design, innovation, and the boundaries of the firm

74 DESIGN MANAGEMENT JOURNAL ACADEMIC REVIEW 2000

B y V i v i e n W a l s h

Design, Innovation,and the Boundariesof the Firm1

VIVIEN WALSH,

MANCHESTER SCHOOL

OF MANAGEMENT

UNIVERSITY OF

MANCHESTER

INSTITUTE OF SCIENCE

AND TECHNOLOGY

S E L E C T I O N F R O M M A N A G E M E N T R E S E A R C H

1. IntroductionIn the United States and Britain, style and design were the keynotes of the 1980s, just asprotest and “permissiveness” were those of the 1960s. However, it was retailers and otherservice sector firms that used design more than manufacturers during the l980s, in the UK,at least: interior and graphic design of the “shopping environment,” packaging and advertisingto seduce us into wanting to buy. Meanwhile, public and media awareness of design wasassociated more with fashion and status symbols than with the development of complexengineering components and systems.

However, whether we are aware of it or not, behind every image created by a designer labellie numerous design decisions concerned not only with appearance, but also with ergonomics,ease of manufacture, efficient use of materials, user friendliness and often the incorporationof innovative technologies, components, or materials, as well. All products are designed, fromclothes to engineering components, from magazines to consumer electronics, from kitchengadgets to chemical plants, from advertisements to sales-room interiors.

They are all designed, even those things we think hideous. They may not be designed bya professional designer, but someone makes a series of decisions that result in a product of aparticular function, cost and appearance, any of which may contribute to its commercialsuccess. Design is therefore an important activity for manufacturing firms, and an importanttopic for economic and sociological analysis, while the management of design is a vital aspectof corporate strategy.

2. The Study of DesignA considerable body of literature has been assembled over the past 25 to 30 years on themanagement of R&D, science and technology policy, the economics of technical change andthe sociology of innovation. Much of it has challenged conventional thinking—for example,the neo-classical approach to the behavior of firms, trade and economic growth, or theprescriptive approaches of some of the management literature.

Design, however, has been far less thoroughly studied from a social science perspectivethan innovation or R&D, although there are a variety of books, for example, on the history ofdesign, which focus on the visual aspects of various design styles rather than analyzing designas a resource to be deployed by industrial management or an activity involving numerousinteractions with other actors in the evolution of a new product. This only began to change inthe 1980s. The author of this paper is part of the Design Innovation Group (DIG),2 which hasbeen carrying out research on various aspects of design and design management since 1979(see, for example, Walsh, et. al. 1992).

Akrich (1990, 1992) has approached design from a sociology of innovation perspective.Mangematin (1996) has studied cases of design of high-tech systems from the disciplines ofeconomics and sociology of innovation. Gorb and Dumas (1987) and Borja de Mozota (1990)have written about design as an important concern of management. The work of Utterback(1994), Clarke (1985) and Womack, et. al. (1990) has placed an analysis of design in the context

1. Reprinted from ResearchPolicy 25, Vivien Walsh,

“Design, innovation and the

boundaries of the firm,” 509-

529, Copyright 1996, with per-

mission from Elsevier Science.

2. Located at the University of

Manchester Institute of Science

and Technology (Manchester,

UK) and at the Open University

(Milton Keynes, UK). In addition

to research, teaching of design

management has for some time

been an important part of post-

graduate and post-experience

courses at both institutions.

DESIGN MANAGEMENT JOURNAL ACADEMIC REVIEW 2000 75

DESIGN, INNOVATION AND THE BOUNDARIES OF THE FIRM

of both innovative management and management of innovation. Journals such as Design Studiesin Britain and Design Management Journal in the US now regularly publish studies such as these,while a variety of conferences regularly take place and courses are taught3 in the area.

Margolin (1989) and Buchanan and Margolin (1995) call for a “new discipline of designstudies,” and have edited collections of writings on the sociological, psychological, philosophi-cal, and political analysis of design as their initial contribution to it. Their work links the earliertrend of work on history and cultural studies of primarily the aesthetic aspects of design withthe more recent work within a social science framework mentioned above.

This section will now summarize some of the findings from our empirical studies ofmanufacturing firms’ use of design in various countries (e.g. Walsh and Roy 1983; Roy, et. al.1986; Potter, et. al. 1991; Walsh, et. al. 1992), where they are relevant to the issue of the insti-tutionalization and location of design within the firm. Methodological and other details arenot given here, but are available in the works cited.

First, we found there was an enormously wide variation in what those firms meant by“design.” Some firms mentioned only one element of design—for example, fitness for use orperformance, or visual appearance or fashion. Other firms mentioned both,4 in some casesadding other features, such as making something that sells or makes a profit, user friendliness,efficiency in production and use of materials, safety or durability.

Second, we found that the existence of design activity was far less dependent on size andsector than the existence of R&D. Some kind of design activity was carried out by almost allfirms we visited in an international study of different-size firms in high- medium- and low-technology sectors. In contrast, R&D is very highly concentrated in a few industrial sectors.5

Third, we observed a wide variation in the location of design in manufacturing firms, partlyrelated to the features they mentioned when defining design. Some firms have a specialistdesign and development department. In other firms, design may be part of R&D as capturedby the term research, design, and development. Or it may be defined as the function of the drawingoffice, which would probably be part of the production department and not of R&D. In yetother firms, design is the responsibility of the marketing department, in which case it is likelyto focus on industrial design, with style, image, and packaging design emphasized. There areeven some firms in which the staff in the finance area do part-time design and developmentwork, apart from the input on costings they make to the design process. The location ofdesign in a functional department such as production or marketing rather than in a specialistdesign department (or with R&D) was not necessarily a function of firm size. There weresimilar numbers of firms whose marketing or production departments were responsible fordesign in each of the size categories, while half the firms with specialist design departmentshad fewer than 200 staff.6 Perrin (1989) also notes the diverse forms of design and theirlocation in several departments in French firms.

In some firms, the design function is split up between departments. Some large electronicsbusiness equipment manufacturers, such as Ferranti, Philips, and Olivetti,7 have electronicsengineers designing the combination of components and printed circuits that togetherprovide the functions of the machine, while industrial designers in a separate departmentdesign the casing and arrangement of controls. One type of designer is concerned withtechnology, reliability, and function, the other with appearance and ease of use, but they arenot seen as representing the different skills of a single design department.8

Fourth, we found a variable mixture of in-house and consultant designers employed. One ofour studies9 compared design by firms in the furniture, heating equipment, and electronicbusiness equipment sectors in various countries. Three-quarters of them used consultants fordesign and development work—sometimes, as well as in-house design, sometimes instead.The main reason for employing a consultant was either a general lack of in-house skill, or lackof a particular skill.10 Some firms11 employed consultants as a matter of principle or companystrategy in order to maintain a flow of fresh ideas.12

Last, we found a wide variety of attitudes and strategies toward design. Firms (including firmsin the same sector and of similar size) vary enormously in the extent of time, effort, money,and professional expertise they believe should be accorded to design, and the extent to whichdesign is carried out by professional design staff, (employed in-house or retained as consult-ants). Some firms take design very seriously, and allocate resources accordingly.13 However,

3. In addition, the Design

Management Institute in Bos-

ton, Massachusetts, USA

(which publishes Design Man-agement Journal), also publi-

cizes the importance of design

management through the pub-

lication of case studies and

the organization of conferenc-

es, while the London Business

School (UK) offers design

management courses to MBA

students and managers taking

short courses. In France. stu-

dents at the Ecole Superieure

de Design Industriel and the

Université de Paris V are

offered courses in design

management.

4. The firms thatdefined de-

sign broadly, mentioning sev-

eral attributes, tended to be

those that performed well in

commercial terms and

were likely to win design

awards, too.

5. See also footnote 22.

6. Size was important in dis-

tinguishing firms in which the

head of the firm (rather than a

department of any kind) took

responsibility for design. This

only happened in the smaller

firms — but then having a

structure with functional de-

partments in the first place is

a function of size.

