the economical impact of design on companies in flanders
DESCRIPTION
In 2003 we studied the impact of implementing design on business performance. Design was defined as … … a holistic dealing with matters, that besides the styling and restyling of products, extends to the application of innovative and alternative materials, ergonomics, engineering, ecology and ethics, psychology, culture and last but not least management. (Definition of ‘design’ according to Flemish Ministry of Economy) For this study, 400 managers of Flemish manufacturing companies were interviewed about the way they run their business. Business performance and the evolution in business performance ( ) was analysed in function of the extent to which the companies implement design activities.TRANSCRIPT
The economical impact of design on
companies in Flanders
The 2003 study
The 2003 study
In 2003 we studied the impact of implementing design on business performance. Design was defined as …
… a holistic dealing with matters, that besides the styling and restyling of products, extends to the application of innovative and alternative materials, ergonomics, engineering, ecology and ethics, psychology, culture and last but not least management.
(Definition of ‘design’ according to Flemish Ministry of Economy)
For this study, 400 managers of Flemish manufacturing companies were interviewed about the way they run their business. Business performance and the evolution in business performance (1999-2001) was analysed in function of the extent to which the companies implement design activities.
The 2007 study
The 2007 study
In the 2007 study, a new random sample of 500 managers was interviewed about their design implementation, their attitude towards design and its impact on business performance. Amongst them were 400 managers of manufacturing companies and 100 managers of businesses in the service sector.
Business performance and the evolution in business performance (2001-2005) was analysed in function of the extent to which the companies implement design activities.
The latter analysis was also performed on the 2003 sample. To that end the 2003 sample was enriched with business performance indicators for 2005.
Survey 2007
Questionnaire
Business Performance
Indicators
Survey 2003
Questionnaire
Business Performance
Indicators
ComparisonManufacturing
companies
Evolution in function of
design implementation
Evolution in function of
design implementation
Comparison Manufacturing
vs. Service companies
amongst 400 manufacturing
companies with at least 5 employees
amongst 400 manufacturing
companies and 100 service companies with
at least 5 employees
Indicators ofbusiness performance
Indicators of business performance
Business performance parameters included in the analysis:
• Turnover
• Number of employees
• Profitability
• Solvency
• Liquidity
Indicators of business performance
Profitability =PROFITEQUITY
Solvency = EQUITYTOTAL LIABILITIES
Liquidity =CASH + ACCOUNTS RECEIVABLE < 1yearCURRENT LIABILITIES / DEBTS <1year
To what relative extent is the company making profit
To what extent can the company survive when business is bad
To what extent is the company able to fulfil short-term financial obligations
Measurement of design application
Measurement of design application
Implementation of design was measured in different ways:
• By means of a straightforward question (European standard = Danish Design Ladder) ‘Please indicate which situation you think is most typical for your company’:
- No application of design - Occasional application of design- Only used in the stage of product finishing- Integrated in the production process- Applied strategically
• By means of 28 design indicators (as in 2003)
28 design indicators
Office furniture is designed by an external specialist
Patent application
The production hall is dressedPackaging is designed by an external specialist
Receive media attention for innovative productsHouse style developed by an external specialist
Regular rethinking of the work place interiorExplicit dress code exceeding safety requirements
Regular rethinking of packagingRegular updates of packaging
Visits to design fairs / consulting design magazinesIn house designer
Product development in partnershipDesign used as tool for making a difference (USP)
Rethinking of product functionalitiesDevelopment of more ecological productsResearch into user friendliness of products
Regular updates of product modelsRegular updates of the shape of products
Continuous search for new materialsFocus on long lasting use of materials
Regular update of the technology used in productsRegular rethinking of the production process
Service design departmentResearch into customer needs and expectations
Development of procedures to improve our services
Registration of brand namesRegistration of models
Measurement of design application
Half of the Flemish companies indicate to
apply design
Already 12% of the Flemish companies indicate to apply
design strategically
12%
11%
20%
12%
9%
12%
6%
11%
53%
53%
0% 25% 50% 75% 100%
production 2007
services 2007
Design as a strategic value Use of design for the development of products Use of design for the finishing of products
No systematic use of design No implementation of design
Implementation of design
Degree in which design is used in the company.
