The Danish Enterprise and Construction Authoritys Division for Research and Analysis

Pernille Johansen, Tobias Lau, Casper Hgenhaven and Jrgen Rosted

Background Report
Concept Design how to solve complex challenges of our time

August 2007

Pernille Johansen, Tobias Lau, Casper Hgenhaven and Jrgen Rosted

Background report
Concept Design how to solve complex challenges of our time

Indholdsfortegnelse

Introduction

Chapter 1 1.1 1.2 1.3 1.4 1.4.1 1.5 1.5.1 1.5.2 1.5.3 1.5.4 1.5.5 1.6

The Danish design industry Background Identifying/mapping relevant design companies The Danish concept design companies Concept design companies are witnessing signicant growth The largest export shares Concept design company characteristics Competences Methods and tools Client access Network relations Customer segment Summary

8 8 11 15 18 20 21 21 24 26 27 28 29

Chapter 2 2.1 2.2 2.3 2.3.1 2.3.2 2.3.3 2.3.4 2.4 2.4.1 2.4.2 2.4.3 2.5

Comparing leading Danish and international concept design companies Mapping international concept design hubs Size and location of international concept design regions Point system International survey Criteria for concept design companies Ranking concept design companies Summary Signicant conditions for a concept design region The needs of client companies University structure Network creation Summary

30 30 32 36 36 37 38

40 41 42 43 46

Chapter 3 3.1 3.1.1 3.1.2 3.1.3 3.1.4 3.2 3.2.1 3.3 3.3.1 3.3.2 3.4

Strategies and competences in the concept design company Developing a business strategy The strategic concept design company The design focused concept design company The holistic concept design company The work process in concept design companies Using competences Three competence combinations Exploring collaborative opportunities Industrial companies focus on concept design Concept design creates solutions across industries Summary

48 48 49 52 55 56 56 57 60 60 62 64

Appendix A Appendix B Appendix C

Representativity Point system for selecting concept design companies Typical work process in a concept design company

66 68 70

Introduction

is publication constitutes the background report to the book Concept Design - How tol solve complex challenges of our time, which was published in connection with the INDEX: AWARD in August of 2007 in Copenhagen. e purpose of this background report is to map the growth potential of the Danish design industry. Is there a particular type of growth-oriented companies working with the combination of innovation and design? And if so what characterises this type of company? e analysis shows that the design industrys potential goes far beyond the traditional focus on product design. Design is an important discipline to concretise innovation and to create new products and services - this implies that the companies increased focus on innovation has opened new opportunities for the design industry. It should be stressed that design cannot drive company innovation on its own. Other industries including advertising and consulting use disciplines that are important to the development of innovative solutions. Companies assisting other companies with innovation must therefore work with tools from various professional disciplines. ese are the companies referred to as concept design companies throughout this study. Please refer to the main report: Concept Design - how to solve complex challenges of our time for a precise description of the terms concept design and concept design companies. As described in the main report concept design companies originate from a range of businesses, most notably consulting, advertising and design. Concept design companies are characterised by assisting other companies in innovation through a combination of disciplines such as design, social science1 and business2.

1) Social science covers competencs from the humanities and social styudies including ethnographic, anthropological studies and other types of qualitative studies. 2) Se chapter 3 for a review of the applied methods and competences required to carry out concept design.

is analysis focuses on concept design. is does not imply that classic product design is not important. Product design is the cornerstone of Danish design - and there is and always will be a demand for design in the traditional sense of the word. e fact that concept design is the focal point of this analysis can be accredited to a set of emerging trends that are impacting not only the design industry but also other Danish companies that are demanding advisory services on user needs and innovation. e new trends are concentrated within two areas: More and more, Danish design and consulting companies are working with companies on new strategies and concepts. More and more Danish design and consulting companies are working to strengthen other companies innovation processes by applying design methods and tools.
Repor t structure

Chapter 1 highlights the general structure, size and importance of the Danish design industry and maps the Danish concept design companies. e chapter also introduces a point system for ranking indidivual companies in terms of their ability to carry out concept design. Chapter 2 maps and describes internationally leading concept design regions asnd compares results from the Danish survey with the results from the international mapping. In continuation thereof the chapter compares the identied companies based on the system introduced in Chapter 1. Chapter 3 describes a range of trends that impact concept design compniaes and their potential for growth. ese trends include choice of business strategy, how to combine concept design competences and nally how large industrial companies are moving into concept design.

Part 1

The Danish design industry

is chapter highlights the general structure, size and importance of the Danish design industry and maps the Danish concept design companies. e chapter also introduces a point system for ranking indidivual companies in terms of their ability to carry out concept design.
1.1 Background

e design industry has a profound impact on the Danish self knowledge. Companies in other industries use design as a key competitive parameter in the global competition - Danish design signals credibility and quality.

In the report Danish design - good business3? the Danish Growth Fund estimates annual turnover in the design industry at DKK 40 billion when including turnover in the fashion and furniture industries. According to the Growth Funds assessment turnover in the design industry surpasses that of the pharmaceutical industry, where 2005 annual turnover amounted to DKK 35 billion4. In the report An Image of Danish design - Challenges and Perspectives the Danish Authority for Enterprise and Construction (DAEC) draws a picture of the Danish design industry. In the report design companies are dened as companies registered under the industry codes 748.720 - Product design and industrial design and 748.710 - Interior architects5. Companies that use design as a key competitive parameter but which are not registered under the two industry codes are not included in the DAEC report. An image of Danish design - challenges and perspectives shows signicant growth in the number of companies in the design industry as well as strong continued growth in revenues, employment and exports. From 1999 to 2004 turnover increased from DKK 1.8 billion to DKK 2.9 billion6. During the same period employment grew by roughly one-third from
3) The report can be downloaded at www.vaekstfonden.dk. 4) Source: Statistical Yearbook - http://www.dst.dk/homedk/statistik/ags/statistiskaarbog.aspx. 5) In a company some activities wil results in a sale of products or services that yield revenue. The industry reflects the activity that leads to the companys turnover. 6) Source: EBST in An Image of Danish Design - Challenges and Perspectives (2007) based on data from Statistics Denmark.

2 000 to 3 0007. e number of companies has grown from approximately 1 200 in 1995 to 3 800 in 2004. e industry has also become more export oriented. Over a 10 year period income from international clients rose from 15 percent in 1995 to 24 percent in 20048. However, the signicant growth enjoyed by the design industry is not unique in comparison with other industries providing similar services to businesses (Figure 1.1).
70 Percentage changein employment 60 50 40 Architects 30 20 10 0 -40 -20 -10 -20 Percentage change in revenue 0 20 40 60 80 Ad agenceis Design Overall private sector Other advisory services (planning, control etc.) Consulting engineers

Figur 1.1 Percentage change in revenue and employment compared to the private sector 1999 - 2004

e DAEC report shows that the design industry has undergone rapid developments in recent years. However, at the same time the report shows that the industry is faced with a key challenge. e report shows that the design industry is characterised by a myriad of small companies. Of the 4 500 design companies that existed in 2004 only 1 800 were active. In other words, more than half of the Danish design companies were inactive9 (Figure 1.2).
4.500

Figur 1.2 Companies in the design industry 1996-2005 Source: EBST (2007) based
Total number of companies Active companies

Number of companies in the deisgn industry

4.000 3.500 3.000 2.500 2.000 1.500 1.000 500 0

on Statistics Denmark

7) See footnote 6. 8) See footnote 6. 9) According to Statistics Denmark a company must employ a years work of one person or have a turnover of at least 135.000 DKK to be considered an active company.

19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05

e myriad of small companies in the Danish design industry may be perceived as a signicant challenge - or a signicant opportunity depending on your point of view. e challenge lies in securing a layer of larger companies that may attract revenues and employment to the industry. e opportunities offered by small companies lie in them being catalysts for innovative thinking, creativity and talent. Concept design companies part of the Danish design industry? e traditional Danish design industry as described in the DAEC report is a growth industry both in terms of employment, revenues and exports. At the same time the industry is dominated by a myriad of small companies that contribute with idea generation and talent for the albeit low number of larger companies. In addition to the emerging trends in the traditional design industry we are witnessing a novel and interesting trend. A range of Danish companies that are not dened as product design companies but which work with design in a broader context are entering the market. is group of companies is characterised by mainly selling creative ideas, skills and user needs insights to other companies, where design skills and processes are critical elements in the production process together with social science and business skills. is group of companies is referred to as concept design companies through this report (Exhibit 1).

10

3) Rapporten kan downloades p www.vaekstfonden.dk. 4) Kilde: Statistisk rbog - http:// www.dst.dk/homedk/statistik/ags/statistiskaarbog.aspx. 5) I en virksomhed foregr nogle aktiviteter, der resulterer i salg af et produkt eller en ydelse, som giver en omstning. Branchekoden skal afspejle den aktivitet, der frer til virksomhedens omstning. 6) Kilde: EBST i Et billede af dansk design - udfordringer og perspektiver (2007) p baggrund af Danmarks Statistik: Regnskabsstatistikken (REGNR6 og REGNR7). 7) Som ovenfor. 8) Som ovenfor

What is a concept design company??

Concept design companies work with the discipline of creating concepts. A concept is a solution to a problem, a service or a combination of products and services that have not been solved yet or which have been solved in an unsatisfactory manner. New technology may be an important part of a new concept, but a concept may also be built on new solutions based on existing technologies or on non-technological knowledge. Concept design requires at least the different skills: social science, business and design that are combined in a new manner. Social science skills are necessary when observing user behaviour or uncovering user needs. Design skills are necessary when transforming new knowledge on user and market needs into functional and aesthetics products and services. . Business skills are necessary when mapping the concepts validity in the market subsequent consequences to the companys business model.

Exhibit 1 What is a concept design cmpany?

Konceptdesign
Business

Design

Socialvidenskab

is chapter, which is part of the concept design analysis, focuses on the group of Danish concept design companies. How many are there? Where do they originate from? Are they seeing higher growth compared to traditional design companies? What characterises Danish concept design companies?
1.2 Identif ying/mapping relevant design companies

e purpose of the analysis is to take a closer look at the Danish design companies - and to compare them to the more traditional Danish design companies. e rst step in the analysis is to identify the companies that are to be part of the study. It is our ambition to include all Danish companies working with design and concept design - in the intersection covering design, business and
9) Iflge Danmarks Statistik skal en virksomhed enten have et halvt rsvrk eller en omstning p over 135.000 kr. for at blive betragtet som en aktiv virksomhed.

11

social science. A portion of the Danish companies in fact working with concept design are not registered in the ocial Danish business statistics (748.720 - product design and industrial design10). is implies that the identication of companies cannot be based on existing statistics but must be collected through alternative methods. In this analysis we have chosen to identify relevant companies using the snowball method. e method consists of three phases. Phase 1: Denition of relevant design companies To identify the relevant companies requires a precise and operational denition. To include both design companies and concept design companies the company should meet at least one of the following three operational criteria: e company sells products and prototypes, where design competences and processes are vital elements in the process. e company sells services, creative ideas and competences, where design competences and processes are vital elements in the process. e company sells new insights into user needs, which contribute to change processes and innovation, where social science competences, business competences and design competences and processes are decisive elements in the process.

