Towards a Design Policy for Quebec

2

ACKNOWLEDGEMENTS 3
INTRODUCTION 4
CHAPTER 1 | WHAT IS DESIGN? 6
DESIGN AS SUSTAINABLE COMPETITIVE ADVANTAGE 6
FOR PRODUCTS 6
FOR BRANDS 7
DEFINING DESIGN 7
SECTORIAL APPROACH 9
DESIGN AS PROCESS 10
DESIGN AS PROBLEM-SOLVING 10
CHAPTER 2 | THE DESIGN ECONOMY 13
METHODOLOGICAL DIFFICULTIES 13
ENTANGLEMENT OF DESIGN 14
DESIGN AS INTANGIBLE VALUE 15
ECONOMIC IMPORTANCE 17
MICRO LEVEL 19
MACRO LEVEL 21
ECONOMIC IMPORTANCE IN CANADA 26
MARKET FAILURES 28
INFORMATION ASYMMETRY 28
KNOWLEDGE SPILLOVERS 28
POSITIVE EXTERNALITIES 29
SYSTEM FAILURE 31
CHAPTER 3 | MEASURING DESIGN 32
FIRM LEVEL 32
NATIONAL LEVEL 32
CHAPTER 4 | DESIGN POLICY 35
A BRIEF HISTORY OF DESIGN POLICY 35
DESIGN SYSTEMS 37
FOR SMES 40
MINI CASE STUDY: SOUTH KOREA 42
CHAPTER 5 | DESIGN POLICY IN QUEBEC AND CANADA 44
WHY A DESIGN POLICY? 44
MAPPING THE DESIGN SYSTEM IN QUEBEC 45
TOWARDS A DESIGN POLICY 49
RECOMMENDATIONS 51
CONCLUDING THOUGHTS 57
BIBLIOGRAPHY 59

3

Acknowledgements
The research for this paper was conducted over a short period of three months.
Its aim was ambitious: to understand the role of design in the competitiveness of
nations or regions, and in Quebec particularly. I spent most of my early professional
life in the creative industries, yet I am not a designer, nor am I directly involved with
this sector. My recent foray into formal management training, through the undertaking
of an executive MBA, has sharpened my competitive intelligence skills. During the
program, and thanks to a variety of stimuli, I developed a hunch that design could
possess a relatively untapped power to make our firms more competitive. It is this
hunch that I wanted to validate (or invalidate) at the outset of my research. To say
that I found more than I expected is a gigantic understatement. I found more global
awareness of the power of design, more insightful research, more groundbreaking
firms and, above all, more talented and dedicated people.
I must thank all of the local and international actors in economy and design that I
had the chance to speak to throughout this short but intense endeavour. They allowed
me, a complete outsider, to peer into their world and helped me to make sense of it.
My talks with them have shown that design stakeholders in Quebec are determined to
leverage our immense local design talent, and are equally committed to pull their
weight in helping our province to prosper. With only modest means, Quebec’s design
stakeholders work everyday miracles. Despite the important challenges that the
stakeholders face, and insofar as design is concerned, this incursion leaves me with a
very positive outlook on our province’s current and future ability to negotiate turns
and curves in the world competitiveness landscape.
Specifically, I’d like to thank Alain Dufour of Mission Design, Béatrice Carabin of
the Bureau du design (Ville de Montréal), and Pierre Cohendet, professor of economics
at HEC Montréal. I dare hope that, in one way or another, my outsider’s perspective
may shed new light on your day-to-day business. My warmest thanks also goes to
Louis Hébert and Alain Pinsonneault. Much like the design stakeholders I met
throughout my research, Louis and Alain choose to champion innovative ventures over
historical antagonisms (Louis and Alain respectively represent HEC Montréal and
McGill University in a unique joint EMBA program). I also owe a big thank-you to Pierre
Balloffet for his trust and encouragements. Lastly, but by no means least, I’d like to
thank my life partner, Maude Labelle, for her unconditional support and invaluable
cheerleading throughout this adventure.

4

Towards a Design Policy for Quebec
Introduction
“The Obama presidential campaign was an innovation in American politics and
American design. For the first time, a candidate used art and design to bring
together the American people—capturing their voices in a visual way.”
This mention is found on the Designing Obama website, which promotes the
book of the same name. The book chronicles the implementation of the design
strategy that was devised for President Obama’s 2008 presidential campaign. The
president’s strategists had apparently deemed fit to explicitly leverage the power of
design—in this case graphic design—in order to achieve their electoral objectives. That
designers would be commissioned to produce graphic design material for a political
campaign is not in itself extraordinary. However, the fact that design played such an
explicitly integral role points to a high-level acknowledgment of the power of design—
or marketing aesthetics, as it is sometimes called—as a strategic tool. This is but one of
several unexpected design-related findings that are chronicled in this paper. Indeed,
Chapter 3 examines recent studies and research papers that have successfully
demonstrated a surprising correlation between good design and such things as crime
rate (Cozens et al., 1999) and businesses staff turnover (Backhaus and Tikoo).
Moreover, it is not uncommon to witness sustainable design proponents and urban
planners argue that good design is paramount to improving such broad measurements
as quality of life. The impact of good design practices is nowhere as well documented
as it is in business: “…there is a marked correlation between the use of design and the
economic performance of companies and subsequent macroeconomic growth.”
(Danish Business Authority, 2003). Using various methodologies and samples,
numerous more studies conducted in the past fifteen years echo DBA’s conclusion,
confirming a correlation between the use of design and markedly better business
performance. Building on this diverse body of research and the latest reports, this
paper proposes an up-to-date survey of the substantiated linkage between design, the
economy, and business performance. It does so using available global and local data,
as well as theoretical frameworks. Furthermore, it explores how the province of
Quebec and its firms leverage design to increase their competitiveness.
Design is a broad term that is used very loosely. Because of this, it must be
appropriately defined before delving into the subject. That is why Chapter 1 is entirely
devoted to introducing the various angles from which design can be considered or
defined. Amongst countless definitions that have been advanced left and right, we
retain a sampling here and sort them according to whether they are sector-based or
process-based definitions. Moreover, special attention is given to the broader
problem-solving concept of design. These various definitions are later deployed
throughout the paper, according to what the context best calls for. When relevant, we
explicitly state to which definition we are referring.

Introduction
Philippe-Aubert Messier, Towards a Design Policy for Quebec
5
Chapter 2 proposes an up-to-date survey of what we will call the design
economy. Data from various studies illustrate the importance of design at
microeconomic and macroeconomic levels, and highlight the macroeconomic
importance of design in Canada. The rest of the chapter explores how neo-classical
economics accounts for design, with a specific focus on market failure theory. As we
will see later, this is a critical concept to address, given that most existing design
support programs—explicitly or not—rely on market failure-based arguments to justify
their existence. The chapter opens with two of the most important methodological
difficulties in collecting economic data on design, namely the entanglement of design
with other activities, and its intangible quality.
While measuring design is clearly challenging, it is no less indispensable, if only
to satisfy the business mantra that, “one manages what he can measure.1
” Chapter 3
surveys the different frameworks and methods that are used to measure different
aspects of design. It covers theoretical methods as well as ad hoc industry practices.
These fall into two broad types of measurements, namely firm level, and national-level
measurements.
Chapter 4 covers the relatively new concept of design policy. This concept has
been gaining traction in the last decade: nearly half of the European Union countries
today have an explicit design policy. We relate a brief history of such design policies
and explore its most fundamental tool, the design system. The chapter then goes on to
show how design policies especially benefit SMEs. We conclude with a concrete
example: a mini case study of South Korea. Due to a certain confluence of factors,
South Korea has been a world pioneer in establishing design as a national strategic
goal—it drafted its first design policy in 1995—and is still to this day on the forefront of
design policy thinking.
The fifth and last chapter is entitled Design Policy in the Province of Quebec. It
attempts to build on all of the notions previously explored in this paper to paint a
portrait of the situation in la belle province. It starts by mapping the Quebec design
system in order to provide a clear view of all of the different stakeholders. It pursues
by identifying the strengths and weaknesses of this system. The chapter concludes
with a series of eight recommendations, some of which are moderately straightforward
to implement while others are highly challenging. All the recommendations should be
considered as the outcome of a survey of the available industry literature, both foreign
and local.
1
From the Dutch “meten is weten,” attributed to Dutch Nobel laureate, Jan Tinbergen.