n=400
n=100
19,5 20,322,2
17,2
9,7
35,8
20,7 19,9
28,8
14,912,5
41,4
0
10
20
30
40
50
Sample(Turnover)
Not applied(Turnover)
Occasionally(Turnover)
For productfinishing
(Turnover)
Integrated(Turnover)
Strategic(Turnover)
2001'2005'
Average turnover (in million €) in function of the degree of design implementation
Manufacturing companies
Implementation of design
43,540,7
48,9
33,736,7
68,4
41,539,5
44,8
28,2
33,8
67,7
0
25
50
75
Sample(#employees)
Not applied(#employees)
Occasionally(#employees)
For productfinishing
(#employees)
Integrated(#employees)
Strategic(#employees)
2001'2005'
Average number of employees in function of the degree of design implementation
Manufacturing companies
Implementation of design
Survey 2003
Questionnaire
Business Performance
IndicatorsEvolution in function of
design implementation
amongst 400 manufacturing
companies with at least 5 employees
14,0
17,7 18,3
5,9
9,9 10,9
30,1
34,5 34,9
0
10
20
30
40
50
1999' 2001' 2005'
Sample (Turnover) Low group (Turnover) High group (Turnover)
Average turnover (in million €) in function of the degree of design implementation
Implementation of design
Average number of employees in function of the degree of design implementation
42,4 43,2 42,1
21,3 20,9 20,4
99,0106,6 103,9
0
25
50
75
100
125
1999' 2001' 2005'
Sample (# employees) Low group (# employees) High group (# employees)
Implementation of design
There is a positive relationship between design
implementation and the profitability of the company
Implementation of design
ProfitabilityProfitability is higher for implementers of design than for those who implement design rarely.
In the Design group, profitability was lower in 2001 than in 1999. No such drop in profitability was observed in de non-Design group. In 2003 it was concluded that the Design group suffered more from the 9/11 crisis.
In 2005, 4 years after 9/11 profitability is lower for all companies. The profile is however similar to that in 1999, with companies that implement design being more profitable than the other companies.
Implementation of design
Profitability
33,2
30,7
25,2
29,3 29,6
23,2
36,6
32,6 33,1
0
10
20
30
40
50
1999' 2001' 2005'
Sample (Profitability) Low group (Profitability) High group (Profitability)
Implementation of design: High vs. Low
42,06% 43,10%51,85%
57,94% 56,90%48,15%
0%
25%
50%
75%
100%
Sample Low High
Increased Decreased
Profitability: increase or decrease from 2001 2005
There is no relationship found between design
implementation and the solvability and liquidity of the
company
Survey 2007
Questionnaire
Business Performance
Indicators
Survey 2003
Questionnaire
Business Performance
Indicators
ComparisonManufacturing
companies
Evolution in function of
design implementation
Evolution in function of
design implementation
Comparison Manufacturing
vs. Service companies
amongst 400 manufacturing
companies with at least 5 employees
amongst 400 manufacturing
companies and 100 service companies with
at least 5 employees
Although half of the companies indicate not to implement design, all of
them do indicate to apply activities that can be considered as design
activities
Total Survices Manufacturing265 53 212
Development of procedures to improve our services 79,25% 84,91% 77,83%Regular rethinking of the production process 77,36% 71,70% 78,77%
Regular update of the technology used in products 68,30% 86,79% 63,68%Research into customer needs and expectations 61,51% 73,58% 58,49%
Focus on long lasting use of materials 58,11% 32,08% 64,62%Continuous search for new materials 51,70% 24,53% 58,49%
Regular updates of the shape of products 43,02% 45,28% 42,45%Rethinking of product functionalities 42,64% 45,28% 41,98%
Registration of brand names 36,60% 37,74% 36,32%Research into user friendliness of products 35,85% 37,74% 35,38%Development of more ecological products 35,85% 32,08% 36,79%
