The  role  of  Design  in  Business  ROI:  A  Literature  Review  –  August  23,  2012 1 The  role  of  Design  in  Business  ROI:  A  Literature  Review       Prepared  by   Angèle  Beausoleil,  ISGP  MA  Student     Abstract:  This  paper  reviews  select  literature  that  examines  the  role  of  design  in  shaping,   influencing  and  affecting  an  organization’s  return  on  investment  (ROI).  It  explores  the  meaning,   context  and  application  of  the  concept  of  “design  ROI”  across  disciplines  and  sectors  and  provides   an  analysis  of  the  most  recent  research  on  the  subject  of  the  economic  value  and  performance  of   design.  The  bulk  of  this  paper  highlights  the  authors  and  organizations  currently  investing  in   research  and  proposing  design  value  metrics.  The  vast  inventory  of  research  and  methodologies   infers  the  need  for  a  linguistic  typology  -­‐-­‐  a  common  and  shared  vocabulary  -­‐-­‐  to  better   communicate  design’s  positive  economic  impact  across  economic  and  industry  sectors.  It   concludes  that  good  design  is  good  for  business  and  suggests  research  gaps  to  better  understand   the  value  of  design  in  business.  The  purpose  of  this  research  is  to  broaden  the  understanding  of   the  impact  of  design  on  business  ROI  and  to  present  evidence  on  why  design  is  good  for  business.     Keywords:  design  ROI,  business  return  on  investment,  design  economics,  design  performance.       Introduction:       Design  is  central  to  every  experience,  product  or  service  created  and  consumed.  Successful   companies  such  as  Apple,  P&G  and  BMW  are  often  cited  as  corporate  leaders  that  clearly   understand  the  business  value  of  good  design.  In  today’s  economy,  scholars  and  practitioners   (Brown,  2009;  Bryson  and  Rutsen,  2010;  Kelley,  2005;  Martin,  2009;  Meinel,  2011)  position   design  as  a  company’s  most  critical  competitive  advantage.  Their  collective  research  provides   evidence  that  the  design  process,  design  thinking  and  designed  products  matter,  and  make  a   major  contribution  to  economic  and  national  competitiveness.       This  paper  examines  recent  research  on  the  value  of  design  in  business  ROI  and  serves  as  the  first   inventory  of  published  design-­‐ROI  oriented  research.  It  aims  to  create  a  better  understanding  of   the  value  of  design  through  the  business  language  of  return  on  investment  (ROI).       The  methodology  for  this  literature  review  took  into  account  the  current  characteristics   of  design  evaluation  methods  in  the  context  of  design  as  a  discipline  (Cross,  2001).  The  approach   was  discursive  because  the  research  examined  on  the  topic  came  from  a  number  of  disciplines   and  cultures  and  has  not  been  undertaken  systematically  or  by  economic  sectors.  The   interpretations,  observations  and  conclusions  were  derived  from  a  variety  of  small-­‐scale,  well-­‐ organized,  in-­‐depth  case  studies,  theoretical  frameworks  and  industry  surveys  that  illustrated   good  practice  and  provided  useful  insights  into  the  understanding  of  design  ROI.         During  the  review  of  the  literature  both  academic  and  industry  sources  were  accessed  and  the   topic  “design  ROI”  was  searched  across  multi-­‐disciplinary  databases  from  the  David  Lam   Management  Research  Library  and  included  articles  from  science,  technology,  arts  and  sociology   libraries.  Industry  reports  were  then  sourced  using  the  web’s  search  engines  and  e-­‐news  media   websites.  The  literature  reviewed  includes  journal  articles,  books,  news  media,  dissertations  and   industry  reports  and  whitepapers.  When  identifying  relevant  literature,  abstracts  and/or  full  texts   and  chapters  of  the  identified  articles  and  reports  were  evaluated  based  on  the  criteria  of   The  role  of  Design  in  Business  ROI:  A  Literature  Review  –  August  23,  2012 2 providing  insights  on  the  topic  of  design  evaluation  methods,  based  on  the  return  on  investment     (ROI)  model.  The  data  gathering  process  uncovered  information  on  typologies  within  design-­‐ oriented  industries  and  gaps  in  linguistic  typologies  on  the  topic  design  evaluation  and  ROI  in   non-­‐design  industries.  