6

Chapter 1 | What is design?
“Certainly, without design, most goods and services would not exist or would fail to
be differentiated in the market place.”
-Creative Economy Report, UNCTAD, 2008
Design as Sustainable Competitive Advantage
Before the 1990s, design was perceived in one of two ways. The first was to
regard design as the process by which one addresses aesthetic considerations related
to a product or a brand. This was understood to encompass typical design activities,
such as graphic design, interior design and product packaging. The second conception
of what conventionally constitutes design referred to the work of industrial designers,
who deal with considerations of mass production as well as ease of use and
ergonomics (Bitard et. al). In both instances, design was treated as an expense—a
costly and risky one in the case of aesthetics-driven projects, moreover.
Beginning in the early 1990s, a number of practitioners and researchers began to
link design to firms’ competitive advantage: "Recently, business has grown
increasingly aware that design sells. U. S. companies, in particular, are rediscovering
that good design translates into quality products, greater market share, and heftier
profits." (Kotler and Rath, 1984). What was then often called "competitive aesthetics"
was beginning to be seen by managers as more than just another expense. Throughout
the 1990s and the first decade of the 2000s, a body of research work further
substantiated this idea, among which the work of Nussbaum, 1988, 1997; Peters, 1989;
Oakley, 1990; Veryzer, 1995; Page and Herr, 2002; Borja de Mozota, 2002; and
Hertenstein et al., 2005. Gradually, aesthetics and design became recognized for their
strategic importance as “unequivocal sources of differentiation” (Montana et al., 2007)
and, therefore, as potent tools by which to gain a sustainable competitive advantage.
The bulk of this work focuses on the various ways in which a firm can better compete
through the use of design. Unsurprisingly, the power of design as a competitive tool is
most widely recognized in the practices of product design and brand management.
For Products
Examples of design-driven products now abound and many ‘star’ products from
the past 15 years immediately come to mind. In the automotive sector, critics
overwhelmingly attribute the tremendous success of the New Beetle, the Mini Cooper,
and more recently the Fiat 500, to the cars’ aesthetics and overall design (Page and
Herr, 2002), (Bitard and Basset, 2008). In the consumer electronics industry, Apple
has been consistently delivering groundbreaking new products. Here again, consumers
and analysts alike hailed the aesthetic qualities of Apple products and directly credit
design for their success. (Page and Herr, 2002), (Heskett, 2009). Here in Canada, real

Chapter 1 | What is Design?
7
estate developer Freed Development has been enjoying tremendous success with
their design-based strategy for the redevelopment of the west end of Toronto’s
downtown core. The company’s motto, ‘Design-based development,’ encapsulates the
firm’s commitment to design. Clearly, they have made a strategic choice to leverage
design to increase their ability to compete, as is the case with all of the above-
mentioned firms. The 2002 investigation by Page and Herr on the interaction between
product design and brand strength further argues that design can be leveraged by
weak brands that wish to compete effectively with strong brands. In other words, their
experiments show that a design-conscious David has a shot at taking down design-
lazy Goliath. This is an aspect that we will look into further when we discuss design
and policy making.
For Brands
Design and brands interconnect in several ways. Consumers react to brands in
ways that are largely conditioned by designers. Consumers will use design cues to
evaluate brand and product categories, and an appealing design will lead to positive
assessments of brands (Kreuzbauer and Malter 2005). While marketers in theory
control a brand’s message, the language by which this message is conveyed is in large
part the vocabulary of design. Given that visual symbols hold greater value than words
in the marketplace (Borja de Mozota 2003), fluency in the language of design is the
ability for a brand to speak to its consumers. Furthermore, with today’s ever-increasing
media mix, design plays a crucial role as the coordinator of a brand’s image: “[…]
design may serve as the cohesive factor for all elements that configure a brand
experience. Consumers can better understand what a brand stands for and what it
does for them when all of its brand elements are consistent. This consistency can be
achieved through design (Montana et al., 2007).”
Granted, most technology firms still invest more in research and development
than in design, and will use design primarily as a differentiator. However, in sectors
such as the hotel and restaurant business (the largest sector within the tourism
industry), “the intangible aspects of offerings are more important than the tangible
ones.” (Montana et al. 2007). Thus, some industries are apt at leveraging design more
than others. Yet, it is more often than not outstanding product design that receives the
lion’s share of praise. Indeed, beyond product development, it is not well understood
how design benefits firms. The sectors where intangibles play a greater role, such as
services and retail, are perfect candidates for increased performance through design.
We will return to this point later; in order to make such an argument convincingly, we
must first define exactly what design is.
Defining Design
A logical prerequisite to an assessment of design’s role in the economic well
being of societies is the capacity to define what design is. However, this is not such an

8
obvious endeavour. Interpretations vary wildly, which partly explains why design is still
such an exotic topic in economics and management. "Most business executives have
no idea what design means if it doesn't involve the iPod," quips Jeanne Liedtka
jokingly in her 2010 paper about strategy and design. How can one study, compare
and correlate things that have not been properly defined? How can one manage and
teach what one does not fully understand? The confusion surrounding the nature of
design is great enough to have an impact on policy making, as Bitard and Basset
remark in their 2008 Pan-European study, entitled “Design as a Tool for Innovation”.
They state that, “in policy oriented documents, definitions are often too vague for
measurement.” If ambiguity indeed hinders policy-making, achieving clarity about the
nature of design should be treated as a strategic issue. Policymakers, like most people,
are familiar with industrial or product design, but are often less well versed in the
notions of service design and public sector design. If a policymaking effort is to be
endeavoured for Quebec, first it will be necessary to tackle the challenge of defining
design.
The UK Design Council offers these thoughts on defining design:
“Good design isn't simply about the surface. Aesthetics are
important, but only a part of a bigger picture […]. (Design is) an
activity that translates an idea into a blueprint for something useful,
whether it's a car, a building, a graphic, a service or a process. The
important part is the translation of the idea, though design's ability
to spark the idea in the first place shouldn't be overlooked.” .
The aforementioned quote proposes a definition of design, but more
importantly, it serves as an apt introduction to the difficulty that defining design
poses. The UK Design Council begins by defining design by what it is not (“not only
about the surface”), and then moves on to suggest that we should not “overlook”
anything when considering it. This dancing around the issue shows how design is
inclined to evade definition. In laymen’s terms, design is an umbrella designation for a
wide variety of things, which commonly includes certain commercial activities
(industrial design, interior design, etc.), a set of processes (service design, software
design, etc.), as well as objects that abide by certain aesthetics principles (a design
lamp, designer jeans, etc.). To understand how designers themselves think about
design, Michael E., Atwood, and W. McCain, compiled a list of designers’ own
definitions in their 2002 paper, entitled “How Does the Design Community Think
About Design?” Here is a sampling of some of the definitions advanced by designers:
J. Christopher Jones ...initiating change in man-made things
Christopher Alexander ...the process of inventing physical things which
display new physical order, organization, form, in
response to function

9
Horst Rittel ..structuring argumentation to solve “wicked”
problems
Donald Schön ...a reflective conversation with the materials of a
design situation
Pelle Ehn ...a democratic and participatory process
Jens Rasmussen/Kim Vicente ...creating complex sociotechnical systems that
help workers adapt to the changing and uncertain
demands of their job
We can see already that designers view their work as much more than mere
styling. In the context of this paper, we will limit ourselves to two families of
definitions. On the one hand, we will consider those definitions that offer some
relevance to the world of business. On the other, we wish to explore a broader
reflection on the human capacity for altering our environment. With that in mind, we
will review briefly what we shall refer to as the sectorial and process approaches, and
then spend more time exploring what we shall designate design as problem-solving.
Sectorial Approach
As down-to-earth as it may sound, studying design as a sector is a thorny
endeavour. The international classification of economic sectors does not provide a
class that encompasses all design activity, because designers are employed, to a
varying degree, in almost all economic sectors. The European Commission
classification of sectors (NACE Rev2, 2008) thus limits its scope to activities that
directly involve design:
74.10 Specialised design activities
This class includes: - fashion design related to textiles, wearing apparel, shoes,
jewellery, furniture and other interior decoration and other fashion goods as well as
other personal or household goods - industrial design, i.e. creating and developing
designs and specifications that optimise the use, value and appearance of
products, including the determination of the materials, mechanism, shape, colour
and surface finishes of the product, taking into consideration human characteristics
and needs, safety, market appeal in distribution, use and maintenance - activities of
graphic designers - activities of interior decorators
62.01 – Computer programming activities
Covers design and programming of web pages
71.11 Architectural activities
Covers architectural activities

10
71.12 Engineering activities and related technical consultancy
Covers engineering design, i.e. applying physical laws and principles of
engineering in the design of machines, materials, instruments, structures,
processes and systems (Bitard et. al)
Various reports and research papers use the so-called ‘creative industry’ as a proxy for
design activities (Bitard and Basset). The British report “Creative Britain – New talents
for the New economy” (DCMS, BERR and DIUS, 2008) defines the creative industry as
follows: “The creative industries include advertising, architecture, the art and antiques
market, crafts, design, designer fashion, film, interactive leisure software, music, the
performing arts, publishing, software and computer services, television and radio.” The
UNCTAD’s “Creative Economy Report” also uses a sectorial approach when assessing
the economic importance of design, with the added subtlety that it places design in
the ‘functional creations’ category. While we naturally recognize that such
amalgamation can be relevant and useful at times, it fails to account for some of the
essential properties of design.
Design as Process
Industrial design projects are typically conducted as a set of sequential tasks to
be performed, along the lines of: “establishing requirements, defining alternatives,
validating and selecting solutions” (Hatchuel et al., 2003). Engineers and industrial
designers ascribe to this process-based concept of design. Although this adequately
describes observable industrial design activities, this view of design does not account
for the content input at each of the stages. The process is described as a series of
events, independent of the designer’s intellect or any other form of cultural input. In
reality, each of these steps must be fuelled by ideas, culture, and human interaction.
There is thus an argument to be made in favour of admitting the concept of ‘Fuzzy
Front End,’ broadly defined as the chaotic initial assessment phase of product
development, as a helpful complement to such purely sequential depictions of the
design process. Doing so would grant the process a notion of incertitude, which is
fundamental to design, and upon which we now shall expand.
Design as Problem-solving
Aside from the word design, what do service design, software design, interior
design, graphic design and architectural design have in common? One quickly sees the
pitfalls of the sectorial approach in that these design practices do not have much in
common in terms of required skills and knowledge. Though there is a hint of a
common process in most of the activities above, this does not tell the whole story. In
his 1986 “Report of the Research Briefing Panel on Decision Making and Problem
Solving”, Herbert Simon, the 1978 Nobel laureate in economics, wrote: “…ambiguous
goals and shifting problem formulations are typical characteristics of problems of
design,” He further qualified design work as addressing ill-structured problems. We