Phase 2: Preliminary interviews with key knowledge individuals During the early phases of the analysis an inspirational committee was set-up covering prolic Danish design experts. e inspiration committee was asked on their knowledge of interesting companies in the design area. Furthermore, they were asked on their knowledge of other key individuals and experts in the design area. In addition to the companies, knowledge individuals identied by the inspiration committee we have contacted 20 companies and knowledge individuals in the design area. ose companies and knowledge individuals were asked on their knowledge of companies and key individuals.
10) For more information on the brekadown of companies check www.dst.dk

12

Phase 3: Electronic snowball An exhaustive list of interesting companies and key individuals was drafted based on input from the inspirational committee as well as conversations with other companies and key individuals. e list formed the platform for the electronic snowball, which is briey described in Exhibit 1.2.
The snowball method is used to identify actors in a population or network who are not immediately accessible through quantitative approaches such as business statistics or commodity codes. The snowball process can be divided into three stages: 1. The snowball is launched by asking a number of design industry experts and key players about their knowledge of companies that meet one or more of the three criteria listed above. These people are also asked if they know of any other experts or key knowledge individuals who may have knowledge of these companies. 2. The snowball continues by sending new questionnaires to those experts identified by the key knowledge individuals and companies identified during stage 1. 3. The snowball continues until it is determined that all interesting companies have been referred to. Exhibit 1 What is a snowball

Snowball recipients were presented with 1) a list of companies and key individuals in the design area and 2) a description of the three criteria dening relevant design companies for the purpose of this analysis. e recipients were then asked to answer the following questions: Can you think of additional companies in the design area which should be added to the company list? Did you nd companies that should not be on the list? Can you think of any key individuals that should be added to the list? As new responses come in the gross list is revised, and the questionnaire is forwarded to the new companies and key individuals. e snowball continued among Danish companies and knowledge individuals until it was assessed that all interesting companies had been identied. e snowball rolled for 3 months and we experienced a maximum of 3-4 days between replies. 287 companies meeting at least one of the three criteria were identied. Some 100 individuals participated in the process. To ensure that the 287 companies provide an adequate image of the Danish

13

design companies and concept design companies the nal list of companies has been checked among members of the inspirational committee. At the same time it has been tested to which extent the identied design companies provide a representative image of the traditional design industry. e test shows that between 92 and 100 percent of the design companies with more than 5 employees has been identied in the snowball11. ere is no guarantee that all design companies have been identied; however, we feel condent that the traditional design industry is covered by the analysis. Collectively, it is the assessment that the most important Danish stakeholders have been identied.
The Sur vey

A survey was forwarded to the 287 identied companies in the extended design eld. 145 companies responded, corresponding to a 51 response rate12. e results from the survey were primarily used to 1) identify the design companies that perceive themselves as working with and selling concept design and 2) to qualify these answers in light of the fact that companies may have dierent perceptions of the term concept design. It has been tested if the incoming answers were representative for the collective population of design companies. Of the 287 identied companies 132 originated from traditional design industry. Of the 132 companies 52 percent responded. Representativity was tested by comparing the distribution of size with the distribution of design companies in the ocial business statistics. At the same time we have tested if the 145 companies that have answered the questionnaire are distributed in a manner similar to the one found among the 287 identied companies (Appendix A). e study nds that the survey is representative for the group of design and design related companies that are the focus of this analysis. Finally, it should be stressed that only companies with 3 or more employees that have been selected for this analysis. Hence, 4 000 companies have been omitted from the analysis. ere are two reasons why we have chosen to focus on companies of a certain size. First of all the very small companies do not have a global orientation
11) See Appendix A 12) Clothing companies, manufacturing companies and interior architects have been removed from the analysis due to limited responce rates.

14

found among larger companies. Secondly, concept design is characterised as being of such a size that companies can draw on a range of competences and disciplines.
1.3 The Danish concept design companies

In the survey companies were ask to state which services they sell. 58 of the 145 companies reported selling concept design. At the same time the survey shows that 21 percent of total revenues can be accredited to concept design. is makes concept design the largest source of income for the design companies included in the survey. Graphic design, communication design and Digital and multimedie design constitute between 15 and 17 percent of total revenues, while Product and industrial design, Interior and exhibition design and Other claim between 9 and 11 percent of total turnover among participating companies (Figure 1.3).
Figur 1.3
Other 9% Product and industrial design 11%

Distribution of total revenues in selected product areas

Concept design 21%

Graphic design 17%

Note: As a starting point, companies in the fashion industry were part of the analysis. Some fashion com-

Interiror and exhibition design 10% Digital and multimedia design 16% Communication design 16%

panies have participated in the survey and have stated that they work with concept design. However, due to the

e fact that some 58 companies have stated that they sell concept design is quite surprising. It could imply that a range of Danish companies are working with new methods in uncovering user needs and developing innovation in cooperation with companies; however, the fact that concept design is a relatively new phenomenon may have led to dierent interpretations of the term. is analysis oers a precise description of concept design based on a range of characteristics, which describes the companies use of methods, competences and relationships. To qualify the incoming answers a point system has been organised. e question remains whether the companies stating that they sell concept design are in fact working with concept design as dened throughout this analysis. e 58 companies stating that they sell concept design have been rated on the

limited number of respondents we have chosen to omit fashion design from the analysis Note: The question asked how large a share of total revenues were generated in the following categories

15

11 criteria that make up the point system. e point system evaluates each companys ability to work with concept design. e point system is based on the companies responses to the survey. Among other things they have answered questions related to the competences and methods applied, the level of client contacts and participation in networking relations with other companies. In other words the exact same areas that characterise concept design throughout the analysis. In the point system the 58 companies are evaluated by 4 dimensions: Competences a high score is given to companies that frequently apply the competences that are necessary when working with concept design. Methods and tools a high score is given to companies that frequently apply competences from humanities and social, economics and business economics, as the application of methods and tools from these disciplines are important for the ability to work with concept design. Customer contact For concept design companies it is often important to involve the clients top management and innovation department. us a high score is accredited if the design company is working with the top management and/or innovation departments. On the other hand, a low or no score is given to design companies working with client departments that are further away from the strategic decision making. Network activity the use of dierent disciplines is an important part of concept design; therefore, concept design companies are required to work with other companies and knowledge institutions. Network activities will therefore yield a high score. e maximum score is 55 points. None of the 58 companies scored 55 points, but a number of companies were given a solid score (Table 1.1).
Table 1.1 Company rankings in the point system Point score 0-10 11-20 21-30 31-40 41-50 51-55 Total Number of companies 4 20 10 18 6 0 58

16

To qualify the incoming answers we have set a limit (38 points) for a company to be regarded as with concept design on a high professional level. Further information on the point system is found in Appendix B. 38 points is the minimum number of points that may be achieved if a company can be regarded as fullling the 4 dimensions. In practical terms the company will have to answer 1) to a signicant extent or to a very signicant extent in terms of using the necessary methods and competences for working with concept design, 2) that they regard the same competences and methods as being very or extremely important, 3) that to some extent, to a signicant extent or to a very signicant extent the company is working with the clients strategy or innovation department/corporate development/top management/consumer insights department and 4) that the companies often, to a signicant extent or to a very signicant extent participate in networking activities with other stakeholders. 10 Danish concept design companies scored 38 points or higher. 14 companies received between 31 and 38 points, and thus lie close to the leading concept design companies. e Danish concept design companies originate from a variety of industries. Even though concept design companies use knowledge and competences from design, social science and business and therefore can be originate naturally from consulting and design there are Danish concept design companies originating from other industries, including software development, architecture or measuring and technical analysis. 7 of the 10 identied Danish concept design companies originated from industries outside the design world (Table 1.2).
Industry Code Industry Number of concept design companies

Table 1.2 Where do concept design companies originate from?

748720 744010 742040 741490

Formgivning og industrielt design Reklamebureauvirksomhed Arkitektvirksomhed Virksomhedsrdgivning undtagen landbrugskonsulentvirksomhed

3 2 2 1

743090 722200

Anden mling og teknisk analyse Udvikling af kundespecifikt software og konsulentbistand i forbindelse med software

1 1

17

Figur 1.4 Average growth rate kin percentage for revenue, employment and revenue per employee 2002 - 2006

e interdisciplinary approach taken by concept design companies thus implies that the companies do not necessarily originate from the design industry. At the same time it could indicate that companies from various industries have opened their eyes to the possibilities that lie in combining design competences from the humanities, social science, business and other related areas. It also implies that the Danish design is crossing professional boundaries becoming in essence an element in various business sectors across Denmark.
1.4 Concept design companies are witnessing significant growth

Note: Concept design companies (n=5) and the rest (n=43). Note: One of the concept design companies has been removed from the gure, due to radical changes in the companys business strategy.

As shown in section 1.2 the traditional design industry has benetted from the booming Danish economy. Hence, it could be interesting to see if Danish concept design companies have seen similar growth. Of the 145 partcipating companies, 71 have provided information on revenues, employment and exports. All of the concept design and a representative share of the other companies provided nancial information. From 2002 to 2006 average growth among Danish concept design companies was 14 percentage points higher compared to growth among traditional design companies. During the same period average annual growth in employment was 7 percentage points higher and growth in turnover per employee was 6 percentage points higher (Figure 1.4).
35 31 30

25 25

20 18 17 15 Concept design Design companies

10

0 -1 Revenue -5 Employment Revenue per employee

While dierences in growth rates are rather obvious they should be treated with some caution as the data material is limited. It has therefore been tested to see if there are any solid dierences in growth rates; the test shows signicant dierences (Exhibit 1.3).

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Exhibit 1.3
To test if the growth rates for concept design and design companies are significantly different a t-test is conducted. the zero hypothesis is tested against the alternative-hypothesis, which states that the growth rate for concept design companies is higher than the growth rate for design companies. If the zero-hypothesis cannot be rejected it implies that the difference in growth rates is the result of a random variation in the samples. An therefore there will no reason to assume that the two growth rates are significantly different. If the zero-hypothesis is rejected and the alternative hypothesis is accepted it implies that differences in growth rates are significantly different. We initially test at the 5 percent level. If the zero-hypothesis cannot be rejected we test at the 10 percent level. This is acceptable due to the limited amount of data Old companies (5 years or more)

Signicance test

Group

Number

Average annual growth 48,46 23,67

Variance

Concept design Design companies

Test for identical variance

5 43
S V=
2 Koncept 2 Resten

589,28 415,83
589,28 = 1, 42 415,83

F (n 1, m 1) V =

H0 :
The critical value , F
= 0,975

2 Resten

2 Koncept

,: A H

2 Resten

2 Koncept

(5 1, 43 1) = F (4, 42 ) = 3,11 .

H 0 cannot be rejected at a 5 percent level; hence it cannot be ruled out that the two variances are identical. The common variance: S 2 =
2 2 (n 1)SKoncept + (m 1)SResten

n+m2

S2 =

(5 1)589, 28 + (43 1)415,83 = 467, 07

5 + 43 2

As it is assumed that the two variances are identical, the hypothesis is tested through a t-test.

T=

X Y S2 1 + 1 n m
H0 :

,T

t (n + m - 2 ) T =
= ,: A H

48, 46 23, 67 467, 07 1 + 1 5 43

>
Resten

(
.

= 2, 43 .

Resten

Koncept

Koncept

The critical value t

= 0,95

(n + m 2 ) t (5 + 43 2 ) t (45) = 1, 679 .