Linguistic  typology  challenges  surfaced  when  initially  searching  for  the   term  “design  ROI”.  To  locate  high-­‐quality  research  studies,  understanding  the  language  and   vocabulary  used  to  describe  the  economic  value  of  design  was  critical.  Thus,  with  only  a  few   studies  resulting  from  the  initial  search,  the  subject  and  keyword  phrase  was  extended  to  include   “design  performance”,  “design  evaluation”,  “cost  benefit  analysis  of  design”  and  “design   economics”,  in  order  to  yield  greater  and  relevant  research  results.       During  the  analysis  phase,  themes  emerged  from  the  literature  that  could  form  the  basis  of  a   classification  framework  as  an  aid  to  better  understand  the  economics  of  design.  The   classification  framework  themes  were  design  as  product,  service,  process,  people,  place  and   policy.  Further  research  on  design  value  metrics,  by  design  theme  across  economic  sectors  is   highly  recommended.     The  selected  literature  reviewed  for  this  paper  is  presented  in  three  sections:  the  first  section   explores  the  role  of  design  in  creating  business  value  as  described  by  scholars  and  practitioners,   the  second  section  provides  a  discussion  on  the  concept  of  design  economies  with  industry   examples  across  the  three  economic  sectors,  and  the  third  section  examines  the  shared   vocabulary,  meaning  and  models  of  design  ROI  across  disciplines.  It  concludes  with  a  discussion   on  the  gaps  in  the  literature  and  areas  for  further  research.     1.  The  value  of  design  for  business       Design  has  been  recognized  as  one  of  the  critical  factors  for  business  success  (Yin,  Qin  and   Holland,  2011).  It  is  defined  as  the  act  of  conceiving,  planning  and  making  products,  services,   systems,  brands,  or  environments  that  serve  users  and/or  organizations  (Gajendar,  2003);  as  the   interface  between  consumer  behaviour  and  product  development  (Bryson  and  Rutsen,  2010);   and  as  a  process  of  innovation  (Brown,  2009;  Kelley,  2005;  Martin,  2009;  Whicher  et  al,  2010),  a   complex  method  that  involves  collaboration  between  participants  from  different  disciplines   leading  to  a  specific  outcome.  Design’s  value  is  often  communicated  based  on  the  role  it  plays   (Design  Council,  2007)  either  as  a  process,  product,  service,  person,  policy  or  corporate   competitiveness.  For  the  purpose  of  identifying  the  breadth  of  design  ROI  research,  this  paper  is   examines  “holistic”  design  (Guo,  2010),  meaning  design’s  role  in  the  widest  sense,  from  the  visual   to  the  financial  and  strategic,  and  by  the  value  it  brings  to  commercial  or  business  organizations.     A  growing  body  of  research,  from  practitioners  and  scholars,  provides  evidence  of  the  positive   association  between  design  and  business  value.  Business  Week’s  Helen  Walters  in  her  article  The   Value  of  Design  (Walters,  2011)  writes  IDEO’s  Diego  Rodriguez  makes  the  case  that  good  business   arises  from  a  design-­‐centric  process  that  incorporates  marketing,  research,  and  ideas  while  RKS   Design's  Ravi  Sawhney  and  Deepa  Prahalad  outline  four  specific  areas  in  which  design  can  create   value:  understanding  the  consumer,  mitigating  risk,  boosting  marketing  and  branding,  and  driving   sustainable  business  practices.  Walters’  also  mentions  angel  investor  Dave  McClure’s  belief  that   design  and  marketing  are  more  important  than  engineering  for  the  firms  with  which  he  works,   and  highlights  how  Dr.  Jay  Parkinson,  a  pediatrician  and  preventive  medicine  specialist,  believes   the  role  that  design  through  disruptive  innovation  can  play  in  retooling  the  U.S.  health-­‐care   system.  (Walters,  2010)   The  role  of  Design  in  Business  ROI:  A  Literature  Review  –  August  23,  2012 3 The  value  of  design  and  design  thinking  is  demonstrated  through  case  study  research  by  IDEO’s   Tim  Brown  and  Tom  Kelley,  who  present  findings  on  Fortune  100  companies  such  as  Steelcase,   P&G  and  McDonald’s,  that  have  organically  and/or  systematically  incorporated  design  thinking   into  their  culture  and  processes,  resulting  in  positive  correlation  between  human-­‐centered   design  and  economic  success  (Brown,  2009;  Kelley,  2009).  