11
argue further here that the driving force of what we call design, as well as the creative
economy, is a competency for solving such ill-structured or ill-defined problems, by
leveraging information detained by a given collectivity. As we will see in chapter 5,
policies that recognize design as a vector of economic growth will not aim to support
strictly the design sector, but rather any initiative that aims to leverage abilities that
help a given community to solve ill-structured problems. Take interior design as an
example. A given project will present itself as “refreshing the office floor of Company
X.” This project is collective, because solutions will leverage knowledge from a
community of stakeholders: employees, managers, contractors, tradespeople, city
officials, inspectors and building administrators. It is ill-defined; what is it that the
collective really aims to do? Hide cracks in the walls, away from the view of clients?
Boost employee morale? Convey a brand message? Improve employer attractiveness?
Satisfy a manager’s vanity? Most of these questions will not be addressed explicitly in
an offer of services. Yet it is these very issues that the interior designer will dig up,
consciously or not, in order to execute his or her mandate. Choosing finishes and
colours is merely the observable technical aspects of his or her work. The design
challenge lies deeper: to understand the office floor occupants’ and managers’ ill-
defined problem, and use collective and technical knowledge to address it.
In his 2008 book, The Power of Design, Richard Farson argues: “on a larger scale,
design can potentially contribute to solutions to societal and economic problems.” We
would add that this concept of design could enable us to view business managers and
political leaders as designers. While this may sound a tad absurd, one could look at it
this way: would it be so far-fetched to state that the Minister of Finance has just
finished designing this year’s budget? Many already refer to the ‘designing’ of social
programs. Isn’t there something that feels intuitively right in those arguably odd
statements? Budget drafting obviously has nothing to do with aesthetics or what one
commonly thinks of as creativity. Still, one could consider that budget planning on a
national level is design because it is the mother of all ill-structured problems and it
involves a collectivity. Simon made a similar argument in favour of a broad definition
of design:
“Everyone designs who devises courses of action aimed at changing existing
situations into preferred ones. The intellectual activity that produces material
artefacts is no different fundamentally from the one that prescribes remedies
for a sick patient or the one that devises a new sales plan for a company or a
social welfare policy for a state. Design, so construed, is the core of all
professional training; it is the principal mark that distinguishes the
professions from the sciences,”(Simon, 1981).
Furthermore, we can link this definition of design to the recent interest the issue
has garnered. In urban centres, we have been witnessing an increasing need for design
as problem-solving, in particular within the field of architecture: “The skills of fine-
tuning a complex building and fitting it into a difficult site are going to be needed
more in future, as pressures to build on urban brownfield sites, or adapt existing
buildings, continue and increase. In such circumstances standardised forms of

12
construction and formulaic design simply do not work” (Worpole, 2000). Once a
design problem is well defined and remedied, it no longer requires a designer’s input.
A solution is standardised and deployed, sometimes globally, until it is no longer
useful. Yet, the architectural example above shows how standardized deployment is
seldom achievable in urban settings. The more complex things get, the more we need
designers to solve problems. The energy sector is on a similar path: now that the
ecological impact of energy production has become obvious all around the globe,
‘standard’ ways of producing it are often considered unacceptable and new ‘designs’
must be put forward to accommodate this reality.
While these theoretical definitions somewhat succeed at getting to the core of
what many authors think of as design, its broadness is yet another factor that
complicates attempts at design policy-making. We have yet to witness a local
operational definition of design that would allow us to collect statistics, address
performance issues, and carry out effective industry-level monitoring and policy-
making. While several research bodies have published studies with similar goals (the
British Design Council, the Economic Research and Business Information, the City of
Toronto, etc.), the resulting reports typically suffer from using other sectors, or
aggregate data, as proxies, which arguably limits the effectiveness of any eventual
intervention these studies might suggest. Bitard and Basset (2008) propose that we
reconsider the very definition of research and development that is used in Europe
when collecting statistics, in order to isolate the design component, thus avoiding
overlapping and misleading data. If design is to be a vector for improving nations’
competitiveness, as many prescribe, this definitional hurdle should be recognized and,
if not addressed by further research, its complexities should be taken into
consideration. Hatchuel, Le Masson, and Weil (2003) expressed a need for a better
understanding of design: “we need a framework coming from recent perspectives on
design theory which define ““design” as the dual generation of concepts (innovations)
and knowledge (competencies).” They further add that design “needs a complex
learning process in uncertain contexts and some forms of “mapping”, “guiding
patterns”, or “framing”.” Meanwhile, policy-making that focuses strictly on design as a
set of economic sectors will miss the core competence of design, which we argue is
the solving of ill-structured problems, and its modus operandi, the pooling and
leveraging of human knowledge and resources. This construct of design is a research
topic in itself: firstly, because it is the least understood; secondly, and paradoxically,
because it is arguably the one in which resides the most value as a competitive tool.

13

Chapter 2 | The Design Economy
In this chapter, we discuss the design economy. Readers will likely recall that
several such new economies were recognized in recent decades. The so-called New
Economy itself, but also the knowledge economy, and more recently the creative
economy. These last two obviously overlap in countless ways. This paper argues that
the design economy is a better-suited proxy by which to survey economic endeavours
of a creative nature. The creative economy, through deliberate effort or not, has the
arts at its semantic core (after all, art is the ultimate ‘creative’ act). However, art is not
concerned with economic output, and most artists would argue that art is not market-
oriented, primarily because “creative integrity requires the artist or artistic director to
be essentially product-oriented”(Holbrook et al., 1985). Design, on the other hand, “fits
into the “functional creations” category”(UNCTAD, 2008). It openly pursues “market
objectives” (idem). Though the arts are an essential contribution to society and the
economy, art’s lack of preoccupation with market demand makes it an odd choice for
poster boy of a new economic growth engine. In terms of exports, design is the largest
and fastest growing subgroup of all the creative industries. It is also one of the two
subgroups2
of the creative industries that are of greatest economic and social
importance for developing countries (UNCTAD). For these reasons, design, or the
solving of ill-structured problems—which includes creativity and art in its toolkit and is
concerned with market output—is a far more promising core around which to structure
yet another new economy.
Yet can we quantify design’s impact on firms and nations? How much value can
it add to a product, or to society? Design supporters will naturally turn to economists
for answers. Unfortunately, with remarkably few exceptions, the discipline of
economics does not acknowledge design. Herbert Simon indicates why: “Economics
[…] works on three levels, those of the individual; the market; and the entire economy”
(1981). Economics does not concern itself with what is going on at the firm level, nor
does it model design as part of the production of the wealth of nations. This chapter
surveys several means by which design nonetheless can be linked to economic output.
It also addresses the various methodological difficulties inherent to doing so. The core
of this chapter aims to sketch a portrait of design’s impact at micro and macro levels,
with a particular spotlight on Canada. Lastly, this chapter will examine so-called
market failures. This economics concept describes situations in which price
determination fails to abide by classical economic market efficiency rules, and will
therefore provide perspective on how the market values and rewards design.
Methodological Difficulties
2
The other one is Arts & Crafts

14
There are several difficulties with assessing the value of design. These difficulties
are possibly responsible for design’s relative absence in economic and management
theory, despite its undeniable economic importance, as we shall see later.
Entanglement of Design
It is often challenging, if not impossible, to isolate the design factor from all
other factors that affect market response and consumer quality judgments in
reference to a brand or product. This entanglement of multiple perceptual stimuli
renders design effectively impervious to quantitative studies. As North put it, “when
integrated into product development processes it is virtually impossible to disentangle
the precise contribution of design, or any other discipline, to the final outcome”
(North, 1990). While we can easily find quantitative studies on the effectiveness of
many management tools, we have yet to read convincing studies on the effect of
design’s best practices on a firm’s profitability. Qualitative inquiries and case studies
abound, but they often preach to the converted, and bear neither the appeal nor the
explicitness found in quantitative studies. Granted, studies on many management tools
suffer from the same entanglement with other factors that plagues design research.
Thus, such studies easily could be subject to the same form of reader scepticism.
However, proponents of most new management tools and frameworks will often
manage to provide some quantitative data. While it rarely suffices to prove causality
on its own, quantitative data has the power to apply a veneer of credibility that most
qualitative studies on design seldom can offer.
The comprehensive 2002 study by Page and Herr is one of the few that
succeeds at disentangling aesthetics, function and brand strength. They recognized at
the outset that, “when both aspects of design are considered, it seems unlikely that
consumers will respond to a product in a simple manner.” Their set of controlled
experiments aimed specifically to disentangle consumer responses to function,
aesthetics and brand strength. These experiments succeeded in improving
understanding of this dynamic relationship, and provide several valuable insights. First,
it blurred the lines that had previously been drawn by the affective-cognitive matching
framework proposed by Fabrigar & Petty in 1999. This framework suggests that
judgments about likability are affected by aesthetics, while quality is primarily affected
by cognitive information such as product specifications and brand strength. Page and
Herr’s experiments blur these lines by showing, for example, that aesthetics has a
positive impact on both likability and quality judgments. In short, these findings further
substantiated the ‘what is beautiful must be good’ inference process, described in 1972
by Dion et al.
Another valuable insight revealed by Page and Herr's experiments concerns the
relationship between aesthetics judgments and brand strength. Their findings suggest
that aesthetics influence quality judgments more for weak brands than for strong