Since 2,43 > 1,679 H 0 is rejected at the 5 percent level; i.e. the hypothesis on similar mean values and the alternative hypothesisof higher growth rates is accepted One company has been omitted from the analysis, as it has undergone extraordinary changes.

19

e established concept design companies thus have a signicantly higher growth compared to the traditional design companies. e question then remains; is this a trend seen also among the newly established companies. According to the survey 4 concept design companies and 23 other design companies were established in the past 5 years13. Except for one concept design companies, which has seen signicantly higher revenues, the newly established concept design companies and newly established traditional design companies have seen similar revenues in the nal year (Figure 1.5).
40

Figure 1.5
35

Revenue (in million DKK) in latest year for companies that are less than 5

35

30

25

years old.
20 Concept design Rest

15

10

9 7 5 5

4 1

0 3 years 2 years 1 year

0 4 years

1.4.1 The largest expor t shares

Globalisation opens a huge window of opportunity for Danish design and concept design companies. A stronger customer base will lay the ground for stronger revenues, higher employment and the opportunity for companies to specialise in certain areas. But globalisation also represents a major challenge to the Danish design and concept design companies that are feeling the pressure from international companies looking to enter the Danish market. Already today we are witnessing strong competition from leading international design and consulting companies. All this means that the Danish concept design companies increasingly turn towards the global market. In 2006 the average export share was 7 percent higher than the export share of traditional design companies (Figure 1.6).

13) It shouldbe stressed that we have only included companies with 3 or more employees.

20

Figure 1.6 Average export share in percentage of total revDesign companies 16 84

enues for concept design companuies and design

Export Domestic market

companies (2006). Note: Concept design com-

Concept design

23

77

panies (n=10) and the rest (n=62) .

20

40

60

80

100

120

1.5 Concept design company characteristics

Concept design companies are dened as companies that in material ways dier from traditional design companies in terms of the choice of competences and methods, client contact points and network relations. e survey investigates a number of dierent areas in relation to the companys use of competences, methods, tools and relations, but also in relation to the companies assessment of the importance of the various areas. In the following section each of the key areas - competences, methods, client relations, networks, employee composition and customer segment - and differences between concept design companies and traditional design companies are illustrated.
1.5.1 Competences

Application of skills By denition concept design companies focus on competences to uncover the market and user needs. High-priority competences include data collection on market and users, data interpretation skills and skills in developing concepts based on user demand. All of the identied concept design companies have answered to a signicant extent or to a very signicant extent in terms of using the abovementioned competences. Only between 43 and 68 percent of the traditional design companies reply that to a signicant extent or to a very signicant extent they are using competences for collecting, interpreting and applying data on markets and customers in developing new concepts (Figure 1.7).

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0%

10%

20%

30%

40%

50%

60%

70% 72%

80%

90%

100%

Figure 1.7 Applied competences in

Product design

60% 39% 60%

Design companies

Technological competences

concept design companies and design companies

Competnces in surveying the clients current and potential markets

24% 80% 22%

Concept design

Competences in collecting data on user behaviour

100% 21% 100% 43% 100% 21% 70% 56% 70% 37% 60% Percent

Competences in interpreting user data (pattern recognition)

Competences to apply user knowledge to create new concepts

Competences to test user reactions to new products/concepts

Competences to work with other professional groups

Other competences

Concept design companies also stand out in terms of testing customer reactions to new products and concepts. 70 percent of the concept design companies apply this competence to a signicant extent or to a very signicant extent. Among the traditional design companies the share is 47 percent. On the other hand, traditional design companies are more frequent user of product design competences compared to concept design companies. 83 percent of the design companies state that to a signicant extent or to a very signicant extent they are using product design competences, while only 60 percent of the concept design companies are using product design competences. is serves to underline the hypothesis that traditional design companies have a strong focus on product design. In general, concept design companies tend to use more competences compared to traditional design companies. With the exception of product design competences the concept design companies are more frequent users of all of the competences included in the survey. e importance of skills Further to the companies assessment of the extent to which they use various competences, the companies have been to rate the importance of the various competences ve years from now. All of the concept design companies oer the assessment that competences used to collect user data, to interpret data on user data and to apply user knowledge to develop new products as well as competences for testing user

22

reactions to new products/concepts also will be important, very important or extremely important ve years from now. e traditional design companies are also sharpening their focus on user and market needs in the coming years. While only half of the traditional design companies often, to a signicant extent or to a very signicant extent use these competences today between 79 and 97 percent of those companies expect these competences to be important, very important or extremely important ve years from now (Figure 1.8).
0%
Product design

10%

20%

30%

40%

50%

60%

70%

80%

90% 86%

100%

Figure 1.8 Share of participating Danish companies that

50%
Technological competences

77% 70%

Competnces in surveying the clients current and potential markets

84% 100% 79% 100% 83% 100% 97% 100% 79% 100% 86% 80% 48% 70%
Design companies Concept design

assess the following competencese as being important ve years from now.

Competences in collecting data on user behaviour

Competences in interpreting user data (pattern recognition) Competences to apply user knowledge to create new concepts Competences to test user reactions to new products/concepts Competences to work with other professional groups

Other competences

Evidence suggest that a growing share of companies in the design world will focus on skills related to user and market needs, thereby following the example of concept design companies. Employee composition e fact that concept design companies focus on a wide range of competences implies that concept design companies have more professional disciplines employed compared to the residual group of participating companies. Of course the majority of the concept design companies has employees with a design background. However, an equal share of companies has employees with a background from humanities and social science, while 80 percent of the concept design companies have employees from economics and business economics. e majority of the traditional design companies have employees with a design background, while only 40 to 60 percent have employees with a background in other competence areas (Figure 1.9).

14) It should be stressed that only companies with 3 or more employees are included.

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Figure 1.9 Composition of labour

120,0%

100,0% 90%

96% 90% 80%

80,0%

60% 60,0%

61%
Concept design Design companies

42% 40,0%

42%

20,0%

0,0% Design Natural science Humanities and social science (Excluding economics) Economics and business economics

1.5.2 Methods and tools

e use of methods and tools Per denition concept design companies dier from traditional design companies by more frequently using skills from humanities, social science, market economics, economics and business economics. Traditional design companies primarily focus on design and intuitive methods. All of the concept design companies have replied to a signicant extent or to a very signicant extent in terms of using methods and tools from the humanities and from social science, while 90 percent state that they use methods from market economics, economics and business economics. Among the traditional design companies more than 90 percent state that to a signicant extent or to a very signicant extent they are using methods and tools from design and intuitive methods. Other methods do not appear as widespread among the traditional design companies. Only 40 percent of the traditional design companies state that to a signicant extent or to a very signicant extent they use methods and tools from the humanities, social science, market economics, economics and business economics (Figure 1.10).

24

120%
Konceptdesign Designvirksomheder

Figure 1.10 Share of participating Danish companies that use the following methods to a
76% 70% 60% 60% 50%

100% 100% 90% 82% 80%

large extent or to a very large extent.

60%

40% 31% 20% 20%

18% 9%

19% 12%

0%
From design From natural science From market economics From the humanities and social science (Excluding economics) From economics and business econ. Intuitive methods Other methods

e importance of methods and tools When companies are asked to rate the importance of the various methods and tolls, the concept design companies maintain a strong focus on methods from multiple professional disciplines, whereas the traditional design companies rst and foremost focus on tools and methods related to design and intuitive methods. All of the concept design companies rate methods and tools from the humanities and social science as being important, very important or extremely important. 90 percent regard methods and tools from market economics, economics and business economics as important, very important and extremely important. Also, methods and tools from design and intuitive methods are regarded as being important among most of the concept design companies. Among traditional design companies methods and tool from design and intuitive methods are regarded as the most important; 90 percent of the design companies state that methods and tools from design and intuitive methods are important, very important or extremely (Figure 1.11).

25

Figure 1.11
Procent

Share of participating Danish companies that

120%
Konceptdesign Designvirksomheder

100%

assesses the following methods and tools as

100%

96% 90% 80% 90%

94%

80%

being important, very important or extremely important.

44% 40% 30% 60% 53%

68% 57%

70%

70%

41%

20%

0%
From design From natural science From market economics From the humanities and social science (Excluding economics) From economics and business econ. Intuitive methods Other methods

e results point to a stronger focus among design companies on the importance of methods and tools from the humanities and social science, market economics, economics and business economics. 68 percent of the traditional design companies state that methods and tools from the humanities and social science are important, very important or extremely important.
1.5.3 Client access

Concept design companies often maintain a broad focus on the development of concepts and strategies based on innovation and new thinking. is implies that client access must take place at variuos stages and that there is access to client decisions through the management team of the strategy/innovation departments. 90 percent of the concept design companies reply that often, very often or every time they work with their clients strategy and innovation departments. e share among concept design companies is between 60 to 70 percent. To the traditional design company the clients marketing department is the key collaborative partner. 92 percent of the traditional design companies state they work often, very often or every time with the clients marketing departments. 71 percent of the traditional design companies work with their clients strategy and innovation departments, while 60 percent often, very often or every time work with the clients design department (Figure 1.12).

26

Figure 1.12
Strategy or innovation department 90% 72%

Share of participating companies assessing that they frequently, very

Consumer insights

60% 15%

R&D

60% 30%

frequently og whenever possible sell products

40%
Concept design Design companies

Logistics and transportation

10% 4%

and services to the following departments.

Manufacturing

30%

Communication/HR

50% 55%

Design

60% 57%

Marketing

70% 93% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

At the same time, the gure shows that concept design companies have multiple entry points compared to traditional design companies.
1.5.4 Network relations

Networks may be very important to the companys knowledge and competence building, especially across knowledge intensive business sectors. For concept design companies working with multiple competences network activity is important; especially if the company does not possess all the necessary competences. e study shows that Danish concept design companies do not engage in engage more often than traditional design companies. Concept design companies are more active in networks covering educational institutions and relevant professional organisations. On the other hand, traditional design companies maintain stronger contacts with companies from other business sectors (Figure 1.13).
80,0% 73% 70% 70,0% 70% 73%

Figur 1.13 Share of companeis that

60,0%

57% 50% 50% 45%

Concept design

often, to a large extent

50%

50,0%

or to a very large extent participate in networks with the following players.