Roger  Martin  adds  the  business  value   of  design  is  through  integrating  design  thinking  into  the  corporate  culture  which  leads  to  new   business  models,  breakthrough  innovations,  market  demand  and  business  sustainability,  as   illustrated  in  his  research  on  Cirque  du  Soleil  and  RIM  (Martin,  2009).     Research  on  product  design  and  Norwegian  manufacturers  (Bryson  and  Rutsen,  2010)  also   provide  evidence  that  good  design  does  not  just  enhance  the  profitability  of  a  company   producing  the  product,  but  can  also  enhance  the  profitability  of  business  partners.  A   complimentary  study  on  design  management  performance  (Chiva  and  Algere,  2009)  finds  good   design  does  not  emerge  by  chance  or  by  simply  investing  in  design,  but  rather  is  the  result  of  a   managed  process.     While  the  case-­‐study  based  research  asserts  a  design  approach  is  positively  linked  to  business   success  (Walters,  Brown,  Kelley,  Martin  et  al),  it  also  suggests  only  a  fraction  of  global   organizations,  across  economic  sectors,  are  applying  design  strategies,  activities  and  thinking  into   their  business  modeling  and  practice.  The  level  of  corporate  adoption  of  design  strategies  and   activities  may  be  linked  to  a  lack  of  a  universal  understanding  of  design  and  its  role  in  creating   business  value  across  disciplines  and  sectors.       2.  Design  Economies:  measuring  the  impact  of  design  by  economic  sector     Academics,  policymakers  and  business  leaders  increasingly  recognize  that  design  is  a  both  an   inherently  creative  activity  that  sits  at  the  intersection  of  art,  business  and  technology  (Vinodrai,   2011),  and  an  economic  driver  (Design  Council,  2007)  for  the  production  and  commercialization   of  goods  and  services  for  traditional  and  emerging  sectors.       This  section  provides  evidence  on  design’s  impact  on  ROI  within  the  three  economic  sectors   theorized  by  economists  Colin  Clark  and  Jean  Fourastié  (1950s).  The  three  sectors  are  defined  as   the  primary  sector  (businesses  focused  on  the  extraction  of  raw  materials,  such  as  mining,   agriculture  and  forestry);  the  secondary  sector  (businesses  focused  on  manufacturing,  the   conversion  of  raw  materials  provided  by  primary  industry  into  commodities  and  products  for  the   consumer);  and  the  tertiary  sector  (businesses  focused  on  providing  services,  including  both   profit  and  non-­‐profit  making  organizations).  The  select  literature  provides  the  basis  of  who  is   leading,  publishing  and  investing  in  research  studies  on  the  topic  of  design  ROI,  however  it  also   exposes  knowledge  gaps,  suggesting  a  classification  framework  may  be  required  to  better   navigate  and  understand  the  meaning  and  value  of  design  economies’  research  within  and  across   economic  sectors.     a)  Primary  Sector   Only  one  in  20  businesses  in  the  UK’s  primary  sector  think  design  is  crucial  to  their  success,  yet   two  out  of  three  businesses  agree  that  design  is  integral  to  the  UK’s  overall  economic   performance  and  believe  there’s  a  link  between  design  and  profitability  (Design  Council,  2007).   This  UK  study  might  explain  the  lack  of  research  observing  design  activities  and  performance  in   the  primary  sector  in  other  nations.     The  role  of  Design  in  Business  ROI:  A  Literature  Review  –  August  23,  2012 4   The  Netherlands  shipping  industry  is  one  industry  investigating  design  ROI.  A  study  analyzing  the   relationship  between  technical  specifications,  services  provided  and  earnings  potential  (Veenstra,   2006),  outlines  a  framework  for  ship  owners  to  measure  the  costs  and  benefits  (aka  earnings   potential)  of  three  design  factors  critical  to  their  business:  cargo  carrying  capacity,  speed  and   versatility  (Veenstra,  2006).     