Regular updates of product models 35,09% 37,74% 34,43%Product development in partnership 33,21% 30,19% 33,96%
House style developped by an external specialist 30,94% 47,17% 26,89%Registration of models 24,15% 15,09% 26,42%
In house service designer 23,77% 28,30% 22,64%The production hall is dressed 21,13% 49,06% 14,15%Regular updates of packaging 20,38% 16,98% 21,23%
Regular rethinking of packaging 18,87% 11,32% 20,75%Explicit dresscode exceeding safety requirements 16,60% 18,87% 16,04%
Office furniture is designed by an external specialist 15,85% 26,42% 13,21%Design used as tool for making a difference (USP) 15,85% 11,32% 16,98%
Patent application 15,47% 9,43% 16,98%In house designer 14,72% 5,66% 16,98%
Packaging is designed by an external specialist 13,96% 9,43% 15,09%Receive media attention for innovative products 11,32% 15,09% 10,38%
Regular rethinking of the work place interior 10,57% 18,87% 8,49%Visits to design fairs / consulting design magazines 9,81% 3,77% 11,32%
212 manufacturing companies and 53 service companies indicate NOT to apply design in their business.However, when questioned about specific design activities, all of them do seem to apply design activities. Among the manufacturing companies that don’t apply design:
•78% develop procedures to improve services•65% focus on long lasting use of materials•59% continuously search for new materials•42% regularly update the shape of products•34% regularly update product models•27% have their house style developed by an external specialist•17% use an in-house designer
Implementation of designBased upon “The Danish Design Ladder”
• Design is not implemented (n=212)
• Design is implemented for styling (n=58)• Occasionally (n=24)• For product finishing (n=34)
• Design is implemented systematically or strategically (n=129)
• Integrated in business processes (n=81)• Strategically (n=48)
Total Not applied For styling ImplementedTotal 400 212 58 129
Regular rethinking of the production process 84,25% 78,77% 94,83% 88,37%Development of procedures to improve our services 84,50% 77,83% 96,55% 89,92%
Focus on long lasting use of materials 69,25% 64,62% 65,52% 78,29%Regular update of the technology used in products 73,25% 63,68% 77,59% 86,82%
Continuous search for new materials 71,75% 58,49% 79,31% 89,92%Research into customer needs and expectations 63,00% 58,49% 63,79% 69,77%
Regular updates of the shape of products 56,75% 42,45% 67,24% 75,19%Rethinking of product functionalities 51,50% 41,98% 65,52% 60,47%
Development of more ecological products 48,50% 36,79% 58,62% 62,79%Registration of brand names 41,50% 36,32% 36,21% 51,94%
Research into user friendliness of products 46,75% 35,38% 56,90% 61,24%Regular updates of product models 54,00% 34,43% 62,07% 82,17%Product development in partnership 44,75% 33,96% 56,90% 56,59%
House style developped by an external specialist 35,75% 26,89% 43,10% 47,29%Registration of models 30,25% 26,42% 29,31% 37,21%
In house service designer 30,50% 22,64% 36,21% 40,31%Regular updates of packaging 28,50% 21,23% 37,93% 35,66%
Regular rethinking of packaging 28,75% 20,75% 36,21% 37,98%In house designer 42,50% 16,98% 50,00% 80,62%
Design used as tool for making a difference (USP) 41,25% 16,98% 50,00% 77,52%Patent application 20,75% 16,98% 18,97% 27,91%
Explicit dresscode exceeding safety requirements 18,75% 16,04% 15,52% 24,03%Packaging is designed by an external specialist 21,75% 15,09% 32,76% 27,13%
The production hall is dressed 24,25% 14,15% 29,31% 38,76%Office furniture is designed by an external specialist 21,00% 13,21% 24,14% 32,56%Visits to design fairs / consulting design magazines 30,50% 11,32% 31,03% 62,02%
Receive media attention for innovative products 22,00% 10,38% 22,41% 40,31%Regular rethinking of the work place interior 24,50% 8,49% 39,66% 44,19%
Implementation of design
Implementation of designBased upon 28 indicators
25% companies with overall the highest degree of implementation (n=101)
Vs.