15
ones3
. The results initially, and unsurprisingly, confirm the authors’ hypothesis that a
“strong brand will positively affect the quality judgment of a product.” They go on to
show that, because it lacks the positive ‘aura’ of a powerful brand, a weak brand’s
product quality judgment will instead be qualified by its aesthetics. This simple insight
has a wide range of implications for start-ups and small businesses that wish to
compete with stronger brands. Indeed, without a known brand as a clue to gauge a
product's quality, the experiments tell us that consumers will instead rely on
aesthetics. Therefore, weak brands must leverage design in order to better compete; it
is simply too powerful a lever to be ignored. Strong brands benefit from equity when it
comes to quality perceptions, and therefore are more impermeable to the
consequences of poor design. But herein too lies a warning for strong brands: when
weak brands leverage aesthetics, not only are they able increase their competiveness
in terms of consumer likeability judgments (which one intuitively might have guessed
would be the case), but also in perceptions of quality. Returning to methodological
difficulties, Page and Herr caution readers that they conducted their experiments on a
“high symbolism” product category (laptop computers), which is likely to affect the
weighting of the different variables in consumers’ responses. These experiments
should therefore be re-conducted with a product that is low in symbolism in order to
see if the results are consistent or not.
Design as Intangible Value
"…the gross national product does not allow for the health of our children,
the quality of their education, or the joy of their play. It does not include
the beauty of our poetry or the strength of our marriages; the intelligence
of our public debate or the integrity of our public officials. It measures
neither our wit nor our courage; neither our wisdom nor our learning;
neither our compassion nor our devotion to our country; it measures
everything, in short, except that which makes life worthwhile. And it tells
us everything about America except why we are proud that we are
Americans.4
"
- Robert Kennedy Jr., 1968
As Senator Kennedy wisely put it, gross domestic product and other such
economic measures fail to account for all sorts of alternative sources of value that we
typically refer to as ‘intangible value.’ Cultural value and historical or spiritual
significance are hardly measurable, and therefore provide little comfort to the
empirical analyst. The recent work of Dr. Zec and Jacob from the red dot institute aims
to assign numerical values to what they dubbed design assets and design strength, but
this proprietary method has yet to gain acceptance. While it may be of interest for
3
Strong and Weak brands are used broadly in the original text. They can be read
respectively as recognizable brands and unkown brands.
4
Robert F. Kennedy Address, University of Kansas, Lawrence, Kansas, March 18, 1968.

16
internal use, the Generally Accepted Accounting Principles currently limit its scope.
Indeed, according to GAAP, investments in design will suffer the same treatment as
the research part of R&D projects, where research will only be considered a tangible
asset when it can be linked to a revenue stream. Because of design’s entanglement
with technology in product development, it will hardly ever show up a by itself as a
line item on a firm’s balance sheet. At best, disentanglement and recognition of design
investments and assets by GAAP would be treated by readers of financial statements
with the same form of scepticism that R&D investments and assets typically inspire,
e.g. as highly subjective measures to be interpreted with caution. This aside,
economists have realized since 1968 that economic growth tends to stem more and
more from investments in intangibles. Research and development have long been the
holy grail of investment in intangibles. For decades, these activities mobilized
governments, who were told that support for R&D was the salvation of innovation-
driven economies. As shown in Table 1, R&D has been supplanted by design in the
United Kingdom, in terms of relative share of intangible investments.
Bias is the final methodological hurdle that hampers design research. Indeed,
openly ‘pro design’ bodies finance most of the studies that the discipline relies on
today. Bitard and Basset caution that, “...professional organisations are often key
sources and disseminators of the relevant and up-to-date data on design. This can be
considered as having a mixed effect on the measure; they provide the latest accurate
assessment, but may not be objective.” While it would be hasty to reject any and all
studies conducted by design professionals, independent studies would be welcome
additions to the body of research, if only to bolster its credibility. As long as interested
parties continue to emit the lion’s share of design studies, these will leave themselves
open to scepticism and criticism.
SOURCE: NESTA Innovation Index 2009 (2009:11)
Table 1: NESTA Innovation Index 2009: UK investment in intangibles

Investment
in
intangibles
(UK
–
2009)
£Billion

1
Training
&
skills
development
32.1
24.1%

2
Organizational
improvement
26.1
19.6%

3
Design
22.1
16.6%

4
Software
development
20.2
15.1%

5
R&D
14.9
11.2%

6
Advertising
&
market
research
14.5
10.9%

7
Other
3.5
2.6%

TOTAL
133.4
100

17
Economic Importance
The 2009 crowning of Steve Jobs as ‘CEO of the decade’ by Fortune magazine
reminds us that, however defined, design exerts a considerable impact on the world
economy. The man who is credited for making the computer sexy was obsessed by
design, down to the smallest detail of circuit board layouts inside the devices he built.
Today, Apple is the largest company in the world, and aesthetics and design have
been at the core of its competitive edge throughout this rise to dominance. Catchy
headlines aside, many of the world’s largest firms place design at the core of their
competitive strategy. Design’s economic clout is undisputable. We can get a glimpse
of its importance simply by sampling the language used by some of today’s top firms
in their annual reports:
“The Company’s business strategy leverages its unique ability to design and develop
its own operating systems, hardware, application software, and services to provide
its customers new products and solutions with superior ease-of-use, seamless
integration, and innovative design.” (Apple)
“Philips taps teams of futurists, cultural anthropologists, designers and scientists to
develop user centered products and services.” (Philips , first sentence of the annual
report, p. 2). ()
Proctor & Gamble: Report subtitled “Designed to grow,” in which key chapters are
entitled “Designed to Grow,” “Designed to Win,” “Designed to Deliver” and
“Designed to Lead.” (Proctor and Gamble)
As early as 1978, Herbert Simon pointed to design as a factor in economic theory.
Further neglect of this subject can arguably be explained by the methodological
difficulties that we explored earlier, in addition to the fact that economics is primarily
interested in markets, and less by issues at the firm level. Despite this, many
organizations have found ways to assess the economic importance of design.
The British Government has provided us with the largest quantity of studies and
statistics on design and design-related topics, though they are not alone in such
endeavours. Their New Talents for The New Economy study in 2001 (DCMS, BERR and
DIUS) revealed that the creative industries in the UK generate revenues of around
£112.5 billion and employ some 1.3 million people. Exports contribute around £10.3
billion to the balance of trade, and the industries account for over 5% of GDP. A more
recent study conducted in 2008 further revealed that, “Two million people are
employed in creative jobs and the sector contributes £60 billion a year – 7.3 per cent –
to the British economy. Over the past decade, the creative sector has grown at twice
the rate of the economy as a whole and is well placed for continued growth as

18
demand for creative content – particularly in English – grows.”(DCMS, 2008). Since
2006, the Design Council in the UK has been compiling design-specific statistics in its
annual “Design Industry Research”. The 2010 edition of the report states that, “the
overall annual earnings of UK design businesses are estimated at £15bn– this includes
design consultancy and freelance fee incomes as well as in-house design team budgets
– an increase of approximately 15% since 2005, taking inflation into account.” This
pegs the design-specific activities (design as a sector) in the UK at 2.5% of GDP, and
broader creative industries at 7.3%. Table 2 compares design with various sectors of
the British economy.
Sectors
Contribution to
GDP (in billion of
pounds)
% of
GDP
Year of
reference
Design as sector £15 2.5% 2010
Hotels and
restaurants
£33 4% 2004
Public
administration
and defense
£55 7% 2004
Creative industry £60 7.3% 2008
Financial and
business services
£86 10% 2004
Since 1995, studies on design have been conducted by the Design Innovation
Group, Britain’s Design Council, the UK Department for Culture, Media and Sports
(DCMS) and Denmark’s National Agency for Enterprise and Housing. Together, these
studies have long constituted the main body of empirical data on the design sector.
Here are some of the most valuable insights from these studies:
• Where comparisons with previous, less design-oriented, products were possible,
sales [of design-oriented product] increased by an average of 41 per cent. (Design
Innovation Group, 1995)
• Every £100 a design alert business spends on design increases turnover by £225.
(Design Council – UK, 2007)
Table 2: Relative Gross Value of the Design Sector and Creative Economy
Sources:
United Kingdom National Accounts The Blue Book 2006.,
UK Government Department for Culture, Media and Sports (DCMS), 2001, Creative
Industries Mapping Document, Foreword.
Design Council (2010) Design Industry Research 2010.

19
• So called ‘Gazelles5
’ are nearly six times as likely as static businesses to see design
as integral to their activities. (Design Council – UK, 2007)
Lately, Britain’s Design Council has been on the forefront of research and
distribution of information about design at large, and is also a leader in empirical
research on design’s importance in the economy. Here are more insights gleaned from
a number of their studies currently published on their website:
• In businesses where design is integral to operations, over three quarters say they’ve
increased their competitiveness and turnover through design.
• Businesses that see design as integral don’t need to compete on price as much as
others. Where design is integral, less than half of businesses compete mainly on
price, compared to two thirds of those who don’t use design.
• Businesses where design is integral to operations are twice as likely to have
developed new products and services. In the past three years, four fifths of them
have, compared to a UK average of 40%.
• Turnover growth is more likely for businesses that increase their investment in
design. Conversely, those that decreased investment cut their chances of growth.
• Two thirds of UK businesses believe that design is integral to future economic
performance.
• Rapidly growing business are three times more likely than the rest to consider
design crucial to success.
• Rapidly growing businesses are twice as likely as the UK average to have increased
investment in design. Over two thirds have done so recently.
• Businesses that add value through design see a greater impact on business
performance than the rest.
Source: Design Council, UK, from their website.
Micro Level
Stock Market
The Design Council carried out a study of UK FTSE-listed companies between
1994 and 2003. In the ensuing report, entitled The Impact of Design on Stock Market
Performance, the sixty-three companies that had been identified as effective users of
design were shown to outperform the FTSE 100 index by 200% over the entire period
of the stufy. A number of previous studies had shown similar results (Fitch, 1998; UK
Design Council, 1999; and subsequent review by Hugh Aldersey-Williams), but this was
the first study of the genre to cover a full decade, and to include both bear and bull
markets. This was also the first study not to be subsequently challenged about its
methodology, sample size or breath. The methodology of the study is based on the
identification of ‘good performers’ in design, which is done by accounting for the
5
Gazelle is a term used to describe a small yet very high growth firm.