In  a  sector  that  makes  use  of  natural  resources  to  generate  wealth,  and  could  benefit  from   evaluating  design’s  value  in  operational  efficiencies,  and  R&D  of  new  technologies  for  harvesting   and  transportation,  design  ROI  research  is  completely  underexplored.     b)  Secondary  Sector   In  the  manufacturing  sector,  where  production  process  and  product  are  critical  for  survival  and   growth,  design  is  highly  valued  –  from  a  requirements  perspective  to  ensure  the  right  product  is   being  developed,  to  the  manufacturability  and  cost  of  the  product  (Wynn  and  Clarkson,  2009).     Half  of  the  manufacturers  surveyed  in  a  UK’s  Design  Council  study  (Design  Council,  2008)  suggest   design  has  an  either  integral  or  significant  role  to  play  in  their  business  and  are  convinced  it  has  a   vital  impact  on  UK  economy.  The  majority  agreed  that  design  is  integral  to  UK’s  future  economic   performance  and  recognize  the  link  between  design  and  profitability  (Design  Council  2008).   Canadian  manufacturing  companies  are  aligned  with  the  UK  study,  and  are  changing  the  way   they  conduct  product  design  and  development  and  innovation  practices  to  stay  competitive   (Industry  Canada,  2010).  Studies  show  those  who  invest  more  in  product  design  and   development,  generate  additional  business  benefits  from  new  or  significantly  improved  products,   increased  client  satisfaction,  increase  revenues  and  improved  access  to  new  export  markets   (Industry  Canada,  2010).  Over  the  last  two  decades,  Japan,  Taiwan,  Korea,  and  Hong  Kong  has   used  design  to  move  from  manufacturing  to  producing  well-­‐known  branded  products  resulting  in   a  transformation  from  ‘‘Made  in  China’’  to  ‘‘Designed  in  China’’  (Guo,  2010).  This  strong   commitment  to  product  design  will  help  China  reap  some  of  the  success  of  its  western   competitors.     Design  as  manufactured  artefact  (product)  has  deep  roots  in  history  across  the  globe,  yet  it  is   only  since  the  last  century  that  its  role  in  distinctive  product  development  and  Intellectual   Property  ownership,  has  it  been  identified  as  impacting  the  world’s  economy.  Iconic  product   designs,  manufactured  in  large  volumes  are  protected  through  patents,  trademarks,  and  trade   dress,  thus  play  a  crucial  role  in  business  success  (Ratner,  et  al,  2006).  Design  ROI  through   product  development  is  just  starting  to  be  researched  by  copyright  and  intellectual  property   lawyers,  who  use  product  designs  to  illustrate  that  protections  provided  by  patents,  trademarks,   and  trade  dress,  lead  to  business  success  (Ratner,  et  al,  2006).       An  automobile  industry  study  (Pauwels,  et  al,  2004)  analyses  the  economic  importance  of  new   product  introductions  and  sales  promotions  to  the  bottom  line  and  finds  new  product   introductions  have  a  positive  short  and  long-­‐term  impact  on  the  firm’s  top-­‐line  bottom-­‐line  and   stock  market  performance,  and  have  a  positive  correlation  to  the  level  of  product  design  and   innovation  (Pauwels,  et  al,  2004).         The  role  of  Design  in  Business  ROI:  A  Literature  Review  –  August  23,  2012 5 Scholars  (Guo,  2010;  Ratner  et  al,  2006;  Pauwels  et  al,  2004;  Wynn  and  Clarkson,  2009)   recommend  that  companies  in  the  manufacturing  sector  focus  on  process  and  new  product   introductions  to  generate  business  value  and  resist  relying  on  sales  and  marketing.       c)  Tertiary  Sector     The  tertiary  or  service-­‐oriented  sector,  which  represents  an  extensive  global  network  of  design-­‐ industry  associations  and  design  as  service  companies,  is  the  most  prolific  sector  publishing  dROI   research.  Service  industry  studies  on  Small  Medium  sized  Enterprises  (SMEs)  suggest  they  see   design  as  very  important,  having  a  positive  correlation  with  brand  image,  improving  the  quality  of   the  services  and  increasing  profits/performance  (Design  Council,  2007;  Larsen,  Tonge  and  Lewis,   2007).  Businesses  in  the  real  estate,  finance  and  business  services  industry  were  the  most   positive  towards  design  investment  with  four  out  of  five  businesses  thinking  design  has  a  role  to   play  in  their  operations  and  business  profitability.  