself as a global leader in service design. For governments, it is crucial to plan and invest around areas where a country can derive long-term competitiveness as part of the innovation landscape.

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002

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of 2

003

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004

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005

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006

Sum

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007

India

Mexico

USAGermany

France

UK

ChinaItalyRussiaBrazil

3

2.5

2.0

1.5

1.0

0.5

0

One way to measure a country’s standing in that landscape is by looking at its research and development (R&D) spending. As the chart shows, some countries surge ahead. The United States invested 2.7 per cent of its GNP in R&D in 2007, closely followed by Germany (2.5 per cent), France (2 per cent) and the UK (1.8 per cent). The real mover, however, is China, where R&D spending rose by 56 per cent between 2000 and 2007, from 0.9 per cent to 1.4 per cent of GNP.

R&D spending (per cent of GNP)Source: Economist Intelligence Unit

Research and Development (R&D) spending


Why emerging markets are embracing smart design

The BRIC countries — Brazil, Russia, India and China — are becoming more ambitious and confident when it comes to taking a lead in different areas of design. Charles Bezerra, executive director at Gad’Innovation, a Brazilian consultancy, argues that there is no longer such a sharp divide between developed and emerging economies: “The technologies and the methodologies are spread out globally” he says.

In some areas emerging market designers have a natural advantage. In a recent paper, Design for BRIC: the new frontier, Mr Bezerra went further, claiming that emerging market designers should have a competitive advantage in these fast-growing economies: “The BoP [bottom of the pyramid, referring to those around the world who live on less than US$2 a day] represents a big opportunity for BRIC businesses. This is because in the logic of traditional capitalism, multinational companies from the developed countries create products directed at their own national consumers and consumers like them; only as an afterthought are those products brought to developing countries.”

If this is correct, Brazilian and Chinese designers could be better prepared to create products for the

next wave of Asian and South American economies than the leading experts in the well-established economic powers.

There are, however, serious challenges to overcome. As already noted, China has ambitions to become a global leader in design. Yet in one respect it faces a design crisis, just as it is becoming one of the great glamour destinations for the world’s leading engineers, fashion names and product craftsmen. Carl Liu, an author and partner at Idea Dao Design Shanghai, says that of 100,000 people who graduate from Chinese universities in design each year, only 3-5 per cent end up in a practice. “Some students do not really have an interest in design when they enroll — they just want to get a degree,” Mr Liu explains. “They think design is an easier course to get into, and they think that it is an easy course to graduate in.”

As more Western companies have opened up in China, Mr Liu believes that domestic businesses have started to grasp the importance of design. However, he believes that Chinese businesses are still not making design a top priority and that they will have to improve their design standards if they are to compete on the world stage. “Local brands that want to go into international markets will soon realise just how weak they are and will then have to focus more on design,” he says.

■ India’s Mumbai dabbawallas, who dependably deliver by bicycle 200,000 meals per day

■ Indonesia’s “SMS e-government”, a channel of communication between citizens and legislators

■ Kenya’s M-Pesa banking service, which turns millions of “unbanked” in Africa into users of banking services through simple mobile telephones

■ India’s Hindustan Unilever’s Project Shakti, where poor rural women become micro-entrepreneurs who teach their neighbours about basic nutrition and hygiene

■ South Sudan’s first beer brewery by SABMiller, making beer accessible to eight million people

■ India’s Aravind Eye Care System, delivering high-quality eye care at minimal cost

■ Brazil’s Embraer, the only aircraft manufacturer based in an emerging market that competes with the likes of Boeing on price and design

■ India’s DBOP project, showing local communities how design can help create innovations that improve people’s lives and create sustainable economies

■ China’s largest networking and telecommunications equipment supplier, Huawei, and its installation box for optical cables

■ India’s Tata Nano, the world’s cheapest car, at US$2,000

Ten of the most innovative design stories from emerging markets


The importance of design in modern business can be traced right back to the Industrial Revolution. Back then, there were plenty of entrepreneurs generating cheap and cheerful (but not always well designed) products. Many achieved temporary popularity. But the names that are remembered centuries later are the innovators that were able to harness new technologies and production techniques to bring brilliantly designed products to a new and burgeoning consumer market. These innovators came up with great ideas and managers brought the insight to design a process that helped successfully commercialise those ideas.