7. Only the first two were in-

terviewed in our studies.

Information about Olivetti

comes from Kicherer (1990).

8. The separation of design

activities, a result of the em-

ployment of a great many staff

in each category, poses prob-

lems of communication and

interaction. In 1983, Philips

discussed at Board level the

problems caused by institu-

tional boundaries between

different design activities, and

proposed a number of steps to

encourage collaboration be-

tween them.

9. Roy, et. al. (1986).

10. For example, firms with in-

house design engineers might

use consultants for industrialdesign, and many firms em-

ployed consultant graphic

designers for brochures and

manuals, because they did not

have enough work to employ

a full-time graphic designer

in-house.


PAPERS ON THE NATURE AND PRACTICE OF DESIGN MANAGEMENT

despite the now quite widespread awareness of design, there are still many firms that havenot regarded it as very important—for example, one-third of plastics products firms in one ofour studies (Walsh and Roy 1983) employed specialist designers neither in-house nor as con-sultants.14 Commitment to design is not a function of size. Two heating equipment firms wevisited illustrate the difference in attitude among firms that are similar in many other respects,including size. The first had a large team of industrial designers, testing staff, and combustionengineers concerned with the design of new products. The second had only the technicaldirector doing virtually all the product design, as well as playing a managerial role.

The attitude of firms to R&D is quite different. It is far more clear cut and more stronglyrelated to sector and size. The more high-tech the firm, the more likely it was to do R&D; ina borderline case, the larger the firm the more likely it would be to do R&D. If a firm didR&D, it would have a specialist R&D department unless it was too small to have functionaldepartments at all.15

The phenomenon of “silent design” (Gorb and Dumas 1987) is related to a firm’scommitment to design. Silent design is the process in which marketing, production, andother staff contribute to design decisions, or do design and development work part time.They may be highly qualified in, and committed to design, but their managerial responsi-bilities make it impossible to devote much time to design. On the other extreme, they maybe neither qualified designers nor talented amateurs, but the firm lacks the resources ordoes not think design important enough to deserve professional design and developmentstaff or to retain consultants.16 The paper now turns to a survey of the innovation and relatedliterature, to consider how the design function might usefully be analyzed.

3. What Is “Design?”The term design (as it is used in English) covers a wide range of activities (see Figure 1):architecture, fashion design, interior design, graphic design, industrial design, and engineeringdesign. Designers usually specialize in one of these disciplines, although design firms mightemploy specialists and manufacturers might need inputs from several of them. The differentdefinitions of design (mentioned above) we observed in our studies are a different set ofcategories, although there is some overlap in that firms that see design as primarily aboutappearance might only employ industrial designers, while those that see design as mainlyabout performance might only employ design engineers. Indeed, in our visits to manufactur-ing firms, the most striking difference we observed was that between the contribution of theindustrial designer and the engineer/engineering designer (in Scandinavian firms between“form-giving” and engineering). In principle, the same word design in English conveys thenotion of the multiple facets of one process.17 In practice, engineering design has evolved intoa separate discipline, a quite separate profession, with its own traditions, skills, education and

training systems, career paths,routines, and systems of rewardand recognition, from otherdesign disciplines. It is notablyseparate even from industrialdesign, which has an importantcontribution to make to the sameproducts. The differences

among most of the other designdisciplines are less. Whilepublications on design maycover several design disciplines,it is very rare for engineeringdesign to be included in thesame kind of treatment as theothers (and vice versa).18

Moody (1984) explains whatis meant by “industrial design,”and at the same time analyzes

Figure 1The Main Areas of Design

Source: Shirley and Henn (1988)

DESIGN

GRAPHICS

PRODUCTS Engineering processes

Arts, crafts, and jewelry

Fashion, footwear, textiles

Interiors (offices, shops, domestic houses, TV, films)

Typography and books

Exhibitions and displaysPromotional and technical literature

Company image and logo

Software and CAD

Electrical, electric circuitry

Engineering components

Architecture

Consumer and industrialproducts

Engineering structures

11. This was more common

among the Scandinavian firms,

for example, than the British

ones.

12. For example, the highly

design-conscious American-

owned office furniture firm,

Herman Miller, has since the

1930s retained eminent con-

sultant designers on a long-

term basis to do most of its

product design. Italian multina-

tional Olivetti’s reputation for

design is based on the compa-

ny’s long-established policy of

using in-house independent

designers for product design.

This means independent de-

signers (some, like Ettore Sott-

sass, world famous) are re-

tained on a long-term

consultancy basis and pro-

vided with offices, administra-

tive support, and full access to

the company’s operations

(Kicherer 1990). On a much

more modest scale, the suc-

cess of Plasplugs, the British

manufacturer of do-it-yourself

products is based on a similar

philosophy of retaining long-

term consultants. On the other

hand, Dutch electronics giant

Philips relies far more on in-

house than external design

resources, with 300 product,

industrial ,and graphic design

staff based mostly at its corpo-

rate industrial design centre at

Eindhoven (in addition to its

many thousands of R&D staff).

13. One such firm for exam-

ple, which was both commer-

cially successful and had won

several design awards, had a

design director who sat on the

company board and was re-

sponsible for nothing but de-

sign. The company’s attitude

to design was summed up by

his saying: “Design is not the

icing, but the first nut and

bolt.” Another example was a

furniture firm, whose chief

executive, sales director, and

marketing manager were all

qualified designers. An inter-

nationally famous designer

was retained as a consultant

and a substantial number of

practicing designers were on

the staff, too.

14. In another study (Roy, et.

al. 1986), the chairman of an

office-furniture firm admitted:

“It’s not really design. We buy


DESIGN AND CONSUMER RESEARCH

its emergence as an activity distinguishable from engineering design: “Industrial designseeks to rectify the omissions of engineering; it is a conscious attempt to bring form andvisual order to engineering hardware where the technology does not of itself provide thesefeatures.” There are, of course, cases in which technology has an intrinsic elegance. Thesteam-turbine rotor’s complex symmetry derives from the mechanics of fluids; and the exte-rior of the modern aircraft’s fuselage has a continuous organic form, which derives from itsaero-dynamic function.

But, argues Moody, where form does not automatically follow function, industrial designaims to relate the hardware to the dimensions, instinctive responses, and emotional needs ofthe user. “Through the conscious control of form, configuration, overall appearance, anddetailing, industrial design is capable of conveying to the user the abstract characteristics of aproduct—for example, robustness, precision… It can arrange for controls to be comfortable,pleasant, and easy to operate. It is capable of imbuing a product with a distinctive ambience,style, and feeling of good quality that equates with the personal taste of the user.” In thesevarious ways, therefore, industrial design makes a contribution to innovation that producesa more rounded-out effect, meeting the needs (explicit, unconscious, or possibly only as-sumed)19 of the user. In practice, the relative importance of engineering and industrial designvaries considerably from product to product. There is a spectrum of product design in whichthe contribution of engineers and industrial designers depends on the relative importance tothe purchaser and user of technical, aesthetic, and ergonomic factors. The historical evolutionof the two disciplines will be discussed later.

All design terms, however, involve the creative visualization of concepts, plans, and ideas—and the representation of those ideas (as sketches, blueprints, models, or prototypes) so as toprovide the instructions for making something that did not exist before, or not in quite thatform. Aubert (1982) defines design as “the very core of innovation, the moment when a newobject is imagined, devised, and shaped in prototype form.” Elsewhere he says that design intro-duces technology into the social fabric (Aubert, 1985). So even the most radical technologicalinnovation has to be embodied in usable form via the design process. On the other hand, somenew products are designed but involve no technological change—for example, the new stylingfor a car body or a new pattern on a toaster or arrangement of controls on a cooker. Fashiondesign has been described as the creation of “noninnovative novelties” (Piatier 1984).20

4. What Is Design For?Different people within and outside the firm have different perspectives on design. Designersthemselves may see their work in terms of creativity, problem solving, or even art. Marketingmanagers may see the work of designers employed by their firm as differentiating their productsfrom those of competitors, making people want to buy, even in a recession. To consumers, thefunction of design may be the creation of new styles, fashions, and images; or the improvementof products so that they are easier to use, longer lasting, or energy-saving; or simply to make itpossible to do something that could not be done before. Strategic management may see thefunction of design as adding value, increasing production efficiency in use of materials andenergy, and generating increased profits. Some of these differences generate conflicts. Thedesigner may feel constrained by the manager’s insistence on commercial criteria. And there isa fine line between the designer educating the client or the final customer in what is possible orwhat is beautiful, and ignoring what the customer/client wants. The designer stands betweenthe user and the producer. Mangematin (1996) describes the way in which first users are“recruited” by the producer in certain cases of rival projects in IT systems, and how they makea significant contribution to the design of the technological system.

