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Anders Andersson, the chief executive of Swedish underfloor-heating company Thermotech, was incredulous when his marketing manager suggested a redesign of the product line. Why jazz up something that no one can see after it's installed? But Andersson relented, hired a team of designers, and made several key changes, such as ditching his copper and brass pipes in favor of cheaper stainless steel.
Two years later, the company has saved $965,000 in manufacturing costs, and total sales were up 40% last year, to $9.7 million. "Today, I think that if a company isn't using design, it isn't working correctly," says Andersson.
Thermotech's approach to design earned it a place on the program of a recent conference in Paris focused on design and business. The featured companies all understand that design isn't just about looks. It's also about employing new materials to reduce waste and improve performance, and about focusing on customer needs to make products and services more user-friendly.
BOTTOM-LINE EFFECT. The conference, called Challenges of Design Promotion in Europe and sponsored by the French design council, Agence pour la Promotion de la Création Industrielle, brought together several hundred of Europe's most influential leaders in the design community.
The bad news is that the challenge of spreading the word on design is considerable. A survey of almost 4,000 European company managers from a broad range of industries conducted exclusively for the conference revealed that they consistently rank design among the least important ingredients to business success. Their reasoning is often the same, said conference speaker Jean-Paul Palasz, adjunct director for business innovation at the French Finance Ministry: "Design doesn't have an obvious enough impact on their bottom line."
And yet, recent studies by various European design agencies -- state-funded bodies that promote national innovation -- have revealed convincing evidence that the impact is real. In Norway, 63% of companies that have already integrated design methods into their business reported steadily growing profits over the past four years. In Britain, almost half of the companies interviewed by the national Design Council that use design in everyday business have seen a boost in sales, profits and competitiveness, vs. just 10% of companies overall. In Spain, unlike most countries, managers at 40% of all companies interviewed believe design has a significant impact on sales.
SERVICES STUDIED. Beyond trumpeting these results near and far, how can the design industry convince the naysayers? Recent support from leading political figures has helped put innovation on more lips than ever. In early 2005, British Finance Minister Gordon Brown commissioned an in-depth study of the state of national innovation from the Chairman of the British Design Council, Sir George Cox.
The resulting Cox Report made a series of practical recommendations, many of which Brown has since ratified. These include plans to create business design courses and to build a network of high-profile innovation centers around the country. The Norwegian government meanwhile has doubled the funding for its design agency this year.
The conference survey results revealed that service innovation is the next big frontier. According to the managers interviewed, while half of all companies invest in communications design, only 6% to 20%, depending on the country, spend money on improving services.
"Most businesses don't understand that services can and should be designed," urged Robin Edman from the Swedish design council Svid. As an example, he mentioned a prototype headset being developed for patients in hospital waiting rooms. It allows receptionists to update individuals with information on how long their wait will be, or which doctor will see them. The overall effect is to make an uncomfortable situation more bearable.
CUSTOM CLICKS. The speakers also had some wise words about product design. Marion Pötz from the Vienna University of Economics & Business Administration argued that manufacturers need to involve users much more in the design process. Forget focus groups, the new way forward, says Pötz, is so-called toolkits.
These come in many forms, but all allow users to add design features to a set of pre-defined parameters, such as the basic shape of a product. Not only is it cheaper for the company, but it dramatically improves customer satisfaction. Some companies incorporate consumers at the market-research phase, sending products out and asking users to add design features and send the product back. Other businesses allow users to design their ideal products as part of the buying process.
One company that has done this to great success is the Italian shopping Web site Yoox. Last December, it launched Strambo self-made bags, a collection of simple purses created by eight renowned designers, painters, and cartoonists. To buy a Strambo, each e-shopper chooses one of the basic models and then customizes it to their taste by clicking on icons for extra straps, bag attachments, and colors. The purses were one of Yoox's hottest sellers over Christmas.
CONTINENTAL MATRIX. The practical solutions suggested at the conference were useful. But the takeaway message from the speakers and the survey is that there's still a long journey ahead for advocates of business innovation. Design councils from the survey's participating countries -- which include France, Denmark, Spain, Britain, Norway, Sweden, and The Netherlands -- will need to spend the next few months analyzing some surprising results. Why, for example, do the results suggest that British companies invest far less in design than Spanish companies?
Harry Rich, the deputy chief executive of the British Design Council, hopes to change all that. In fact, he sees this survey as laying the groundwork for the first Europe-wide measurement of design matrices. "Various institutions have tried and failed before us," he said. "Hopefully, this will be the basis for the first comprehensive study of European Design." And, beyond that, maybe a new age of design-consciousness.
Tiplady is a correspondent in BusinessWeek's Paris Bureau
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