Design and Innovation

OECD has a new paper out on Measuring Design and its Role in Innovation. The paper is part of OECD’s efforts to look more closely at non-technological innovation by the Working Party of National Experts on Science and Technology Indicators. This primarily a report on measurement which looks at the advantages ad limitations of various methods of measuring the economic impact of design. While that is an important contribution to the public policy literature, what I find more interesting is its insights about design and the innovation process.
As the report notes in the beginning, one measurement problem is the interconnection of types of innovation.

Results from innovation surveys have repeatedly shown that the two broad types of innovation (product and process on the one hand and organisational and marketing on the other) are more likely to co-occur than take place in isolation. Furthermore, cognitive interviews with business managers in several countries have revealed difficulties among respondents in separating between some types of innovations, in particular between process and organisational innovations.

Building on this, they look more closely at the interconnections and come up with some interesting findings on the role of design based on some optional questions on design by Statistics Denmark in its 2010 innovation survey:

– Around one enterprise out of four reports using design, either with the sole purpose of providing a last finish on products (5%), as an integrated though not determining element (10%) or as a central and determining element (8%) in their activities. The sectors showing the highest propensity to integrate design are high-tech manufacturing sectors, followed by ICT services, other professional business services and lower and medium tech manufacturers with a focus on consumer products.
– The use of design as an integrated element is highly correlated with innovation outcomes, particularly product and marketing innovations, including new-to-market innovations. Controlling for observed firm characteristics, the probability of introducing a product (marketing) innovation is 24 % (31%) higher for firms where design is integrated.
– Design integration tends to have a positive effect also on the success of innovative products. On average the percentage of innovative turnover of product innovating firms is nine times higher in firms using design as an integrated element.
– The use of design as an integrated element is highly correlated with measures indicating the implementation of methods of user engagement such as consumer panels and other advanced methods, thus lending support to a “user centred” view of design.
– The use of design as an integrated element is found to be significantly related to other innovation activities, both internal and external. Design integration generally reduces reliance on external product development, except for firms where design is a determining element, which rely heavily on external R&D and often co-develop their innovations with other partners.
– Robust correlations are found between design use and firm’s economic outcomes, especially value added and productivity growth. Firms using design as an integrated element are found to have on average a 9.1% higher employment growth rate, a 18.7% higher value added growth rate and a 10.4% higher productivity growth rate than similar-sized firms within their own sectors over the three-year period covered by the survey.

These finding reinforce my own thinking about the role of design thinking and how intangible assets working in a holistic ecosystem. First, as the report notes, “The concept of design as a broad ranging user-centred development activity is insightful in its integration of development and implementation and the integration of users and producers.” Design is an integrating activity, not simply an add-on or stand-only attribute. Second, the integrating nature of design highlights the fact that intangible assets need to work together to be effective.
However, this nature of design makes the measurement problem much more difficult:

it is apparent that identifying potential mechanisms for measuring design and producing indicators will not by itself satisfy the needs and expectations of policy users. Potential questions concern estimating the private and social rate of return to design investment, the extent of spillovers from design activities, the most appropriate protection frameworks for design outputs, the case of or against financial reporting requirements, the relevance of raising awareness on design and developing links with the design community, or the potential promotion of design skills and capabilities in firms, the workforce and youth. Dealing actively with these questions requires an ambitious research agenda. Identifying and addressing data gaps is a necessary step, which must be supported by the legal and physical infrastructure that provide the means for linking data sources and policy experiences in an analytical setting. This agenda requires first and foremost a continued dialogue to identify the most crucial questions of interest for policy makers and how they can be tested empirically.

Our task therefore is not to downplay the importance of design and other non-technological factors – as some might be tempted to do. Rather our task is to come up with new ways to tell the analytical story beyond the simple metrics now available. As the saying goes, “better to have an imprecise answer to the right question than a precise answer to the wrong question.”

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