How to Increase the Value of Industrial Design
This is the third post in a rough three-part series about the value of industrial design.
If you haven’t read the other two posts, you may want to go back and do so for this to make sense:
The TLDR:
It started with a simple question of why UI/UX designers get paid more than industrial designers
The reasons are mainly:
Software margins are usually way, way higher
There is a much larger demand for UI/UX designers
But also:
Industrial designers have done a poor job communicating our value
The value of design conversation is dominated by UI/UX
In this post, I’ll argue that though market and economic realities may mean that it will never be as valuable as digital design, industrial design is still a very high-value activity.
Industrial design has been systemically undervalued by business and there is strong evidence that there’s a lot to gain for all parties involved in recognizing and implementing its true value.
It starts with a smile
To give us a framework to think about this, I’d like to take you back to Taiwan in the 90s, and talk about a little company called Acer.
Acer is a manufacturer of PCs, founded in 1976. It makes PC products for other brands (such as Google Chromebook) and their own brands.
In the early 90s, Acer was in trouble. Profits were declining sharply and in 1991, Acer posted a loss of $22.7 million. This was because the price of computers was rapidly falling and the Taiwanese dollar was growing in value.
Acer’s business was heavily based on manufacturing and assembling the PCs in Taiwan. The chairman at the time and co-founder of Acer, Stan Shih, understood that they were focusing on the activity with the lowest value-add in the production chain of PCs.
To save Acer, he wanted to reform the business, get away from manufacturing and assembly and invest more heavily in R&D and marketing.
But as he shared his ideas with his colleagues, he encountered a lot of friction.
A lot of them were very invested in their manufacturing prowess. He likened it to American factory workers striking when their jobs were shipped overseas to Asia.
So in 1992, he came up with a simple diagram to explain his thinking, one that he credits with convincing his colleagues to pursue higher value-add activities in the production chain without distraction.
This is the Stan Shih smile curve:
Shih analyzed many different industries and theorized that different activities in the production chain add different amounts of value to the final product, roughly following the shape of a U curve.
Looking at this diagram, you can see that manufacturing is at the bottom, adding the least value, while R&D, branding, design, marketing, and sales/after service are higher on the value curve. Shih wanted to get Acer out of the middle/bottom of the curve and move towards the higher ends.
This simple idea took hold in Shih’s colleague’s minds.
By spreading the smile curve throughout Acer, Shih was able to shift the company’s business strategy to focus their domestic efforts on higher value-add activities, move manufacturing and assembly overseas, and eventually become a global brand for PCs and related products.
Two years later, profits were up to $210 million, and by 1995 Acer was the number one PC brand in many developing countries. As of January 2021, it was the 6th largest PC vendor in the world. Many other PC companies have emulated Acer’s model.
What this shows is that different activities in the production chain of a product have a different value-add. Knowing where you currently are on on the value curve and strategically moving towards the higher ends can have a huge impact on your returns.
Moving up the value curve
So if you’re an industrial designer, where are you on your company’s (or your client’s) value curve?
Or more importantly, where do other people, both inside and outside your company, think you are?
Well, it’s not quite as dire as Acer’s situation in the 90s.
But it’s probably only one step up:
(Of course, this isn’t true of all companies, but judging from the comments I’ve been getting from industrial designers, it is true of a lot of companies or projects where industrial designers are involved)
In the first post of this series, I wrote about why UI/UX designers get paid more than industrial designers. I explained that you get paid a portion of the value you generate for others.
So naturally if you’re perceived to be lower on the value curve, you are going to be compensated lower than people higher on the curve. A factory worker is compensated a lot less than someone in the marketing department.
You are also going to have less say in the process of creating the products. A factory worker has almost zero influence over the product development process, while a salesperson might actually have significant sway, even though they are on the back-end of the production chain.
Being perceived to be lower on the value curve is the source of a lot of an industrial designer’s woes: lower pay than their digital counterparts, the “make it pretty” trap, being subservient to the marketing or engineering departments, among many.
In my last post, I argued that digital designers have made a better case for themselves and been able to move up the curve and increase their perceived value due to better linkage with business outcomes and generally dominating the “value of design” conversation.
Conversely, industrial designers are trapped lower on the curve because of a fixation and over-emphasis on the tangible pretty object that is often the outcome of our efforts and a lack of participation in the value of design conversation.
But let’s look at the activities on the curve again.
I think any designer will be able to recognize that industrial design actually contributes to every single activity on this curve.
Let’s look more closely:
Concept / R&D
ID is instrumental in translating new technologies and innovations into viable commercial products by mapping them onto user needs and coming up with product concepts.
A little design goes a long way in the early stages of product development to envision what could be and getting feedback from users.
Branding
A product’s industrial design and usability is inherently part of a brand’s DNA and they must speak to each other.
Design
OK. Not sure I have to explain this one.
Manufacturing
ID has significant sway over materials, manufacturing processes, assembly procedures, etc.
Decisions made during the design process determine 70-90 percent of a product’s production cost. ID can inform efficient manufacturing and assembly that can help greatly reduce cost.
ID can also reduce time-to-market by working closely with manufacturing.
Distribution
ID can have impact on the shipping weight, packaging, and other distribution factors
Marketing
ID is often a key factor in a hardware brand’s marketing. Think Apple. A big chunk of their marketing focuses on those lustful pieces of aluminium.
Sales/After Service
A well-designed product that users love is obviously a lot easier to sell than a mediocre one.
A good design with well thought out usability reduces the burden on the company to provide customer support, returns, or replacements.
Though it isn’t always recognized as such, industrial design is a high value activity because when empowered to work across the product creation process, it adds substantial value all throughout the production chain.
To increase industrial design’s perceived value and ability to contribute across the product development process, the key is to get other people in the business to understand, recognize, and appropriately value it.
