Sunday, March 18, 2007

No Accounting For Design?

The ROI for design ...

"It's the design world's dirty little secret. Despite the growing consensus that "good design is good business," most companies lack objective financial metrics to help them calculate whether increased investment in design will, in fact, generate increased profits. Does it matter? Chuck Jones, Whirlpool's (NYSE:WHR) design chief, certainly thinks so.

Two years ago, Jones made a pitch to add some injection-molded ornamentation to a KitchenAid refrigerator's redesign, which would have added about $5 to the per-unit cost. The company's resource-allocation team asked him to estimate the return on investment, but Jones couldn't produce the numbers to make such a forecast. As a result, he was forced to fall back on a rationale that was simultaneously elitist and lame: Trust me. I'm a designer.

That argument didn't fly.

Defeated, Jones resolved to improve on what he dubbed his "Las Vegas approach" to investing in design, "where you're basically asking people to roll the dice and hope for the best." As a first step, he surveyed 15 "design-centric" companies, including BMW, Nike (NYSE:NKE), and Nokia (NYSE:NOK). To his surprise, few had a system for forecasting return on design. Most simply based future investments on past performance. "No one," Jones says, "had really figured this stuff out."

The reasons are twofold, according to two Northeastern University accounting professors, Julie Hertenstein and Marjorie Platt, who described the phenomenon in a Journal of Product Innovation Management article. First, it's incredibly difficult to untangle design's contribution from all of the business drivers--engineering, manufacturing, distribution, marketing--that ultimately fuel a product's performance in the marketplace. Then there's the accounting problem: Design investments are immediately written off as expenses. Months (or years) later, when a product finally hits shelves, companies are loath to retrieve the data necessary to calculate returns.

Beyond those issues, designers themselves can't agree on how to approach return on design--or even whether to. One camp argues that the surest way for designers to make manifest their capacity to drive corporate success is to bring objective business measurements into the process. A design solution might be technically masterful and aesthetically pleasing, but if you can't quantitatively calculate its clout, you can't claim its success. "If we don't sort out the ROI, design will continue to be viewed with skepticism in many corners," warns Rob Wallace, managing partner of Wallace Church Inc., a brand-identity consultancy."    (Continued via Fast Company)    [Usability Resources]

Design and Business at Whirlpool - Usability, User Interface Design

Design and Business at Whirlpool

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