The design innovation performance of Paraná Businesses

THE DESIGN INNOVATION
PERFORMANCE OF PARANÁ BUSINESSES
Darragh Murphy & Gisele Raulik Murphy
December, 2015

Report on the Design Innovation Performance
of Paraná Businesses
Prepared by:
Darragh Murphy &
Gisele Raulik Murphy
December, 2015

Paraná Inovador – Design Innovation Performance of Paraná Businesses 2
INDEX
1. Introduction page.3
2. Methodology page.3
3. Key findings page.6
3.1. Sales of new to Market products page.6
3.2. Business performance page.9
3.3. Investment in Design page.10
3.4. Return on Design Investment (ROI) page.11
3.5. Design Management page.14
3.6. Common issues page.15
4. Conclusion page.17

1. Introduction
This report is the conclusion of a two-year programme run by Centro Brasil Design
(www.cbd.org.br) in the state of Paraná in the South of Brazil. DUCO was commissioned by CBD to
compile this report on the current state of the art of design practice and performance among
businesses in Paraná in order to inform and guide future editions of the Paraná Inovador program.
One of the unique benefits of the Paraná Inovador programme was the use of design diagnostics to
advance the consultation between companies and advisors from Centro Brasil Design. These
diagnostics are based on data collected from the companies and compared with international
standards, thus providing objective and tailored insights in how to improve the contribution of
design to each company’s performance. The high quality and volume of the data collected has
made it possible to give a thorough review of the design, management, and innovation practices of
businesses in the programme. This analysis is given an extra dimension by comparing the Paraná
dataset against a Brazil sample, a High Growth sample, and High Innovation sample. These are
substantial datasets in terms of their size and comparable composition, thus allowing for significant
findings in the analysis.
In compiling this report, the challenge has been to interpret the large volume of data into insights
that CBD and its partners can act upon. This has been addressed with the use of graphics, the
authors’ own personal experience of the programme in interpreting the data, and eleven short
summaries of the key findings called ‘insights’.
2. Methodology
During the course of the Paraná Inovador programme, participant companies completed a
questionnaire on their design activities. In return they each received a design diagnostic report (see
figure 1), which identified key design and management areas they needed to address with Centro
Brazil Design in order to improve their design innovation performance.
The collective data is analysed for this report to assess the strengths and weaknesses of design
practices among companies in Paraná. To do this the Paraná dataset is compared against other
datasets that represent key themes to the programme; Design in Brazil, Design for Innovation, and
Design for Growth. See figure 2.
Design in Brazil consists of data from 182 companies mainly across the south and southeast of
Brazil (81% from São Paulo, Santa Catarina and Rio Grande de Sul, see figure 3). The composition is
very similar to the Parana sample in terms of company size and the sectors represented.
Design for Innovation consists of 112 companies from Europe and Brazil that are considered
successful innovators. They are defined by being able to design and develop new products to the
market that each achieves better sales than their established products. The size and sector
composition of the companies in this sample are very similar to the Paraná sample.

Figure 1: Questionnaire, good practice cards and the
design diagnostic report that each company received.
Design for Growth consists of 245 companies from Europe and Brazil that have a three-year
average annual growth rate of 20% or more. This sample has a higher proportion of creative based
companies and service companies than the Paraná sample, with more companies in the smaller size
categories.

Figure 2: Composition and characteristics of the four samples

Figure 3: Distribution of business data collected for the Brazil sample.
3. Key findings
To construct this report 160 design and management metrics were analysed covering every aspect
of design in an organisation e.g. design strategy, contribution of design, design resources,
investment in design. To give an outline of how the Paraná sample performs the graph in figure 4
summarises the extent to which it performs better, worse or the same to the other three samples
across all 160 metrics.
Compared with the Brazil sample, Paraná scores the same across 72% of the metrics, with 17%
better and 11% worse. With the better and worse scores nearly cancelling each other out it leaves
the Parana sample almost equal to the Brazil sample. This would suggest that the design and
management practices of Paraná companies are of the same standard of the Brazilian average
(considering that the Brazilian sample is concentrated in the south and southeast of the country).

Figure 4: Performance of the Paraná sample in comparison to the
three other samples across 160 design and management metrics
Compared with the high growth and high innovation samples the Paraná sample underperforms
significantly. In order to progress the design agenda among Paraná businesses, it would be more
advantageous to draw conclusions from the high growth and high innovation samples rather than
compare against the Brazil sample.
INSIGHT 1:
Paraná companies perform design and management
practices to the same standard as other companies in
the south and southeast of Brazil.
Innovation is difficult to measure reliably and to find data, however one of the metrics used in the
Paraná Inovador programme is the breakdown of sales from new to market products that are less
than three years old. This metric demonstrates the ability of a company to develop new products
and to be the first to take them to the market. Figure 5 illustrates the breakdown in sales of new to
market products. In the pairs of circles along the top the smaller white circle is proportional to the
percentage of sales from new to market products. The groups of circles below them represent the
average number of products each company sells both mature and new to market products. The
area of the new to market products is proportional to how they generate sales against the mature
products. In the case of Paraná, on average 31% of sales come from new to market products. On