Akrich (1992) writes about the representation of users and how this is constructed duringthe design of a technical product, not just using explicit techniques (such as market surveys,consumer tests, and customer feedback) but also based (more often than we might think) on thedesigner’s personal experience and assumptions. In our studies, we made a similar observation.This applies both to details of product function and to the general conception of what sortof customer is the target for what sort of product. For example, there are many implicitassumptions made by designers about what is appropriate for particular groups of customers,which may be as much a reflection of their prejudice as of measured market demand (see also

in our competitors’ products,

strip them down, and some-

thing emerges from that.”

15. In the three-sector study

mentioned above, all the elec-

tronic business equipment

firms (high-tech) did R&D, no

matter how small. (The small-

est electronic business equip-

ment firms’ R&D staff repre-

sented about a third or more

of total employees even

though they were not large

enough to be “departments.”)

None of the furniture firms

(low-tech) had R&D depart-

ments, no matter how large.

Or rather, the two largest had

departments they called

“R&D” or “technical” but they

were essentially design and

development departments.

Research relevant to the sec-

tor (in new materials, treat-

ments, finishes, or production

machinery, for example) was

likely to be done by supplier

firms. The R&D by the heating

firms (medium-tech) was re-

lated to size. Only the largest

of the small and medium-size

firms in this sector had an

R&D department, while only

one of the large firms did not

(even though it employed

seven graduate engineers in

production).

16. Some managers do not

even appear to be aware that

design decisions were being

made. Thus one we inter-

viewed (Walsh and Roy 1983)

said, “We don’t do design,”

meaning, in fact, that before

making a product, someone

on the shop floor would sketch

the design “on the back of a

cigarette packet.” The tool-

maker who was to make the

mould in which the plastic

product would be manufac-

tured might be left to decide

on a suitable shape for the

mould and, in effect, would

thus design the product.

17. Where many other lan-

guages have different words

for different aspects of “de-

sign,” thus conveying sepa-

rateness.

18. And the Design Business

Association, for example, the

British trade association for

design companies, includes

architects but excludes

engineering designers from

membership.



Buhl 1990). Hence the Danish construction toy Lego is designed for a market of both boys andgirls, although the (to some extent) competing British products Meccano and Airfix, before thecompany went bankrupt in 1981, were deliberately not aimed at girls. Office equipment isaimed at the purchasers (usually male) rather than the actual users (usually female). Inner citiesare littered with architectural disasters originally hailed as imaginative ways of providing masshousing for working class people, at least partly because the intended users were the last peopleto be consulted about their requirements.

Design is crucial to innovation in that it is the domain of creativity in which ideas aredevised but also where the “coupling” occurs between technical possibilities and marketdemands or opportunities (Freeman 1983). This integrative role of design is not limited tomatching inventions and markets. It is equally important in relation to production techniques,as many new products also require a new process to produce them. Walsh and Roy (1985)have described the role of the designer as partly that of “gatekeeper,” by analogy with Allen’s(1977) technological gatekeepers. By this, we meant that the (in-house or consultant) designeraccessed all the specialized functions within the firm, such as R&D, marketing, production,finance, materials testing, strategic management, and corporate planning, as well as manyoutside the firm, such as trends in fashion and design, in use of new materials, machinery andproduction processes, and trends in consumer behavior and patterns of demand. From theseare assembled the necessary information to input to the design process. For example, the pio-neering American designers (discussed later) acted as intermediaries between specialists, suchas model makers, draftsmen and women, market researchers, other designers, advertisers andengineers (inside or outside their client firms), and the top management of the client firm,spending time at board meetings, supervising in-house design and development work andcollating market surveys (Sparke 1986). The nineteenth century locomotive engineers (seefootnote 32) incorporated ideas of visual harmony, functional performance, corporate identity,and the demands of climate, fuel, maintenance routines, passengers, infrastructure, and so on,often on the basis of experience and common sense rather than formal information gathering.

There is some similarity in this approach to that developed at the CSI21 (for example,Callon, et. al. 1986; Akrich 1990, 1992; Callon 1991; Mangematin 1996) in that the designercan be seen as an actor playing a key role as translator in one or more networks of people(inside and outside the firm, all with different knowledge, information, skills, and desires) andof ideas, artifacts, instructions, cost constraints, machinery, blueprints, prototypes, and so on.However, Akrich (1995) also points out that the design of a technological system or artifact isindissoluble from the construction of the socio-technical network that gives meaning andexpression to it. This does not just mean making the links described above, but building anetwork that binds together various actors and objects necessary for the new design to becommercialized. For example, in the case of a telephone system, the user is a telephonesubscriber (but also a customer of other products—perhaps a parent, house owner, citydweller, and professional employee of some kind). This conjures up a network of all the othersubscribers who might be contacted by telephone, the telephone hardware (the handset, andperhaps answering-machine or fax), the cable, microwave, and satellite system; the telecompersonnel; the bills and billing system; the repair system; the assembly of information to go indirectories; the printing and distribution of them, and so on. For a new telecom product to becommercialized, not only does the technological artifact have to be designed and made, but sodoes a network such as this.

Hennion and Meadel (1989) examine the links made between producers, consumers, andothers by “artisans of desire,” by which they mean professionals in the advertising agencies,whose job is to make products become objects of consumer demand. But they might equallywell have been referring to designers (who design the packaging, manuals, corporate identity,and the product itself, as well as the advertisements). They ask: “Where do objects get theirpower from?” and “what makes us desire them?” One of the purposes of design is to make usdesire the artifact that is designed, based both on its “image” and its function and perfor-mance. And the management of design has to ensure that a dialogue takes place between allthose with a material interest in the use of design, including the final customer.

19. The way in which design-

ers find out, or assume, what

users needs or requirements

are in order to incorporate

them into the design, and

some of the consequences of

their approaches, are dis-

cussed in the next section.

20. Clearly, he means “tech-

nologically innovative” when

he says “innovative” here.

21. Centre de Sociologie de

l’Innovation, Ecole Nationale.

Supérieure des Mines de

Paris.



5. Technological Paradigms, Industry Lifecycles and the EconomicImportance of DesignDesign plays a different role at different stages in the life of an industry, product or technol-ogy. Various authors in the economics of technological change literature have captured theidea that the beginning of the evolution of a new technology is characterized by a multiplicityof potential approaches that is gradually replaced by a convergence on one common one.Thus Nelson and Winter (1977) have written about technological regimes and naturaltrajectories, Sahal (1981) about technological guide posts, Dosi (1982) about technologicalparadigms, while Utterback (1979, 1994) refers to the emergence of a “dominant design”during the lifecycle of a technology. Georgiou, et. al. (1986) argue that by building up specificcompetencies, particularly an organized knowledge base, companies are able to develop afamily of designs within a “technological corridor.” The successful companies are those thatcontinuously modify and adapt their designs in response to new technologies, competingproducts, and changing user needs. In the sociology of innovation, Callon (1991) writesabout irreversible techno-economic networks, capturing a similar phenomenon to thetrajectories and paradigms above.

