It’s not just decoration: Design is a competitive advantage

Companies with good design outperform by nearly every metric that matters now. Why is it still an afterthought at so many companies?

Why Design Matters

Family standing on a sidewalk beside their Model T in 1910.

“Any colour as long as it’s black”: a family with their Model T Ford in 1910. The Model T was a landmark success until the 1920s, when more desirable GM models wiped out its market share. (Universal History Archive/UIG/Getty)

In September 1923, six cars rolled off the assembly line of the General Motors–owned Oakland Motor Car Company in Pontiac, Mich. Each one was bright blue, with orange or red racing stripes—the result of a new kind of automotive paint recently introduced by the DuPont Company.

At the time, 80% of all cars on the road were black. This was largely due to the dominance of GM competitor Ford and its Model T, famously available in “any color, as long as it’s black,” as founder Henry Ford is said to have put it. One standard colour was cost effective because it reduced complexity and sped up the assembly line. Non-black cars tended to be custom paint jobs, which were both expensive and short-lived; the paints of the era often flaked off within months, unable to endure the elements.

DuPont’s “Duco” enamels were different. They were quick-drying, durable and available in a wide variety of colours; GM knew it now had a way to undermine Ford by offering mass-produced cars in a much wider variety of looks and styles.

The six “True Blue Travelers,” as the Oakland models were nicknamed, were each dispatched on a cross-country tour, culminating at the New York Auto Show in December 1923. GM’s growing line of vehicles, now available in an array of brilliant colours, were a hit with drivers, and GM’s sales exploded. Ford, meanwhile, owned 60% of the market in 1921. By 1927, its share had fallen to less than 10%. The drab Model T was scrapped.

The episode is an early example of a story that played out again and again throughout the 20th century and still happens all around us today. Henry Ford thought he was in the car business—the functional task of getting drivers from Point A to Point B at a reasonable cost. GM saw that the form of its cars mattered, too—what you had in your driveway expressed your personality, your status, your taste. That insight helped GM eclipse its rival for a generation.

Today, a new shade of paint isn’t enough to raise the pulse of (most) shoppers, but the principle remains the same: Design is a competitive advantage. It can capture consumer desire. It can speed up production. It can reduce costs. It can fatten margins. And the companies that grasp these realities are more likely to win in the marketplace.

But exactly how valuable is design?

In 2015, the Design Management Institute, a U.S.-based think tank that studies how companies integrate design ideas into their businesses, put together a theoretical stock index aimed at calculating this. The Design Value Index tracks a portfolio of publicly-traded U.S. companies that excel at design, including Apple, Disney, Nike and IBM. Over a 10-year period, this basket of 14 companies outperformed the S&P 500 by 219%.

“Design is the last differentiator,” says Carole Bilson, president of the Design Management Institute. In the era of offshore contract manufacturing, in which factories in China and other emerging economies can quickly tool up and churn out consumer goods at an industrial scale, making a product stand out on a store shelf (or in a page of Google results) requires more than merely meeting basic functionality requirements. An eye-catching look is a good start, but design is about more than decoration. This is one of the central problems with many boardroom conversations about design: Executives end up talking about how a product looks, not the whole experience of using it.

This is one reason why many in the field now downplay the D-word in favour of “User Experience,” or UX. Born out of software design, UX has become a useful lens for understanding everything from watches to wheelbarrows. The total experience of the customer is what counts. That includes the product’s fit and finish, its ergonomics and safety features, and how intuitive it is to use. What’s it like to call the 1-800 help line? To read the monthly invoice? Did you cut yourself opening the plastic package?

“Take chain restaurants,” says David Cronin, executive design director at GE Digital. “People have always cared about how their restaurants looked, but now I see a much more concerted effort to tie the brand experience to the in-store experience to the digital experience.”

And it’s not just consumer-facing companies that can benefit from more attention to design. Cronin points out that researching and improving UX in industrial settings can be critical. For instance, a field engineer may carry an instrument intended to measure metal fatigue, and needs to be able to use it while dangling off the side of a wind turbine. A confusing readout display isn’t just an inconvenience, but potentially dangerous. “How do we deliver that information in a direct way that enables them to focus on the task at hand?” Cronin asks. The answer is, it takes a rigorous design, testing and revision process that ties together business strategy, hardware engineering and software development.

Bilson says the best thing that companies can do to up their design game is to include designers as early as possible when developing a new product or service. “So much is lost if you’re not at the table from the outset,” she says. Having a senior manager responsible for design in the C-suite will help. But one of the big ways designers help companies innovate is by breaking down silos. Designers often work with engineering, marketing, operations, support and other departments. “The designers can see all the pain points and problems in every part of the chain,” says Bilson. That’s an opportunity to lower costs, improve service and build a seamless experience that keeps customers coming back.