20
various design awards for which FTSE-listed companies are laureates. As we will see in
the next chapter, when attempting to correlate firms’ use of design and their financial
performance, this approach is widely used. In this study, two portfolios were created
with companies that had won at least one prize in the selected set of design-related
awards shows. The ‘Design Portfolio’ and ‘Emerging Portfolio’ respectively represent
higher scorers, and lower scorers, in terms of number of awards won.
As Figure 1 shows, the study spans both the bull market of the 1990s and the bear
market of the early 2000s. The Design index tends to outperform the FTSE indices
in the bull market. Table 3 also clearly shows that both the Design Portfolio and the
Emerging Portfolio companies, despite the generalized slump, managed to preserve
their value through the bear market of the 2000s much better than their peers.
Source: Design Council, February 2004
Figure 1: Design portfolios performance over ten years
(1994-2003)

21
Table 2: Highs and lows of portfolio performance
Portfolios & Indices
Nb. of
Companies
Design Portfolio Emerging Portfolio
Largest one-
week fall -
Bear marke Low-
High-28 Feb, 2000* High-6 Mar 2000* 2012-09-10,
2001*
3 March 2003*
Absolute Performance
FTSE 100 100 +89.8% +92.2% +39.1% +2.1%
FTSE All-Share 700+ +85.3% +87.5% +26.5% +0.2%
Design Portfolio 63 +295.9% +292.4% + 168.7% + 135.6%
Emerging Portfolio 103 +235.0% +245.8% + 121.1% + 110.2%
Relative to FTSE 100
Emerging Portfolio 103 +145.2% + 153.6% +81.9% + 108.1%
Relative to FTSE All-Share
Emerging Portfolio 103 +149.8% + 158.2% +94.6% + 110.0%
Macro Level
Given the impact that design has on individual firms, one would suspect that a
similar impact might exist for national economies. Yet despite design’s economic
importance, very few studies have addressed macro-level design competitiveness.
Starting in 2005, Designium6
in Finland compiled the Design Competitiveness Index as
an attempt to assess macro-economical design competitiveness. For its most recent
survey in 2010, researchers at Designium used the criteria below to compile it.
Capacity for Innovation
Companies obtain technology (1 = exclusively from licensing or imitating foreign
companies, 7 = by conducting formal research and pioneering their own products
6
DESIGNIUM - Centre for Innovation in Design ®, Helsinki University and the New Zealand
Institute of Economic Research (NZIER)
• All figures relative to 29 December 1993
• SOURCE: Design Council
SOURCE: Design Council February 2004

22
and processes)
Production Process Sophistication
Production processes use (1 = labour-intensive methods or previous generations of
process technology, 7 = the world’s best and most efficient process technology)
Extent of Marketing
The extent of marketing in your country is (1 = limited and primitive, 7 = extensive
and employs the world’s most sophisticated tools and techniques)
Degree of Customer Orientation
Firms in your country (1 = generally treat their customers badly, 7 = are highly
responsive to customers and customer retention)
Extent of Branding
Companies in your country that sell internationally (1 = sell into commodity
markets or other companies that handle marketing, 7 = have well developed
international brands and sales organizations)
Source: Global Design Watch, DESIGNIUM - Centre for Innovation in Design ®
The results are published bi-annually in the report Global Design Watch. This
report is a welcome complement to the wealth of competitiveness data, which the
World Economic Forum has already been publishing for more than three decades in
their Global Competitiveness Report. Figure 2 plots the Designium design ranking of
developed nations against the Growth Competitiveness index published by the WEF.
There is a clear correlation between the two indexes, which confirms the tendency
observed at firm level, namely that nations that are apt at design are also more
competitive.

23
Sources: Global Design Watch 2006 and 2008, World Economic Forum, Global Competitiveness
Report 2009/2010, 2007/2008 and 2005/2006.
According to these results, Canada is better at growth competitiveness than at
design. This data supports the warning offered by Porter and Martin, when they
addressed the manufacturing industry in 2000. The two scholars expressed concern
about Canada’s trailing position in terms of innovation. They argued that the country’s
competitiveness at the time was still due to elusive factors such as favourable
exchange rates and the price of commodities. They further warned that a failure to
drive innovation and entrepreneurship would hinder Canada’s transition into a
knowledge economy. Individual country results from the Global Design Watch report,
shown in Figure 3, supports Porter and Martin’s forewarning: Canada occupies an
enviable 9th
rank in growth competitiveness, but still ranks only 23rd
in design, which
suggests that innovation is trailing.
Switzerland

United
States

Singapore

Sweden

Denmark

Finland

Germany

Japan

Canada

Netherlands

Hong
Kong
SAR

Taiwan,
China

United
Kingdom

Norway

Australia

France

Austria

Belgium

Korea,
Rep

New
Zealand

4

4.5

5

5.5

6

6.5

0
5
10
15
20

Design
average
2010

Growth
CompeBBveness
Index
ranking
2010

Figure 2: The relationship between design performance and growth competitiveness
Table
6:
Growth
Competitiveness
Index

24
We also see that Canada underperforms on the ‘nature of competitive
advantage’ criteria. According to Porter and Martin, this poor performance is due to “a
weakness in strategy,” where Canada “has pursued replication, not distinctiveness.”
In 1990, Korea became one of the first countries to directly invest in design to
improve its national competitiveness. At the time, the Korean government felt it
needed to compensate for the drop in demand for their goods (Diamond, 2008). As
we will see in Chapter 4, Korea is also a world leader in design policy and design
research. The Korean Institute of Design Promotion (KIDP) has improved on previous
design research methods. It audaciously proposed “the first-ever framework to
evaluate countries’ design competitiveness.” KIDP revealed the framework’s first
results in 2008. Seventeen major countries were assessed under the heading National
Design Competitiveness Report 2008. The report proudly indicates on its front page
that Korea ranked 8th
in design competitiveness, compared with 9th
in 2007 and 15th
in
2010 (according the Designium’s studies). Otherwise, results are difficult to compare
since the Korean so-called NDCP methodology relies on a three dimensional
framework. The framework’s three axes represent public goods level (design policy);
design industry level (design industry), and consumers level (design culture) (KIDP).
Grow
th'Com
petitiveness'
Index'ranking
Com
pany'spending'on'
R&D
Nature'of'com
petitive'
advantage
Value'chain'breadth
Capacity'for'innovation
Production'process'
sophistication
Extent'of'm
arketing
Degree'of'custom
er'
orientation
Design'AverageDesign'Ranking
Canada 9 4.2 3.6 4.1 4.4 5.3 5.6 5.5 4.67 23 rrr
USA 2 5.6 5.5 5.4 5.5 5.9 6.4 5.7 5.71 5
Germany 7 5.8 6.4 6.2 5.9 6.4 5.8 5.6 6.01 3
Source: Global Design Watch, DESIGNIUM - Centre for Innovation in Design ®, Helsinki University and the New
Zealand Institute of Economic Research (NZIER) and World Economic Forum, The Global Competitiveness
Report 2010-2011.

25
One could question the communication effectiveness of this three-dimensional
model (it is difficult to read and interpret). Altogether, the NDCP methodology does
mark a step forward in design research, if only by the fact that it includes input from
both the public and consumer sectors in its assessment.
Although research on the macroeconomic impact of design started as early as
1990, data is still relatively sparse, especially when compared to other sectors of
similar economic importance. With the recent quasi-universal recognition of the
creative economy as a powerful growth engine, it is likely that we will see more studies
in the years to come. Methodological hurdles will remain, however. The entanglement
of design within larger existing data sets, such as R&D investments, will still prevent
convenient in-depth analysis. As Bitard and Basset put in in their 2008 study,
“Measurement is the crux of the matter: without a clear operational definition of design
activity, which translates into an effective official statistic system (such as the
European Community Innovation Survey, CIS), policies in support of design lack
fundamentals.” Therefore, research on the macroeconomic impact of design should
not only aim to collect and analyse new data, but also to refine existing sources by
untangling elements like R&D.
Figure 3. Three-dimensional analysis of design competitiveness by country
Source: KIDP, 2008

26
Economic Importance in Canada
Data on design in Canada is, unsurprisingly, nearly inexistent. A 2006 joint study
by Concordia University and the University of Toronto paints a historical portrait of
design policy in Montreal, but it does not provide any numerical data on design’s
economic importance for the city of Montreal, the province of Quebec, or the country
as a whole. The same year, the City of Toronto’s Economic Research and Business
Information program published a report that argues for an increased leveraging of
Toronto design capabilities. While the report does not directly address the economic
importance of design in the Canadian or Torontonian economies, it does put forward
compelling statistics on design as a discipline that permeates every sector of the
economy.
Industry (NAICS name)
All
Designer
s
Architect
s
Landscape
Architects
Industrial
Designer
s
Graphic
Designer
s
Interior
Designer
s
Other
Design
ers
Mining and Oil & Gas
Extraction
0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0%
Utilities 0.2% 0.7% 1.8% 0.4% 0.1% 0.0% 0.0%
Construction 1.8% 2.2% 3.5% 3.1% 0.2% 7.0% 0.6%
Manufacturing 14.8% 2.3% 1.8% 51.3% 13.4% 3.2% 20.4%
Wholesale Trade 2.2% 0.3% 1.8% 5.7% 2.0% 2.2% 3.0%
Retail Trade 6.0% 0.5% 1.8% 3.3% 2.8% 13.5% 23.0%
Transportation &
Warehousing
0.3% 0.0% 0.0% 0.8% 0.4% 0.3% 0.0%
Information &Cultural
Industries
7.5% 0.3% 0.0% 1.5% 12.5% 0.3% 10.9%
Finance & Insurance 1.2% 0.8% 0.0% 0.0% 1.9% 1.0% 0.0%
Real Estate & Rental &
Leasing
0.4% 0.7% 0.0% 0.0% 0.3% 0.9% 0.9%
Professional, Scientific &
Technical Services
58.6% 88.6% 60.2% 29.7% 59.6% 68.8% 28.1%
Administrative & Support,
Waste Management &
Remediation Services
2.2% 0.4% 21.2% 1.5% 2.1% 1.0% 3.3%
Educational Services 0.6% 0.7% 0.0% 0.0% 0.8% 0.0% 0.7%
Health Care & Social
Assistance
0.2% 0.0% 0.0% 0.0% 0.4% 0.3% 0.0%
Arts, Entertainment &
Recreation
2.2% 0.3% 1.8% 0.8% 2.4% 0.4% 7.6%
Accommodation & Food
Services
0.2% 0.0% 0.0% 0.0% 0.1% 0.7% 0.0%
Other Services (Except
Public Administration)
0.9% 1.2% 0.0% 0.8% 0.9% 0.3% 1.1%
Public Administration 0.9% 1.9% 7.1% 0.8% 0.6% 0.6% 0.4%
TORONTO(%) 100.4% 100.8% 100.9% 99.6% 100.4% 100.6% 100.0%
Table 4: Employment by Industry and Design Occupation in Toronto CMA, 2001 (°/>)27
Source: ERBIC, Making The Link, 2008.