Although these authors have all addressed a similar phenomenon, there is a wide varietyof emphasis and interpretation in their arguments, notably about the extent to which techno-logical trajectories, guideposts, and so on might be considered deterministic, and the relativeimportance of social and economic forces (and the assumptions of technologists and manag-

ers) compared with the opportunities and constraints of the technology (see, forexample, McKenzie 1992 and Utterback 1994: 77). This has some resonanceswith the earlier debate on “Discovery Push” versus “Demand Pull” theories ofinnovation (see, for example, Walsh 1984). While sociologists in the “social shap-ing” tradition (see, for example, Bijker, et. al. 1987; McKenzie 1992) emphasizetrajectories as essentially social phenomena, Callon and colleagues have cut acrossthe debate by including in their networks both human and institutional actorssuch as designers, engineers, managers, shareholders, government regulators,suppliers, users, firms, and public institutions, and the intermediaries that moveamong them, such as blueprints, specifications, documents, computer hardwareand software, designed artifacts, prototypes, samples of material and money (see,for example, Callon 1992).

Despite their differences, these sociological and economic approaches based ontrajectories, guideposts, irreversibility in networks, or the emergence of dominantdesigns all have in common a dynamic perspective. As far as design is concerned, ashift in emphasis may be observed in the lifecycle of an industry or technology,from an early period primarily of designing for experimentation and technologicalinnovation to one in which designing for technical improvement, lower cost, andease of manufacture become more important, and finally a mature phase in whicha multiplicity of design variations, fashions, styles, and redesigns within productranges aimed at different market segments predominates. Before the introductionof “flexible manufacturing,” mature industries were characterized by undifferenti-

ated standard products made by efficient, capital intensive, largely automated, but rigid pro-cesses. Abernathy (1978) described the “productivity dilemma” characteristic of a period inwhich the production plant was automated in the interests of economic efficiency to such anextent that response to change and further innovation was extremely difficult. However, re-cent innovations, especially by Japanese car firms, have allowed capital intensive, highly auto-mated processes to be introduced, which are capable of manufacturing products with variedspecifications or in smaller runs (Womack, et. al. 1990). Low unit costs are no longer tied tolong production runs and standard products. Another example may be found in the knitwearindustry, a mature sector that has introduced a variety of computer-based innovations indesign, knitting machines, and retail stock control to produce a large variety of relativelyinexpensive designs (Belussi 1989; Baden-Fuller and Stopford 1990). However, Economu(1992) found that FMS users outside Japan rarely invested in FMS with the intention ofexploiting the potential design flexibility of the system, but rather for operationaladvantages, such as cost reduction and quicker set-up times.

Before the introduction

of “flexible manufacturing,”

mature industries were

characterized by

undifferentiated

standard products made by

efficient, capital intensive,

largely automated, but

rigid processes



Rothwell and Gardiner (1983) distinguish between pre-production design processes,leading from a basic idea to an original technological innovation, and post-productiondesign processes or successive redesign, component changes, and evolution. Post-produc-tion redesigning may eventually result in further product innovations, the emergence of adominant design, and families of design variants such as a range of cars or aero-engines witha similar basic design but different specifications. There is thus also a difference betweenincremental improvements, or product differentiation within an established dominantdesign, and the qualitatively different design concepts (for example, diesel versus electriclocomotives) available before a dominant design emerges.

In studies of innovation policy and management, radical technological innovations haveoccupied a prominent position compared to incremental and design innovation.That is because, if they are particularly successful, they can stimulate a series ofrelated upstream and downstream product and process innovations and give riseto new industrial sectors. In the view of a great deal of analysts in the neo-Schumpeterian economic tradition (see, for example, Freeman and Perez 1988;Freeman 1989 and other papers in the collection edited by Dosi, et. al. 1988a),when such a series of related innovations occurs in infrastructural areas (forexample, materials, energy, transport, communications, automation, and processtechnology), they can have a pervasive effect throughout the economy, making acontribution to long-term economic upswings.

Design clearly plays an important role in the realization of the radical inventionas an innovation; in particular, systemic innovations need a great deal of design co-ordination in development and commercialization because systematic adjustmentsto other parts of the system have to be made. But design is also important in theperiod of “swarming secondary innovation” via competing designs, in productdifferentiation and reliability, and in price competition via the efficient use of ma-

terials and design for ease of manufacture. Thus design is important throughout the industrylifecycle and at different stages of economic upturn and downturn, but it plays a different roleat each stage.

Incremental innovations and design improvements are the “bread and butter” of newproduct development for most firms most of the time. Japanese industry has demonstratedthat the processes of successive redesign, component improvement, and evolution of theproduct to improve its performance, increase its quality, and reduce its cost can be as eco-nomically important as radical new technology. However, incremental innovation is onething; product “churning” is another. This is the introduction every few months, for example,in certain electronic product markets, of new models involving design modifications but verylittle technological innovation (even incremental innovation). This now seems to havereached declining returns on firms’ investment and effort as customers seek products that lastlonger or can be upgraded rather than replaced.

But many firms adopt a strategy of incremental, as opposed to radical innovation for avariety of reasons to do with their size and resources, the nature of their industry, the level ofresearch and development necessary, or the size of risk involved. Even the firms that success-fully introduce radical technological innovations do not do so very often (Freeman 1982). Wehave argued (Walsh, et. al. 1992) that the economic and commercial importance of incre-mental innovations and design improvements have been greatly underestimated and neglectedin the literature.

In discussing policy issues in particular, it is obviously important to have a perspective forfuture economic growth and thus to propose an array of policy instruments that will fostersuch future growth. Hence the current emphasis in the technology-policy literature on tech-nological developments with the potential for future macroeconomic impact, such as IT andbiotechnology. However, it is also important, when stressing the importance of supply sidefactors as a counter to the conventional emphasis on demand management or monetarism(depending on the government in power), not to forget that new technologies with majorpotential as engines for future economic growth actually have their economic impact in theworking out of the technological paradigm, its adaptation to other sectors, and its application tothe process innovations and the many incremental product innovations that appear after the

…design is important

throughout the industry

lifecycle and at different stages

of economic upturn and

downturn, but it plays a

different role at each stage



“take off ” of the paradigm has been established. Thus the industrial sectors that are now ma-ture or maturing, where incremental and design innovations are paramount, representthe realization and established operation of past new technological paradigms. In planning for thefuture, the present must not be neglected, which is why our research has emphasized designas an equally important counterpart to radical new technology.

6. Design, R&D, and InnovationThus far, the paper has suggested that design and technological change have something ofa symbiotic relationship, each changing in nature over time, but each connected to andinteracting with the other. However it is more complicated than that. Design is not only animportant part of the innovation process, contributing in different ways to different stages ofthe lifecycle of a technology, it is also an important part of the noninnovation activities of firms(using innovation in the sense of technological innovation). That is to say, design contributes tothe marketing of existing goods via packaging, advertising and company image, and it contributesto the production of existing goods using existing processes via changes in layout, sequencing of tasks,and plant design. Design therefore overlaps only partly with innovation.

At the same time, where it is part of technological innovation, design only partly overlaps withR&D as one of the inputs to the innovation process. Certainly, much of the development workin the term R&D involves the design, construction, and testing of experimental prototypes, orother activities in which the discovery or novel idea is translated into a configuration of materi-als and components, as captured by the term research, design and development. However, designalso contributes to the innovation process outside R&D, through the marketing of the new product(via packaging; brochure, manual, and advertising design; and corporate identity), and the de-sign of the process, layout, and sequencing of tasks for the production of the new product.

Design thus plays an important part in both technological innovation and noninnovativeactivities. And within the innovation process, it plays an important part both in R&D and inother activities necessary for success in innovation.22

The combination of similarities and differences between design and R&D, and design andinnovation, play an important part in explaining the particular features of the institutionalizationof design, and its location with respect to the boundaries of the manufacturing firm. First, design is anactivity more widespread than R&D in any particular firm; since it makes a contribution to mar-keting and production, as well as to new product development. It is therefore more directlythe concern of marketing and production departments than R&D would be. Second it is morewidespread than R&D in any particular industry, since it is done by firms that innovate, by firmsthat do their own R&D, and by those that do neither. As I have argued, all products are de-signed, even though they may not be designed by a professional designer, and even thoughthey may not incorporate any technological innovations.