So it is perhaps surprising to find that many top managers today remain diffident about the importance of design. This is one of the paradoxes of modern business: CEOs constantly espouse the need to innovate, yet few seem obviously comfortable with the design ethos that is likely to produce such innovations. As Sir John Sorrell notes: “Design is difficult to get a handle on. It’s a word that provokes suspicion among many business leaders and civil servants.”

DESIGN THINKING IN BUSINESS

Where will you focus your design and development efforts over the next three years, in terms of creating better services or products?

Providing seamlessly integrated solutions or services for greater convenience of customer

Providing a similar product or service but at a lower price than the competition

Providing products/services that are cutting edge in terms of performance or functionality

Adapting products, processes and services to meet regulations and standards in home/overseas markets

Creating products/services or services that are a first of their kind

Modifying products to meet customer preferences or technological challenges of individual markets

Other, please specify

28%

22%

19%

14%

9%

7%

0%

0 10 20 30 100

“ Design is difficult to get a handle on. It’s a word that provokes suspicion among many business leaders and civil servants.” Sir John Sorrell


Attitudes are beginning to shift. Most of the world’s fastest-growing companies are achieving success by embracing design principles. But the survey indicates that while some companies are ready to invest in inherently risky innovation or in the vagaries of the creative process, others are holding back. When asked whether their priority is to invest in innovation or to cut costs, only a slim majority (56 per cent) pick the former (see table on page 9). This is at least understandable in the current climate.

Perhaps more worryingly, only 9 per cent of firms are striving for first-of-a-kind innovation, compared with more than twice the number (22 per cent) that plan to focus on creating similar products to competitors at a cheaper price. Apart from the 28 per cent that say their priority is to work on integrating solutions and services to improve customers’ experience, the remainder are content to fine-tune and improve existing products or services. This may well be a safe and profitable course — until customers’ tastes change or a new entrant arrives to disrupt the market.

China

Brazil

Mexico

UK

Italy

France

Germany

N America

0 10 20 30 40 50 60 70 80 90 100

Cost control is a bigger priority than innovation and design

It is most important to increase investment in innovation and design

52.6% 47.4%

50.7% 49.3%

57% 43%

49.4% 50.6%

42.9% 57.1%

24.5% 75.5%

43.1% 56.9%

25.3% 74.7%

Is it most important to increase investment in innovation and design or is cost control a bigger priority than innovation and design?


Three-quarters of respondents in France and North America think it is most important to increase investment in innovation and design, while respectively 57 per cent and 53 per cent of respondents in Mexico and China think that cost control is a bigger priority. In the UK, respondents are divided almost 50-50.

It would be too simplistic to divide companies between the innovative visionaries destined for success, and the cost-cutters making short-term profits but lacking a long-term plan. Designing new products can be expensive. There are many failures, and spending heavily on R&D is no guarantee that a product will even make it to market. It is not foolish for chief executives to want to find smarter, more cost-effective ways to design the next big thing. But the companies that embrace design thinking are more likely to take a long-term perspective on these crucial issues.

The designer boss All chief executives face the challenge of how to embed innovation into their corporate culture. It is an uphill struggle given that organisations tend to create structures and hierarchies that discourage creativity and risk-taking as they grow larger.

Much depends on the CEO’s own attitude to design and innovation. The survey indicates that chief executives are at least moderately involved in elements that make up their company’s design strategies. For example, 96 per cent of respondents say that the CEO plays a hands-on role in tracking market trends and opportunities, while 87 per cent set strategic goals for innovation. But setting goals is one thing; creating a culture that is capable of innovation or great design thinking is a much greater challenge.

Not that chief executives need to be trained designers themselves, of course. But if they are serious about innovation, it can be argued, they need to take steps to elevate the status of design within the organisation. If the rest of the management team isn’t design-literate, it helps to have someone to act as an adviser. Top management in most companies is disproportionately drawn from people with a background in roles such as finance and accounts or operations. And in general, management training emphasises analytical discipline, rather than a creative mindset. Sir John Sorrell’s advice to these managers is that they should do what Apple did, and put its top designer — Jonathan Ive — on the board.