27
While many consider cities like Toronto and Montreal to be design clusters in
their own right, the statistics also clearly reveal that design is a key component of
many other industries too. Table 4 shows how design pops up in almost every sector.
This pattern resembles what we would observe if looking at information technology,
e.g. a distinct cluster in itself, yet also as an “enabling service” (ERBIC) across the
entire economy.
Design and Non-Design Sectors
Table 4 also shows that design is not particularly prevalent in many sectors.
Indeed, it is not surprising that the mining and oil industries do not make extensive use
of design. One can act on this discrepancy in one of two ways. First, it could be used
to orient design policy toward sectors that make extensive use of it. Alternatively, it
can be used to identify opportunities for improvement—for gaining a competitive
advantage—where it is under-utilized. While infusing raw materials with design
attributes may seem like an amusing idea, let us be reminded of the many product
categories that have gone from a very low degree of differentiation to an
extraordinarily high degree, sometimes within a remarkably short timeframe. Before
the 1990s, blue jeans bore a straight leg and were sold in denim blue, light blue, and
black. Levis sold them for around $40, and its classic design dominated the market. In
the early 1990s, companies such as Guess Jeans decided that jeans were not just jeans
anymore, but could now be considered a fashionable clothing item. They produced a
steady stream of models throughout the 1990s and 2000s that totally awakened the
denim category from its commodity slumber, transforming it into the extremely
differentiated, high fashion behemoth of a category that it is today. Jeans can still be
bought at Wal-Mart for low prices, but the price range extends well into the thousands
of dollar for custom-order jeans, with every possible option between these two
extremes. In a similar fashion, two unlikely bedfellows turned the accommodations
industry on its head: Ex-Studio 54 club promoter Ian Schrager and French designer
Philip Starck are together credited for launching the boutique hotel concept that
transformed hotel rooms and lobbies into fashion statements and lifestyle experiences.
This created a whole new playing field on which to compete. Whereas hotels
previously were selected based on their amenities and proximity to services and
attractions, etc., ever since Morgans opened up in New York City, a new category of
travellers now chooses their accommodations based on design. Condominium
developers have recently borrowed from this model and created the so-called
condotel. This concept is mostly found in city centres and brings hotel-style services
to condo living; and, more importantly, it offers a design-infused, modern citizen
lifestyle modeled on the boutique hotel ethos. Returning to the subject of raw
materials, Swedish furniture giant IKEA used design processes and aesthetics to
leverage its considerable forestry resources. In that sense, it is not such a far cry to
submit that the province of Quebec could use ingenious design in a similar fashion to
leverage its own forestry or aluminum industries. In 2000, Michael Porter and Roger
Martin argued that the road to Canada’s competitiveness and economic prosperity can
only be maintained and improved through an innovation-based strategy. Indeed, it has
been said so many times that it has almost become a cliché: Quebec’s primary sector

28
industries must convert to more value-added offerings. What is scantily
acknowledged though, at least at the political level, is that design—both in a narrow
sectorial sense, and in a broader ‘solving of ill-structured problems” way—can
contribute to meeting that goal.
Market Failures
To promote government intervention in support of R&D and innovation, its
advocates often rely on the market failure economic theory. Its core idea is that, when
left to its own devices—for various reasons—the market fails to reward firms that
invest in innovative projects. This concept certainly applies to design. Indeed, we can
observe the market failing to value design in many ways. The most prominent causes
of market failure in design are asymmetry in information, spillover of knowledge,
positive externalities, and failure of the system. (EU, 2006), (Bitard et al. 2008),
(EBRIC, 2006).
Information Asymmetry
Information asymmetry refers to the absence of information necessary to
properly value a product, service, client, etc. This leads to pricing being affected—
whether positively or negatively—in a manner that does not reflect the true value of
the goods being exchanged. Hence, a “bad used car” will often be bought for more
than it is worth, because of the lack of available information about it. (Borooah)
Conversely, someone selling a “good used car” might have trouble getting a fair price
for it because of asymmetric information between himself and the buyer. Such
examples illustrate how prices can become distorted in an entire sector. Much like the
case of the “good used car,” in nations that have little knowledge about the benefits of
good design for their economy, the market won’t be able to appreciate design’s true
value. As we have seen, at both the firm and national level, the strong relationship
between design and overall performance is well established. Yet results suggest that
Canadians at both levels—and possibly many designers too—underappreciate this fact.
This partly explains why neither firms nor governments (with the exceptions of the
municipal governments of Toronto and Montreal) have shown significant commitment
to incorporating design into their growth strategies.
Knowledge Spillovers
In most nations, intellectual property law protects innovations through elaborate
measures for patent filing and enforcement. While this approach has been successful
at protecting countless scientific and technological innovations, most ideas stemming
from design are not eligible for patent registration. Aside from the occasional patented
industrial design breakthrough, firms rarely pay compensation or give credit when
replicating a designer's idea. Many garment chains proud themselves in being able to

29
source new ideas from elite fashion or furniture shows in New York, Paris or Milan, only
to reproduce the design in a matter of weeks. Copyright law requires some minor
changes in the design, but the styles themselves are notoriously un-copyrightable.
Hence, “innumerable companies around the world specialize in being "fast-followers,"
adept at rapidly producing imitations of successful innovations at low cost.” (Heskett,
2009).
Positive Externalities
‘The faces of buildings which are turned outwards towards the world are
obviously of interest to the public, and all citizens have a property in them. The
spectator is in fact part owner. No man builds to himself alone. Let the proprietor
do as he likes inside his building, for we need not call on him. Bad plays need not
be seen, books need not be read, but nothing but blindness or the numbing of our
faculty of observation can protect us from buildings in the street. It is to be feared
that we are learning to protect ourselves by the habit of not observing, that is by
sacrificing a faculty.’
- W.R. Lethaby, Architect, 1922
Architects were early to recognize that the impact of their work goes far beyond
the utilitarian aspects of the roofs they design for us under which to work and live. The
cultural value of architecture to society is now relatively well acknowledged. We
understand, for example, that competitiveness in the tourism industry often relies on
the number of architectural artefacts that a city possesses and can proudly showcase
to visitors. Economists use the word externality to describe unintended or corollary
effects of an economic activity, for which the economic impact is unforeseen, or at the
very least, not initially taken into account. For example, the cost of reconditioning
contaminated soil after a quarry’s ore has been exhausted is an externality. Throsby
(2003) argues that designers and artists support a dual market: “(a) a physical market
for the good which determines its economic price and (b) a market for ideas which
determines the good’s cultural value.” Countless authors credit design, architecture
and art with the generation of extraordinary amounts of cultural worth, as well as
many other such side benefits, or positive externalities.
On Well-Being and Crime
The notion that ill-designed housing complexes in many ways favour alienation
and crime has been the subject of many studies, dating as far back as the 1970s.
Today, architects and urban planners carefully optimize spatial layout and use traffic
and lighting as tools to reduce criminal incidents and procure a sense of security for
tenants. The impact of design on crime is so well established that it has become a
responsibility for developers and landlords to manage these issues:
“The design-affects-crime debate may well become increasingly important.
Indeed, the courts in America are increasingly holding landlords and others liable

30
for failing to take sufficient security precautions to prevent criminal attacks on
their tenants and guests. Third parties are being increasingly sued for premises
liability, especially if a criminal attack can be partially attributed to poor design
(Cozens et al., 1999).
Most police forces in England and Wales now have an ‘architectural liaison officer.’
This agent can be called upon to consult with the police force on addressing crime
problems through design solutions. This relationship between arguably odd partners
has been remarkably fruitful. This suggests that design could be put to use as part of
other such counterintuitive tandems, and provide similar benefits. Worpole further
suggests that positive externalities of design may already include such hidden benefits
as a reduction in demand for health care provision, and possibly even an increase in
education attainment.
On Human Resources
Office buildings are the largest capital asset in the developed world. This is also
where half of the workforce is employed (Bole et al., 2006). The role of designers has
long been to cram as many cubicles as possible into an office floor plan, but this is
showing signs of changing. Indeed, the priorities in office design have shifted towards
creating efficient, employee-friendly spaces that encourage informality and
communication. Human resources academics publish studies with titles such as “The
Impact the Physical Work Environment Has on the Professional Performance and
Psychological Well-Being of Employees” (Earle, 2003). While human resources
professionals link the quality of the office environment with employee performance,
office design is also becoming a key differentiating factor when trying to attract
employees in the first place, a fact that is confirmed by Jeffrey Taylor, Chief Executive
Officer of the Internet-based career centre Monster.com: "Our office design is a perk
to clearly differentiate us from other companies."
On Quality of Life
Robert W. Veryzer has published several studies that together demystify the
relationship between product aesthetics and consumers’ affective judgments. In a 1993
article entitled "Aesthetic responses and the influence of design principles on product
preferences," he concludes that, “Aesthetics/design has the capacity to influence the
very quality of life itself by literally shaping the products that make up so much of the
"world" in which we live” (Veryzer, 1993). Design can improve access for the disabled
and elderly; it can simplify complex operations, make optimal use of space, and
minimize maintenance; it can improve civic pride and sense of identity. Design can act
on countless little things that make up the wider notion of “quality of life.”
On Tourism

