Beruflich Dokumente
Kultur Dokumente
Article information:
Access to this document was granted through an Emerald subscription provided by emerald-srm:478379 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for
Authors service information about how to choose which publication to write for and submission guidelines
are available for all. Please visit www.emeraldinsight.com/authors for more information.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0025-1747.htm
MD
45,2
180
Povl Larsen
Richard Tonge
Department of Accounting and Law, Portsmouth Business School,
University of Portsmouth, Portsmouth, UK, and
Alan Lewis
Downloaded by UFLA At 07:53 09 May 2016 (PT)
Management Decision
Vol. 45 No. 2, 2007
pp. 180-195
q Emerald Group Publishing Limited
0025-1747
DOI 10.1108/00251740710727232
Introduction
The importance attached to the benefits of design in manufacturing enterprises is well
reported, as is the analysis of the strategic planning process and strategies employed.
A number of studies conducted over the last two decades have further researched these
areas in an attempt to identify the secrets of success of high-, super- and
hyper-growth medium-sized enterprises. These studies have highlighted the strategic
importance that products make to the success, performance and growth of companies.
However, research into the benefits of design and design related strategies in the
service sector have received less attention, this despite the fact that the service sector in
the UK accounts for 79.5 per cent of the labour force and contributes 75.8 per cent to the
UKs GDP (CIA, 2006). To address this apparent void, a survey of manufacturing and
service sector medium-sized enterprises was conducted during the period 2000 to 2001.
The Chartered Institute of Management Accountants (CIMA), under the heading
Identifying Best Practice Integrated Design and Management Accounting Processes
sponsored the research, with additional non-financial support from the Design Council.
This paper reports on the findings related to the strategic activities and benefits of
design in medium-sized service sector enterprises.
Objectives
The objectives of the paper are to review, in the context of medium-sized service sector
enterprises, which medium-sized enterprises are the users of design, how important
design is seen to be by the users of design, to identify the benefits for those who use
design, and report on the past strategies employed and those intended for the future.
Implications for management
The findings are important because they shed light on:
.
the importance of design and the benefits of design in the service sector;
.
the service design strategies responsible for current performance;
.
how the performance of service sector medium-sized enterprises is assessed in
terms of financial, market and service supply criteria;
.
how service sector medium-sized enterprises have reached their current status
and how they intend to progress in the future; and
.
the organisational, service supply and market factors employed in the past and
how these might change in the future.
Literature review
While much research has been conducted into the benefits and value design offers and
a number of studies have looked at strategic factors and how they impact business
performance, there has been scarce attention paid to the relationship of design to
business strategy and performance (Gemser and Leenders, 2001; Potter et al., 1991;
Roy, 1994; Bloch, 1995; Ulrich and Pearson, 1998).
Why design is important
According to Cooper (2001), in his book Winning at New Products, the meteoric rise and
current fortunes of many corporations are due to the introduction of new products. For
example, Glaxo, once a mid-sized British pharmaceutical company, rose to number two
in the pharmaceutical world on the coat tails of a single anti-ulcer drug; or Microsoft,
virtually unknown in 1982, through its design of the Windows operating system, has
become a corporate giant.
In many industries, opportunities for mergers and acquisitions are drying up, which
leaves innovation, through the design of new services, as the main source for creating
company growth (von Stamm, 2006). It is now firmly established that those enterprises
that use design effectively will be those who survive and prosper in increasingly
Strategic
planning and
design
181
MD
45,2
182
demanding world markets (Design Council, 1998). In order to meet this challenge,
businesses intent on growth need to encourage the use of design and in the process
ensure that design is a value adding activity. According to Fairhead (1988) those
companies that have a strong design focus that pervades their entire culture show
improved performance. Research by the Open University and Open University/UMIST
Research Team (1991) and by Aldersley-Williams (1996) suggests that successful
companies are likely to have a strong bias towards design. A study by Roy et al. (1999)
found that high-growth firms were more likely to have managers with a positive
attitude to design and innovation, introduced products more frequently, and were more
likely to use state of the art technology in product development. While Trueman and
Jobber (1998) suggest that companies will only take design seriously if they can see a
tangible benefit showing where and how design is associated with improved
performance.