The bare essentialsDesigners have often gravitated to the premium end of the market, in search of a big budget to help fuel their creativity. But one widespread current trend is to use design to produce simpler, more elegant and cost-effective solutions. This is especially true of frugal innovation, an exciting trend which sees companies developing products for consumers who traditionally could not participate in consumer society. But it is also a trend which is equally apt for developing countries where cost-conscious customers, companies and governments are looking for quality design at a cheaper price tag. Nearly two-fifths of respondents to our survey say that their customers would most like to see them focus on cost and value for money when developing products or services over the next three years. This far outstrips the 22 per cent calling for stronger ethical credentials, or the 17 per cent who opt for more choices to suit personal tastes (see table on page 12).


Although designers have always had to consider cost and affordability constraints, frugal innovation — a form of product and service development that targets consumers too poor to afford traditional consumer products — has pushed the boundaries further. Famously, General Electric (GE) and Tata, an Indian conglomerate, take a backwards approach, stripping out superfluous elements of existing technologies to make their products more affordable. In 2009, GE built an electrocardiograph machine weighing six pounds, half the weight of the smallest machine available at the time and 80 per cent cheaper than similar products.

The same year, Tata launched the world’s cheapest car, the US$2,000 Nano, in its home market. Almost every aspect of automotive design was questioned as part of the Nano’s design, even to the extent of removing the passenger-side wing mirror and getting a single windscreen wiper to do the job of two.

Successful examples of frugal design do not only apply to products but also to services. Witness the rise of M-Pesa, a branchless banking service that has turned millions of “unbanked” in Africa into users of banking services by leveraging the simplest of mobile telephones.

What do you think your customers would most like to see you focus on when developing products and services in the next three years?

Greener/lower carbon footprint on products and services

Cheaper/better value

Reliability

Top-of-the-range performance or functionality

Brands that they are proud to own

Stronger ethical credentials

Simplicity and intuitive user experience

More choices to suit personal tastes or preferences

Better support and servicing


0 10 20 30 40 100

39%

39%

34%

32%

26%

22%

20%

17%

13%

0%


CASE STUDY

India’s Aravind Eye Care System has shown that taking a frugal approach to the design of even complex services does not have to mean skimping on levels of service. Quite the opposite, in fact.

The organisation began life in the 1970s, when eye surgeon Dr Govindappa Venkataswamy established an 11-bed hospital with the grand ambition of eliminating avoidable blindness in India. Millions of Indians suffer from blindness, which in most cases is caused by easily treatable cataracts. Since its small beginnings, Aravind now provides 45 per cent of eye care in the state of Tamil Nadu, or 5 per cent for India as a whole. Its success is due to a series of innovations, in business models, products, processes and services.

Firstly, says Dr P Namperumalsamy, the company’s chairman, Aravind recognised that the people who most needed the service were those who felt treatment was simply unavailable, and began to deliver care to villages. Next, rather than import lenses used in cataract surgery, Aravind began to make its own at a fraction of the cost. Training staff is also a costly enterprise, so Aravind now trains local villagers as paramedics for routine work, which ensures it gets the most value out of its doctors. Finally, the company has designed a fee scale to ensure delivery of the highest levels of treatment to as many people as possible. Its most recent innovation has been to partner with major medical schools, such as Johns Hopkins University, on telemedicine and education programmes.

Aravind proves there’s richness in frugality

These and similar initiatives have inspired designers around the world to think how great design can be delivered at much lower cost to the customer. There is a need for similar thinking in developed markets. “It’s important to balance design with cost”, says Paul Lester, chairman of road fuel provider Greenergy. “No matter how fantastic a design is, cost has a major influence on how things look.”

Mr Lester was previously chief executive of VT, a UK-based support services group that was involved in the last government’s £45 billion Building Schools for the Future programme. The consortiums with which VT was involved would typically ensure that the front of the school had a distinct design, but would then use standard designs behind that façade to keep on budget. “There would be individuality for the front area, but modular design at the back,” he explains.