31
We erect buildings to fulfill a function, such as housing families, businesses, or
sporting events. These serve their function, but some of them, old and new, fulfill an
entirely different purpose: to elicit gazes and awe from locals and foreigners alike. If
there is one common element in the activities of any type of tourist--whether it be
young backpackers, retirees, or lovebirds—is that they will visit architectural
landmarks. Not only that, many will choose their destination based on one landmark, or
an abundance of landmarks. Cities like Rome, Paris, and Florence support their tourism
industry through their established architectural heritage, while Barcelona, Berlin and
Chicago distinguish themselves by regularly proposing radical new designs. One of the
most striking examples of an architectural project stimulating the tourism industry is
Frank Ghery's spectacular design for the Guggenheim Museum in Bilbao, Spain. This
previously run-down patch of industrial riverside now attracts 3 million visitors a year
and has become one of the richest cities in the country. In the words of Herbert
Muschamp, the architecture critic for the New York Times:
“Bilbao has lately become a pilgrimage town. The word is out that miracles still
occur, and that a major one has happened here. The city's new Guggenheim
Museum, a satellite of the Solomon R; Guggenheim Foundation in New York, opens
on Oct. 19. But people have been flocking to Bilbao for nearly two years, just to
watch the building's skeleton take shape.” (Muschamp, 1997)
Tourists’ spending power has changed the fate of Bilbao in this impressive
example, but the same phenomenon is at play, to varying degrees, in cities throughout
the world. Other prominent examples include Beijing ‘bird’s nest’ Olympic stadium by
Herzog & Meuron, the Burj Kalifa in Dubai, and lastly the Millau Viaduct. This
extraordinary countryside bridge is yet another stunning example. Sitting there alone
in the valley of the river Tarn in southern France, the bridge alone attracts over
600,000 tourists annually, on top of its 4-million strong automotive traffic (AFP, 2011).
System Failure
The final aspect that can produce market breakdown when it comes to design is
the failure of any component of a so-called design system to function properly, thus
possibly affecting otherwise working components of the system. For example, a nation
might have considerable innovation skills, yet insufficient venture capital to properly
fund go-to-market strategies. The market would thus diminish the design output of
this nation because its products fail to make it to market. We will examine each
component of a design system in Chapter 5, but for now let us understand system
failures as either missing links, or coordination failures, between collaborating partners
in design, thus preventing design from expressing its value.

32

Chapter 3 | Measuring Design
Getting accurate measurements of R&D investments and returns has been
crucial in raising its importance. In the late 1980s in the United Kingdom, the House of
Lords science and technology select committee urged increases in R&D. The ensuing
influx of new investments required new accounting procedures, customized financial
reporting, and results measurements. This eventually led to the creation in 1992 of the
first R&D scoreboard, which unleashed R&D policy (Design Council’s website). R&D,
which had often been viewed as "too creative to measure" (Design Council), was now
understood sufficiently enough that firms and nations could invest in it. Design is at
this stage today, where R&D was in the early 1980s; there is growing awareness of
design’s ability to increase competitiveness, yet substantiating the design discourse
with significant empirical evidence is still challenging. This begs the question: where
are we when it comes to the measurement of design? This chapter will address
different attempts at quantifying design, at the firm level and national level.
Firm Level
In keeping with the current gospel that managers should manage what they can
measure, design managers look to implement performance indicators. Academics in
the field have promoted the use of the balanced score card to integrate notions of
design value into regular business performance monitoring. The vision-based, holistic
approach of the BSC is easy to appropriate for designers (Borja de Mozota, 2006).
Another potential contribution to firm-level design measurement is the Design
Value methodology, put forward by Dr. Peter Zec and Jacob Burkhard for the Red Dot
Institute. The guiding principles of this proprietary method, the full details of which
have not been released to the public, were the subject of the eponymous book, Design
Value (2010). The aim of the authors was to devise a rigorous framework for
quantifying a firm’s design value. As part of this framework, they devised a formula
that combines new concepts that they put forward, such as design assets and design
strength, and which together can be used to calculate a firm’s design value:
Design value = Design revenue x (Design strength + Design continuity) + Design
Assets
The method used to generate the terms of the equation remains unpublished for now,
though it can be bought as a consultancy service by firms in need of such valuation.
National Level

33
The Danish Design Ladder is a tremendously useful tool for conveying a nation’s
use of design. This model originally stemmed from a study that aimed to benchmark
Danish companies on their investment in design. The study surveyed 1,000 companies
and tracked various metrics including revenue, employment, and exports. The survey’s
report concluded that firms that use design have an additional growth of 250%
compared to others. Using the survey data, firms could be categorized into four stages
of “design maturity” that characterize each stage’s use of design. In 2011, the SEE used
the Danish Design Ladder model to categorize nations using maturity stages, albeit
slightly different ones than in the original Danish model, as shown in Figure 8.
Other initiatives include the “International Design Scoreboard” produced by the
University of Cambridge. Measurement of design can also be found in the Global
Design Watch report 2010, which offerds qualitative benchmarking of national design
policies. The World Economic Forum (Global Competitiveness Report 2012-2013) ranks
nations according to a number indicators, including a few that are design-related. The
United Nations Conference on Trade and Development (UNCTAD) publishes The
Sources: Design Creates Value, National Agency for Enterprise,
Copenhagen, 2007 & SEE 2011.
Figure
8:
Danish
Design
Laddder
(2007)
&
Design
Policy
Ladder
(2011)

STAGE&4:
DESIGN&AS&STRATEGY
Design'is'a'key'
strategic'means'of
encouraging
innova3on'
Design'is'integral
to'the'
development
process
Design'is'only
relevant'in'terms
of'style
Design'plays'no'role'
in'product/service
development
STAGE&3:
DESIGN&AS&PROCESS
STAGE&2:
DESIGN&AS&STYLING
STAGE&12:
NO&DESIGN
STAGE&4:
POLICY&VISION&FOR&
STARTEGIC&DESIGN
STAGE&4:
POLICY&VISION&FOR&
SERVICE&DESIGN
STAGE&4:
POLICY&VISION&FOR&
INDUSTRIAL&DESIGN
STAGE&4:
NO&POLICY&VISION
&FOR&
DESIGN
DK&/&FI&/&UK&/&EU
EE&/&ES&/&SI&/&SE
BE&/&CZ&/&FR&/&IE&/&IT&/
LV&/&PL&/&PT&/&RO&/&SK
AT&/&BG&/&CY&/&DE&/
EL&/&HU&/&LT&/&LU&/&
MT&/&NL
Design&
Policy&
Ladder&
2011
Danish
Design&
Ladder&
2007

34
Creative Economy Report every two years, which measures the economic importance
of different creative sectors, including many design-related sectors. Both the data
from UNCTAD and the WEF studies rely on very narrow sectorial definitions of design.
The data will show, for example, total revenues generated by a country’s architecture
and interior design firms. These studies therefore fail to account for increased tourism,
human resources benefits and other externalities that are generated by design
projects, nor do they account for the design-related revenues of the designers’ clients.
These two notable omissions from such seminal publications demonstrate that we are
not yet able to provide quantitative data that captures the full scope of the economic
impact of design on a national level.

35

Chapter 4 | Design Policy
In the previous chapters, we established design’s importance to the economy, as
well as how it can procure competitive advantage for firms as well as nations. We also
identified the ways in which classical economic theory fails to account for design’s true
value to society. From positive externalities that procure tremendous value to society,
to systems that fail to deliver economic value, we are seeing that leveraging design’s
potential can be a tricky task. Yet we know that innovation-driven economies must
rely on “Business Sophistication” and “Innovation,” both of which already depend
heavily on design, to further their competitiveness. (World Economic Forum, 2012
Global Competitiveness Report). In light of these facts, a question remains: how are we
to overcome the challenges in valuing design, in order to harness its power to deliver
competitiveness and growth? Several nations have run into the same challenges, and
most have responded with what we now refer to as a national design policy. In this
sense, design is following in the footsteps of R&D, which had sustained the same
market failures as we now see for design. The overbearing evidence of the importance
of R&D for nations’ competitiveness spurred governments to step in with innovation
policies that aim to correct market failures, often by subsidising R&D. We should note
that R&D, on its path to universal acknowledgement as a growth tool, suffered the
same methodological difficulties that plague design research today. Indeed, before
R&D funding became widespread in the developed world, R&D investment advocates
had to overcome the challenges posed by vague definitions, scarce data, and
difficulties establishing causal links.
A Brief History of Design Policy
Charles and Ray Eames are the designers behind many iconic chairs and objects
that we still see around in both museums and living rooms today. In 1958, the Indian
government asked Eames to visit India and write what was later to be called The
Indian Report. The Indian government wanted the designer to “recommend a program
in the area of design that would serve as an aid to small industries.” (Eames, Charles
and Ray, 1958). The Indian government sensed that its population did not possess the
design skills (the report would confirm that) that would enable them to address the
poor quality of the consumer goods that the country produced. While modest, this
initiative likely was nonetheless the world’s first attempt at a national design policy.
At that time, there were virtually no trained professional designers in Japan
either. Just like India, Japan had judged that design professions were key to their
competitiveness and took on the task of creating a design workforce. By 1992, Japan
had 21,000 industrial designers as a result of the policies introduced by the Ministry of
International Trade and Industry. Just as Japanese designers were acquiring these new
skills, the semiconductors industry was exploding. Those two trends dovetailed and