The  majority  agreed  that  design  is  integral  to   the  wider  economic  context  and  future  economic  performance  of  the  UK  (Design  Council,  2007).       Design  oriented  and  technology  service  industries  invest  in  User  Experience  design  ROI  research.   Recent  studies  (Marcus,  2002;  Mayhew,  2012;  Momentum  Lab,  2009)  provide  businesses  with   the  language  and  evidence  to  articulate  value  of  design  thinking,  process  and  application  to  new   technology  products.  (User-­‐experience  is  a  design  process  that  is  simple  to  measure  since  the   quantitative  metrics  are  captured  directly  from  digital  consumer  behaviour,  such  as  click-­‐through   rates,  website  visits,  app  downloads,  purchases,  etc.)  Apple's  iPod  is  the  archetype  of  a  product   for  UE  dROI  as  it  delivers  exceptional  user  experience  and  positive  ROI  (Mayhew,  2002).     Organizations  from  the  service  sector  understand  the  value  of  design  from  a  human  resource   point  of  view.  There  is  a  belief  (Kesler,  2010)  that  to  reap  the  benefits  of  investments  in  talent,  a   company  needs  an  organizational  environment  that  inspires  and  supports  employees  from  the   front  line  to  the  CEO  to  do  their  best  work.  Kesler  (2010)  discusses  characteristics,  aptitudes  and   thinking  styles  relating  to  design  as  a  person/function  as  “organization  design”  which  enables   effective  business  decisions  leading  to  sustained  success  (Kesler,  2010).       Geographically,  the  most  active  service  sectors  researching  design  evaluation  models  are  located   in  Denmark,  Finland  and  the  UK  (Sorvali  and  Nieminen,  2008),  where  government  supported   design-­‐industry  trade  organizations  reside.  Their  interest  in  design  research  is  reflected  in  their   policy-­‐making  programs  and  promotion  of  design  (Design  Council,  2007;  DTI,  2005;  Danish  Design   Centre,  2003;  Raulik  et  al,  2009).  Other  countries  publishing  design  research  reports  are  listed   below  (figure  1)  in  the  Global  Watch  2008:  Digital  and  Innovation  report  (Sorvali  and  Nieminen,   2008):       The  role  of  Design  in  Business  ROI:  A  Literature  Review  –  August  23,  2012 6                            Figure  1.  Global  Design  Watch  2008:  Design  and  Innovation  Centres  (Sorvali  and  Nieminen,  2008)     Generally,  the  industrialized  nations  are  exploiting  design  as  an  asset  for  their  economic   advantage  and  for  the  international  promotion  of  their  image  (Ralik,  et  al,  2008).  In  contrast,   developing  countries  -­‐  with  very  few  exceptions  -­‐  have  disregarded  design  as  a  tool  for  economic   and  social  development  (Ralik,  et  al,  2008).     Despite  the  evidence  that  design  is  critical  to  the  competitiveness,  innovativeness  and  prosperity   of  firms,  communities,  cities  and  nations  (Brown,  2009;  Kelley,  2009;  Martin,  2009;  Whicher  et  al,   2010)  design  is  not  particularly  prominent  across  all  three  economic  sectors.  The  primary  sector   has  invested  the  least  in  dROI  research  while  the  secondary  or  manufacturing  sector  shows  a   growing  interest  in  dROI  models  in  order  to  meet  changing  consumer  needs  and  sustain  market   growth.  The  majority  of  dROI  research  is  being  led  by  the  service-­‐sector,  especially  the  design-­‐ oriented  and  new  technology  industries,  driven  by  market  competitiveness  and  profitability.  It  is   worth  noting  that  the  cultural  industries  are  also  researching  dROI  models  (Vinodrai,  2009)  with  a   focus  on  industry  investment  and  policy-­‐making.     The  role  of  Design  in  Business  ROI:  A  Literature  Review  –  August  23,  2012 7   3.  Shared  vocabulary,  meaning  and  models  of  design  ROI     Research  has  firmly  established  that  businesses  that  use  design  effectively  will  be  those  who   survive  and  prosper  in  increasingly  demanding  world  markets  (Design  Council,  1998;  2007).  Yet  it   is  suggested  (Trueman  and  Jobber,  1998)  that  companies  must  see  a  tangible  benefit  showing   where  and  how  design  is  associated  with  improved  business  performance,  before  taking  design   seriously  (Larsen,  et  al,  2007).  