Strategic factors related to service design
The literature on strategic factors related solely to service design is sparse. However,
number of studies do exist that have reported on manufacturing businesses and
businesses from both service and manufacturing sectors.
Mondiano and Ni-chionna (1986) found that successful companies concentrated on
the value of their products rather than low price, were highly customer-orientated, were
fast and flexible in their responses to customer needs and new trends, avoided head-on
competition and expanded into overseas markets early on in product development.
Clifford and Cavanagh (1985) found that the key success factors in medium-sized
enterprises were paying attention to the needs of customers, having a
market-orientated strategy, focusing on innovative products, producing high-quality
and added-value products and employing motivated staff. Taylor et al. (1990) studied
successful medium-sized enterprises in the UK and found that the role of niche
markets, unique products, product diversification, flexibility and creating added value
products were the main characteristics of these businesses. Later research by Taylor
(1997) identified four areas that companies intent on growth should concentrate on:
(1) find a niche market you can defend;
(2) compete in areas that require speed, flexibility and customer service;
(3) diversify into related products and adjacent markets; and
(4) leave the industry before the window of opportunity closes.
Successful companies satisfy the needs of the customer through the design of high
quality services and products. As Tonge et al. (1998) found in their study of strategic
leadership in super-growth companies, these companies place a greater emphasis on
the customer in that they look to add new customers, understand customer needs and
seek to increase sales to existing customers. From Tonge et al.s (1998) survey it was
found that the following seven critical success factors, in order of importance,
differentiated high- and super-growth companies:
(1) flexibility;
(2) product diversification;
(3) attracting and holding on to quality staff;
(4)
(5)
(6)
(7)
niche marketing;
early entry into growth markets;
quality; and
frequent innovation.
Strategic
planning and
design
183
Methodology
From the Hemmington Scott (2000) compact disc Really Essential Financial Statistics
UK medium-sized service enterprises that were registered on the London Stock
Exchange were identified. To be considered as medium-sized an enterprise had to have
an annual sales revenue turnover of between 5 million and 250 million over a
four-year period. Due to the limited size of the population (365) all the service sector
enterprises that met the criteria for medium-size over a four-year period were included
in the survey. The categories surveyed covered:
.
distributors;
.
general retailers;
.
leisure, hotels and entertainment;
.
media and photography;
.
real estate;
.
restaurants, pubs and breweries;
.
software and PC services;
.
support services; and
.
transport.
A mail survey questionnaire was chosen as the appropriate mechanism to collect data
because it was deemed important to first identify a general consensus of opinion or
overview of the use of design in medium-sized service enterprises. There was also the
difficulty in identifying, which medium-sized enterprises would be willing to take part
in interviews. From the authors own experiences using mail survey questionnaires
had been found to be an appropriate method for introducing a research topic and one
that enabled the would-be respondents to decide if they wanted to take part in
follow-up interviews.
Prior to conducting the full survey, a pilot test of the questionnaires was
undertaken on a sample of 20 service sector enterprises that had an annual sales
revenue turnover of between 5 million and 250 million but over only a
three-year period. That is, they were of a similar size but did not meet the criteria
for inclusion in the main survey. Seven completed questionnaires were received
that emphasised the need to add a section to the questions that enabled additional
comments or suggestions to be added.
The questionnaires were posted to the Managing Director (MD) or Chief Executive
Officer (CEO) of each of the UK service sector medium-sized enterprises in March 2000.
In order to increase response rates, questionnaires were mailed out again one month
later.
MD
45,2
184
Response rates
Previous studies on strategic planning by other authors have produced response rates
of 23 percent (Glaister and Falshaw, 1999), 26 percent (Sohal et al., 1999), and 53 percent
(Berry, 1998). Consequently, the decision to use a mail survey questionnaire to collect
data was expected to produce a similar response rate. Three hundred and sixty-five
service sector companies were surveyed, from which 75 responses, for the research
presented in this paper, were received, representing a response rate of 21 percent.
t-Tests were carried out for the respondents and proved that the sample of
medium-sized enterprises that responded to our questionnaire are not significantly
different from the population of all the medium-sized enterprises listed in the sector
Findings
Users of design
The service sector medium-sized enterprises were asked to state if they did or did not
have a design function and whether they designed their organisations services (see
Table I) and, if so, who were the designers?