In another example of frugality in the West, Motel 6, a chain of more than 1,100 budget hotels in North America, asked Priestman Goode, a London-based design group, to look at redesigning its rooms. Realising that many people do not use wardrobes in hotels, for fear of leaving their clothes behind when they check out, Priestman Goode created a furniture unit that held the television, a cubby for the remote control and valuables, and space for shelving and hangars. A single unit replaced three or four pieces of furniture, reducing cost by a third. Clever design offered great value for money, which Motel 6 could then pass on to their customers to become even more competitive on cost.

“Manufacturing cost was reduced and it gave a main focal point to the room, almost like a fireplace used to be,” says director Paul Priestman. “With frugal design you can design an object to make it do several things, reducing waste, cost, weight, materials.”


CASE STUDY

Keeping it simpleA cost-driven trend to pare back design could also be good news for customers and clients in terms of making products and services more pleasurable to use. Technology-based products arrive rammed with an array of features and functions, many of which will never be used by the customer, or even understood.

Executives in the survey give apparently contradictory views on this issue. As previously mentioned, 28 per cent say that a high priority is to provide integrated solutions and support that make life easier and more convenient for customers. At the same time, they do not see simplicity as being particularly high on the agenda for customers.

Only one in five respondents believes that their customers want them to focus on simplicity and intuitive user experience. And yet, customers in focus groups or in online feedback constantly express frustrations about the difficulty in using technology-based products – and the companies that lead in consumer electronics are increasingly working hard to create both a simpler human interface and support services that wrap around the product.

The same could be said of pure services such as banking. Where services have been shifted online or to outsourced call centres simply to save cost, the result has often been deterioration in service quality and a backlash from customers.

The pharma sector and the search for emotional branding The pharmaceuticals industry is bland, defensive and fails to foster loyalty among its customers. These were some of the thoughts going through the mind of brand design guru Jonathan Sands, chairman of Elmwood, a design consultancy as he sat through the Economist Pharma Summit earlier this year.

“The more I listened to guys from big pharma the more I heard a recurring theme,” says Mr Sands, whose consultancy has worked with some of the world’s best-known retail, consumer and corporate brands. “They were worried about their patents running out, the rise of generic drugs.”

Worse still, Mr Sands observed, was that the major companies appeared somewhat paranoid about their public image. “They thought that they were almost seen as being worse than bankers. I found it quite incredible — here was an industry doing research to help people have better lives, a front-foot industry talking on the back foot, relying on patents to protect their revenue streams,” he says.

One issue facing the industry is that although pharma companies are well known, their medicines are not. In this regard, Mr Sands argues, pharma is its own worst enemy — the portfolios at GlaxoSmithKline and AstraZeneca, for example, include Adartrel, Zyban, Accolate and Zomig. “These may have meaning internally in the corporation but are meaningless to the end user, and nobody can identify one drug from the next from the packaging,” Mr Sands argues.

Mr Sands believes that brands are like friends. “You can buy all sorts of smartphones, but you buy an iPhone for more than its functionality — you are part of the Apple Club. The iPhone 4 had antennae problems, but people still want to be part of the club.”

In many of their largest markets, pharma companies are prohibited from marketing directly to patients, and regard doctors and governments as their primary targets. But patients — the ultimate consumers of medicine — are better informed than ever about their conditions and treatment options, and are playing an increasingly important and active role within healthcare systems. Pharma firms, Mr Sands says, could do worse than learn how to emulate companies in other sectors that have become successful because their customers love the brand.


CASE STUDY

Smarter players think about service designs that join the dots between different customer touchpoints. In this way, banking feels like a friendly and informed conversation with a bank that values its customers.

Technological complexity is not only a problem for designers in the consumer electronics sector. For defence companies manufacturing high-tech weapon systems, getting the interface right could be a matter of life and death.

Dr Savage at Lockheed Martin points out that design has always been intrinsically important in the defence industry. “But things have become more complex,” she says. “When I joined as an engineering graduate, there would be tens of hundreds of lines of code but now there are thousands upon thousands.”

As technology changes, so designers must keep systems simple for the user — while not overlooking very basic problems that would be noticed quickly in less advanced products.