Design companies

40,0% 36%

30,0%

20,0%

10,0%

0,0%
Other design companies Companies from other industries Education Organisations Individual experts

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1.5.5 Customer segment

Often design companies will depend on industries in the surrounding community. For example, the car industry is an important customer business for the LA/San Diego design industry in Southern California, while the electronics industry is an important customer to Tokyos design companies. e question remains whether Danish design companies are depending on specic business sectors and whether there are dierences between concept design companies and traditional design companies in terms of their dependence of various business sectors. e Danish concept design companies and traditional design companies do not appear to be dependent on one particular business sector, but are rather spreading their activities across multiple sectors. At the same time the study shows that Danish design companies work for a greater variety of business sectors compared to traditional design companies. Finally, more concept design companies are working with knowledge intensive sectors including pharmaceuticals, the public sector and the telecommunication industry (Figure 1.14).
Figur 1.14 Share of concept design companeis and design companies that have customers in the following industries.
Fashion Pharmaceutical Other industries

40% 20% 19% 18% 28% 54% 20% 24% 10% 19% 31% 22% 20% 21% 40% 37% 34% 33% 40% 50% 30% 50%

60%

The company is a subcontractor to other design companies

Telecomm. Private consumers 0%

Public sector

70%

Furniture

Concept design Design companies

70%

Machinery Trade and transportation

Business service

Consumer goods

Retail

0%

10%

20%

30%

40%

50%

60%

70%

80%

1.6 Conclusion

e chapter focuses on the larger traditional design companies and concept design companies i Denmark. e survey identies the companies in the extended design area which have seen the most signicant growth in the past ve years, as well as common characteristics among growth companies in the extended design area. Results can be summed in three headlines: Concept design companies are showing impressive growth rates Concept design companies constitute a signicant growth layer in the Danish

28

design industry. When comparing concept design companies with the traditional design companies we see a strong trend; concept design companies are seeing the strong annual growth in both revenues and employment. At the same time, concept design companies continue to more export oriented compared to the residual group of companies. Concept design companies claim a larger share of revenues on markets outside Denmark compared to the rest of the companies in the survey. Concpet design companies originate from a number of dierent business sectors Many concept design companies do not have a background in design, but originate from other businesses such as advertising, consulting or architecture. Concept design companies that come from outside the design world have seen the opportunities present in the market. e survey shows that concept design is an important growth layer in the extended design world that may create growth and companies of a size that may change the structure of the Danish design world thereby boosting revenues and prots in the industry. Concept design companies maintain a multidisciplinary approach Concept design companies more frequently use methods and techniques in collecting and interpreting data on market and user needs compared to traditional design companies. Concept design companies have a larger share of employees with a background in the humanities, social science, market economics and business economics. e rest of the companies participating in the survey primarily use competences form design and intuitive methods; methods also regarded highly by concept design companies. At the same time concept design companies dierentiate themselves from the other companies by addressing other departments within the client company. Concept design companies often work with innovation departments, R&D departments and consumer insight departments, where as the residual group of companies primarily work with design and marketing departments.

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Del 2

Mapping Danish and international champions in the concept design industry

is chapter maps and describes internationally leading concept design regions asnd compares results from the Danish survey with the results from the international mapping. In continuation thereof the chapter compares the identied companies based on the system introduced in Chapter 1.
2.1 Mapping international concept design hubs

e mapping of the leading international concept design companies and regions is based on a comprehensive qualitative survey. As a starting point, we have used the same method to collect international data which was used when collecting the Danish data. However, collecting data for all the design companies in the world has not been possible. erefore, the international segment of this study focuses exclusively on concept design companies. As stated earlier concept design is a relatively new phenomenon. is implies that there is no international standard for how to dene a concept design company and there is only limited hard data available to be used in an international analysis of the concept design world. Existing data only covers the traditional design industry and therefore omits a signicant portion of the concept design companies. It is not possible based on existing data to get an overview of the number of concept design companies on a global scale. Hence, it has been necessary to construct new qualitative and quantitative data. e qualitative part described in detail below has been applied in mapping internationally leading concept design companies and concept design regions. e quantitative part is built on a survey and details the identied companies prerequisites for carrying out concept design on a high professional level. e international qualitative mapping is carried out in 6 phases:

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Phase 1: Preliminary interviews with key Danish knowledge individuals In the Danish part of the analysis we conducted a range of interviews with key individuals in the area of concept design. ese individuals were asked to assist in dening leading international concept design countries, regions and companies. e same questions were given the Danish inspirational committee (Please refer to the main report) Phase 2: Conclusions from the Danish survey Participating companies in the Danish survey were also asked to identify the leading international countries, regions and companies; hence, Danish concept design companies have contributed in identifying leading international concept design regions and companies. Phase 3: Interviews with key international individuals As part of the mapping of international frontrunners in the eld of concept design we have carried out interviews with key individuals. ese individuals were asked to identify leading international countries, regions and companies in the area of concept design. e individuals were identied through the internal network and through references. Phase 4: Interviews with identied international concept design companies Interviews were conducted with 36 of the international concept design companies identied in the previous three phases. Companies were asked to state if their region could be dened as a concept design region and whether other regions could be seen as competitors. Finally, they have pointed to competing concept design companies within and outside the region. Phase 5: Electronic snowball Based on the four initial phases an electronic snowball is launched with the purpose of identifying international concept design companies across the identied concept design regions14. Phase 6: Ongoing contact with selected international knowledge people To ensure that the electronic snowball provides an honest image of concept design companies in the respective regions we have invited international knowledge people to evaluate the collected data by acting as sparring partners when distributing the electronic snowballs and by assessing the quality of the nal list of international concept design companies.
14) Se chapter 1 for an in-depth description of the snowball approach

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e most signicant challenge in terms of the international mapping of leading concept design companies lies in the successful roll-out of the snowball across all of the identied concept design regions. e snowball was satisfactorily rolled out in the Danish part of the analysis. is is due to the nature of the close contacts maintained to key individuals in the industry. We have not been able to establish close contacts to international concept design regions. In San Francisco, London and the Netherlands local knowledge individuals were involved securing satisfactory results. In the remaining regions - New York, Chicago, Boston and Munich-StuttgartNurnberg the international snowballs have quickly died out. It has therefore been necessary to use alternative methods to secure a satisfactory international mapping of concept design companies. Among other things, the leading concept design companies and knowledge individuals were asked to audit and nalise the list of concept design companies that were identied through the electronic snowball. Based on the large number of concept design companies and key knowledge individuals that have participated in the audit of the mapping it is our assessment that the largest and most important concept design companies have been identied. Concept design companies in particular have a strong image of the competitors within and outside the region. erefore, we assume that all15 of the large international frontrunners in the concept design world have been mapped in the audit process. In terms of the smaller concept design companies the picture is somewhat blurred. Even though in theory the snowball should map all concept design companies it is dicult to state that this is also the case for the small or medium sized businesses. Since concept design is a relatively new phenomenon it cannot be ruled out the small or medium sized companies with a potential for concept design will surface.
2.2. Size and location of international concept design regions

e international mapping points to a number of concept design regions: the San Francisco/Bay Area, New York, London, Boston, Chicago, Los Angeles, Munich-Stuttgart-Nrnberg, e Netherlands and Denmark. e international mapping also provides an overview of the number of concept design companies (Figure 2.1).

15) In the following section we operate with a limit of 40 employees or more for large concept design companies and less than 40 employees for small-medium sized businesses.

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Figure 2.1
London Boston San Francisco 30 Chicago Denmark

Internationally leading concept design regions

17
Netherlands

10 4 7 Munich

10 24
New York

11 8
Los Angeles

- location and number of companies

e mapping shows that several regions have a relatively strong concentration of concept design companies; however, at the same time we see signicant variation across regions. Denmark is ranked alongside Boston in fth place with 10 concept design companies. London (17), New York (24) and San Francisco (30) are regarded as global hubs for concept design. Also Chicago lies ahead of Denmark with 11 concept design companies. Denmark is followed by Los Angeles (8), MunichStuttgart-Nurnberg (7) and the Netherlands (4). Outside of the 9 regions with a certain concentration of concept design companies we have identied 15 companies: 2 in Paris, 3 in Milan, 2 in Toronto, 1 in Barcelona, 1 in Zurich, 1 in Stockholm and 5 across the United States. A few concept design companies were identied in Asia (Shanghai and Singapore), but were all branches of US or European concept design companies. e analysis concentrates on US and European regions as it is assessed that such a mapping provides an accurate image of the international concept design world. e study primarily focuses on the strongest regions. Hence, the following analysis deals exclusively with San Francisco/Bay Area, New York, London, Boston, Chicago, Los Angeles, Munich-Stuttgart-Nurnberg, the Netherlands and Denmark. Size of concept design companies We see signicant variation in terms of the size of the identied concept design companies. None of them can be described as large companies with independent legal entities. For example, Denmark only hosts 3 concept design companies with 40 or more employees (Figure 2.2).

33

Figur 2.2 Concept design companies with over 40 employees

15 8 4

4 6 2 14 9

11 8 4

3 6 2

New York (9), San Francisco (8) and London (8) have the highest concentration of concept design companies with more than 40 employees. In that respect Denmark is well positioned against the top-performing regions. Only a handful of companies have more than 100 employees. Among the larger concept design companies there is a widespread notion that 70-80 is the optimal employee number. is number provides the company with the potential to solve the more demanding concept projects, while at the same time allowing the company to maintain its uniqueness. e capability to solve complex concept problems does not appear to be contingent upon company size. Concept design is a very special oering that requires high levels of professional ability, but it also requires intuition and thus very person-specic competences. ere are a lot of smaller companies solving complex concept design challenges for some of the worlds largest companies. e origin of concept design companies In addition to analysing the number and size of concept design companies it seems relevant to investigate the origin of concept design companies. is may provide us with an image as to whether the region is self sucient in terms of concept design companies or if the region depends on international concept design companies locating in the region. If we focus exclusively on companies that originate from their respective regions Denmark posts a solid ranking. In the United States San Francisco has fostered concept design companies and 9 branches from other regions. New York is home to 13 concept design companies from the region and 11 branches from other regions (Figure 2.3)

34

Figure 2.3 Concept design compa-

11 10 15 21 8 6 7 14 13 4

10

nies originating from the region where they are

located

roughout Europe London and Denmark have fostered the largest number of concept design companies (10) originating from the regions in which the companies are located. It is striking that all of the Danish concept design companies have originated from the region, and that there are no foreign branches in Denmark (Table 2.1).
Number of companies Companies with a minimum of 40 employees 8 9 8 2 3 4 4 2 4 Companies originating from the region Table 2.1 Concept design companies originating from the San Francisco New York London Chicago Denmark Boston LA Munich The Netherlands 30 24 17 11 10 10 8 7 4 21 13 10 7 10 8 5 0 4 region where they are located

e fact that there are no international concept design companies in Denmark may be regarded as positive or negative depending on your point of view. On the one hand Denmark is well positioned against the international concept design regions despite the lack of interest from international concept design companies. In other words, Denmark has singled handily been able to foster a booming concept design culture. On the other hand, one should contemplate why it remains less than attractive for international concept design companies to open branches in Denmark. e explanation is likely that there are not that many interesting clients in the area of concept design. erefore, the international design companies have not yet found it to be nancially attractive to locate within Denmark.

35

e large concept design companies often have several branches. A normal pattern appears to be that a concept design company is born in one of the leading regions such as San Francisco or New York. When the company grows to employ 70-80 sta members, a branch is opened in the region where most of the new clients are found, or where the company perceives the existence of interesting client potential.
2.3 Points system for identif ying Danish and international concept design companies preconditions for carr ying out concept design

In the following section we evaluate the quality of individual concept design companies. the starting point of the analysis is the point system that was developed for the Danish part of the analysis.22 e point system is built on a range of criteria that together provide us with an indication of the companies prerequisites for working with concept design on a high professional level. is approach allows us for comparing Danish and international concept design companies in terms of their ability to carry out concept design. e purpose of the international comparison is to create an image of how well-prepared the Danish concept design companies are compared to the international front runners. 2.3.1 e international survey We have collected information on the companies ability to carry out concept design through an international survey. For a more nuanced but also a more precise description of the identied concept design companies the survey investigates the methods applied, collaborative partners, client relations and network relations. e question presented in the international survey are identical to the ones asked in the Danish survey. Hence, responses are assumed to be comparable to the Danish responses16. e international survey was forwarded to the 103 concept design companies identied in the international mapping. e companies are located in the following regions: San Francisco/Bay Area, New York, London, Boston, Chicago, the Netherlands and Munich-Stuttgart-Nurnberg17. Unfortunately, we have seen some rather low response rates even though we encouraged companies to answer the questionnaire through the phone and through e-mails (Table 2.2).
16) For a detailed run-down of the pint system please refer to chapter 1. 17) See chapter 1, where the content of the questionnaire is presented.