The largest response came from the real estate sub-sector, with a total of 17
medium-sized enterprises, of which only two used design, two admitted they did not
design their services, and 13 stated they had no design function. And yet, looking at
real estate agents for sale signs, these are noticeably different from one another and
therefore a higher number saying they did use design would be expected. Software
and PC services had seven medium-sized enterprises stating they had no design
function and just one saying they did use design. Even media and photography, as a
creative industry, had five admitting to no design function and two not designing their
services. Could it be that within these sub-sectors employees themselves design the
services, such as, estate agents know what sells a house and therefore do not need the
services of a professional designer? Likewise in the software and PC services
sub-sector the programmers are creating the on-screen imagery and have no need for
professional designers? And in the case of media and photography, taking
photographers as an example, again they would decide on what makes a good picture
and not require a designer.
Sub-sectors surveyed
Table I.
Service sector users and
non-users of design
Distributors
General retailers
Leisure, hotels and entertainment
Media and photography
Real estate
Restaurants, pubs and breweries
Software and PC services
Support services
Transport
Totals
Sample
size
Response per
sub-sector
No design
function
We do not
design our
services
We do
use design
33
43
33
43
56
28
51
58
20
365
6
4
12
8
17
3
8
9
8
75
3
3
6
5
13
1
7
5
4
47
2
0
1
2
2
0
0
2
2
11
1
1
5
1
2
2
1
2
2
17
Alternatively, it could be that those medium-sized enterprises that do not design their
services or have no design function are using some kind of software that creates
publicity material or sales literature in the style of a services brand image, but is not
actually referred to as a design tool.
The highest level of support for design came from the leisure, hotels and
entertainment sub-sector where interior design is well recognised as important in
creating the right mood to meet customer expectations, but even here the majority
either had no design function or did not use design.
Looking at those medium-sized enterprises that do use design, who are the
designers? To answer this question the survey population were asked to specify if the
designers of services were internal, that is, in-house designers or external (e.g.
consultants), or other. Other was included should any medium-sized enterprise not
have designers but use engineers, service planners, marketing, etc.
Thirteen respondents of the medium-sized service sector enterprises used internal
designers. Five used external designers in addition to internal designers and three used
only external designers, with one respondent refusing to complete this question.
However, no medium-sized service sector enterprises suggested any alternatives to
internal or external designers.
Importance of design
The MDs/CEOs of the service sector medium-sized enterprises were asked to select
how important they thought design was to their organisation based on 1 being very
important to 6 being not at all important. Eleven respondents saw design as very
important, four as important and two as not at all important.
One of the two who saw design as not at all important came from the leisure,
hotels and entertainment sub-sector. The other came from the transport sub-sector.
However, four respondents who saw design as very important also came from the
leisure, hotels and entertainment sub-sector. Closer examination of these findings
showed that the one respondent from the leisure, hotels and entertainment sub-sector
that saw design as not at all important was involved in sports, while the four who
saw design as very important were involved in hotels. The 11 remaining respondents
were spread randomly over the other service sub-sectors and consequently offer little
insight into the importance of design in relation to sub-sectors.
Benefits of design
The two greatest benefits of design for the service sector (see Figure 1) relate to brand
image either for the organisation or for the organisations service closely followed by
increases profits. Adds value and forges closer relationships with customers
were also well represented. The least benefit from design was seen to be in reducing the
selling price of the services provided. These results offer a very positive response to
design and suggest that those medium-sized services that have recognised the
importance of design are now reaping the benefits of increased profitability as a result
of being highly customer orientated and concentrating on the value of their services
rather than low price, which supports some of the findings of Mondiano and
Ni-chionna (1986) and to a lesser degree those of Clifford and Cavanagh (1985) and
Taylor et al. (1990).
Strategic
planning and
design
185
MD
45,2
186
Figure 1.
MD/CEO viewpoint
regarding benefits of
design in the service sector
Strategic
planning and
design
187
Figure 2.
MD/CEO opinions on the
priority ranking of design
related factors responsible
for current performance
(where 1 is most
important)
ranged from one to six, where one was seen as very important and six not at all
important.