Third, design is also more widespread throughout industry in general, for similarreasons. That is, although a large number of firms nowadays carry out some R&D, theresources spent on R&D indicate that it is an activity that is concentrated in only a handful ofindustries.23 Some industries are thus highly research intensive while others much less inten-sive. Design, however, is very important to both research-intensive industries, such as aero-space or consumer electronics, and traditional, craft-based sectors not so concerned withR&D or technological innovation, such as furniture and pottery. This is so even though thetype of design input may vary, engineering design being much more important to the former,industrial design to the latter.

7. Markets and Hierarchies in Design and R&DOne of the most important organizational innovations of the past century was the institution-alization of R&D as the in-house laboratory24 (Freeman 1982). By internalizing R&D, the firmwas able to increase its control over the rate and direction of technical change, reducing itsinherent risks and uncertainties, appropriating new areas of knowledge, and hence negotiatingand controlling some aspects of its environment rather than simply responding to it (Coombs,et. al. 1987). It revolutionized the way in which firms compete and change their technologicalbases (Freeman, 1982) and increased the firm-specific and cumulative nature of technology(Dosi and Soete 1988).

22. This is underlined when at-

tempting to assemble statistics on

design. The OECD collects probably

the most extensive and compre-

hensive statistics for international

comparison of R&D activities. But

the Frascati Manual, which defines

the data to be collected under dif-

ferent headings, is unable to deal

satisfactorily with design. Design is

a “borderline case between R&D

and other industrial activities,” and

member states are asked to divide

their data on design, some to be

included in R&D statistics and the

rest excluded (OECD 1981). There

are, in fact, no systematic statistics

on design produced on a regular

basis, certainly not internationally

comparable ones. Design indicators

are discussed further in Walsh, et.

al. (1992).

23. In the UK, for example, the

aerospace, electronics and chemi-

cals sectors account for about 70

percent of all resources (that is,

from government, industry, and

other sources for military and civil

projects) spent on R&D in the busi-

ness enterprise sector. In Germany

and Japan. about 70 percent is

spent on electronics, chemicals,

and engineering (OECD 1989).

24. Defined by Teece (1988) as a

part of a manufacturing firm or

some other business enterprise

engaged in at least one other activ-

ity vertically integrated to R&D,

such as marketing, distribution, or

sales.

25. They concentrated on materials

analysis and quality control more

often than the generation of scien-

tific knowledge. Or they were the

personal facilities of inventor/entre-

preneurs like that of Gerard Philips

in the Netherlands, established in

1891. Even in 1921, the US chemi-

cal and related industries (rubber,

petroleum, and glass) employed 40

percent of research scientists and

engineers, while electrical machin-

ery and instruments employed less

than 10 percent (Mowery and

Rosenberg 1989).



In most industries and in all countries, in-house R&D was still quite limited before the FirstWorld War (Sanderson 1972).25 Mowery (1983) has shown that independent research organiza-tions played an important role in the United States in the early years of this century, employingmore than 15 percent of private sector professional scientists in 1921, and still employing morethan 5000 (nearly 7 percent) as recently as 1945. But during the course of the century, the in-house laboratory became the main form of private sector organization for R&D. Schmookler

(1957) refers to the change over the period 1900 to 1950, from overwhelmingdominance by independent individuals to dominance by business enterprise in theperformance of R&D. It was after the Second World War that the real take-off inorganized industrial R&D took place. My argument about the design function incontrast to R&D is that there is no clear-cut institutionalization of it within themanufacturing industry in the same way that there is of the R&D function. Ifthere were, design would usually be done in-house, and it would typically be thefunction of a separate design department. It is not even the case that design isnormally the function of any particular other department, since it can be located inR&D, production, or marketing. On the other hand, an institutionalization of thedesign function that was clear cut but different from that of R&D would havedesign typically done by consultants—a separate industry.

To use the terminology of Williamson (1975), why should industry chooseeither to manage design administratively within the firm, or by means of an arms-length transaction in the marketplace? Williamson’s analysis, based on transactioncosts, of a variety of activities (including the existence of firms in the first place),concluded that, in general, transactions take place more efficiently via the marketunless special circumstances exist. A substantial body of literature has emergedfrom the ensuing 16 years’ research into the nature of these circumstances, howthey arise, their institutional implications, and so on (Williamson 1985, 1989,1990). Most of the resulting publications have been concerned with in-house

versus external sources of production and supply activities rather than R&D, and none haslooked at design. Among those that have examined the location of R&D in this context areTeece (1988), Kay (1979, 1988) and Pisano (1990). Teece and Kay26 both concluded that R&Dis usually done more efficiently in the firm for a variety of reasons. Workable contracts aredifficult to specify where there is uncertainty, and in R&D there is technological, market, andgeneral business uncertainty (Freeman 1982). The protection of proprietary information isdifficult, there is a high tacit knowledge content, and cumulative learning processes are impor-tant. Pricing is difficult for a product that does not yet exist, much research may not beproduct specific, and a considerable lag often exists before the results of R&D are embodiedin a commercial venture.

The shorter timescale, lower uncertainty, and greater degree of specificity of design com-pared with R&D make it more suitable than R&D for sub-contracting (Kay 1988), which goessome way to explaining the existence of consultant design firms, though not why it should bean increasing phenomenon. However, the transaction cost approach is not entirely satisfactoryin dealing with aspects of firm behavior and strategy, which are more complex than a weighingup of benefits and costs. For instance, Williamson argues that firms may behave opportunisti-cally, but not why they decide to behave more opportunistically under certain circumstancesthan others. Chesnais (1996) criticizes the transaction-cost approach for ignoring the firm asthe central institution for creation and transformation (rather than just the allocation) ofresources, for ignoring firms’ capacities for strategic behavior, and for presenting the firm asmerely an (often less desirable) alternative to the market. This is an area in which disciplinessuch as sociology and psychology may contribute to economic understanding (see Coombs,et. al. 1996 for a further discussion).

As far as design is concerned, although many firms now do have design strategies, in othersthe choice about in-house or consultant designers often seems to be the result of evolution,accident, habit, and culture rather than a careful analysis of costs and benefits. Reasons thatwere logical in the past for a particular organizational form can change more rapidly than theorganizational structure and arrangements to which they give rise. Most of the respondents ina DIG study of the use of design consultants (Potter, et. al. 1991) were doubtful about using

26. Pisano was comparing in-

house R&D with inter-firm

alliances, which are neither

“market” nor hierarchy, and

issue outside the scope of this

paper (but discussed, for

example, in Walsh 1991;

Coombs, et. al. 1996). Ap-

proaches to the sociological

and economic analysis of co-

operative alliances in technol-

ogies is the theme of the latter

publication.

…although many firms

now do have design

strategies, in others the choice

about in-house or consultant

designers often seems to be

the result of evolution,

accident, habit, and culture

rather than a careful analysis

of costs and benefits



consultant designers in advance and pleasantly surprised by the direct benefits (profit, marketshare, exports) and indirect benefits (learning how best to use a consultant) afterward. (Thismay not say much for the planning and strategy of the firms, but it is a vindication of govern-ment policies of encouraging manufacturing firms’ use of professional design via subsidies.)In explaining the somewhat ad hoc development and growth of the activity both within andoutside manufacturing industry, a brief review of the history and incorporation of design inindustry will add another dimension to the analysis given earlier, based on the different facetsof design, the different ways in which firms view design, and the aspects of design important todifferent functions within the firm and at different stages of an industry’s life. But first, a briefnote relating the institutionalization of R&D to the evolution of firm structure.