25% companies with overall the lowest degree of implementation (n=97)
19,5
13,2
27,5
20,7
14,4
32,6
0
10
20
30
40
Sample (Turnover) Low group (Turnover) High group (Turnover)
2001'
2005'
Average turnover (in million €) in function of the degree of design implementation
Manufacturing companies
Implementation of design
43,5
26,9
65,3
41,5
26,2
63,2
0
25
50
75
Sample (# employees) Low group (# employees) High group (# employees)
2001'
2005'
Average number of employees in function of the degree of design implementation
Manufacturing companies
Implementation of design
Design was mentioned as a key success
factor for business performance
Design was, however, the least important of all factors presented
Implementation of design
To which extent are the different aspects of doing business determining for the success of the company?
Scores were given from 1 up to 7.
5,06
4,98
4,71
4,39
3,91
3,17
5,11
5,23
4,84
4,27
3,94
2,89
1 2 3 4 5 6 7
Financial management
Internal communication
Operational management
Marketing and sales
R&D
Design
Production 2007 Services 2007
n=400 n=100
Better business performance is especially
prominent (turnover, profitability, solvency,
liquidity) in companies that implementeddesign for:
- Multimedia applications- Communications & Brand - Interior & Exhibition design- Service design
52%
51%
40%
38%
28%
19%
70%
30%
62%
55%
47%
15%
0% 25% 50% 75% 100%
Multimedia applications
Product&industrial design
Communications&brand
Interior&exhibition design
Service design
Clothing or textiles
production 2007 services 2007
Implementation of designPurposes of design. Which sub-aspects of design were used in the past 3 years?Percentages based on companies that implement design; 47% in the manufacturing sector;47% in the service sector
n=188 n=47
Multimedia applications• Design is used (n=97)
• Design is not used (n=303)
19,5 19,5 19,420,7
18,9
25,1
0
10
20
30
Sample (Turnover) No Use of design (Turnover) Design of Multi Media (Turnover)
2001'
2005'
Design used for multimedia applications
Average turnover (in million €) in function of use of design
Manufacturing companies
60,42% 57,84%66,67%
39,58% 42,16%33,33%
0%
25%
50%
75%
100%
Sample No use of design Design in Multi Media
Increased Decreased
Number of companies with increased/decreased turnover
Design used for multimedia applications
Design used for multimedia applications
Average number of employees in function of use of design
Manufacturing companies
43,5
39,1
57,3
41,5
37,2
54,9
0
25
50
75
Sample (# employees) No Use of design (# employees) Design of Multi Media (#employees)
2001'
2005'
Number of companies with increased/decreased # of employees
Design used for multimedia applications
48,54% 48,45% 48,81%
50,29% 50,78% 48,81%
0%
25%
50%
75%
100%
Sample No use of design Design in Multi Media
Increased Decreased
56,3
65,5
32,3
42,046,2
30,8
0
25
50
75
100
Sample (Profitability) No Use of design (Profitability) Design of Multi Media(Profitability)
2001'
2005'
Design used for multimedia applications
Profitability in function of use of design
Manufacturing companies
Number of companies with increased/decreased profitability
Design used for multimedia applications
41,18% 40,76% 42,25%
57,25% 58,15% 54,93%
0%
25%
50%
75%
100%
Sample No use of design Design in Multi Media
Increased Decreased
Design used for multimedia applications
Solvency in function of use of design
Manufacturing companies
36,7 36,238,5
39,838,6
43,5
0
25
50
Sample (Solvency) No Use of design (Solvency) Design of Multi Media (Solvency)
2001'2005'
56,36% 54,58%61,90%
39,02% 40,46%34,52%
0%
25%
50%
75%
100%
Sample No use of design Design in Multi Media
Increased Decreased
Number of companies with increased/decreased solvency
Design used for multimedia applications
13,2 13,6
12,1
15,3 14,9
16,6
0
10
20
30
Sample (Liquidity) No Use of design (Liquidity) Design of Multi Media (Liquidity)
2001'
2005'
Design used for multimedia applications
Liquidity in function of use of design
Manufacturing companies
54,20% 51,72%61,90%
45,80% 48,28%38,10%
0%
25%
50%
75%
100%
Sample No use of design Design in Multi Media
Increased Decreased
Number of companies with increased/decreased liquidity