Financial results was the most important primary focus for the future. Long-term
performance and building and enhancing customer relationships were the second
most important primary focus for the future, followed in third by short-term
performance, competitive position, and improve service brand image. These
primary focuses for the future reflect the service sector medium-sized enterprises
selection of the benefits of design (see Figure 1), suggesting that in the future the
service sector recognise the short and long-term benefits that design can have on
business performance.
The low support for market share could be related to the high support for early
entry into growth markets (see Figure 2). That is, enter new niche markets but exit
before the window of opportunity closes, thereby avoiding the need to build market
share.
Strategic areas
Figure 4 shows the strategic areas concentrated on in the past and future with a view to
understand whether growth was achieved from within, for example through service
provision and organic growth or externally through acquisitions and mergers.
From Figure 4 the most favoured strategic area concentrated on in the past was
service innovation, followed by of equal importance organisational control and
acquisition, suggesting that innovation was achieved through acquisition, which in
turn required keeping a tight eye on organisational control. Market development and
MD
45,2
188
Figure 3.
MD/CEO opinions on the
importance of the primary
focuses for the future
(where 1 is most
important)
joint ventures were past strategies supported by just over half of the respondents.
For some of the service sector medium-sized enterprises, acquisition could have been
one strategy employed to increase market development, while others could have used
joint ventures to achieve the same effect. Organic growth appears a less favoured
strategy, which is supported by the lack of interest in internal investment, clearly
indicating that in the past for the service sector mergers and acquisitions were not
drying up, as von Stamm (2006) suggests.
The future strategic areas to concentrate on show a marked support for service
innovation, which dominates all of the other areas. Innovation, which has overtones of
the use of design as the favoured strategy, is a very encouraging response for the
greater use of design within the service sector. Organisational control, acquisition,
joint ventures and market development also show increased support. Acquisition
in particular would again appear to dispute von Stamms (2006) suggestion that
mergers and acquisitions are drying up. The use of joint ventures is a recognised
means of reducing risks associated with innovation. While organic growth shows no
change from past strategic areas to concentrate on there are marked increases in
internal investment and the selection of suppliers. The increase in internal
Strategic
planning and
design
189
Figure 4.
MD/CEO opinions on the
service sector strategic
areas concentrated on in
the past and for the future
investment could be related to the substantial increased support for innovation. The
selection of suppliers can have a bearing on the ability of an organisation to innovate
its services and therefore an increase in line with the increase in support for innovation
is likely. Overall the strategic areas to concentrate on in the future depict a determined
move towards an increase in innovation and therefore should herald an increase in the
need for the use of design.
Key strategic activities
For Figure 5 the higher the numbers of respondent service sector medium-sized
enterprises that selected an activity the higher the importance attributed to a factor.
The MDs/CEOs were asked the question on past strategic areas to identify how the
medium-sized enterprises had reached their current status and on future activities to
identify how they intended to reach their future status.
In the past the key strategic activity responsible for attaining past performance has
been the addition of new customers by improving the quality of services provided.
This has been achieved through teamwork, changes to organisational structure and
offering best after sales service, achieved by seeking to understand customer needs. In
terms of service supply activities the main thrust in the past has been on the need to
improve service quality, which reflects the findings of Clifford and Cavanagh (1985),
Mondiano and Ni-chionna (1986), Taylor et al. (1990), Taylor (1997) and Tonge et al.
(1998). However, the developments of new process technologies and improving supply
and distribution have not been necessary.
MD
45,2
190
Figure 5.
MD/CEO opinions on the
service sector key
strategic activities in the
past and for the future
For the future the service sector medium-sized enterprises show a distinct change in
strategy with the key strategic activity geared towards understanding customer needs.
Continuing support for this key activity in the future again reflects the benefits derived
from increasing teamwork in the past. New key strategic activities gaining popularity
are improving service quality, improving service functions and features, and
offering best after sales service emphasising a very customer-centred focus. The
need to add new customers is no longer a priority, as the increase in support for
increase sales to existing customers shows. But this is partially offset by a
determined emphasis on exploiting niche markets. In order to meet these changes in
strategy the medium-sized services intend to improve their information and strategic
planning systems.
In comparing the past and future key strategic activities noticeable differences not
already discussed are apparent in the decision to increase organisational learning,
developing new processes, reduce service lead-time, and benchmark competitors.