There’s a lot at stake (for everyone)
It’s not just industrial designers who have a lot to gain from moving up the value curve and being involved throughout the product development process.
All parties stand to gain:
Industrial designers get to deploy their skills
The user gets a well thought-out product that isn’t just skin deep
Which sells more and generates higher returns for the company/shareholders
Sounds great, right?
But hey, don’t just take my word for it.
Let’s look at this landmark study by multi-billion dollar consulting firm McKinsey & Company.
In 2018, McKinsey did a wide-ranging study (they claim the first of its kind) of how the design practices of 300 publicly listed companies over five years and how they affected their financial performance. The companies products spanned physical, digital, and services.
Through this study, they identified four key factors that made a major impact:
Analytical leadership
Measuring and driving design performance on the same level as revenue and costs
Cross-functional talent
Spreading design throughout the organization through cross-functional teams
Continuous iteration
De-risking development by continually testing and iterating with end-users
User experience
Designing around the user, not features and specs
But it’s not enough to just do well in one of these areas. They all work together.
What McKinsey found was that companies that excelled in all four areas of design performed up to twice as well financially as industry benchmarks in revenue and total returns to shareholders.
Making design a top priority and part of the organizational strategy means stronger bottom line for the company and a better outcome for everyone.
If you’re an industrial designer working with or within a hardware company, moving up the value curve and being involved throughout the whole development process is a net benefit to all.
Room for improvement
Given the huge potential returns, surely every company is champing at the bit to implement this kind of design-centric culture so they can rake in the cash.
Well, not quite.
McKinsey again:
“What our research demonstrates, however, is that many companies have been slow to catch up. Over 40 percent of the companies surveyed still aren’t talking to their end users during development. Just over 50 percent admitted that they have no objective way to assess or set targets for the output of their design teams.”
So around half of the companies they studied don’t know how user-centric design can impact their business and even if they do, they don’t know how to go about implementing the changes that would benefit them.
Specifically regarding industrial design, a 2017 National Endowment for the Arts special report on ID says this:
“Many SMM leaders believe that industrial design is limited to aesthetics and product design, and are not aware of how it can integrate into their business or when is the best time to engage an industrial designer in their manufacturing process. In a survey administered to directors of 23 centers around the country that provide expert and business services to SMMs, only 13% were familiar with industrial design. What’s more, 72% said a lack of knowledge about industrial designers’ value prevents their center from engaging with designers, and over 56% do not have access to industrial designers at all.”
While this is specifically about how SMMs (Small and Medium-sized Manufacturers) perceive industrial design, I think many designers across companies large and small can relate to the problems they point out: limited understanding of what ID is, how it adds value, and the misconception that it is limited to surface-level beautification.
Clearly, there’s a lot of room for improvement in the integration of industrial design and design as a whole across the product development process for all kinds of companies.
What gets measured gets valued
If the upside for everyone is so great for design to be more valued and fully integrated, why aren’t industrial designers being pulled up the ends of the value curve by senior management and why do they still have difficulty making the case that ID is a valuable function?
What can industrial designers do about it?
In their study, McKinsey offers two insights:
“With no clear way to link design to business health, senior leaders are often reluctant to divert scarce resources to design functions. That is problematic because many of the key drivers of the strong and consistent design environment identified in our research call for company-level decisions and investments.”
“Design issues remain stuck in middle management, rarely rising to the C-suite…Designers themselves have been partly to blame in the past: they have not always embraced design metrics or actively shown management how their designs tie to meeting business goals.”
Basically, designers don’t always link their work to business goals, and without that clear linkage, senior leadership can’t drive that company-level change and integration of design.
One of the advantages that UI/UX design has over industrial design is the ease of collecting user data in real-time that can be quickly translated into performance metrics to be tracked over time. These can be tied to financial performance and the value of UI/UX design is thus proven and supported across software organizations much more easily. Since digital products are constantly being iterated upon, tested, and measured this self-reinforcing cycle is always at work.
Industrial design does not lend itself to such real-time reporting and feedback loops. The main indicators you have of how valuable the design effort was is in the sales volume of the product and user reviews, both of which lag significantly behind the actual design work. Little can be done to influence them once the product has already shipped.
When those indicators do become available, the next product development cycle is likely already under way and there’s little time or effort available to make connections between the design work and the business results.
In order for industrial designers to move up the value curve and drive the organization-wide recognition and integration across the entire product development process that we know will result in better products and a net benefit to all parties, we must actively seek to measure the results of our work at every stage of the process and clearly communicate linkage to business outcomes.
That might mean:
Measuring user satisfaction before and after a design cycle, perhaps scoring prototypes against existing products
Numerically measuring and communicating the impact of design changes:
Sales volume
Material and cost reductions
Reduction in time-to-market
Maybe some combination of hardware/software to measure physical user behavior and the impact of design changes.
Depending on the context (consulting/corporate, size of company, type of product, etc.), how an industrial designer affects this change will look different.
But the bottom line is, to increase the value of industrial design, we need to find ways to measure the business impact of what we do, and constantly point to that impact as we push to integrate across the entire product development process.
At the end of the day, it’s a win-win for everyone.
P.S. Wow. Since my last post my subscribers have doubled to 330! Thank you and welcome to everyone new!
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P.P.S. This newsletter/blog/whatever is going to be moving soon to a new place on the internet (http://designthings.blog/) Check out the teaser site I have up right now (no need to sign up again if you already have since it’s the same mailing list). I’m going to try to migrate all the current posts, but also keep them up on this site (anson.design) so any old links still work.
P.P.P.S. If you’re a designer, I’d highly recommend you read the McKinsey study I’ve mentioned a few times in this piece. It will give you a framework and language to have a clearer, more coherent “value of design” conversation with anyone.