36

Region

Number of identified concept design companies 30 24 17 11 10 10 8 4 7

Number of responding concept design companies 4 7 7 2 10 0 3 3

Response rate Table 2.2 The international survey

San Francisco New York London Chicago Denmark Boston LA The Netherlands Munich

13,3 29,2 41,2 18,2 100 0 75 42,9

e low response rate is a problem in terms of representation. is means that only a few of the international concept design companies can be included in the international point system. e results should therefore be treated with some caution as other concept design companies that have not completed the questionnaire potentially could be ranked at the top of the chart. However, the analysis shows that many of the companies that have answered the survey are the same companies that were highlighted as international frontrunners during interviews with leading concept design companies and knowledge individuals. In our assessment it is still interesting to conduct the international comparison. It does provide us with an image of how well-prepared Danish concept design companies are for carrying out concept design compared to the international elite. 2.3.2 Criteria for concept design companies e point system is built around a range of criteria intended to provide an indication of the individual companys prerequisites for carrying out concept design on a high professional level. e criteria were developed during the Danish analysis. e individual concept design company is terms of their responses. e criteria are as follows: Competences a high score is given to companies that frequently apply the competences that are necessary when working with concept design.

37

Methods and tools a high score is given to companies that frequently apply competences from humanities and social, economics and business economics, as the application of methods and tools from these disciplines are important for the ability to work with concept design. Customer contact For concept design companies it is often important to involve the clients top management and innovation department. us a high score is accredited if the design company is working with the top management and/or innovation departments. On the other hand, a low or no score is given to design companies working with client departments that are further away from the strategic decision making. Network activity the use of dierent disciplines is an important part of concept design; therefore, concept design companies are required to work with other companies and knowledge institutions. Network activities will therefore yield a high score. 2.3.3 Ranking concept design companies e point system shows that the list of companies scoring 38 points or higher is dominated by US companies (Table 2.3).
Table 2.3 Results from the international ranking
Company number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Sum (Max = 55, MIN = 38 point) 50 49 49 49 48 47 46 46 45 45 43 43 43 43 43 42 41 40 40 40 Region NY CITY NY CITY NY CITY Munich London NY CITY Denmark Denmark San Francisco Denmark San Francisco San Francisco NY CITY Denmark Chicago Denmark Denmark London London Denmark

38

21 22 23

39 39 38

Denmark Denmark Denmark Tabel 2.2 Status p udsendelse af

e highest scoring Danish concept design company (46 points) is ranked seventh on the list. is despite an overrepresentation of Danish concept design companies as compared to the number of concept design companies in other regions. e highest scoring international concept design company (50 points) is located in New York. None of the Dutch concept design companies are ranked among the companies that score 38 points or higher. While Denmark performs well compared to the Netherlands, we are not ranked in the upper part of the point system18. In addition to the companies that have responded to the survey there are companies which have been identied as being particularly interesting concept design companies by the international knowledge people and concept design companies. It is assessed that ve of those companies would be ranked alongside the top-10 companies if included on the list. e ve companies are located in New York (2), San Francisco (2) and the Netherlands (1). We nd both large, medium-sized and small companies in the top-10 list. e capability to solve complex concept problems does not appear to be contingent upon company size. Concept design is a very special oering that requires high levels of professional ability, but it also requires intuition and thus very person-specic competences. ere are a lot of smaller companies solving complex concept design challenges for some of the worlds largest companies. Of the 3 companies that were assigned the highest score, there are 2 companies employing just 10-20 employees each. As mentioned earlier we nd an adequate number of concept design companies with 40 or more employees in the international mapping. When looking exclusively at companies with more than 40 employees having scored more than 38 points or higher we see no dramatic shifts. New York og San Francisco continue their domination of the ranking (Table 2.4).

internationalt sprgeskema

18) None of the identified concept design companies in Boston have completed the questionnaire and have thus been omitted from the point system. It may very well be that those companies would rank among the top-performers.

39

Table 2.4 Results from the international point system for companies with 40 or more employees that have scored 38 points or more.

Top company 1 2 3 4 5 6 7 8

Point score 50 49 47 43 43 40 40 39

Region NY CITY NY CITY NY CITY San Francisco Denmark London Denmark Denmark

It should be noted that a large portion of Danish companies fall out of the ranking because they have less than 40 employees. us, most of the Danish concept design companies are relatively small compared to the leading international concept design companies. 2.3.4 Summary Overall, the results from the international point system show San Francisco and New York host some of the worlds most capable concept design companies. However, results would look somewhat dierent if more or other of the identied international companies had decided to participate. However, the evidence suggests that many of the incoming replies have come from the most advanced concept design companies; hence, it is still interesting to compare those with the Danish concept design companies. If focus is on companies with more than 40 employees, the study shows that Denmark has relatively few concept design companies compared to the leading US regions.
2.4 Significant conditions for a concept design region

Following the mapping of Danish and international concept design companies and having assessed the quality of individual companies it could be interesting to shed some light on the fact that most concept design companies are located in a limited number of regions. Which conditions have been benecial to the blossoming of a professional concept deisng environment such as the one found in San Francisco? Why is it that no international concept design company have decided to establish a stronghold in Denmark? And why is it that despite this Denmark has a large

40

number of concept design companies? Based on the information retrieved through interviews with leading Danish and international concept design companies and knowledge individuals from universities and business schools is it possible to establish three overall conditions that repeatedly are highlighted as important conditions for a strong concept design environment: e needs of client companies University education Network creation It is important to underline that the answers are ambiguous and that it will require an in-depth analysis to nd a coherent explanation to why one region would distinguish itself from others. 2.4.1 e needs of client companies One condition that has been highlighted as e key element in a regions strength in concept design is the industrys focus on product development and innovation. e larger the focus, the better the results. An important part of a concept design companys work is to identify the users recognised and nonrecognised needs. e Bay Area is one of the worlds leading regions in terms of product development and innovation that focus on users. One of the fundamental characteristics of the region is a profound focus on user friendliness and a deep understanding of users in the product development process, often referred to as user-driven innovation19. Concept design companies in the Bay Area grew up in a user-driven approach. At the same time there is widespread sense of understanding in terms of the potential for a user-driven approach to problem solving. e good message has spread and is now well anchored in the region. e industries strong focus on user-driven innovation is a huge advantage for local concept design companies, as demand for their services is signicantly compared to most European regions such as Munich and the Netherlands. Here, the industries grew up with a more traditional approach, where users were only drawn into the process at the later stages of the product development cycle.

19) Read more on user-driven innovation in: User-driven innovaiton - results and recommendations. The report can be downloaded at www.foranet.dk

41

Another trends that has been identied is that concept design companies will often locate near large, multinational companies - except in Denmark. All of the interviewed parties agree that the nature of the work commissioned by client companies is highly important to the concept design company. e Bay Area is dominated by the IT and pharmaceutical industry, Munich is focused on automobiles. New York and London maintain a strong focus on communication, and London is also characterised by maintaining a strong focus on the services industry. Concept design companies will be aected to a certain extent by the regions industry structure. e primary source of income for a concept design company is to sell services to a client company. In other words the concept design company should therefore be in close contact with potential client companies. Hence, it is only natural for a concept design company to locate itself in a region that has already attracted a range of major industries. 2.4.2 University structure Another condition highlighted as very important is the structure of the educational system in the region. Concept design companies will gain advantage from locating in regions where the educational institutions succeed in combining the three necessary concept design competences: business, social science and design. ere are surprisingly few spots where the educational institutions have succeeded in combing education and knowledge production that is relevant to the concept design company. e availability of competent employees was mentioned repeatedly during interviews with the leading Danish and international concept design companies. An important part of working with concept design is to have the necesary competences through well educated and qualied employees. Most concept design companies are seeing this as a scarce resource. Strong concept design regions have produced a stable ow of well-educated graduates that are much sought after by concept design companies. Table 2.5 lists the educational institutions that were highlighted as important suppliers of concept design graduates.

42

Stanford Universitys D-School Parson School of Design Royal College of Art Institute of Design, Illinois Inst. of Techn.

San Francisco/Bay Area New York London Chicago

Table 2.5 Overview of international educational institutions with a strong record in concept design

3 of the three educational institutions are located in the United States and one in London. I.e. there is a strong correlation in terms of location between the top performing regions and the top performing educational establishments. 2.4.3 Network creation e third and last condition that was highlighted as vital to an eective concept design environment was the presence of a strong networking culture. For several reasons it is vital to build a solid network. First of all concept design is carried out on a very abstract and highly strategic level compared to the traditional design companies. e growing complexity in the problems presented to concept design companies necessitates a broad as well as a specialised knowledge. Secondly, concept design companies are experiencing a lack of resources in terms of acquiring qualied and well educated employees. e concept design practice is growing and the educational world cannot keep up. To many concept design companies it is therefore necessary to participate in networks to acquire the right competences and the latest available knowledge in the area of concept design. At the same time concept design companies are faced with increasingly complex tasks. rough interviews with leading Danish and international concept design companies and knowledge individuals we have identied several types of networks that may prove benecial to concept design companies. ey can be divided into 3 types of networks: Networks between concept design companies and universities Networks between concept design companies and industries Networks involving concept design companies Networks between concept design companies and universities It is important that the concept design company has the ability to evaluate

43

a problem to a highly abstractive level. e approach to problem solving is typically of a more strategic character and the problems are more complex20. Although a concept design company possesses the necessary competences business, social science and design competences - the problem solving may sometimes require specialised knowledge; knowledge that can be collected from universities and knowledge institutions. At times a concept design company will require access to this specialised knowledge to be able to solve the task at hand. e closer the concept design companies are located to universities and knowledge institutions the bigger the chance that the concept design company is capable of acquiring the knowledge necessary for solving the task at hand. is way the concept design company will get the most updated information on knowledge and technologies that may inspire to alternative and perhaps radical innovations. Furthermore, the concept design companies will get closer to the professional disciplines that are vital for the company to possess, i.e. ethnologists, anthropologists, psychologists, designers and business school graduates. Because of the scarcity of graduates with this combination of competences it could be an advantage for concept design companies to engage in networks with universities and knowledge institutions. is will give concept design companies a greater chance of attracting the most qualied candidates. e US concept design companies have an advantage in that respect since most of the educational institutions oering concept design programmes are located here including Stanford Universitys D-School, Parson School of Design and Institute of Design, Illinois Institute of Technology. Networks between concept design companies and industries A second type of networks that appear to be conducive to a concept design companys success is networks involving industrial companies from other businesses. Compared to the traditional design companies, the concept design companies work on a more strategic and abstract level. is implies that the challenges faced by concept design companies to a signicant extent resembles those found among industrial companies. Hence, it could be benecial for both parties to engage in networks.

20) See the main report for more on the various types of challenges faced by concept design companies.