Increasing organisational learning is in line with the continued decision to increase
teamwork: why reinvent the wheel if the knowledge is already within the organisation?
Developing new processes shows an amazing change in emphasis, as in the past this
was of very little importance, but this would be one method to assist in reducing
lead-times, which also show improved support and could be explained by the
ever-growing demands of customers for services now. As markets become more
competitive the need to be aware of the competition also increases, which would go
some way to explain the increased support for benchmarking competitors.
Conclusion
This paper has reviewed the benefits of design and strategic factors in medium-sized
service sector industries. Medium-sized service sector enterprises were selected based
on an annual sales revenue turnover of between 5 million and 250 million over a
four-year period. Industries covered:
.
distributors;
.
general retailers;
.
leisure, hotels and entertainment;
.
media and photography;
.
real estate;
.
restaurants, pubs and breweries;
.
software and PC services;
.
support services; and
.
transport.
An unexpected finding from the research survey was that 58 of the 75 respondents
stated that they had no design function or did not design their services. If the sectors
had been limited to industries such as distributors or transport as these might term
design activities as more akin to planning then this would have been
understandable. But this was not the case, with some of the respondents from
industries such as leisure, hotels and entertainment, media and photography, and
software and PC services also stating that they did not use design. The authors suggest
that in some industries the employees may design certain services themselves and
have no need for the services of a professional designer. For example, in software & PC
services it is the computer programmers who write software and may decide how the
end product looks. In hindsight it may have been beneficial to change the term design
to professional design to differentiate the act of designing by anybody from
designing by those who have been trained and or gained a degree such as product
design, industrial design, interior design, graphics, architecture, etc.
Among those who stated they did use design, 11 respondents saw design as very
important, four as important and two as not at all important. Of the two that did not see
Strategic
planning and
design
191
MD
45,2
192
design as important, one came from the transport sector and the other from the leisure,
hotels and entertainment sector, specifically sports.
The two greatest benefits of design for the service sector relate to brand image,
either for the organisation or for the organisations service, closely followed by
increases profits.
Looking at the design factors responsible for current performance, design had been
used to add value and improve quality by attracting and holding onto quality staff.
Design also improved these enterprises ability to respond flexibly and enter into
growth markets.
In determining the criteria used to assess future performance the medium-sized
enterprises selected financial results as the primary focus. Enterprises have in the
past been criticised for concentrating on the short-term at the expense of long-term
strategic issues; in this survey, the service sector clearly placed long-term performance
ahead of short-term performance. The equal placing of building and enhancing
customer relations with long-term performance highlights the service sector
medium-sized enterprises belief that future financial results will be dependent on the
creating a customer based strategy.
Recent research (von Stamm, 2006) has suggested that mergers and acquisitions
were drying-up and one method to overcome this was to use design as a competitive
tool. This research survey found little to support such views. Although innovation,
which includes the use of design, was paramount as the strategic areas to concentrate
on in the past, acquisitions were still seen as beneficial and could also have assisted in
gaining access to innovation and market development. For the future strategic areas to
concentrate on innovation showed even greater support, but although acquisitions
rose slightly there was also an increase in support, compared with the past, for internal
investment and joint ventures. Overall the strategic areas to concentrate on in the
future depict a determined move towards an increase in innovation and therefore
should herald an increase in the need for the use of design.
Analysing the key strategic activities for the past and in the future suggests that past
performance has been dependent on adding new customers by improving the quality of
services provided, through teamwork, changes to organisational structure and offering
best after-sales service. For the future the medium-sized enterprises service sector show
a distinct change in strategy with the key strategic activity geared towards
understanding customer needs. There is no longer the same emphasis on adding new
customers, rather to increase sales to existing customers through improved service
quality and improved functionality and features of the services offered.
For those medium-sized service sector enterprises that recognise the importance of
design to business performance, this survey suggests that they will continue to build
on the value adding aspects design offers in order to improve performance. The
situation facing those that do not use design or have no design function, as they failed
to complete the survey questions, is unknown, but warrants further research.
To summarise the findings of this research into design in the service sector
medium-sized enterprises, the majority do not have a design function or use design. For
those that do use design:
.
the majority see design as very important;
.
the benefits of design relate to brand image of both the organisation and the
services provided closely followed by increased profits;
.
.