Design used for multimedia applications
Communication & Brand• Design is used (n=75)
• Design is not used (n=325)
19,5 18,9
21,720,7
18,4
29,0
0
10
20
30
40
Sample (Turnover) No Use of design (Turnover) Design of communication(Turnover)
2001'
2005'
Design used for communication & brand
Average turnover (in million €) in function of use of design
Manufacturing companies
60,42% 58,41%67,74%
39,58% 41,59%32,26%
0%
25%
50%
75%
100%
Sample No use of design Design in communication
Increased Decreased
Number of companies with increased/decreased turnover
Design used for communication &brand
Average number of employees in function of use of design
Manufacturing companies
Design used for communication &brand
43,5
38,3
67,9
41,5
36,5
65,2
0
25
50
75
Sample (# employees) No Use of design (# employees) Design of communication (#employees)
2001'
2005'
Number of companies with increased/decreased # of employees
Design used for communication &brand
48,54% 48,58% 48,33%
50,29% 50,00% 51,67%
0%
25%
50%
75%
100%
Sample No use of design Design in communication
Increased Decreased
56,360,0
40,342,038,7
55,9
0
25
50
75
100
Sample (Profitability) No Use of design (Profitability) Design of communication(Profitability)
2001'
2005'
Profitability in function of use of design
Manufacturing companies
Design used for communication &brand
41,18% 39,13%50,00%
57,25% 59,42%47,92%
0%
25%
50%
75%
100%
Sample No use of design Design in communication
Increased Decreased
Number of companies with increased/decreased profitability
Design used for communication &brand
Solvency in function of use of design
Manufacturing companies
Design used for communication &brand
36,7 37,135,1
39,8 40,138,5
0
25
50
Sample (Solvency) No Use of design (Solvency) Design of communication(Solvency)
2001'2005'
Number of companies with increased/decreased solvency
Design used for communication &brand
56,36% 55,79% 59,02%
39,02% 38,95% 39,34%
0%
25%
50%
75%
100%
Sample No use of design Design in communication
Increased Decreased
Liquidity in function of use of design
Manufacturing companies
Design used for communication &brand
13,2 13,8
10,5
15,3 15,7
13,2
0
10
20
30
Sample (Liquidity) No Use of design (Liquidity) Design of communication(Liquidity)
2001'
2005'
Number of companies with increased/decreased liquidity
Design used for communication &brand
54,20% 54,58% 52,46%
45,80% 45,42% 47,54%
0%
25%
50%
75%
100%
Sample No use of design Design in communication
Increased Decreased
Interior & Exhibition design• Design is used (n=72)
• Design is not used (n=328)
19,518,8
23,1
20,7
25,1
19,1
0
10
20
30
Sample (Turnover) No Use of design (Turnover) Design of workplace (Turnover)
2001'
2005'
Design used for interior & exhibition design
Average turnover (in million €) in function of use of design
Manufacturing companies
Number of companies with increased/decreased turnover
Design used for interior & exhibition design
60,42% 59,50%65,22%
39,58% 40,50%34,78%
0%
25%
50%
75%
100%
Sample No use of design Design in workplace
Increased Decreased
Average number of employees in function of use of design
Manufacturing companies
Design used for interior & exhibition design
43,5 42,5
48,5
41,5 40,2
47,6
0
25
50
75
Sample (# employees) No Use of design (# employees) Design of workplace (#employees)
2001'
2005'
Number of companies with increased/decreased # of employees
Design used for interior & exhibition design
48,54% 47,87% 51,67%
50,29% 51,06% 46,67%
0%
25%
50%
75%
100%
Sample No use of design Design in workplace
Increased Decreased
56,361,0
33,3
42,039,7
52,3
0
25
50
75
100
Sample (Profitability) No Use of design (Profitability) Design of workplace (Profitability)
2001'
2005'
Profitability in function of use of design
Manufacturing companies
Design used for interior & exhibition design
41,18% 38,28%
54,35%
57,25% 61,24%
39,13%
0%
25%
50%
75%
100%
Sample No use of design Design in workplace
Increased Decreased
Number of companies with increased/decreased profitability
Design used for interior & exhibition design
Solvency in function of use of design
Manufacturing companies
Design used for interior & exhibition design
36,7 36,9 35,9
39,8
43,5
40,0
0
25
50