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Concept design companies participating in networks with industrial companies will gain a greater insight into the challenges faced industrial companies. Based on this knowledge concept design companies can point to alternatives to the more traditional approaches to product development. For the industrial company participation in networks involving concept design companies will provide them with a much greater insight into the potential of concept design and in continuation there of a discussion of how innovation processes targeting user needs are developed. Concept design provides a deeper understanding of the market. An increasing number of industrial companies are seeing the potential of using resources to understand user and user needs prior to the development and launch of a product. e product will have a greater chance of success, and in the longer term it will be possible for the industrial company to carry out concept design based on experience and knowledge gathered via networks involving concept design companies21. Network involving concept design companies e last type of networks mentioned by Danish and international concept design companies are networks between concept design companies. In general, concept design companies may use such networks to size themselves against other leading concept design companies. is may provide inspiration for improving the use of methods and tools in concept design. One important matter in that respect is that concept design may originate from many business sectors. One may originate from traditional design, another from a consulting company. Depending on the point of origin there may be dierent competences available in the company. Concept design companies may learn from each other and there lies a great potential in exchanging experiences with other concept design companies that originate from other industries. In some of the identied international concept design regions we nd a very open innovation culture. is is particularly evident in the Bay Area, in fact across the entire United States, where concept design companies regard other concept design companies as potential collaborative partners rather than competitors. e desire to share knowledge and to gather competences and professional skills from other companies is much more common in the United States than in European concept design regions. It is generally accepted that concept design borrows or hire employees from other concept design
21) To learn more on the focus of industrial companies on concept design please go to chapter 3.

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companies. is may explain why US concept design companies outperform their European counterparts.

Adaptive Path
Established: 2001 Location: San Francisco Number of employees: 25 Professional tradition: Case problem: What can openness do for concept design companies? Adaptive Path specialises in designing experiences and user interfaces for the software and electronics industries. The company also works within other industry sectors. Adaptive Path clients include Yamaha, Intel and Nokia. Ethnographic methods are an important aspect of Adaptive Paths work and together with market analysis, make up the platform for Adaptive Paths work. The company presents its results in a report, design brief, road map or a model describing how the client company should design its experiences or user interfaces to ensure that they meet user needs. Adaptive Path is located in the heart of San Francisco in an area that is also home to departments of other concept design companies such as IDEO and Cheskin. This proximity to other concept design companies is no coincidence. Openness and networking is very important to Adaptive Path. The company often participates in network activities with the other concept design companies in San Francisco, and often hosts their own network events as well. Network activities are important for Adaptive Path in keeping up with the latest developments in concept design, to meet knowledge individuals within the field as well as meeting potential clients. The following is an example of an Adaptive Path network event (issued to local design blogs and design news websites): Its Adaptive Paths Sixth Anniversary! Its that time of year again. Join us for our annual fiesta (yes, the taco truck will be back) on Friday, March 2. Bigger and better every year, the party will start at about 6:30 PM and wrap-up much, much later. Mark March 2nd on your calendar and come and visit us at our San Francisco headquarters. All are welcome. Please let us know youre planning on attending by RSVP-ing below.

2.5 Summar y

e international mapping identied 9 leading concept design regions: San Francisco, New York, London, Chicago, Boston, Los Angeles, Munich, the Netherlands and Denmark. e mapping provides an overview of the strength of the identied concept design regions. San Francisco and New York stand out as strong regions and London also performs well. In Denmark we have identied 10 concept design companies, which is roughly one-third of the number of concept design companies found in the top-performing region (San Francisco). Denmark has 3 concept design companies with 40 or more employees. In other words, most of the Danish concept design companies are relatively small. However, this does not imply that the Danish design companies are

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not qualied to carry out concept design on a highly professional level. Some of the smaller Danish and international concept design companies prefer to collaborate with high-quality partners rather than employing additional employees. e international mapping also shows that Denmark and the Netherlands are the only regions where all of the concept design companies are home grown. A questionnaire was forwarded to all of the companies identied in the international part of the analysis. e responding companies were then ranked using a point system developed for the purpose of this analysis. e point system shows which companies are best equipped for carrying out concept design. e international point system shows that San Francisco and New York host some of the worlds most qualied concept design companies. ree conditions have repeatedly been highlighted as being important to the development of successful concept design regions: the need of client companies, university education and network creation.

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Del 3

Strategies and competences in the concept design company

is chapter describes a range of trends that impact concept design compniaes and their potential for growth. ese trends include choice of business strategy, how to combine concept design competences and nally how large industrial companies are moving into concept design.
3.1 Developing a business strategy

Companies looking to carry out concept design will face dierent business challenges depending on which business sector they belong to. Dierent concept design companies are faced with dierent challenges. ese challenges are highlighted in this section and are illustrated using the concept design model.

e concept design model denes 3 archetypes of concept design companies that are each identied by their business strategy: strategic, design based and holistic. e three strategies are stereotypes created to promote an understanding of various business challenges. It is of course possible to combine the strategies in several ways.

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3.1.1. e strategic concept design company Companies work in top right-hand corner of the concept design model (abstract, strategic and multidisciplinary).

e strategic concept design company focuses on the initial phases of the innovation and development process, i.e. with a strong focus on research, strategy and concept development. e strategic concept design company solves complex, societal, behaviour related problems often formulated by the client as an abstract problem: how should the kindergartens of the future work? or how can you create a healthier working environment?. e strategic concept design company collects information on user needs and the clients competitive landscape. e gathered information and research material is used to develop a new product or service strategy, often illustrated with individual proposals for new concepts. e strategic design company does not design the nal product, nor its packaging. If the client wishes to design proposals for the concept proposals with the intention to market the product a design agency or the clients own design department will develop the design. Hence, the strategic concept design company is not involved in the development phase. Focus is targeted towards the collection of data that may create new knowledge, insights and strategies that will improve or develop the clients innovation ability. If the strategic

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concept design company is presented with a traditional design task such as designing a toothbrush, it will often decline the task or choose to gain a better understanding of peoples behaviour when purchasing a toothbrush, alternatively to spot new market opportunities. e strategic concept design company will use a variety of professional disciplines when carrying out concept design and applies an approach which may be termed strategic optimism. In other words, the concept design company will focus on research and analysis on a high scientic level. At the same time, it will use is imagination to combine knowledge into new improved products and services. e research includes qualitative user surveys and market potential mapping; thus the strategic concept design company will have a strong academic prole. At the same time the strategic concept design company will use its imagination and creativity in a highly strategic manner and propose daring new products and services. is type of concept design company typically hires people with a degree in social science, economics or the humanities. Often anthropologists, ethnologists and psychologists are used (Cheskin in San Francisco, Nest Home Lab in New York and ReD Associates in Copenhagen).

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Cheskin
Established: 1961 Location: San Francisco (headquarters) Number of employees: 100 Professional tradition: Market research Case problem: What is the difference between girls and boys?

Cheskin is a consulting company offering research-based innovation-consultancy. The needs of the end user are always central to Cheskins work in nding solutions to client problems. Cheskin starts of by obtaining an understanding of the users experience of the problem under consideration. Cheskins work often results in principles intended to guide the design of the solution. The companys primary offering is user research and description of the experience demanded by the user. Cheskin does not submit a prototype or sketches of new concepts; instead they use reports or gures that describe the design principles necessary to design the most user-friendly experience for the clients customers.

If the client wishes to continue working with the proposed design principles with Cheskin acting as facilitator, Cheskin begins collaborating with design companies to develop prototypes of the concrete product. We are interested in facilitating the designers creativity and inspiring it with our understanding of consumers, explains Steve Diller, partner and manager of Cheskins Experience Design Studio.

An example of Cheskins work method can be seen in an analysis undertaken for a client within the IT sector in the San Francisco/Bay Area. The client wanted to know why girls do not play computer games. With this open brief as a starting point, Cheskin set their anthropologists, psychologists and business-educated people to work to determine a unique insight that would later guide the entire product development process. Cheskin developed a number of design principles, one of which was: Make the game actively distasteful to boys so that they wont take it from their sisters. This and other principles guided the client to discover what sort of game should be designed. The process ended in the creation of a game called Purple Moon (boys hate the colour purple, according to Cheskins research), which would go on to become the second-highest selling game in the following Christmas season in the United States.

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3.1.2. e design-focused concept design company e company operates in the bottom, left corner of the concept model (concrete, non-strategic and non-multidisciplinary) .

A design-focused concept design companies will often solve traditional design assignments such as logo design, door knobs or a chair while simultaneously working with concept design. is requires that the company is capable to work with the clients needs on a strategic level. is calls for additional competences. e design-focused concept design company is rooted in the traditional concept design industry. ey focus on the creative element and aesthetic quality. At the same time they are in an ongoing dialogue with the client to identify the strategic rationale behind the assignment. If this type of concept design company is presented with a traditional design job the company will design the end product. However, the design-focused company will not design a toothbrush that is simply interesting or fashionable. Instead the company will take the opportunity to understand the underlying cultural and societal needs that may eventually lead to a more in depth analysis of hygiene related issues. Quite often, the design-focused concept design company will make present the argument that the client should focus on the broader cultural and societal aspects of the product. e design-focused concept design company will not necessarily be responsible for carrying out

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the background analyses (user and market studies); this may very well be left to the strategic concept design company. A broader perspective implies that the concept design company will be in contact with more than one client department providing the company with a deeper understanding and insight for inuencing the clients overall strategic decision processes. If the concept-focused concept design company is capable of upscaling the project into a more strategic, abstract and multidisciplinary context it will be able to solve far more complex tasks. By challenging the core problem one changes the assignment to be more than a design-job becoming a task involving designers, anthropologists, hygiene experts and business school graduates. It is the transition from a simple mono-disciplinary approach to a complex, multi-disciplinary, knowledge based and strategic approach, which separates the classic designers from the design-focused concept designers. Not all design problems can be solved using concept design. In many cases a design company is hired to solve a concrete design job in a quick and creative manner. ere is a tendency among design-focused concept design companies that are rooted in the traditional design industry to downplay their use of design when marketing their business. e successful US company Frog Design does no longer brand itself as a design company but rather a strategic-creative consultancy. By their own admission they position themselves this way to attract more strategic clients.

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Prospect
Established: 2006 Location: London Number of employees: 5 Professional tradition: Strategic design, graphic design Case problem: What can employers do to motivate employees to focus on living a healthy lifestyle?

Prospect is a small strategic design company located in London that collaborates with a range of different partners to solve various types of problems for their clients. Prospects business model is built upon a close partnership with other kinds of research and design companies, which means that in collaboration with others they can take on more complex projects than traditional design and branding projects. We dont see competitors but possible collaborators, explains Prospects Strategic Director, Richard Eisermann. Prospect was tasked with improving employee health in UK workplaces. Earlier campaigns had failed, and according to Prospect only 15 percent of the NGO and governmental initiatives were successful within UK workplaces. The client commissioning the project, Oxford Health Alliance (OXHA), was in need of new perspectives on the problem.

Many of the illnesses people suffer from in the Western world are lifestyle illnesses such as diabetes and cancer, and these are linked to inadequate diet and lack of exercise. According to OXHA, 69 percent of the British adult population does not live up to the recommended level of physical activity. Prospect contacted their network of research companies and knowledge institutions to gain more understanding of the problem and to generate an idea of how to solve it. Prospect involved many different collaborators for the workplace health project, including anthropologists, health experts and exercise trainers. Together they discovered that people reacted negatively towards campaigns and initiatives that focused on guilt feelings. Instead, Prospect and its collaborating research companies determined that it was necessary to develop new concepts that appeal to peoples motivation and interest in exercising and healthy eating in the workplace. They discovered that people are more committed to health in the workplace if they can see the personal value in it. Based on this insight, Prospect designed an array of new tools for the British workplaces, one of which was called Health Futures, which helps people choose their own desired state of health. And because the employees themselves are doing the choosing when it comes to their own health futures, more employees are sticking with it. The tools were well received by OXHA and are set to be implemented at a number of different UK workplaces.