average a company in the Paraná sample has 76 products, 67 of which are mature products and 9
are new to the market. On average, each of the new to market products have considerably higher
sales than each of the mature products.
Figure 5: Analysis of sales from new to market products and “mature” products
INSIGHT 2:
Compared to Brazil, Paraná companies achieve the
same level of sales from new to market products
but with half the number of products. This means
Paraná companies develop products that achieve
over twice as much in sales as the rest of Brazil.

Detailed analysis has indicated that sales from new to market products in the High growth sample
only partially contribute towards growth. Mature products are still selling well when new products
are introduced. Although the product number count is low, a high proportion of the products are
new to market i.e. 12 out of 36 products compared to 9 out of 76 by the average Paraná company.
INSIGHT 3:
New to market products developed by Paraná
companies are performing well, however
innovative companies have a large portfolio and
twice as many new products launched every year.
The extent to which design contributes towards profit, sales and market share is difficult to
measure as other factors also contribute towards these indicators. However the questionnaire did
ask participate companies if they could indicate the extent they think design contributes to these
key performance indicators. In figure 6 the Paraná companies have a distinctly lower perception to
the extent design contributes to profit, market share and turnover.
Figure 6: The contribution of design to three key business indicators

INSIGHT 4:
Paraná companies do not realise the contribution
of design to key business indicators; turnover,
profits and market share, to the same extent as
high growth and high innovation companies.
In order to develop products that are new and successful in the market, companies need to make
investments into research and development, and design. Both of these investments are equally
important for successful new products. When the data was reviewed further, Paraná companies
differ from high innovators and high growth companies when it came to decision making on
investments in design, see figure 8. The majority of high growth and high innovators make
significant investments on design based on the potential return and with financial procedures in
place (e.g. a dedicated design account, monitoring indicators).
Figure 7: The distribution of investment across key business activities
INSIGHT 5:
Paraná companies underinvest in design and R&D
in comparison to high innovation and high growth
companies. They also invest marginally less in
marketing. This appears to be at the expense of the
equipment budget and other items.

Figure 8: How are resources allocated to design in your business?
INSIGHT 6:
The majority of Paraná companies do not
manage design investment to the same level of
professionalism observed by the high growth and
high innovation companies.
Why do some companies achieve better return on their design investment than others? How can
Paraná companies gain a better return on investment? By combining the investment metrics with
the new to market metrics it is possible to plot the design performance of companies. At first sight
the wide scatter of all the plots are difficult to interpret, but when broken down into four types it is
possible to make sense of the data and arrive at several insights. The graph in figure 9 has divided
the plots into four quadrants along the median values: low investment/high return, high
investment/high return, low investment/low return, and high investment/low return.
The majority of the high innovation companies are spread between low investment/low return and
high investment/high return, suggesting a direct relation between investment and return. The
majority of the high growth companies are spread between the high investment/high return and
high investment/low return, this would suggest that strong positive growth encourages design
investment, although with mixed results.

Figure 9: Distribution of the three samples in different classifications of Return on Investment

INSIGHT 7:
The majority of Paraná companies are categorised
as low investment/low return design operators.
The majority (57%) of Paraná companies are on the quadrant low investment/low return. Of the
four sectors, companies in this quadrant are the largest and oldest. In general they experience low
growth and low export rates. These companies operate in mature markets with products of low
technology and are more likely to compete on price rather than on quality. They have a large
number of products but with a small proportion being new to market, thus the lowest sales from
new to market products. This is despite having the most design experience of the four quadrants
with the majority of companies with good design management capability. The reasons behind this
stagnation require further analysis but several key features of this group could explain it: low
design competitiveness, low acceptance of design as part of the strategic plans of the company,
company culture, low awareness of the benefits of design to business.
The goal of the Paraná Inovador programme is to increase design innovation among companies in
Paraná. By reviewing the characteristics and practices of companies in the other quadrants it is
possible to identify key attributes Paraná companies could adapt as well as identify mistakes that
should be avoided.
To improve return on design investment:
 There has to be a greater proportion of a company’s product range consisting of new to
market products (24% to 42% of the product range, Paraná average 12%).
 Manage design to align with core business objectives.
 Design should be used to develop new markets with new technologies and products to
compete on quality rather than price.
 Companies need to be more design competitive i.e. faster development times, more
sophisticated products. Designers should be better informed with good design research.
 Top management should be supporting design by making it more integral to the business
strategy, performing strong financial and business analysis on design and incentivizing a
creative culture in the company.
What to avoid:
 Sales of each new to market product are only marginally better than mature products. If the
investment is made, the improvement should be substantial.
 The level of design investment not supported by the ability to manage the investment i.e.
big budgets needs strong management
 Poor planning for design e.g. lack of design guidelines, portfolio analysis, unit cost analysis,
product/brand platform.
 Limiting design management to project management. Instead it should be regarded as key
to improving and maintaining company competitiveness, brand value, innovation and
customer experience.
 Low design competitiveness, this includes product development lead times, product
complexity, secrecy.