8. Institutional Innovations: The Structure of Firms and the Evolution of Designand R&D in Business OrganizationsThe organizational innovation of in-house R&D was closely related to the evolution of com-pany structure in general, as analyzed by Chandler (1962, 1977) and Williamson (1975), whodescribe two other very important organizational innovations in the history of the businessenterprise: the evolution of the unitary, or U-form, structure, based on specialist functionaldepartments, at the end of the 19th century, and the multi-divisional or, M-form, structure ofdivisions based on different product groups, each with its own specialist functional groups,which became widespread after World War II (though first introduced earlier). In effect, theemerging in-house R&D function became another functional department in the U-formstructure.27 But the major period of take-off of R&D as a specialist, integrated function in thefirm was complementary to the widespread adoption of the highly structured and functionallydifferentiated M-form (Kay 1979). This made the organization of R&D somewhat morecomplicated. Some multi-divisional firms have specialist R&D laboratories in each division,while some have a central corporate-wide R&D activity for the whole enterprise, and othersmake some kind of hybrid arrangement with elements of both (see Coombs and Richards1993 for a discussion of trends in centralization and decentralization of R&D). Kay (1988) hasanalyzed the trade-offs of each under various circumstances. This makes the institutionaliza-tion of R&D somewhat more complicated but still relatively clear cut as a specific in-housefunction compared with design.

8.1. Design Before MechanizationProducts have always been designed, but have not necessarily been the result of commercialapplication of R&D. Business firms introduced new designs and technological innovationsand re-designed products and machinery before any of them did their own R&D. Design wasoriginally carried out by the craft worker, who made the product and was responsible for ev-ery stage of production, from conception to sale. The separation of design from the process ofmaking emerged before the industrial revolution, with the early forms of capitalist industrialorganization, within factories but based on craft methods of production (Meickle 1989). Atthe British china and porcelain company Wedgewood, for example, designing was done by themodeler, a highly skilled, highly paid, master potter who made prototypes from which othercraft workers would work (Forty 1986). Wedgewood subsequently pioneered the use of well-known artists, like Flaxman and Stubbs, who worked freelance for a commission, were basedin London,28 and were complementary to the use of the modelers.

The adoption of design followed a similar pattern in each of the craft-based industries—pottery, furniture, textile printing, clothing, glassware, coach-building, metal-work, and so on(Forty 1986)—separation of design and production, the development of design skills out ofcraft practices, and the introduction by the most innovative firms of freelance artists,29 as well.The majority of designers, however, were the anonymous,30 in-house craft workers of themanufacturing firms themselves.31 In Germany a similar pattern existed (Heskett 1986).

Design was not “brought in” to the manufacturing firm in the way that R&D was; itwas originally part of production, and indeed became separated from, rather than added to,the product development process. The gradual employment of artists, sculptors, and archi-tects as freelance designers by manufacturing firms was complementary to the in-house,craft-based design activity.

27. Though, at first, the R&D

laboratory was being pio-

neered by the German chemi-

cal industry, while the U-form

was first introduced by US

electrical and engineering

firms.

28. The idea was that they

would be in closer touch with

changes in fashion than arti-

sans living in the pottery

towns, while their creative

temperaments, strongly resis-

tant to factory discipline and

hours, would not cause unrest

among the other employees

(Forty 1986).

29. For example John Flax-

man designed and made

models for the production of

candlesticks, buckles, and

assorted domestic products

for Matthew Boulton, as well

as pottery for Wedgwood.

Sculptor Alfred Stevens de-

signed cast-iron fire grates

and ovens for Sheffield firms

1849 to 1950 (Heskett 1980).

Christopher Dresser made

models for various metal-

working firms, such as Elking-

tons of Birmingham and

James Dixon of Sheffield in

the 1870s and ‘80s (Heskett

1987). But sometimes, the

artists had limited understand-

ing of materials, and they

pushed them beyond their

limits.

30. This was to prevent head-

hunting by rival firms (Sparke

1986).

31. Elkingtons went to the

unusual lengths of sending

more than 50 of its workforce

to classes in design at the

Midland Institute (Heskett

1980).



8.2. The Industrial RevolutionWith the industrial revolution, technological advances and new designs in the machinery, aswell as new designs of the products made by the machinery, were still largely the result ofimprovements made by people working directly with the production process or closely associ-ated with it. Mechanical engineering emerged as a new craft skill, and older skills wereadapted, such as coach-building (in Europe) for the production of railway carriages (and latermotor cars). The inventor or an engineer decided on the form of the product, which wasshaped by the requirements of the production process, individual inventive talent, and gradualmodification as a result of use. Although the engineering and nonengineering craft workerswere trained in a similar way (apprenticeship) and worked in a similar way at designing newand improved products (making models and prototypes), quite a gulf began to appear in theirapproach to the aesthetic aspects of design.

It was not that the engineers were not concerned with the appearance of their machines.On the contrary, steam locomotives (for example) demonstrate the attention that was paid tovisual harmony, as well as to technological function (see Moody’s comments at the beginningof the paper).32 The engineers took the view that function dictated form. Said Brunel: “Fordetail of ornament I have neither knowledge nor time” (Sparke 1986). In fact, as a comparisonof US and British train design shows, engineering design also reflected the physical, eco-nomic, and cultural context in which the design was made, as well as the function.33

The gulf that developed between engineering and nonengineering designers began whenthe designers of consumer goods started to employ a highly ornate decorative style, in contrastto the approach of engineers. This was to meet the demand of the nouveau riche, who wantedobjects to look expensive in order to symbolize their wealth and credit-worthiness. The con-fusion of over-decoration of products with the social status of their owners is often associatedwith Victorian Britain, but was just as characteristic of Germany in the late 19th century(Heskett 1986).34

8.3. In-house Research and DevelopmentThe institutional innovation of the in-house R&D laboratory was made by the chemicalindustry,35 long before the kind of impetus that gave rise to it was felt by engineering firms.In the latter, mechanical ingenuity and experience had enabled engineers and craftspeople tomake improvements as a result of observation, imagination and trial and error (Freeman1982). Meanwhile, scientific research was separate—carried out in universities or privately.Pulleys, levers, pistons, and so on can easily be visualized. Indeed, the development of ma-chinery based on steam technology, which raised questions of power, energy, and efficiency,gave rise to a new branch of science, thermodynamics, rather than vice-versa (Lilley 1949).

Imagining new machinery is one thing. Imagining certain other new products, such aschemicals (and later on, electricity), is an entirely different matter. Some methodologicalunderstanding and theoretical ideas from the science of organic chemistry were a necessarypre-requisite to chemical innovation. It was not something that could be developed from animaginative “design” of new arrangements of atoms by production workers as a result of theiringenuity and day-to-day experience. While the introduction of innovations in engineeringstimulated the development of a new branch of science, innovations in the chemical industrywere themselves stimulated by advances in the science of organic chemistry. This, in turn,stimulated a period of close collaboration between academic research chemists and inventor/entrepreneurs,36 which in turn stimulated a desire for more direct control over the science thatwas being done (Beer 1959; Walsh 1984). But because this innovation took place in thechemical industry, design did not have a clear-cut place in the order of things in the way thatscientific research did.

The chemical industry is one of the sectors in which design has been of more peripheralconcern—relating mainly to the design of packaging, logo, and end use applications.37 So theestablishment of corporate R&D departments did not at first provide design with a well-defined role or location within it, as might have been the case if the engineering industry, forexample, had pioneered in-house R&D. In-house R&D spread to the US electrical industry inthe 1890s, with firms like Westinghouse and GE establishing laboratories38 (Noble 1977), butthey had had engineering departments responsible for design from the time they were set up

32. At least, that is true of

engines produced after the

very earliest ones. The latter

looked exactly like scaled-

down steam engines on

wheels, which they were.

33. American locomotives

were designed using standard

parts for industrial construc-

tion, while British designers

worked in the craft tradition

for much longer. Trains re-

placed stage coaches in Brit-

ain, and their designers were

re-employed on railway

coaches. British railway

coaches were designed just

like joined-up stage coaches.