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3.1.3. e holistic concept design companies e company operates in the entire spectrum of the concept design model.

e holistic concept design company combines research methods from a variety a professional disciplines in an attempt to understand the clients problems, map the competitive landscape, investigating user needs, analysing data, developing concepts, developing prototypes and designing the nal solution. e holistic concept design company covers the entire value chain from background research to the nal design of product packaging or launch of the service. If the holistic concept design company is given the task to develop and design a new toothbrush the process will start with extensive studies including 1) to investigate the users cultural and societal perception of hygiene, 2) to create an overview of the toothbrush market over the past 10 years, 3) to understand the toothbrushs position in the market and 4) to study relevant technologies and other studies. In this phase of the solution process the holistic concept design company use employees with a background in social science and business economics. e studies are planned in co-operation with the client to give them an insight into a new product or new service (a new toothbrush; an alternative hygiene product) or how a new concept may full this need.

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Insights are used as design briefs and input for designers, which are therefore given a framework to work in. e framework holds information on target group, which societal problem you are looking to solve and a few concept design proposals. Following this the designers embark on material, shape and colour studies in terms of appearance, packaging and marketing. this is often carried out in cooperation with the employees that carried out the research studies. Employees at holistic concept design companies come from various professional disciplines and require a working culture that fosters cooperation across disciplines especially when a solution is going from one phase to another. is necessitates that the employees can look beyond their own discipline , something that US employees seem very capable of. One of the reasons may be that the US educational system combines disciplines. 3.1.4. e work process in concept design companies ere are dierent approaches to working with concept design. ree strategies were described in sections above. e strategies will dier depending on which elements in the innovation process the concept design company embraces. Please refer to Appendix C for an in-depth description of the different phases. Each phase will have its own focus areas, method application and competence composition. e following section identies that competences that are necessary when working with concept design.
3.2 Using competences

Concept design requires the combination of several competences. You cannot carry out concept design by using only design competences. On the other hand, one cannot rely solely on social science or business skills. Only when these competence areas are combined one is able to systematically carry out eld work, amrket and suer analysis, concepts, illustrations and prototypes. e three competences needed to carry out concept design are: business, social science and design skills. 1. Business skills is competence area covers the ability to understand market and client needs. In other words that you are capable of analysing the market, developing business models, understanding the competitive environment and using various business related analyis tools such as SWOT-analysis, competitor ana-

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lysis, business cases and benchmarking. ey are typically used in concept design companies to understand the clients challenges from a nancial point of view. Furthermore, they suppor the trust between the client and the concept designer and eases the whole concept creation process 2. Social science skills is competence area is mportant to understand user needs. e users recognised and non-recognised needs are mapped, insights analysed and new meaningful concepts are drafted within a relevant context. Hence, you are capable of understanding the users needs from a cultural and societal angle. is ability will help the concept design company to support the argument that one concept is better than another from a user perspective. is requires a methodical approach to eld work and qualitative interviews, which are carried out by anthropologists, ethnologists and psychologists. 3. Design skills is competence area covers the ability to combine new knowledge with concrete solutions that create surprising and positive solutions to the user. is implies that the designer serves as a junction for all important insights and expressese them in one or more concrete solutions. is is often done by testing a range of solutions through sketches and model (an iterative process). is requires handling and combining market and user knowledge while at the same time being loyal to ones own intuition of how the product or solution may create a positive experience to the customer. is competence is often carried out by deisgn schools graduates. 3.2.1 ree competence-combinations Concpet design is based on a combination of the three comptences described above. Certain combinations are more common than others and are highlighted in the section below: Combination 1: e concept design company will hire people that cover all three conept design competences in teams. Combination 2: Concept design companies accept that not all of the three competences are available in-house and collaborates with other companies. Combination 3:

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e concept design company will hire individuals that possess all three competences. In practical terms individuals will possess two out of three competences; the company will then assume responsibility for teaching employees the third competences. Competence-combination 1: For some companies it is relevant to hire specialists working in teams to cover all three competences. In that manner the company may position herself as a professional practician in a broad range of services covering research, analysis, graphic design and industrial design. Concept design companies will try to gain ownership of all phases in the clients innovation process be it research, market studies, concept development, packaging design and marketing. Companies pursuing this competence strategy include IDEO and Lunar (US) and Engine (UK). Competence-combination 2: To this type of company it is not vital to have all three competences available in-house and will co-operate with other companies to cover them. For this type of company it is not necessary to have all three competences. us, you can be a concept design company even though you only have employees in either design, business or social science. e important part is that all three competences are put into action by cooperating with companies and knowledge individuals. A traditional design company where all employees have a background in design may enter a partnership with a consulting company that specialises in user surveys. Companies that pursue this strategy include Prospect (London) and Nest Home Lab (New York)

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Competence-combination 3: e concept design company employs individuals that possess two or three of the competences. is type of company are searching for employees with a high professional capacity that are able to combine the three competences. is may be dicult to nd. Hence the company will look for employees that master two of the three competences, and will assume responsibility for teaching the employee in mastering the third competence. is approach is not multi-disciplinary but is driven by a desire to create pan-disciplinary teams, where each person is able to think more than one descipline at the time.

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3.3 Exploring collaborative oppor tunities

e study has investigated concept design companies originating from advisory companies (including companies from design and consulting) who is selling concept design services to industrial companies, including Intel, Samsung, Lego and Herman Miller. e analysis identies two interesting development among industrial companies: Some industrial companies carry out concept design on a high professional level Some industrial companies use their innovation or strategy departments to carry out concept design on a level that in some cases surpasses the services oered by top-level concept design companies from the design or consulting business. Concept design companies create solutions across industries. Interdisciplinary themes such as health, the environment and wealth are used as inspiration for spotting new innovation opportunities. Competing concept design companies and industries may work on the same general themes without being aware of it. 3.3.1. Industrial companies focus on concept design Large industrial companies such as Steelcase, BMW and Philips carry out concept design to improve their innovation capacity. Industrial companies have been so successful in doing systematic concept design that concept design has become an integrated part of the industrial companies services. Companies like BMW and Philips Design sell concept design services to other industrial conglomerates such as Nokia and Sony. We have investigated the industrial companies competences by visiting the design and innovation departments. Companies were identied by 1) asked knowledge individuals in Denmark and abroad about their knowledge of industrial companies that carry out concept design, 2) asking the inspirational group on their knowledge of industrial companies doing concept design and 3) asking for information on concept design companies in the questionnaire. We paid visits to 5 in-house departments: Electrolux, Stockholm; Arup, London; Lego, Billund; Philips Design, Eindhoven and BMW DesignWorks, Mnchen. e industrial companies state that rst and foremost they carry out concept

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design to improve their competitive power. is development is frequently seen among industrial companies that have built a systematic use of methods for carrying out design research, strategic research or research on the users use of company products and services. Studies related to studies on design, users, markets and concepts may be used in the strategy department, the design department, the consumer insight department or the innovation department. In addition to using concept design to create new knowledge a number of industrial companies sell their expertise to industrial companies from other business sectors. e execution of concept design takes place at a high professional level and are not dierent from the methods used by the top concept design companies. e reasons may be that some progressive industry companies as far back as the early 1990s experimented with concept design methods in an attempt to develop an internal innovation culture. Industrial companies carrying out concept design still cooperate with independent concept design companies on some projects. It is not important whether a consulting company, an ad agency or a design company solve the problem. is also explains why concept design originates from several industries. Industrial companies not working with concept design For companies not working with concept design in-house, collaboration with an independent concept design company may provide a great opportunity in gaining a new methodical approach to developing new products and services. To many industrial companies it may be somewhat of a cultural shock to work with a concept design company for the rst time. In many cases the industrial company has never worked systematically with methods from design and social science to create new products and services. At the same time the concept design company will often work with knowledge institutions to collect knowledge on the industry that the industrial company belongs to. To carry out a concept design process requires a certain amount of openness and motivation in working with partners and knowledge institutions.

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3.3.2. Concept design creates solutions across industries Industrial companies and concept design companies from dierent industries create solutions that are based on identical societal, cultural and environmental challenges. e one thing that characterises industrial companies, consulting companies, design companies and ad agencies in terms of their approach to concept design is their ability to work with long-term, abstract and societal challenges. A growing number of companies are working with concept design on a highly abstract level. is makes cross-cooperation among companies still more relevant. Industrial companies that collaborate with concept design companies or work with concept design themselves are often relating their own business potential to larger cultural or societal challenges. is implies that a growing number of industrial companies working in cooperation with concept design companies work with broad themes such as energy, urban development, transportation, health and the environment to understand the innovation potential of industrial companies. is research often takes place within each industrial company. Hypothetically, Philips Nokia, ISS and DesignIt work with the same challenges for developing better technologies and services without being aware of it. ere lies a signicant potential in companies from dierent industries working across sectors to create innovation and product enhancements that will help solve major societal problems. Among others, Philips is dedicating itself to engage in such collaborative relationships in the future31. is trend creates a whole new role for the concept design company be it a subsidiary of a large industrial company or an external design and consulting company. e overview of markets and users created by the concept design company implies that the concept design company becomes a bridge builder across industries. is role may be a catalyst for large abstract challenges being solved through an inter-industrial netowrk. By applying large abstract themes such as energy, transportation, the environment, and health concept design contributes to opening the eyes of industrial companies in terms of facing new opportunities. Hence, concept design companies must sharpen their ability to spot opportunities and solutions.
31) Iflge Hans Robertus, Senior Studio Director i Philips Design.

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More Associates
Established: 2002 Location: London Number of employees: 7 Professional tradition: Industrial and graphic design Case problem: What is a new word for kilo watt?

More Associates is a design agency focusing on developing new, user-friendly solutions to large, abstract challenges within the areas of energy and the environment. They create new energy solutions such as new types of electricity meters, and work with energy companies and government authorities on a range of energy projects.

Due to increasing needs to produce and promote a sustainable lifestyle, many energy companies in England are becoming interested in the new green energy concepts. But according to More Associates, the energy companies have difficulties developing these concepts themselves, partly because the energy industry does not have a clear picture of who has responsibility for and who should take the initiative to create new solution models. More Associates has been successful in selling concepts to the energy industry. Rather than waiting for clients to come to us saying, we found an interesting problem - can you solve it?, we now look at the problem base which is about the environment, government policy and energy policy and market transformation in the energy industry, and then start ringing potential clients up and saying: We think we know what the answer for this is - but it needs these different players to bring it together, says Luke Nicholson, partner at More Associates.

One example of a project headed by More Associates is to make it easier for people to talk about energy. For many people, terms such as kilo watt and CO2 ton do not carry any particular meaning. More Associates works with 20-30 energy organisations, the largest energy companies in England, poets, semioticians and users to design a new language and new mental metaphors that will help make the public energy debate more relevant to more people. We allow the public energy debate to happen faster, says Luke Nicholson. More Associates is conducting a user-driven study of public attitudes towards energy and is testing new terms and concepts. A panel of users was set up by an energy company and users were interviewed by More Associates. In this way More Associates can identify the needs of both the market and the users at the same time as it acts as a bridge-builder between organisations and market interests.