Considering the evidence of poor management leading to poor results, this issue was verified
further. In the above recommendations, design management was mentioned on several bullet
points. It is an extensive activity that deals with managing projects to leading design teams and in
some cases leading businesses. To assess the capability of an organisation to manage design, the
Design Management Staircase model is used. It grades companies on one of four levels of
management capability, see figure 10.
Figure 10: Distribution of the samples across the Design Management Staircase
The distribution of Paraná companies across the Design Management Staircase is very similar to the
Brazil sample. When compared with the High Innovation and High growth samples there are
notable differences, namely the proportion of companies at level 3 and 4. To replicate these levels
of Design Management capability in Paraná the majority of companies will need to advance one
level on the staircase model. Advancing each step of the staircase requires different expectations

e.g. to move from level 3 to level 4 requires a change in the company culture towards design, this
can take years to achieve, whereas the move from level 1 to level 2 requires practical advice.
INSIGHT 8:
For 30% of the companies in the Paraná Inovador
programme, design is an integral part of how their
organisation functions (level 3). But the great
majority (55%) are still at levels 1 and 2, regarding
design as an ad-hoc or isolated project activity.
INSIGHT 9:
In Paraná, investments in design are being
jeopardised by the lack of internal management at
companies. This sometimes causes new product
launches to fail due to a lack of expertise and poor
integration with the company structure.
Every recipient company of a design diagnostic also received a letter outlining three key areas that
needed to be addressed in their organisation. A summary of these recommendations is prepared in
figure 11. The most common advice recommended was the need for companies to have a clear
vision of where they are going and how design can support this strategy. Furthermore, with a clear
company strategy and with top management support, real change can happen. Most of the other
recommendations are practical and easier to implement, the other four main recommendations
were:
 Support and involvement of senior management: Is design represented at the
highest level and regarded as a strategic issue for the company?
 Consumer involvement: Are consumers and users of the product / service involved
in the development and testing of new products ?
 Preliminary technical assessment: What procedures are used to analyse the
production and design requirements, and monitor costs at an early stage of the
process?
 Planning: Planning is an important aspect of design which defines the parameters
and conditions to obtain the highest level of design performance.

Figure 11: Breakdown of the recommendations made in the Paraná Inovador programme
INSIGHT 10:
The main difficulty for companies in Paraná is the
integration of design with the company's strategy.
This deficiency causes most companies use design
just for individual projects, often without top
management's attention, wasting a greater
potential return on design investment.

4. Conclusion
This report showed that companies in Paraná are developing new products with good results.
However, when compared against high innovation companies, it became clear that it is necessary
to increase the number of new products launched each year. To achieve this, Paraná businesses
need to increase their investment in design and R&D, or distribute current investment levels across
more projects.
However, for the best results, companies in Paraná need to be more professional in how they
manage their investments in design. This requires them to improve their process management
capabilities and design features above the Brazilian standard in order to achieve global practices
and results. They also need to recognise design as an activity that supports the business strategy
and the key objectives of the company, which goes beyond the current project-to-project design
practice.
In practical terms, this means design teams and
their management develop products more
quickly, within defined processes, and
supported with better research. A dynamic
design team must be able to adapt new
technologies and develop products that open up
new markets for the company. A crucial element
to this success is the guidance of top
management of the company, who should be
knowledgeable of the potential benefits of
design for the business.
INSIGHT 11:
In general for every 1% of
all investment dedicated
to design, it generates 3%
increase in sales from
products and services
among Paraná businesses.
For the companies of Paraná to achieve better financial results from design innovation - the launch
of new products or services - it is necessary to integrate design into the everyday function of the
company and build their capability to manage design. In practical terms, the goal for future
programs, could take the challenge of advising Paraná companies to progress from level 2 of the
design ladder - where design is used for isolated projects - and evolve to the next level, where the
design should contribute to the construction of the portfolio and the growth of the company brand.
In this way, design investments have higher return potential and companies are more likely to grow
their practices and product development structure / services, generating a healthy cycle of
economic growth from design and innovation.
____________________________
© 2015 CENTRO BRASIL DESIGN
All rights reserved. Reproduction of parts of the report may be made without seeking permission
from Centro Brasil Design, on condition that reference is clearly made to the source of the
material.

The design innovation performance of Paraná Businesses

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