A completely new perspective for looking at design and business is now provided by the book "Design Value - A Strategy for Business Success", written by Dr. Peter Zec and Professor Burkhard Jacob. In this interview, Dr. Zec and Professor Jacob explain in detail the concept of the book.

What does design value mean?

Zec: Design value is a strategic instrument for business management. Economic values by themselves, as important as they may be, are not sufficient to manage a company. Entrepreneurial thinking and value-oriented management are not just about increasing turnover and profit, but also always have an eye on the values that precede turnover and profit. This, for instance, includes the innovative strength of a company, the quality and the customer benefit. All these values are reflected in the design of a product as well as the company's communication – or not.

Jacob: Unfortunately, values such as innovation, quality and customer benefit cannot be measured in numbers. The reason for this lies in the dogma of business economics to limit the purpose of a company to profit maximisation. Obviously, the pursuit of profit is a principle which motivates the entrepreneur, because the profit as part of the value creation accrues to the owners of the enterprise. The profit, however, is preceded by the questions of how the entrepreneur can create this value and how the company can survive in the long term.

Zec: The aim of the design value is therefore above all to achieve a better understanding in the economy of the chances and risks that come with design, because to date design at best shows up as a cost factor in a company's balance sheet and not under earnings as part of the proceeds.

Where did the idea for this book come from?

Jacob: The red dot design award enables us to accurately trace the developments in the international design economy. Every year the contest receives more entries while the quality standards are rising simultaneously. But even though the quality standards are growing continuously and design is also one of the most important criteria for consumers' buying decisions, investments in design are all too often still misunderstood as expenses. This is an unsatisfactory situation for designers as well as design managers because they know exactly about the added value that stems from design. At times the differences are so large that one could almost talk about two separate worlds. On the one side are the "hard" facts of the economy: prices, costs, investments – on the other side the "soft" facts of design: quality, use, benefit.

If both sides had the opportunity to come to an understanding about the value of design, then this would be an advantage for everyone. The economic added value of good design has previously not been measurable and thus not been utilisable for strategic design management. Therefore we have looked for a way to also "translate" the value added through design into numbers.

That means we are dealing with a method that could make it possible to quantify the value companies generate with the help of design. How does that work?

Zec: We use the earnings before interest and taxes (EBIT) as an economic key figure. This is the basis, because this figure allows the making of conclusions regarding the purely operational business of a company and enables international as well as cross-industry comparisons. However, EBIT is not a management tool, but a reference value. Entrepreneurs and managers are faced with the question of which things are crucial to economic development. Thus we have determined the operating result based on what contribution the design-relevant products make to the EBIT. We managed to identify design as an essential value driver for a number of companies and have been using the term "design return" since. This is the basis of our analysis, which we combine with our observations in the field of design, distinguishing between design continuity and design strength. Design continuity is based on the many years of experience and the successes in design. Here we analyse and evaluate a period of ten years. In contrast, design strength is a measure of competitiveness in the field of design and as a result of design. Here we monitor and evaluate a period of five years and compare the companies in one industry. Thus design becomes a task of strategic leadership.

Jacob: The design value thus has two bases: the observations which we make in the area of design as well as the economic foundations. We put both in relation to each other. If our observations in the field of design do not correspond with the economic development of a company, then either the data are wrong or our argumentation. If they do correspond with each other – and this is the case with the design value – then you have made an exciting discovery. And this makes design research a type of economic research.

Where do you get the information about the design development of a company from?

Jacob: The results of the red dot design award serve as a basis for the analysis of design strength and design continuity. Thanks to the documentation of the competition results we can monitor individual companies as well as overlook industry trends. With more than 12,000 entries from more than 60 countries, the red dot design award has become one of the largest design competitions of its kind worldwide and is regarded as an international reference. The extraordinarily high standards and criteria that underlie the red dot design award allow a valid assessment of companies' design developments. Here one needs to always bear in mind that only approximately ten per cent of all entries win an award; and only approximately one per cent receive a "red dot: best of the best", a special appreciation.

How can companies benefit from having their design value calculated?

Zec: The design value makes it possible for the first time to measure success as a result of design. Thus design is no longer understood as a pure cost factor but as an investment that pays off. This enormously increases the understanding in the economy of the chances and risks that come with design. The design value serves as an indicator for the assessment of innovative potentials and quality, thus contributing to an increase in company value. By calculating a specific monetary value it can be used as a control figure for success measurement as well as a control value for commercial goals and prognoses for the future. Thus the design value enables entrepreneurs to understand design as a strategy better than ever before and also to implement it, which is becoming increasingly important in the face of continuously growing consumer demands.

Despite having won a design award, it is possible that a manufacturer's design is met with little acceptance and that in spite of an award-winning design sales figures fall short of expectations. What validity does the design value have in such cases?

Jacob: Every rule has an exception. This is no different in the field of design. The calculation of the design value is not based on monitoring an individual product's success or failure. The analysis is much more complex and far-reaching. Of course it is possible that the success or failure of an individual product also influences the design value. This is not unintended. Our observations, however, have shown that companies who lastingly invest in innovative and well-designed products develop better in the market in the long term than their competitors who place little or no value on design. This is of significance both for large corporations as well as small and medium-size enterprises. Particularly small and medium-size companies achieve a high awareness even if their market share is lower.

Zec: Here it is important to note that design leadership does not have to be the equivalent of market leadership. Many design leaders are operating in niche markets with a relatively small group of buyers and high demands on product quality and originality. Design-leading companies might sell fewer products in terms of numbers, but achieve higher profit margins through design and thus have a better value creation than companies that are engaged in competition oriented towards mass turnover.

So you can in fact determine a connection between the design value and the economic development of a company?

Jacob: We can indeed. With the help of the red dot design award we can establish at an early stage whether a company is strengthening its position in comparison to its competition or whether it is falling behind, because we can determine the design quality and the innovative strength with the help of the submitted products. This analysis also gave us the idea of the "red dot design index". The red dot design index is a stock index of listed companies whose design teams have received the honorary title "red dot: design team of the year". This virtual stock basket contains the following companies: Adidas, Apple, Audi, BMW, Daimler, LG Electronics, Nokia, Philips, Siemens, Sony, and Tupperware; all of them companies with high design competency and which have called attention to themselves with innovative design and high product quality for many years. We have compared the market trend of our stock basket with benchmark indices such as the EURO STOXX 50, the DOW JONES, and the DAX over several years. The red dot design index developed better than all these benchmark indices, also or especially during the financial and economic crisis. This is great evidence for our argument.

Zec: Design is certainly not a miracle cure or an object of speculation. However, based on the facts and figures available to us we can say that companies that use design as a strategic management tool and by doing so have been very successful in the red dot design award for years, have clear advantages in the market and over their competitors.

To date, the success design accounts for in a company could not be put into exact numbers. The design value, however, for the first time allows quantifying this service and using it as a comparative tool for different companies and industries. Thus design is finally given a distinct significance and position in the economy, which will continue to play an increasingly important role for the strategic orientation of companies in future.