Stage coaches continued to

be important for shorter jour-

neys in America, and a new

sub-discipline of railway car-

riage design emerged in addi-

tion to the designers of stage

coaches. Long journeys be-

tween climatic extremes in

America demanded enclosed

cabs for the drivers and more

comfort for the passengers.

For reasons of comfort and

because railway coach de-

signers were not redundant

stage coach designers, Amer-

ican coaches were not com-

partmentalized. American

locomotives had cow-catch-

ers at the front because the

trains crossed miles of open

country. British tracks were

protected by the laws of tres-

pass and physical barriers

because a Member of Parlia-

ment had been run over by an

early train. American locomo-

tives were designed to be

more open for ease of access

by maintenance engineers,

who might have to do running

repairs miles from a work-

shop. In fact, the drivers were

called engineers in the US

because they had to perform

this function. American trains

often ran through dry country

a long way from the coal

fields; the locomotives were

designed to run on wood, and

had spark arrestors to reduce

fire risk (Heskett 1987).

34. Although Germany was

later one of the first countries

in which reconciliation of the

concepts and processes of

technology with the forms of

consumer products was

made by the movement that

led to the establishment of the



(Chandler 1962). In industries that took longer to adopt R&D (and, in some cases, have main-tained a very low level of R&D to this day), design had evolved its own patterns of work,closely related to production. In some cases, as R&D was introduced, the design activity wasincorporated with it. In some cases, it remained as part of production. In Japan, design anddevelopment are very often located within the production department (Perrin 1989), as typi-fied by the practice of “using the factory as a laboratory,” described by Freeman (1987).Elsewhere, design evolved into a specialist activity, with an organizational niche of its own,while industrial design as a recognizably separate sub-discipline began to evolve with thegrowth of advertising and marketing strategy.

8.4. The Separation of Industrial and Engineering DesignProduct design in all the industrialized countries remained largely a function of in-house craftworkers and engineers, with occasional use of artists and architects as consultants, until wellinto the twentieth century. The beginnings of divergence between engineering andnonengineering designers has already been described. The growth of markets for consumergoods, and the standardization and production technologies that made mass production pos-sible, stimulated an increased interest in visual form in advertising and marketing strategy.Freeman (1989) describes the growth of marketing and sales activity on the part of Germanfirms at the turn of the century. The appointment of architect Peter Behrens39 as artistic advi-sor to AEG in 1907 marked a departure from tradition and was a symptom of the new aware-ness of appearance as a competitive weapon in AEG, Siemens, and other German firms.However, the growth of consumer goods was greatest in the US, and it was in that countryin the 1920s that the emergence of the industrial design profession as a separate activity fromcraft work, fine art, architecture, or engineering was most noticeable and grew most rapidly.

Economic depression stimulated product differentiation to win or retain market share,which represented further demand for industrial design. Products invented some yearsbefore (such as the vacuum cleaner, typewriter, radio, and sewing machine) were re-designedto increase competitive edge. Chief executives of manufacturing firms recruited commercialartists and Broadway set designers via advertising agencies, such as J. Walter Thompson(Meickle 1989), with a remit to “make things irresistible” (Sparke 1986). Companies suchas Ford, Shell, Bell, and the Pennsylvania and New York Central Railroads thus employedthe now famous Loewy, Dreyfuss, Bel Geddes, and others (Heskett 1980). Their roots inadvertising were reflected in their emphasis on consumer psychology, as well as aestheticappeal, convenience, and so on.

The slogan “styling follows sales” replaced the idealism of their European colleagues’“form follows function” (Sparke 1986).40 They were essentially independent consultants, notin-house designers, but the link with marketing, sales and advertising set the pattern for theemployment later of in-house industrial designers, who were often located in the marketingdepartment in the absence of a specialist design group. The establishment of a separate designprofession, with its roots in advertising and “commercial art,” reinforced the separation ofindustrial and engineering design, which had begun earlier and is described above.

9. Design ConsultantsThe emergence of industrial design as an identifiable activity, and the separation of engineeringand industrial design, which were the topics of the above sections, overlaps strongly with theemergence of the independent design consultant or consultancy firm. Unlike the institutional-ization of R&D, in general an increasingly in-house phenomenon over the past century,41 theinstitutionalization of design in a separate, service sector has increased over the century. It has alsobeen a phenomenon strongly shaped by the particular culture within which it emerged. The USconsultants’ roots in mass-production, marketing, advertising, and sales is powerfully symbol-ized by the brand image devised by Raymond Loewy (though he was originally not Americanbut French) for Coca Cola, itself a world-wide symbol of US commercial drive.

In Scandinavia, the independent consultant designer also emerged early on, and was wellestablished by the 1930s (Annerstedt 1986), but evolved from the tradition of pre-industrial,pre-factory craft work rather than mass production. In Denmark, in particular, which indus-trialized late, the market expectation of high quality hand-crafted goods (like furniture,

Bauhaus (1919) and the rise

of Art Deco.

35. Although British inventor/

entrepreneurs like Perkin and

Nicholson continued to con-

duct experiments in their

firms, it was essentially the

German chemical industry

that, in the 1870s, was the

first to introduce the institu-

tional innovation of the indus-

trial R&D laboratory, employ-

ing scientists and engineers

on a salary. It was not acci-

dental that it happened first in

Germany, for reasons to do

with the deliberate encourage-

ment of science and technol-

ogy, of innovation and of in-

dustrialization in that country

in various ways discussed at

length elsewhere (Beer 1959;

Walker 1980; Walsh 1984;

Freeman 1989).

36. Who often had personal

research laboratories in the

firms they founded.

37. The chemical industry

does depend on the design of

new arrangements of atoms

and functional groups into

molecules on the basis of

some observed relationship

between structure and biologi-

cal function. But that activity is

normally called chemistry, not

design.

38. Edison’s Menlo Park labo-

ratory employed 64 people by

1880 (Teece 1988), but his

laboratory was essentially an

expanded version of the activi-

ties of the inventor/entrepre-

neur, a vehicle for his own

creativity, and he retained

control of it when the manu-

facturing interests of his firm

became part of General

Electric.

39. His appointment was a

permanent consultancy, and

he was given control over the

appearance of all the firm’s

buildings, products, and publi-

cations. Later, he designed

houses and furniture for AEG

employees.

40. The US industrial design

consultants, in contrast to the

European tradition of profes-

sionals who hesitated to ad-

vertise and (in Britain)

“charged in guineas” (Olins

1986), acted like business

people, with an aggressive

approach to profits, share

prices, and marketing their


lighting, ceramics, textiles, glassware, and other household goods) was transferred to anexpectation of machine-made goods of equally high quality, designed, if no longer made, bya named, professional designer, working separately from the manufacturing firm. Thedesigners were often architects who diversified into designing the things that went inside thehouses, as well (and the word architect often used to mean the designer of a product, as well asa building). Scandinavian firms promoted beautiful things for workers’ houses, as well as forthe rich, for everyday use as well as “art” (Annerstedt 1986), stimulated by the early adoptionof a welfare state compared with other European countries. This provided a stable andsophisticated home market.

Many of the Swedish and Danish firms visited in DIG studies were positively opposed toemploying in-house designers. They expected the consultant designer to liaise directly withthe firm’s model builders, production and marketing managers, and whomever else might beresponsible for the design brief. In-house designers, they believed, would get in the way ofthis interaction (J. Bernsen, personal communication 1990). In contrast, consultant designershardly existed in Britain until after the Second World War (Heskett 1980), the first of the newgeneration of consultancies being founded in the late 1950s and early 1960s. Consultanciesgrew in the 1970s and many new ones emerged; by the I980s they had become a “billionpound business” (McAlhone 1987), employing nearly 30,000 people in more than 2,700firms. Rawsthorn (1989) reported a world design market of 6 billion pounds, with seven outof the world’s largest eight design firms being British. Since the economic squeeze of the early1990s, there has been some contraction. Some firms have shed staff, some have gone out ofbusiness, and some have been taken over by advertising agencies (echoing the link, establishedin the US before the Second World War, between industrial design consultancy and ad-vertising). While the largest number of consultancies were involved in interior, exhibition,and graphic design work, often for the retail business (Olins 1986), there were also a largenumber of engineering and product design consultants as well as those involved in fashionand textiles. Francis and Winstanley (1987) describe the increasing trend toward employingoutside engineering designers in the mechanical engineering industries, as well as sub-con-tracting drafting work, which has been common for longer. In 1987, McAlhone claimed thatBritain had the strongest design consultancy industry in the world, yet according to Neal andAssociates Ltd. (1988), half the firms in Britain fail to invest adequately in product design anddevelopment, mainly because of short-term financial targets. Lacking market opportunities athome, many British designers look abroad for work, contributing to the competitiveness ofoverseas manufacturers. McAlhone (1987) reported that 73 percent of consultancies had donework abroad since 1982.

