Core77

[cg]

Instead of waiting for IDSA to get the hint and create their own Design Index to track the stock performance of US-based companies that invest in design (a common-sense measure of design ROI) I thought we might do it ourselves.

Anyone interested?

If so, we need to figure out two things:

1. How do we track?
I was thinking that one of the free "portfolio tracking" financial websites might help us do it visually over time. (I've tried Yahoo finance, but they don't show composite graphs, only comparisons between two companies.)

2. Who do we pick?
An obvious solution might be to seed it with the corporations with the most number of IDEA awards. (Any idea where to even find that? I remember seeing something like that in Business Week, but can't find it on IDSA.org.)

[mrd]

#1...perhaps a brokerage firm might be interested in creating a design-index mutual fund...we could put our money where are mouths are.

#2...this used to be published a few years ago but i do not recall if it was on idsa.org or in biz/wk.

[Deez]

Most number of IDEA awards is a good start, but isn't that such an exclusive club? How about most repeated appllicants, or even co. with most IDSA members employeed (which would be a good representation of a somewhat design forward co.)

Or ones with ID departments? or co. that has a senior level design position? We could get a subscription to Hoovers for 10k. Anyone in?

[Conscience]

Count me in!

Maybe someone knows someone who can manage an investment fund that measures the companies who invest heaviy in innovation and have the product sales to prove it.

And then, dividends from these companies could be used as capital to startup design studios, or help fund design projects that directly assist developing countries.

[I believe]

related topic...Fitch, Inc. (design firm) had a fund as part of their 401k plan for employees that had a stock mix of Fitch clients. The fund outperformed S&P proving that.. companies that invested in (Fitch) design performed better. Perhaps there's a way to assemble a portfolio of companies (across industries) that spend x% and above on design—as a percentage of their operating cost. The performance could be tracked against S&P or other market performance indicators.

[Cordy Swope]

Whoa.

I remember a few years ago I had this idea. I would invest in every company to which I would consult - thinking that naturally they had an edge on their competitors becaue they were doing things in an enlightened way. One of my collegues pointed out the fact that aside from my naive hubris, the clients who were coming our way were coming our way because they were desperate - not because they were necessarily enlightened.

Some of the clients I had then are not doing so well now because of sins that they committed before they ever hired us. Some of them are doing better because they hired us. But blanket investment in companies that hire design firms I think would be a bad idea.

Do you really trust your clients that much?

[userinnovation]

2. Who do we pick?
An obvious solution might be to seed it with the corporations with the most number of IDEA awards. (Any idea where to even find that? I remember seeing something like that in Business Week, but can't find it on IDSA.org.)

Sorry, but this is silly idea, but one that appeals to designers with limited business understanding. I have written on how people confuse cause and effect here. Successful companies may win more design awards, but it doesn't follow that it is because they win awards they are more profitable. For most big public companies, the contribution of an award winning design to profits is very small indeed. You can't measure ROI of design by looking a stock price -- it is like using a yardstick to measure a speck of dust.

On the misunderstanding of stocks and design, see:
http://michaelandrews.blogspot.com/2005 ... about.html

[cg]

2. Who do we pick?
An obvious solution might be to seed it with the corporations with the most number of IDEA awards. (Any idea where to even find that? I remember seeing something like that in Business Week, but can't find it on IDSA.org.)

Sorry, but this is silly idea, but one that appeals to designers with limited business understanding. I have written on how people confuse cause and effect here. Successful companies may win more design awards, but it doesn't follow that it is because they win awards they are more profitable. For most big public companies, the contribution of an award winning design to profits is very small indeed. You can't measure ROI of design by looking a stock price -- it is like using a yardstick to measure a speck of dust.

On the misunderstanding of stocks and design, see:
http://michaelandrews.blogspot.com/2005 ... about.html

Not even a personal anecdote to back up your argument??
Here are some facts that support mine (see hyperlinks for full story):

Design Index: Those who invest in design outperform the market by 3x
Samsung: CEO heavily invests in design, builds worlds fastest growing brand
P&G: CEO makes design their “key differentiator”
Chrysler: Creates hit-machine in 90’s/Regains US dominance
Whirlpool: CEO Creates hit-machine/Sells the “iPod of Washers”
Motorola: Regained the #2 mobile spot via cutting edge design
Apple: CEO refocuses on design, record turnaround fueled by must-haves
Dyson: Designs disruptive bestseller that commands premium price
Nissan: Turnaround CEO says “there’s no problem a good product can’t fix” achieves 10% op margin

In many cases all you need to do is overlay product launches on top of their stock performance for proof that stock price reflects the power of design. Look at Motorola and the launch of the Razr, or Apple in both the era of the iMac and iPod. It's plain as day and designers need to get hip to this to sell the value up the chain. Chuck Jones did it at Whirlpool in '97 and I've done it, so don't tell me that it doesn't work.