Thus,  it  is  important  to  communicate  design’s  tangible  benefits  in  a   way  that  most  businesses  can  understand  and  ultimately  adopt.  This  section  explores  design  ROI   across  disciplines  and  sectors  in  an  effort  to  communicate  design’s  tangible  benefits.  It  presents   the  first  published  inventory  of  design  ROI-­‐related  research  studies  and  suggests  the  need  for  a   linguistic  typology  -­‐-­‐  a  shared  vocabulary  and  meaning  -­‐-­‐  of  design  ROI  models.     The  most  common  approach  to  measuring  the  business  value  of  new  and  improved  processes   and/or  product  offerings  is  the  Return  on  Investment  model  or  ROI.  It  is  defined  as  the  simple   arithmetic  ratio  of  benefits  to  costs,  measured  in  dollars  and  cents.  If  benefits  returned  are  above   costs  (and  expenses),  profits  are  achieved  and  the  value  of  an  investment,  along  with  actual   benefits,  cost  savings,  and  efficiencies  are  obtained  (Rico,  2005).  Since  the  ROI  model  is   concerned  with  benefits  and  costs,  the  literature  reviewed  explores  how  this  model  (benefits  to   costs)  is  being  applied  to  design  activities.     Gregory  (1966)  first  expressed  the  concept  of  design  “as  a  pattern  of  behaviour  employed  in   inventing  things  of  value  which  do  not  yet  exist”.  Cross  (2001)  then  suggested  the  science  of   design  could  improve  our  understanding  of  design  through  scientific  (aka  systematic)  methods  of   investigation  (Cross,  2001;  2006).  Baldwin  and  Clark  (2002)  then  provided  a  design  valuation   methodology  based  on  hypothesis  that  every  artifact  has  a  design,  and  thus  designs  are  an   important  class  of  information  goods  and  called  it  “The  Fundamental  Theorem  of  Design   Economics”  (Baldwin  and  Clark,  2002).     For  this  paper,  design  economics  is  interpreted  by  a  design  ROI  (dROI)  models  which  are  most   prevalent  in  design-­‐oriented  industries.  Studies  on  User  Experience  Design  affirm  positive  return   on  investment  on  user-­‐centric  activities,  especially  within  the  software  development  process   (Momentum  Design  Lab,  2009).  The  dROI  of  UE  in  software  companies  is  measured  by   lowered  development  costs,  fewer  missed  deadlines,  more  cost-­‐effective  maintenance,  improved   customer  satisfaction  and  loyalty  directly  contributing  to  business  success  (Smith,  Reinersten  and   Marcus,  2002).  the  usability  or  UE  returns  many  benefits  (ROI)  to  products  developed  for  either   internal  use  or  for  sales.  Package  design  ROI  models  (Wallace,  2001)  measure  impulse  purchasing   at  shelf  against  production  costs.  Wallace’s  study  (2001)  illustrates  over  two  thirds  of  consumer   product  purchase  decisions  are  made  at  the  point  of  sale  correlating  brand  identity  and  package   design  investment  drives  a  positive  ROI  value  (Wallace,  2001).  Design  ROI  as  a  cultural   investment  tool  has  recently  surfaced  through  the  value  of  “signature  architecture”  (Plaza,  2006).   One  notable  study  argues  the  positive  ROI  of  the  Guggenheim  Museum  in  the  city  of  Bilbao  can   be  analyzed  by  statistical  data  analysis:  the  visitor  rates  (over  7  million  between  1997  and  2004);   the  increase  of  overnight  hotel  stays;  the  effects  on  the  employment  and  tax  income  generated   by  extended  tourism  activities  (Plaza,  2006).       Design  evaluation  models  simulating  the  ROI  model  also  suggest  that  companies  that  invest  in   design  tend  to  be  more  innovative,  more  profitable  and  grow  faster  than  those  who  do  not   The  role  of  Design  in  Business  ROI:  A  Literature  Review  –  August  23,  2012 8 (Whicher,  Raulik-­‐Murphy  and  Cawood,  2010).  Examples  of  design  performance  models  in   chronological  order  include:     • The  Product  Archeology  Approach    (Ulrich  and  Pearson,  1998)  measures  design   performance  through  an  analysis  of  physical  products,  cost  estimation  and   manufacturing  environment.  The  approach  references  the  cost  of  the  industrial  design   products,  a  theoretical  model  combined  data  collected  through  observation  in  the   marketplace  of  an  artifact’s  design  attributes  that  drive  costs,  with  public  financial  data.       • The  Design  Ladder  (Danish  Design  Centre,  2003)  evaluates  design  and  economics  benefits   through  a  linear  regression  analysis  model,  measuring  economic  effects  of  design  against   the  effects  of  other  factors,  such  as  company  size  and  the  number  of  staff  university   graduates,  etc.  The  Design  Ladder  is  now  being  adopted  as  a  performance  tool  by  other   European  countries,  including  Austria,  Ireland,  Sweden  and  Switzerland.   • The  Design  as  Element  of  Innovation  model  (Candi,  2005)    provides  a  basis  for  isolating   and  evaluating  design  along  three  dimensions  visceral,  behavioural  and  reflective  design   to  evaluates  its  performance  in  operationalizing  a  firm’s  activities,  methods  and  efforts.   • The  structural  equation  model  (Chiva  and  Algere’s  (2009)  provides  a  methodological   contribution  to  design  management’s  role  in  enhancing  a  firm’s  performance  as  observed   through  Italian  and  Spanish  ceramic  tile  industries.   • The  Design  Structure  Matrix  (Wynn  and  Clackson,  2009)  is  a  modelling  tool  that  connects   product  to  systems  and  components  and/or  people  to  project  teams  and  has  a  great   bearing  on  an  organization’s  operations  efficiency  and  effectiveness.  It  is  an  adopted  ROI   method  within  the  engineering  design-­‐oriented  sectors  such  as  aerospace,  automobile,   architecture  and  construction   • The  European  Innovation  Scoreboard  model  (Hollanders,  2009)  measures  a  country’s   performance  of  creativity  and  design  using  35  indicators.  The  scoreboard  ranks  Sweden   and  Denmark  as  Europe’s  top  performing  design-­‐led  innovative  countries  while  Bulgaria,   Poland  and  Romania  are  ranked  the  lowest.   • The  10  ways  to  measure  design’s  success  model  (Lockwood,  2010)  proposes  a  framework   for  effectively  measuring  the  value  of  design  through  success  criteria.  The  success  criteria   includes  purchase  influence,  building  brand  image,  improved  time  to  market;  securing   new  markets  and  creating  valuable  intellectual  property.       • The  Five  Milestone  Model  (Kesler,  2010)  measures  outcomes  against  the  organizational   design  process,  which  includes  smart,  practical  judgments  rooted  in  a  business  case,   supported  by  facts,  and  often  developed  through  a  series  of  tested  hypotheses  and  is   typically  crafted  in  a  roadmap  format.   • Digital  Dividends  (Vinodrai,  2011)  is  a  dROI  model  for  the  cultural  economies  whereby   both  cultural  and  economic  value  is  generated  through  a  “design  dividend”  for  a  city-­‐ region.     • Design  for  X  (DfX)  (Industry  Canada,  2010)  is  an  approach  to  product  design  and   development  directed  at  maximizing  the  production  requirements  demands  (such  as   assembly,  quality,  disassembly,  manufacturability,  safety  and  environment  friendliness)   while  simultaneously  minimizing  costs.  Design  for  Environment  (DfE)  is  an  applied   example  of  DfX  for  firms  seeking  to  meet  changing  consumer  preferences  with  a  concern   for  the  environment.   • The  Design  Performance  Measurement  model  (Yin,  Qin  and  Holland,  2011)  measures  key   factors  of  success  and  failure  of  a  new  product  development  process,  such  as  market   share,  investment  return  rate,  and  customer  feedback.  The  tool  supports  a  design   The  role  of  Design  in  Business  ROI:  A  Literature  Review  –  August  23,  2012 9 manager’s  method  to  measure  and  improve  collaborative  design  performance  and   development,  the  design  team’s  strengths  and  weaknesses,  team  communication,  and   suitable  responsive  actions.       The  dROI  and  simulated  evaluation  models  provide  theoretical  evidence  that  the  use  of  design   has  a  positive  impact  on  the  performance  of  a  company,  measured  in  terms  of  profitability,  share   price,  employment  or  exports.  Industry  analysts  (Souza,  2001  and  Bevan,  2005)  suggest  providing   cost  benefit  analysis  models  and  simple  spreadsheet  tools  for  companies  to  calculate  their  own   cost  benefit  analyses  of  design  ROI.  