Where design consultants are involved, there is some kind of trade-off between two sets offactors. The “costs” include the effort necessary to overcome institutional barriers betweenthe client and the consultant (rather than just those between departments and disciplines),which make interaction more difficult, and the time involved in choosing a consultant, hold-ing meetings, and working out or revising a specification. The benefits include the overalleconomic or opportunity cost of using a consultant rather than in-house staff, the experienceand new vision of the designer, the kudos of the “designer label,” and the availability of skillsnot available in-house.

10. ConclusionsCompany and national strategies toward design and the management of design have been farless analyzed than has been the case with R&D and innovation, even though both radical andincremental innovations are implemented via new and improved designs. This paper has triedto show that design as an activity links many of the functions in the business enterprise, andits environment, and that conversely, building such links is an essential part of the design andinnovation process. The historical evolution of the design function into different disciplineswith separate traditions and training has been analyzed. The paper has observed that design isan activity that overlaps with both R&D and with technological innovation, but can alsomake a contribution to the business of the firm outside either. Furthermore, design is takenvery seriously by some firms and not by others in terms of the resources devoted to it andthe ethos of the enterprise.

services. European designers

found their attitudes an inspi-

ration, although they were of-

ten critical of the stereotyped

images of America (associated

with Coca Cola and other

brand names) that resulted

from their work.

41. Apart from the recent

trend toward collaborative

agreements in R&D, dis-

cussed, for example, in

Mytelka (1991) and Chesnais

(1988).



All these factors mean that the institutionalization and location of design is far less clear cutthan that of R&D, and it does not fit easily within either the internal or external boundaries ofthe firm. Indeed, there has been rather an ad-hoc pattern of growth of design as a specializa-tion and of the evolution of its current location with respect to the boundaries of the firm.Design occupies a variety of locations in the structure of business firms, a pattern that variesadditionally with different national cultures and traditions. In R&D, production, and market-ing, as well as in specialist design and development departments and increasingly, outside themanufacturing firm, in design consultancy firms.

The main divisions in design are those between in-house designers and consultants, onthe one hand, and between the various design disciplines, on the other. In particular, there isquite a barrier between engineering and other design disciplines, even between engineeringand industrial design, which are both concerned with different facets of the design of prod-ucts and artifacts. There is by no means a complete overlap between these two sets of divi-sions—in-house design and consultancy and engineering and industrial design—since (asnoted in the paper) engineering, industrial, graphic, and other forms of design activity can allbe found both in-house and supplied by consultants. However, the design disciplines mostfrequently acquired via consultants are graphics and interior design, followed by industrialdesign. Consultant engineering design, apart from drafting, is a more recent and smaller-scalephenomenon. These divisions may partly be explained as follows.

Engineering design is very close to the innovation process, requires rather specific re-sources and assets, and there is a substantial degree of overlap, co-evolution, and interactionwith those required for innovation in the more general sense. These resources and assets tendto be accumulated as firm-specific competencies, which are more costly or more difficult tobuy in or transfer. Industrial design is important both in developing the form of the innova-tive product, and to the design of products that are new but not technologically novel.Graphic design has a role to play in the packaging, advertising, brochures, and manuals ofinnovative products, but a far more extensive role in corporate identity and the packaging,marketing, and user friendliness of existing products. There is thus greater scope in industrialdesign, and even more in graphic design, for a transferability of competencies from one firm,type of product, or industrial sector to another.

Firms often respond to new strategic opportunities and threats with, among other things, amodification of structures and hierarchical relationships. The diffuse nature of design in thesestructures makes it easy to overlook the location and interactions of designers, though this

might make a key difference to the commercial performance of the firm. Dumasand Whitfield (1989) argue that despite the strategic importance of design to thefirm, the diffuseness of design makes it difficult to use strategically. This diffuse-ness is both conceptual and organizational. It is conceptual in relating to issues suchas: What design disciplines does a firm need? Or even: What does the firm meanby design? The paper has referred to the vast range of ideas about what design isand what its purpose is, emphasizing function, performance, efficiency, cost, easeof manufacturing, aesthetics, user friendliness, durability, or ergonomics, as thecase may be. It is an organizational diffuseness in that design is an activity withoutwell-defined organizational boundaries within which people can work togethereffectively, as I have attempted to show. Locational diffuseness may mean thatdifferent structures have evolved that best meet the needs of each individual firm,and that other firms would have quite different ones, depending on whether theyare high- or low-technology, service or manufacturing, based on new or maturetechnology, and located in different countries, cultures, and traditions. However,this diffuseness also makes it difficult to draw general conclusions and lessons

from the experiences of firms. And, in particular, it makes it very easy to overlook design andnot take it into account adequately in the development of strategies for the organization,management, and competitive success of the firm.

It is an added complication that designers may be managed within different functionaldepartments, within which people have different perspectives, not just on design, but on thefirm’s business in general, derived from the multiplicity of their skills and experience and thejobs they do, and their involvement not only with their colleagues in the firm but with the

Firms often respond to

new strategic opportunities

and threats with, among

other things, a modification of

structures and hierarchical

relationships


environment outside it. Thus R&D staff are part of a wider “invisible college” of science andtechnology. Marketing staff are concerned with prices, market shares, and customers’ prefer-ences and purchasing power; production staff are concerned with efficient processes, workingpractices, order of operations, machinery, materials, and so on. An important function of strat-egy, and of management in proposing and implementing it, is to coordinate these functions sothat the perspectives become complementary rather than contradictory and competing; to givedesign a high profile in overall corporate strategy; to promote design awareness throughout theenterprise; and to pay particular attention to the organization and location of design in relationto the structure of the firm. The importance of linkages between all the actors in the innova-tion process, inside and outside the firm, and the key “gatekeeper” role that may be played bythe designer, underlines the need for design management to facilitate the establishment andmaintenance of such linkages. An important aspect of public policy, in promoting design ef-fectiveness, innovative performance, and competitiveness is not only to provide firms withinformation, encouragement, advice, and subsidies to encourage their use of professionaldesigners, but to provide advice and information about the organization of design activities.

AcknowledgmentsThe ideas in this paper evolved over quite a long period of time, and I am grateful to themany colleagues and students for their comments on successive versions, and to the firms Ivisited during the course of several research programs. I have drawn on results from studiesfunded by both the ESRC and the SERC/ESRC joint committee, whom I would like to thankfor their financial support. I am grateful in particular to my colleagues in the Design Innova-tion Group, Stephen Potter, Paul Gardiner, Margaret Bruce, and especially Robin Roy formore than 15 years’ fruitful collaboration. I would like to thank the Centre de Sociologie del’Innovation at the Ecole des Mines de Paris for making it possible to spend a year’s studyleave there, and especially to Madeleine Akrich, Vincent Mangematin, and Sophie Dubuissonfor their insights into the design process. Thanks are also due to Antti Ainamo, Rod Coombs,Chris Freeman, Karen Freeze, Birgit Jevnaker, Tore Kristensen, Keith Pavitt, Matti Pulkkinen,Arie Rip, Lisbeth Svengren, Jim Utterback, and Tuna Vainio for ideas, comments, orunpublished papers. � (Reprint #00AWAL64)

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