Smart design for an ageing market

The world is getting older. In Europe, for example, the median age in 1950 was 30 years. Today, it is 40. Over 65s will make up almost 25 per cent of the UK population by 2034, according to the Office for National Statistics, and by 2025 almost 1.5 million people in the UK will be living with an age-related disability.

Mat Hunter, chief design officer at the UK’s Design Council, says that while the public sector sees this changing demographic as a problem, businesses should spot a chance to develop new products. “If the elderly become seriously unwell, then the state has to pick up the pieces,” he says. “But the private sector should see this as an opportunity: a well-educated, perhaps the wealthiest, demographic in which to pick up new types of customers.”

Car manufacturers are among the pioneers in this field. Mazda has introduced sliding doors on its M5 model to make access easier for their less supple clients, and Toyota has introduced larger typefaces on dashboard instruments. Sometimes, the challenges facing citizens as they age are being addressed by ageing designers themselves. Kenneth Grange, a multi-award winning designer who is in his 80s, recently designed an oversized chair for Hitch Mylius, a furniture manufacturer, after noticing how much more difficult it was to rise from a chair as he grew older.

Some businesses are finding that designing products with older consumers in mind offers a degree of recession-proofing. OXO, a kitchen tool maker, has recorded growing sales numbers since the economic downturn, prompting Bloomberg Businessweek to point out that the company had “built a following by designing everyday items so people of almost any age or physical ability can easily use them.”

But applying smart design to solutions for ageing populations is not only about developing new products. Services aimed at older citizens will also benefit from design innovation. The UK’s Design Council has launched a competition inviting designers to devise ways of ensuring that older citizens do not become recluses. This could be a matter of applying simple design tweaks to a product or service. A dating website, for example, could offer options more relevant to needs or retirees than people in their 20s or 30s.

Service and process design elements will become especially important when addressing the next big challenge facing ageing societies dementia, which already costs the UK £20 billion a year, more than cancer, heart disease and stroke care put together. Telecare services, for example, are now widely available as a way of allowing dementia sufferers to stay at home for longer before requiring full-time supervised care.


CASE STUDY

BankSimple’s back-to-basics approach

Rather than focussing on products, which would see BankSimple competing in an already crowded retail banking space, its founders decided to partner with chartered banks to provide the products and instead concentrate on designing a complete consumer banking experience, accessible via web and smartphone.

According to BankSimple’s founder, Josh Reich, many banks only design their customer offerings at the surface level, rather than at the foundation, with gimmicks like 3D bank statements. Instead, BankSimple’s focus is on the basics of user experience design.

The goal is simple: to effectively use the data already held by banks to help consumers better manage their money. For example, one functionality displays customers’ “spending cushion”, which is determined by setting aside their savings, factoring in their typical monthly expenses, predicting their upcoming income and bills and calculating what is left over. BankSimple also automatically moves funds between savings and credit to help customers pay less and earn more interest.

In addition to customer-led design, there is also an enthusiasm for a parallel trend: customer-focused design. The survey also shows how companies are moving beyond the design of objects (the traditional product for many firms) to focus on the entire customer experience. Sometimes the “product” itself is a service (such as online banking). At other times, it is the service wrapped around a product (such as support services for mobile phones). In either case, companies are trying to apply design principles to the creation and delivery of services. It is a challenge that involves many different corporate functions, from HR skills and training to process and workflow design, to the technology infrastructure that underpins these services and so on. It is not difficult to think of companies that do this very badly, and far harder to find those that do it well. But the goal for companies across all sectors is to design around the customer, and to hone everything about customer-facing services in order to create a seamless, helpful and pleasurable experience.

Companies are seeking to place the customer experience at the heart of their product and service designs. There are examples right across almost every sector, from online shopping services such as Amazon and Ocado, to smartphones — and even customisable cars. We see evidence of this thinking in the survey: 28 per cent of respondents aim to focus their design and development efforts over the next three years on providing seamlessly integrated solutions or services for greater convenience of customer. 22 per cent say that they plan to focus on creating similar products to competitors at a cheaper price.