[niti bhan nli]

alright, then define what "increasing shareholder value" means, if not a rise in the price of a company's stock.

As John Heskett says, “An invention is not an innovation until it creates value for the company, which means it needs to be accepted by the user.”

[userinnovation]

In many cases all you need to do is overlay product launches on top of their stock performance for proof that stock price reflects the power of design. Look at Motorola and the launch of the Razr, or Apple in both the era of the iMac and iPod. It's plain as day and designers need to get hip to this to sell the value up the chain. Chuck Jones did it at Whirlpool in '97 and I've done it, so don't tell me that it doesn't work.

You must be richer than Warren Buffet! To think all one needs to do is overlay a couple of graphs.

I am well aware of the hype in the media, encouraged by the public relations departments of companies profiled, to credit design with their success. It makes a good story, but oddly I don't hear any Wall Street analysts saying watch a design index: it will predict stock price. No, all this is coming from design lobby organizations, journalists with a pet interest in design (mostly Fast Company/BW, who do ad nauseum) and the PR machines at companies. BTW, Fast Company and Business Week are not considered serious business publications in the way the Wall Street Journal is.

What is going on? To the entext there is a correlation in stock price and a companies enthusiasm for design, it is rarely a cause-effect relationship. Autos are a special case, because style does matter much more with autos. But it is absurd to say P&G's stock price reflects their design ability. Hey, I own P&G, and I know I own it for reasons other than design. How much does "Oral B" contribute to P&G's overall sales?

What actually happens is you get a management team that runs thing well generally, including recognizing design has a role to play. Stock price goes up because many things are managed well, not just design. I would argue that Apple is commercially successful now primarily because it has stopped its stupid policy to expecting people to pay through the nose for its products. They have had to pay attention to costs, and drop some arrogance.

I feel the biggest handicap of designers becomes evident when they gush about a simple linear relationship between hipness and profits. That handicap is their very poor ability to view things critically and skeptically. Designers aren't taught this, whether they attended art school or even engineering school. You need a liberal arts education for that. As wonderfully imaginative as designers can be, it can blind them to seeing and considering the logical complexity of relationships.

[cg]

Stock price goes up because many things are managed well, not just design.

If design is an indicator of a well managed company (what Wall Street is looking for) proof would come in the form of an anti-design index. ie.

Index 1: Good Management, Investment in Design
Index 2: Good Management, No Investment in Design
Index 3: Poor Management, Investment in Design
Index 4: Poor Management, No Investment in Design


Back to the question at hand, does anyone have a better way to select the companies for the index, or know of a good public site that would allow us to set up trackers?

[(dmd)]

I'm interested but is there a more effective method of organizing this than on a public forum?

I think tracking stocks is a bit too vague (a least for my clients) too many other factors creep into stock value (accountants go out of their way to make the number look more attractive to shareholders)...........perhaps developing a database more specific to average project investment and the average return related to general markets (technology, household, transportation, SHOPA, etc.).

Just my experience, but any serious discussions tend to fall short of achieving anything on core due to random postings.

Perhaps after an appropriate task team/panel is established, one can set up a private discussion group to collaborate/organize information and post findings on core77/idsa/designaddict/etc.?

Any thoughts regarding this.............I'm just interested in making sure anyone who puts effort into this has something significant to reference in the end.

[niti bhan nli]

DMD,

A group blog may not be a bad place to start trend watching. I'd be very interested as well.

As for the prior discussion between cg and user innovation :

I don't know about a liberal arts education being required to watch the complex relationship between product and share value, however, I have studied valuation, using a model developed by Ken Lehn, consulting advisor to the SEC, and the concept of "goodwill" or "brand value" is very much becoming part of the valuation model. In fact, it was in New Zealand, at the Better by Design conference that Brian Richards presented this evolution in detail. Here is the link for your perusal.

http://sizematter.blogspot.com/2005/08/ ... tment.html

[Guest]

predictive markets could be and interesting way to predict, track, and evaluate the value of design.

It is a kind tought thing to do because companies that effectively use design also effectively use marketing, manufacturing, brand, etc.

Problem is, how do you distill the value of design from the other components, especially when they are so interconnected?

[niti bhan nli]

Guest,

But that's also the larger story of how "design" itself is evolving. Firms like IDEO, Jump, Stone Yamashita et al are taking the conceptual definition of good design to not just focus on a specific product or offering but the entire experience.

Should we evaluate the entire experience? Take the ever famous iPod story as an example. It's not just a well designed product, it's a well designed product and marketing strategy with a sustainable business model that makes it a success.