A  framework  may  be  required  to  determine  common  success   metrics  for  design  investment  since  ROI  varies  based  on  product  or  service  type,  industry  vertical,   company  size,  production  process  and  client  type.  Further  research  is  recommended  on  adopting   and  experimenting  with  these  models.     A  new  and  growing  area  of  research  is  design  as  innovation  practice  with  design  ROI  models   increasingly  being  observed  through  the  perspective  of  how  it  is  applied  to  innovative  strategies,   business  models  and  organizational  structures  and  processes  (Leavy,  2012;  Zott,  2007).  Instead  of   thinking  about  “what  to  build,”  prototyping  is  about  “building  in  order  to  think,”  and  the   prototyping  process  itself  “creates  the  opportunity  to  discover  new  and  better  ideas  at  minimal   cost”  (Leavy,  2012).  From  business  model  design,  to  incorporating  different  kinds  of  people,   prototyping  and  iteration,  design  is  intrinsically  linked  to  innovation  across  all  sectors  (Zott,  2007   and  Osterwalder,  2010).         4.  Conclusion     This  paper  presents  an  analysis  of  select  published  research  on  the  topic  of  design  ROI  (dROI)  and   affirms  good  design  is  good  for  business  (Brown,  2009;  Kelley,  2009;  Martin,  2009;  Walters  ,2010;   Whicher  et  al,  2010  et  al).  This  research  contributes  to  existing  design  research  literature  by   aggregating  and  examining  dROI  and  dROI-­‐related  studies  into  one  paper,  with  the  aim  to  better   understand  the  impact  of  design  practices  in  business  ROI.  It  also  attempts  to  bring  the  reader  up   to  date  on  the  most  recent  research  on  the  subject.     The  research  corroborates  a  positive  association  between  investments  in  design  and  economic   performance  in  terms  of  employment,  sales,  growth  and  profitability,  however  a  limitation  of  this   literature  review  was  in  adequately  sourcing  and  qualifying  the  most  important  research.  Many   gaps  were  observed  that  include:  a  lack  of  research  examining  the  complex  relationship  between   design  and  superior  economic  performance  within  and  across  economic  sectors,  and  within   business  structures  (i.e.  Enterprise  vs  SMEs);  lack  of  shared  citations  and  foundational  theories   between  the  numerous  and  varied  methods  and  models  examining  design’s  business   performance  within  industry  sectors;  and  differing  perspectives  and  vocabulary  from  domain   dependent  studies  in  both  academic  disciplines  and  industry  sectors,  on  design’s  business  value   and  ROI.       One  approach  towards  better  understanding  design’s  role  in  providing  superior  benefits  over   costs  is  through  a  classification  framework  that  could  index  key  design  disciplines  and  practices  -­‐-­‐ such  as  product,  service,  process,  people,  place  and  policy  -­‐-­‐  against  their  value  metrics  (ROI)  and   across  economic  sectors.  Further  research  on  developing  such  a  design  ROI  classification  model  is   recommended.     The  role  of  Design  in  Business  ROI:  A  Literature  Review  –  August  23,  2012 10 Of  note,  the  limited  research  specifically  defined  as  “dROI”  may  itself  be,  by  design.  If  design’s   value  could  be  proven  and  universally  recognized,  business  leaders  would  be  challenged  to   ignore  the  evidence  and  forced  to  evolve  their  businesses.  With  dROI  knowledge,  companies  will   be  able  to  justify  adding  the  much  needed  design  resources,  feel  obligated  to  review  current   management  processes;  enhance  production  budgets;  and  redefine  compensation  structures   (Tim  Brown,  2009).       Finally,  further  research  on  developing  a  linguistic  typology  for  design  ROI  is  also  suggested  as  a   way  of  conversing  about  design  that  is  both  interdisciplinary  and  disciplined,  leading  to  a   common  understanding  and  adoption  of  design  practices  and  valuation.     -­‐-­‐-­‐-­‐-­‐-­‐     5.  References  (*  are  listed  in  annotated  bibliography)     Baldwin,  C.  Y.  and  Clark  K.  B.  (2002).  The  Fundamental  Theorem  of  Design  Economics   Harvard  Business  School     Bevan,  N.  (2005).  Cost  benefits  evidence  and  case  studies.   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