Customers are playing a more active role in shaping next-generation products. Customer focus groups, the traditional way of finding out what customers want from products, is now augmented by technology allowing companies to collect a vast amount of data on how customers spend their time and use particular products in their daily routines. The trend towards customer-led design, in which companies capture this data and feed it back into the design process, is an attempt by companies to harness these tactics to improve the hit rate on innovation.

SERVICES AND CUSTOMER EXPERIENCE


This may help to explain why customer service and support looms as such a big issue for executives in our survey on design. Nearly one-half of respondents (48 per cent) see design and delivery of services for customers as key to the success of their business over the next three years. This is particularly true in the financial services industry, where two-thirds of respondents see design and delivery of services for customers as key to the success of their business over the next three years.

Respectively 48 and 44 per cent of respondents from Mexico and the UK believe that customer service and support strategy are essential in designing and launching a successful product or service. Meanwhile, 57 per cent of respondents in the logistics, transport and travel industry believe this as well, while two-thirds of respondents in financial services think it is more important to focus on what customers want.

Design goes glocalIf companies are genuinely committed to designing around the needs of customers, what does this mean when companies are targeting customers and clients in an array of new and relatively unfamiliar markets? Western companies are seeking to design products and services that need to reflect the needs, aspirations and — of course — price expectations of the vast consumer markets opening up in the BRIC economies. Meanwhile, home-grown champions in those same countries are increasingly seeking to transform themselves into global brands.

Which of the following is most important to the success of your business over the next three years?

Service or solution design: Design and delivery of services for customers

Product design: Developing innovative products for customers

Business process design: Efficient organisational practices and systems

0 10 20 30 40 50 60 70 80 90 100

48%

36%

16%


Only 10 per cent of respondents to our survey say that their company’s biggest struggle when developing new products or services is adapting products or services to the specific needs of different global markets. Perhaps this is because there is a widespread view — among 34 per cent of respondents — that great design comes from listening to customers. However, this opinion varies between country and industry. About 40 per cent of respondents in the UK subscribe to that view, for example, compared with only 27 per cent of respondents in China. Meanwhile, 42 per cent of respondents in the IT, telecommunications and technology industry say that great design comes from listening to customers, but only 25 per cent in the logistics, transport and travel industry share that view.

Every customer is unique, but differences are even greater due to varying cultural and social norms across markets. This is most obvious in the leap from developed to emerging markets, but actually every market and customer segment has its quirks.

Priestman Goode, among other projects, has worked on transport systems around the world. “You must have cultural understanding,” says Mr Priestman, who is now setting up an office in Qingdao, China, where his company works with Sifang Locomotive. “If you’re manufacturing trains for a country, the key is it must look like something that belongs to that country.”

What does your company find most difficult when developing new products or services?

Bringing products to market

Creating a better user experience

Building good support services around your core offering

Tracking changing patterns in customer demands/needs

Working with third parties on innovation projects

Recruiting talent

Getting management backing and focus

Getting funding

Adapting products or services to specific needs of different global markets

General lack of understanding of design issues


0 10 20 30 100

28%

27%

27%

26%

19%

17%

15%

12%

10%

4%

2%


CASE STUDY

Want to boost green thinking? Apply a little behavioural science

Today, businesses ignore sustainability and green issues at their peril. According to nearly 40 per cent of our survey respondents (60 per cent in France and 43 per cent in China), consumers today would like to see companies reduce their carbon footprint on products and services. The issue is more important, they say, than designing cheaper, better value or more reliable products.

But consumers themselves have a big role to play in reducing greenhouse emissions — not simply in the product choices they make, but in being aware of their own behaviour, especially regarding energy consumption. Encouraging citizens to become greener has not always been easy.

OPower, a US-based company which aims to reduce global carbon emissions, has grown rapidly since its founding in 2007. But the success of the company — which has been feted by Barack Obama and David Cameron — is based entirely on the simplest of premises: a good understanding of human behaviour.

“Nearly everyone says saving energy is a good thing,” says OPower president and founder Alex Laskey. “But it’s not the first thing people worry about when they get up in the morning. The challenge is getting people interested in something that is boring.”

