As both an economist and designer I welcomed a report by Design
Council entitled “The
Impact of Design on Stock Market Performance”:
“Design is a critical component of business performance. We’ve
heard designers, commentators and companies say it. But, to date, the evidence
for the link between shareholder return and investment in design has been
scarce and anecdotal.”
While I strongly recommend this report to designers and managers alike I’m
afraid it is going to make more than one economist frown. Design is a critical
component of business performance, no doubt. That said, I have troubles linking
design directly to stock market prices, even after reading this report. Companies
are valued using financial metrics — factual and verifiable (behold the accountants
and controllers do their work correctly and honestly.)
More important than trying to link design to share
prices, is the relation between design and business in general (not specifically
stock market performance). In my opinion better design leads to better products,
and eventually improved business performance. My criticism is directed at their
methodology and the variables used to explain the relation. To use stock market
performance as the basis for business performance is dubious. Moreover, nowadays
share prices are predominantly determined by demand and supply. It is
naïve to assume that share prices actually reflect how a company
is really performing.
I would have preferred to see research based on the link between design and
internal business performance, such as sales, customer satisfaction and brand
experience (i.e. better design leads to % increase in sales.) In my opinion
share prices are too volatile and include too much noise to conclude to anything.
That said, the choice to use stock market performance as a metric is obvious and practical,
being freely and publicly accessible information.
Despite the somewhat flawed methodology, this report is an excellent read and,
in all honesty, I could not agree more with their findings. Design matters!
The general ideas elaborated throughout this report make sense and have been
researched extensively. Design is indeed a critical component of business performance
— I’m just not so sure about stock market performance as a good
and reliable metric.
Comments
One response to “Bullish by Design”
Comparing stock price and any other one factor has always been a foolish practice. There are so many different variables that go into stock price that to just use “design” as one makes the report interesting, but useless in my opinion. Even more so since it was conducted by Design Council, because it is hard not see it as a biased report.
Any interesting study would be to find companies that were struggling for some period of time then switched their design methodologies and were able to rebound.
I am not aware of VW’s past, but I would be curious to know how much their company performance has improved since the release of the new Beetle a couple years ago.