36
gave rise to the Japanese consumer electronics industry that would take soon take the
world by storm.
In 1993, the Design Management Institute dedicated an entire issue of the Design
Management Review to design policy (Design and National Policy). The following year,
a new issue of the same journal tackled the question of measuring design. By then, the
impact of design on micro and macro economics had been identified and several
nations were actively creating policy to better leverage design’s potential. In 1993,
Korea launched its first five-year national design policy, which it has updated every
five years since. By 2011, 17 of the 27 EU member states (SEE, 2011) had explicitly
included design in national policy, with prominent regional design policy initiatives in
Catalonia, Flanders, Lapland, Silesia and Wales. (Whitcher et al., 2012). A 2010 report
entitled Global Design Watch by Finland’s DESIGNIUM, the New Centre for Innovation
in Design, compared different national design policies and programs. These policies
range in scope and depth. In Korea, for example, the national policy favours design
promotion over direct investment in firms (Raulik et al., 2010), while the US devotes
more energy to education in design at managerial levels and the creation of
multidisciplinary courses (Designium, 2010). Most countries that have a design policy
also will have a formal body to coordinate the different stakeholders.

37
Design Systems
Proposed by academics, design systems are
arguably the most powerful tool available to those
creating design policy. This structural model
delineates the different components that interact to
eventually output design. Beyond simply mapping
the sector, design systems help to “emphasise the
complex and dynamic nature of design activity
which involves many stakeholders in an interrelated
network”(Raulik, 2009). Proponents of the design
system suggest that governments use this analysis
framework to identify which component(s) of the
system might be underperforming. This information
can in turn be used to develop policy instruments
that address those weak links, thus enabling the
system to maximise its output. In short, this tool can
be used to address all types of market failures that
we identified earlier:
Information asymmetry: by spotting where knowledge is absent;
Knowledge spillovers: by spotting weaknesses in intellectual property
protection;
Positive externalities: by integrating them into planning;
System failure: by spotting where communication is blocked.
As initially defined by University of Wales professor Gisele Raulik-Murphy et al, (2009),
design systems should comprise a minimum of 4 components, e.g.: design promotion,
design support, design education and design policy (see figure 4.). Design promotion
refers to any initiative that aims to increase public awareness of design, such as award
shows, exhibitions, etc. Some cities, including the city of Toronto, endowed themselves
with design museums as a means to promote design. Design support is usually
provided through government programs that assist businesses in leveraging design to
increase their competitiveness. Design education obviously refers to the training of
designers; however, more and more we also see design education showing up in
management education curriculum. Design education is therefore not seen strictly as
sectorial education, but rather as something that spans various disciplines. For
example, The Australian Governement Public Sector Innovation website reports that
some of its staff members recently enrolled in an eight-week design course that will
teach them about designers’ methods and processes (2012). Lastly, at the centre of a
DESIGN'
POLICY
PROMOTION
EDUCATION
SUPPORT
designers'+'managers
public
businesses
Source: Raulik-Murphy et al.
(2009)
Figure 4. Generic representation
of a National Design System in
2009

38
design system is a design policy that provides governance and coordinates the
system’s various components.
Of course, such design systems representations serve only as a basic framework
to which nations or regions add various components, based on their specifics needs,
issues, and priorities (see Figure 6.). A more recent generic design system put forward
by Whicher et al., (See Figure 5) adds a further level of detail. It identifies—and thereby
highlights the importance of—components such as the design sector itself, regulations,
and design clusters. This model also
dissociates design funding (public and
private) from design support. Regardless
of the specific components of the system,
the goal remains the same, namely to
identify the components of a system so
that one may in turn ensure that these
work cohesively. There are also design
support and policy initiatives that go
beyond national borders. One of the main
actors in the European Union is the SEE
project. SEE stands for Sharing
Experience Europe –Policy, Innovation &
Design and is “a network of 11 design
organisations sharing knowledge and
experience in order to develop new
thinking, disseminate good practices and
influence local, regional and national
policies for design and innovation.” SEE
started in 2005, and has been at the
forefront of research and publication
about design ever since. In the first few
years following its inception, SEE
identified design programs throughout
Europe that were working in isolation and
set out to remedy this. In particular,
communication gaps were revealed
between design organisations and
governments that undermined the proper functioning of the different design systems.
The SEE project’s various publications and networking contributed to EU-wide
awareness of design issues amongst all stakeholders. While speaking at the SEE
conference in 2011, Peter Dröll of the European Commission proposed the following
vision: “by 2020, design is a fully acknowledged, well-known, well-recognised element
of innovation policy across Europe.” Another noteworthy, Europe-wide, initiative from
the now-defunct INNO-GRIPS (Global Review of Intelligence and Policy Studies), is the
2008 research conducted by Pierre Bitard and Julie Basset entitled “Design as a Tool
for Innovation.” This ‘outsider’ inquiry is still one of the most comprehensive surveys to
date of issues surrounding design in the competitive landscape. More recently in 2011,
Source: Whitcher et al., 2012
Figure 5. A more elaborate representation of a
generic National Design System in 2012.
DESIGN'CENTRES,'
ASSOCIATIONS'
&'CLUSTERS
DESIGN'
INVESTM
ENT'
(PRIVATE'
&'PUBLIC)
DESIGN'SUPPORT
DESIGN'CENTRES,'
ASSOCIATIONS'
&'CLUSTERS
RESERACH'&'
KNOWLEDGE'
TRANSFER
DESIGN'
EDUCATIONPROFESSIONAL
DESIGN'SECTOR
POLICY,'
GOVERNANCE'
&'REGULATION
DESIGN'
FUNDING
SUPPLY''''''''''DEMAND

39
and presumably following Bitard and Basset’s findings, the commission awarded
funding of €4.8 million to six projects that proposed to advance the European Design
Innovation Initiative,’s mission, which is “to exploit the full potential of design for
innovation and to reinforce the link between design, innovation and competitiveness
7
.” The projects are:
EuroDesign – Measuring Design Value
SEE Platform: Sharing Experience Europe – Policy Innovation Design
IDeALL – Integrating Design for All in Living Labs
DeEP – Design in European Policies
EHDM – European House of Design Management
REDI: When Regions Support Entrepreneurs and Designers to Innovate
Source: EC’s website, Projects supporting the take-up of the Design in Innovation Policy
7
From EDII’s website, 2012.

40
For SMEs
Design policy is not in itself targeted towards one sector or another. It aims to
make better use of design across all company sectors and sizes. That being said, there
is reason to believe that design policy is of greatest benefit to SMEs. As we stated in
Chapter 1, research by Page and Herr shows that weak brands may be able to compete
effectively against strong brands, as long as the weaker brand’s offering exudes
superior design. In other words, while strong brands provide some protection from the
disadvantages of poorly designed products, SMEs with weak brands do not have that
luxury. In the high symbolism product categories that Page and Herr studied, SMEs are
in a sense compelled to produce good design, because otherwise they risk being
crushed by stronger brands.
However, there is a long list of reasons SMEs fail to invest in innovation and
design. Raulik et al. in their 2009 paper entitled “National Design Systems” compiled,
from various research, the following hurdles that SMEs face with regards to using
design. First, SMEs are not able to absorb the risk inherent to design and innovation
Source: “National Design Systems”, (Raulik-Murphy et al. 2009)
ministry'of'
educaNon
ministry'of'
trade'
and'industry
city
councils
design
forum
finland
design
start
program
tekes
diges
design
2005
(research)
design'
round'table
academy'
of'finland
int.'design
business
mgmt.'prog.
polyV
technics
graffia
nat.'assoc.
of'g.'
designers
ministry'of'
foreign'affairs
insNtue
for
design
research
research
insNtute'of
the'finish
economy
university
'of'lapland
ornamo
finnish
assoc.'of
designers
foundaNonsfinish
indsutries
designium
university
'ofart'
and'design
design
2005
(technology)
FUNDING'SOURCES
DESIGN'POLICY DESIGN'PROMOTION
DESIGN'EDUCATION
PROFESSIONAL'ASSOCIATIONS
DESIGN'SUPPORT
RESERACH'&'DEVELOPMENT
NaNonal'Design'System
FINLAND'(as'of'2007)
private'&'non'profit'sector
Figure
6:
National
Design
System
in
Finland,
as
of
2007.

41
projects; their size makes them more conservative. Second, SMEs often do not have
internal design resources and rely on consultants. The difficulty in managing design
consultants is said to be a key reason for the failure of design projects (Roy, 1994).
Such design management problems are “much more likely to occur in companies with
under 100 employees, and especially affected the smallest companies with under ten
employees.”(Roy, 1994). Third, SMEs are not connected to the rest of the system. They
might not take advantage of all available grants, support projects, or new markets,
because the manager hours needed to do so are often simply not available (Johnson
et al., 1990). Fourth, SMEs tend to foster “efficiency, cost cutting, incremental changes
and a focus on day-to-day business. Innovation is not likely to flourish in such a
culture.” (von Stamm, 2004). Lastly, SMEs generally rely on simple organizational
structures. “Typically, they are managed in a personalised way that directly reflects the
knowledge, skills and attitudes of their owners or managers.” (Bruce et al., 1999).

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