Sample (Solvency) No Use of design (Solvency) Design of workplace (Solvency)
2001'2005'
Number of companies with increased/decreased solvency
Design used for interior & exhibition design
56,36% 56,29% 56,67%
39,02% 40,56%31,67%
0%
25%
50%
75%
100%
Sample No use of design Design in workplace
Increased Decreased
13,2 13,8
10,6
15,3 14,9
16,6
0
10
20
30
Sample (Liquidity) No Use of design (Liquidity) Design of workplace (Liquidity)
2001'
2005'
Liquidity in function of use of design
Manufacturing companies
Design used for interior & exhibition design
Number of companies with increased/decreased liquidity
Design used for interior & exhibition design
54,20% 53,33% 58,33%
45,80% 46,67% 41,67%
0%
25%
50%
75%
100%
Sample No use of design Design in workplace
Increased Decreased
Service design• Design is used (n=53)
• Design is not used (n=347)
19,5 20,1
16,3
20,7 20,3
23,2
0
10
20
30
Sample (Turnover) No Use of design (Turnover) Design of services (Turnover)
2001'
2005'
Design used for service design
Average turnover (in million €) in function of use of design
Manufacturing companies
60,42% 58,20%
72,73%
39,58% 41,80%
27,27%
0%
25%
50%
75%
100%
Sample No use of design Design in services
Increased Decreased
Number of companies with increased/decreased turnover
Design used for service design
Average number of employees in function of use of design
Manufacturing companies
Design used for service design
43,5 43,146,5
41,5 41,0
45,0
0
25
50
75
Sample (# employees) No Use of design (# employees) Design of services (# employees)
2001'
2005'
Number of companies with increased/decreased # of employees
Design used for service design
48,54% 47,64%54,35%
50,29% 51,01%45,65%
0%
25%
50%
75%
100%
Sample No use of design Design in services
Increased Decreased
56,359,1
39,842,0 42,3
39,7
0
25
50
75
100
Sample (Profitability) No Use of design (Profitability) Design of services (Profitability)
2001'
2005'
Profitability in function of use of design
Manufacturing companies
Design used for service design
41,18% 40,37%45,95%
57,25% 58,26%51,35%
0%
25%
50%
75%
100%
Sample No use of design Design in services
Increased Decreased
Number of companies with increased/decreased profitability
Design used for service design
Solvency in function of use of design
Manufacturing companies
Design used for service design
36,7 37,2
33,4
39,8 39,9 39,2
0
25
50
Sample (Solvency) No Use of design (Solvency) Design of services (Solvency)
2001'2005'
56,36% 55,33%63,04%
39,02% 40,00%32,61%
0%
25%
50%
75%
100%
Sample No use of design Design in services
Increased Decreased
Number of companies with increased/decreased solvency
Design used for service design
Liquidity in function of use of design
Manufacturing companies
Design used for service design
13,2 13,7
10,2
15,3 15,5
13,6
0
10
20
30
Sample (Liquidity) No Use of design (Liquidity) Design of services (Liquidity)
2001'
2005'
54,20% 52,84%63,04%
45,80% 47,16%36,96%
0%
25%
50%
75%
100%
Sample No use of design Design in services
Increased Decreased
Number of companies with increased/decreased liquidity
Design used for service design
There is a positive relationship between the domain of design implementation and the company size.
• Packaging design (78 low vs. 89 high)-Regular updates of packaging-Regular rethinking of packaging-Packaging is designed by an external specialist
• Client-centred design (94 low vs. 67 high)-Research into user friendliness of products-Rethinking of product functionalities-The production hall is dressed-Service design department-Research into customer needs and expectations
• Cooperation with external partners (73 low vs. 73 high)-Product development in partnership-House style developed by an external specialist
Domain of implementation and company size
The attitude of companies towards
design is broadening
34%
6%
11%
4%
0%
22%
9%
20%
20%
19%
13%
9%
7%
5%
3%
32%
14%
12%
12%
10%
3%
5%
1%
0% 25% 50% 75% 100%
Form, design, product appearance
Renewing, innovative
In a modern way
Distinctive, original
Creation, Product development, invention
Differently
Style, irradiation
Packaging
production 2003 production 2007 services 2007
Attitude towards design: association with design
n=400 n=400 n=100