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3.4 Summar y

Companies working with concept design can do so in a number of ways depending on which industry they originate from. e chosen approach bears implications for the companys business strategy and competence prole. When launching a new product or service one should have as goal to embrace the entire development process from carrying our social science and market related background research to nishing the layout. Another approach is to carry out research and uncover insights on a high academic and scientic level that may lead to new products and services. A third approach is to start with a concrete design task that may be used as a bridgehead in working with the clients long term strategy and challenges. You do not have to be a designer to carry out concept design; however, concept design requires at least one of three competences: business, social science and design. ese competences cover collectively the ability to uncover market and user insights when designing new or improved products or services. ree competences combinations have surfaced on several occasions during our research eorts: e company hires people that in teams cover all threee competences e company accepts that all three competences may no exist in-house and thus co-operates with other companies to apply those competences. e company hires people that master two out of three competences, and the company trains the employee in the third competence.

Large industrial companies such as BMW and Philips are beginning to sell concept design services to other companies such as Sony and Nokia, as several industrial companies have learned that concept design is a key competitive factor.

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Appendix A

Representativity

Table A.1 Share of large Danish design companies with industry code 748.720 to whom a survey has been forwarded

Number of companies in the CVR registry

Number of companies in CVR registry excluing clothing, interior and manufacturing

Companies that received a questionnaire

Share of companies that the questionnaire was sent to

5-9 10-19 20-49

56 21 9

49 13 4

45 13 4

92 100 100

Table A.2 The number of companies with industry code 748.720, which opted to participate in the survey

Number of companies in the CVR registry

Number of companies in CVR registry excluing clothing, interior and manufacturing

Number of responding companies

Response rate

5-9 10-19 20-49 50-99

56 21 9 1

49 16 4 0

41 14 3 0

23 88 75 -

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Appendix B

Point system for selecting concept design companies

Tabel B.1
Criteria area
Criteria # Description

Point system for selecting concept design companies

Use of competence today
1 Competence to collect data on consumer behaviour (4,5) Competence to interpret user data Competence to use data on user behaviour Competence to collect data on consumer behaviour Competence to interpret user data Competence to use data on user behaviour From the humanities and social science From economics and business economics

Criteria weight (see note)

Minimum number of points required for concept design company

Maximum number of points in each criteria

High

High

High

Medium

Importance of competence in 5 years time

Medium

Medium

Methods and tools

High

High

Consumer insights Strategy or Innovation department Companies from other industries

Medium

Client level
10 Medium 3 5

Networks

11

Medium

Note: High implies that the company replies to a very large extent or to a large extent. Medium implies that the company reply to a very large extent, to a large extent or to some extent.

SUM = 38

SUM = 55

e basis for the individual criterion weighting is as follows: Criteria 1, 2 and 3 deal with the companies current utilization of competences. ese criteria are weighted more heavily in the score system as the companies must have replied to a large extent or to a very large extent in order to obtain points for these three criteria. It is important that a company master these three competences as this will lead to a better understanding of the client-companys market as well as customers. e next three criteria 4, 5 and 6 deal with the companys assessment of the importance of competences 5 years from now ese three criteria are not weighted as heavily as the previous three criteria concerning the companys current utilization of competences. Companies

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could answer to some extent, to a large extent or to a very large extent and still receive 3, 4 and 5 points, respectively. Since concept design is a new discipline for many companies they may not be very strong in the area of competence utilization. erefore it was decided to include the criteria on the importance of skills 5 years from now. e answers may provide an indication of the extent to which companies not currently mastering the required skills are conscious of their own potential. e two method criteria 7 and 8 are heavily weighted in the score system. For both criteria the companies were to indicate replies of to a large extent or to a very large extent (4 and 5 points). By looking at how companies apply their methods and tools you can assess which kind of challenges the company must be equipped to handle. Client-level criteria 9 and 10 are weighted with 3, 4 and 5 points, respectively, in the score system. ese two criteria provide information on the type of problem the company faces,. ere are typically some dierences in the type of problems a company is faced with depending on which client department the concept design company is working with. If the company is a competent concept design company, it will be possible to cooperate with the client company on a higher and more strategic level. However, these criteria are not weighted as heavily as e.g. the companys competence utilisation. e last criterion 11 deals with the companys use of networks. is criterion is weighted with 3, 4 and 5 points. Particularly in smaller companies networks may serve as an important element in working with concept design. Companies that lack the required skills may bring these competences in by cooperating with other companies. e score system does not take into account the composition of the workforce in the company. Companies who may not possess the right resources on paper may still possess the skills inhouse to carry out concept design. For a company to be considered a qualied concept design company, it must have obtained a total point score equivalent to the total of the minimum values possible within each of the 11 criteria categories that is 38 points or higher. However, it is not necessary for companies to obtain points in all of the criteria categories. A company may very well obtain 0 points on an individual criterion if this is compensated by a higher score in the other categories.

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Appendix C

Typical work process in a concept design company

Based on interviews with concept design companies in Denmark and abroad, the following phases were uncovered which are typically applied by concept design companies when attempting to solve a problem: 1. Hypothesis 2. Field work/Research 3. Pattern recognition and analysis 4. Concept creation and design 5. Tests and implementation 1. Hypothesis When concept design companies work on solving a problem, they base their work on a hypothesis that they attempt to validate or reject. A hypothesis that describes the problem how will the kindergarten of the future function? may be summed up in a sentence like: parents need more information on what their children do in kindergarten. e concept design company often uses intuitionist intuition when developing these hypotheses. Whether a concept design company is faced with a concrete problem (design a toothbrush) or an abstract problem (how will the kindergarten work in the future?), an intuitive hypothesis is typically advanced early in the project phase. e concept design company has often developed a wide range of hypotheses which are in the back of their minds when they go out and study users in phase 2 (Field work/Research). In most cases, hypothesis development is performed by a project manager. Project managers come from a number of academic backgrounds, including social science, business, or design depending on the industry in which the concept design company is originally based.

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2. Field work/Research Phase 2 often runs along two parallel tracks: 1) the concept design company studies user needs, and 2) the concept design company collectsthe latest relevant information available concerning the issue at hand. 1) e concept design company studies the recognised and unrecognised needs of users in order to obtain a user insight that can help the company to understand which products and services carry value and relevance to the user. is can be accomplished by using qualitative interview techniques that prompt the users to reect upon their immediate and recognised needs. Unrecognised needs can be uncovered by observation and studying behavioural patterns revealed on video recordings. Observation and video are used because people often will say one thing and do something else (cognitive dissonance). e methods used in these studies originate in the academic disciplines of anthropology and ethnography. To nd out more about user needs studies, see the report entitled User-driven innovation - Results and recommendations published by FORA in October 2005. See www.foranet.dk 2) e concept design company gathers the latest information available concerning the problem that they are working on. is is done in order to understand the projects opportunities. Areas that the concept design companies may wish to further investigate may include research in hygiene and protein research or kindergartens and services. e concept designers gather and combine information not just within the area under investigation, but also concerning a wide range of parallel areas such as technology, politics, the environment, materials or business models which may directly or indirectly be tied to the project. is is done to understand opportunities that can either be combined or which may provide inspiration thereby creating a unique concept. In this phase, concept designers can be described as opportunity-huntersr investigating the opportunities embedded in a given project. is track also uncovers international best-practice cases (such as newly introduced and successful kindergarten-serive-schemes from various places around the world) again with the intent of generating input and inspiration for the analysis and concept development stages. Commonly used methods include desk research, interviews with experts across a range of knowledge areas, subscriptions to leading international periodicals and magazines, and contact with knowledge institutions and research centres. e eld work/research stage is often performed by employees with academic

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backgrounds in ethnology, anthropology, sociology, psychology, business and marketing, or political science. However, the eld work is generally performed by employees with a social science background, sometimes in co-operation with the designers. 3. Pattern recognition and analysis When user insights have been gathered and research performed in the relevant knowledge areas, phase 3 the anaysis phase begins. e analysis phase is referred to by some concept design companies as pattern recognition. By pattern recognition the companies refer to the intersection between two knowledge areas (e.g. where knowledge of a new technology intersects with knowledge of a new user need) in which a new pattern or product emerges. Pattern recognition combines insights from an array of knowledge areas in creating a new solution and a new way of telling the solutions story. is phase is often referred to as the one where magic happens. e phase is often characterised by the structuring and systemisation of often chaotic and fragmented user and market knowledge into new insights and patterns. For a kindergarten project, this pattern could be parental interest in hearing about a childs experiences combined with mobile solutions and stress occurring during drop-o and pick-up. At the same time, quotes of particular interest pulled from user interviews or cases particularly relevant to the projects main objective are also gathered. e main purpose of this stage is to structure the collected information in themes that may kick o the concept development phase, but typically this phase also generates the rst tentative ideas for new solutions as well. Usually the work of the pattern recognition and analysis phases is performed by the same employees who conducted the research and eld work. e project manager also has an important role to play during this stage as it is he or she who must ensure that the analysis is directed towards nding a solution to the clients original problem. 4. Concept development and design Concept design is the phase in which the collected knowledge and analysis from phase 3 is used to develop concrete solutions to the clients original problem. At this stage in the process, a great deal of knowledge on the clients problem has been gathered . is knowledge deals with the clients market possibilities, the clients product users and new, global trends within the clients home industry. A range of ideas are now in the pipeline, awaiting formu-

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lation, discussion and illustration. the concept development stage.

ese ideas are developed and discussed in

Clients are often involved in the discussion phase and are invivted to participate in workshops. is is a forum where the client can put forth suggestions on how they believe the gathered information can be used to shape new concepts. Clients are brought in because the story behind the concept proposals are to be presented. is is often carried out by presenting the new insights and patterns revealed in the research and analysis phase. is can also inspire the client, who may suggest new types of concept that may solve the clients original problem. e concept proposals can be presented in a number of ways, including the use of tools such as: Power-points Reports Posters (which illustrate insights or new strategies) Videos (which summarise insights, often by showing clips from user interviews) Renderings (3D graphics or products, landscapes etc..) Prototypes (models of new products). Concept development and the creation of prototypes are generally performed by the same employees that were responsible for conducting the research and analysis stage in cooperation with the designers. 5. Tests and Implementation If the concepts are approved by the client, the product(s) or service(s) must be tested, developed and launched. It is during this phase that the concept is tested and realised. Tests are often performed with the help of focus groups in which a number of people (usually not more than 10) are presented with the concept, generally in the form of a prototype, and are asked to comment on the prototype. As the concept has already been developed on the basis of user studies, this stage rarely leads to radical changes in the product or service, but rather minor adjustments to the concept or prototype. Implementation of the nal product or service requires a detailed assessment of its production, which is typically led by the clients design and production department and, in some instances, in cooperation with the concept design company.

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It is also during this phase that the marketing, packaging and visual identity are discussed and designed. is can be carried out by the client, by a marketing agency or by the concept design company itself. Whether the concept design company is involved during this stage depends on the type of concept design company concerned (see page XX). Typically involved actors at this phase include those with backgrounds in industrial design, graphic design, civil engineering and marketing. When this phase is completed, the product or service is ready to be launched and the process is complete.

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