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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
Decemb...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 2
INDEX
1. Introduction page.3
2. Methodology page.3
...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 3
1. Introduction
This report is the conclusion of a ...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 4
Figure 1: Questionnaire, good practice cards and th...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 5
Figure 2: Composition and characteristics of the fo...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 6
Figure 3: Distribution of business data collected f...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 7
Figure 4: Performance of the Paraná sample in compa...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 8
average a company in the Paraná sample has 76 produ...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 9
Detailed analysis has indicated that sales from new...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 10
INSIGHT 4:
Paraná companies do not realise the con...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 11
Figure 8: How are resources allocated to design in...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 12
Figure 9: Distribution of the three samples in dif...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 13
INSIGHT 7:
The majority of Paraná companies are ca...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 14
Considering the evidence of poor management leadin...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 15
e.g. to move from level 3 to level 4 requires a ch...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 16
Figure 11: Breakdown of the recommendations made i...
Paraná Inovador – Design Innovation Performance of Paraná Businesses 17
4. Conclusion
This report showed that companies in...
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The design innovation performance of Paraná Businesses

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Report written by Darragh Murphy and Gisele Raulik-Murphy.

Suggested citation:
Murphy, D, Murphy, G., 2015. The design innovation performance of Paraná Businesses. Paraná Inovador pelo Design, Centro Brasil Design, 2015.

Originally uploaded at http://www.cbd.org.br/wp-content/uploads/2016/06/paranareportenglish_download.pdf

Uma versão em Português está disponível para download em http://www.slideshare.net/ducontent/indicadores-do-design-nas-empresas-do-paran-relatrio-do-estudo

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The design innovation performance of Paraná Businesses

  1. 1. THE DESIGN INNOVATION PERFORMANCE OF PARANÁ BUSINESSES Darragh Murphy & Gisele Raulik Murphy December, 2015
  2. 2. Report on the Design Innovation Performance of Paraná Businesses Prepared by: Darragh Murphy & Gisele Raulik Murphy December, 2015
  3. 3. 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
  4. 4. Paraná Inovador – Design Innovation Performance of Paraná Businesses 3 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.
  5. 5. Paraná Inovador – Design Innovation Performance of Paraná Businesses 4 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.
  6. 6. Paraná Inovador – Design Innovation Performance of Paraná Businesses 5 Figure 2: Composition and characteristics of the four samples
  7. 7. Paraná Inovador – Design Innovation Performance of Paraná Businesses 6 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).
  8. 8. Paraná Inovador – Design Innovation Performance of Paraná Businesses 7 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
  9. 9. Paraná Inovador – Design Innovation Performance of Paraná Businesses 8 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.
  10. 10. Paraná Inovador – Design Innovation Performance of Paraná Businesses 9 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
  11. 11. Paraná Inovador – Design Innovation Performance of Paraná Businesses 10 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.
  12. 12. Paraná Inovador – Design Innovation Performance of Paraná Businesses 11 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.
  13. 13. Paraná Inovador – Design Innovation Performance of Paraná Businesses 12 Figure 9: Distribution of the three samples in different classifications of Return on Investment
  14. 14. Paraná Inovador – Design Innovation Performance of Paraná Businesses 13 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.
  15. 15. Paraná Inovador – Design Innovation Performance of Paraná Businesses 14 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
  16. 16. Paraná Inovador – Design Innovation Performance of Paraná Businesses 15 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.
  17. 17. Paraná Inovador – Design Innovation Performance of Paraná Businesses 16 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.
  18. 18. Paraná Inovador – Design Innovation Performance of Paraná Businesses 17 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.

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