.
design has been used in the past to add value and improve quality;
future performance will be measured by financial results;
innovation has been and, to an even greater extent, will in the future be the main
strategic area to concentrate on; and
key strategic activities in the past have been adding new customers by providing
better quality services, whereas in the future key strategic activities will be to
understand customer needs by offering better functionality, features and a
quality service.
Strategic
planning and
design
193
MD
45,2
.
194
References
Aldersley-Williams, H. (1996), Measurement turns a profit, Financial Times.
Berry, M. (1998), Strategic planning in small high tech companies, Long Range Planning,
Vol. 31 No. 3, pp. 455-66.
Bloch, P.H. (1995), Seeking the ideal form: product design and consumer response, Journal of
Marketing, Vol. 59, pp. 16-29.
CIA (2006), available at: www.cia.gov/cia/publications/factbook/geos/uk.html#Econ (accessed
10 October 2006).
Clifford, D.K. and Cavanagh, R.E. (1985), The Winning Performance How Americas
High-Growth Midsize Companies Succeed, Sidgewick and Jackson, London.
Cooper, R.G. (2001), Winning at New Products, Perseus Publishing, Cambridge, MA.
Design Council (1998), Design in Britain 1998-99: Facts, Figures and Quotable Quotes,
The Design Council, London.
Fairhead, J. (1988), Design for Corporate Culture, NEDC, London.
Gemser, G. and Leenders, M.A.A. (2001), How integrating design in the product development
process impacts upon company performance, Journal of Product Innovation
Management, Vol. 18, pp. 28-38.
Glaister, K.W. and Falshaw, J.R. (1999), Strategic planning: still going strong?, Long Range
Planning, Vol. 32 No. 1, pp. 107-16.
Hemmington Scott (2000), Really Essential Financial Statistics, CD-ROM, Hemmington Scott plc,
London.
Mondiano, P. and Ni-chionna, O. (1986), Breaking into the big time, Management Today,
November, pp. 82-4.
Open University/UMIST Research Team (1991), Profits by Design: A Summary of the Findings of
an Investigation into the Commercial Returns of Investing in Design, prepared for the
Department of Trade and Industry by the Design Council, HMSO, London.
Potter, S., Roy, R., Capon, C.H., Bruce, M., Walsh, V. and Lewis, J. (1991), The Benefits and the
Costs of Investment in Design Using Professional Design Expertise in Product Engineering
and Graphics Projects, Report of the Design Innovation Group, The Open
University/UMIST, September.
Roy, R. (1994), Can the benefits of good design be quantified?, Design Management Journal,
Vol. 2, pp. 9-17.
Roy, R., Potter, S. and Riedel, J.C.K.H. (1999), The long-term benefits of investment in product
design and innovation, in Jerrard, R., Newport, R. and Trueman, M. (Eds), Managing New
Product Innovation, Taylor and Francis, London, pp. 142-54.
Sohal, A.S., Gordon, J., Fuller, G. and Simon, A. (1999), Manufacturing practices and competitive
capability: an Australian study, Technovation, Vol. 19, pp. 295-304.
Taylor, B. (1997), Secrets of the supergrowth league, Financial Times Enterprise, January,
pp. 6-7.
Taylor, B., Gilinskiy, A., Hilmi, A., Hahn, D. and Grab, U. (1990), Strategy and leadership in
growth companies, Long Range Planning, Vol. 23 No. 3, pp. 66-75.
Tonge, R., Larsen, P.C. and Ito, M. (1998), Strategic leadership in super growth companies
a reappraisal, Long Range Planning, Vol. 31 No. 6, pp. 835-44.
Trueman, M. and Jobber, D. (1998), Competing through design, Journal of Long Range
Planning, Vol. 31 No. 4, pp. 594-605.
Ulrich, K.T. and Pearson, S. (1998), Assessing the importance of design through product
archaeology, Management Science, Vol. 44 No. 3, pp. 352-69.
von Stamm, B. (2006), About innovation, p. 4, available at: http://designcouncil.org.uk/webdav/
harmonise?Page/@id 6004&Session/@id D_1LpRWazfHbj7FHViOOv1&Section/
@id 1534
Corresponding author
Povl Larsen can be contacted at: PLarsen-pdr@uwic.ac.uk
Strategic
planning and
design
195