OPower works with utility companies to help customers cut down their energy consumption. The firm takes a series of complicated data — from energy meters, local land registries, utilities and other sources — and turns it into easy-to-understand information that allows households to see how much energy they use compared with their neighbours and those in the local community.

OPower’s presentation of simple bar chart and graphic comparators of energy consumption of customers against their neighbours has proven to be a great motivator to switch off lights and improve insulation. On average, customers with utilities using OPower have cut their bills by 2-3 per cent as they try to save more energy and money than their neighbours.

Mr Laskey compares the company’s methodology to Amazon’s. Amazon has more than one million products, but does not email customers random lists of what they can buy. Instead, it looks at what they have previously bought and what they have browsed, and creates a tailor-made list of products customers seem most likely to want to purchase.

OPower is now expanding internationally. First Utility, its UK partner, believes that £400 million could be saved by consumers each year if such a system were deployed on all British households. As Mr Cameron told an audience in 2010, “That sort of behavioural economics can transform people’s behaviour in a way that all the bullying, all the information, all the badgering from government cannot possibly achieve.”

Even multinationals that standardise their products to cut cost can benefit from tweaking designs. For example, burger giant McDonald’s noted that Europeans liked to eat in chic-looking restaurants, but still enjoyed a Big Mac.

In 2006, a French interior designer, Philippe Avanzi, was hired to redesign more than 6,000 McDonald’s stores in Europe, introducing leather chairs and wooden features. He also created a portfolio of designs for each country to reflect their slightly different tastes.


CONCLUSION

The desire to create a better experience for customers goes right back to the most basic design principles. Whether they are developing a product, process or service, the best designers always want to make something well, to ensure it is fit for purpose, and that it is delightful for people to use or interact with.

If only it was as simple as listening to customers — but more often than not, customers can only talk about their current experiences. This is all well and good when you are trying to improve an existing product and service, or to tailor it to different customer needs. But that will only take you so far. The goal is to think ahead and outside perceived boundaries, enabling the company to introduce a ground-breaking product or service.

Henry Ford is once said to have remarked: “If I asked customers what they want, they’d ask for faster horses”. Customer-led design is limited by the fact that buyers often don’t know what they want until they see it. There is still a need for design-oriented companies to make the leaps of imagination. Our survey respondents seem to understand this point, with the majority saying that great design comes from visionary thinkers, rather than listening to customers.

Meanwhile, advances in technology mean that companies now have new, more precise ways of understanding customers’ needs. When this is combined with visionary or creative thinking, companies can dramatically improve their ability to bring great ideas to market more effectively.

As veteran brand designer Ivan Chermayeff has said, “To design is to solve human problems by identifying them, examining alternate solutions to them, choosing and executing the best solution.”

To do that well, this report suggests, designers also need to know when to listen and when to lead.

UK Trade & InvestmentUK Trade & Investment is the government department that helps UK-based companies succeed in the global economy.

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The Economist Intelligence UnitThe Economist Intelligence Unit is the world’s leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946.

The Economist Intelligence Unit is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.

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HELPING YOUR BUSINESS GROW INTERNATIONALLY

A range of UK Government support is available from a portfolio of initiatives called Solutions for Business (SfB). The “solutions” are available to qualifying businesses, and cover everything from investment and grants through to specialist advice, collaborations and partnerships.

UK Trade & Investment is the Government Department that helps UK-based companies succeed in the global economy, and is responsible for the delivery of the SfB product “Helping Your Business Grow Internationally”.

We also help overseas companies bring their high-quality investment to the UK’s dynamic economy – acknowledged as Europe’s best place from which to succeed in global business.

UK Trade & Investment offers expertise and contacts through its extensive network of specialists in the UK, and in British embassies and other diplomatic offices around the world. We provide companies with the tools they require to be competitive on the world stage.

For further information please visit www.ukti.gov.uk or telephone +44 (0)20 7215 8000.

Whereas every effort has been made to ensure that the information given in this document is accurate, neither UK Trade & Investment nor its parent Departments (the Department for Business, Innovation and Skills, and the Foreign and Commonwealth Office) accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned.

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Published September 2011 by UK Trade & Investment © Crown CopyrightURN 11/1278