Reimagining Market Dynamics: Market Issues Related to Design

The last decade has seen a growth of design in large corporations and a more nuanced understanding of the value designers bring to business, organizations, and product or service problems and opportunities. Design has been heralded as the prime mover for startups. Provocateur Bruce Nussbaum argues that "we are seeing a dynamic expansion of the scale, range, and power of traditional design. It promises to revive a broken VC model..." [1] It's increasingly recognized as a key differentiator for bringing industry disruption and changing the face of business and society, and—as Luke Williams describes—it's about "inverting or denying industry cliches [in order to arrive at] significant business breakthroughs."[2] There appears to be general consensus amongst intellectuals in technology and business that design is a non-aesthetic and non-trivial part of solving problems, and provides value in the context of the marketplace; a recent Reuters article proclaimed that "The new breed of 'user experience' designers - part sketch artist, part programmer, with a dash of behavioral scientist thrown in - are some of the most sought-after employees in technology." [3]

As design has "arrived", we are now able to broadly advance the discussion around design-impact in a given market to consider the relationship between designerly ways of thinking, and traditional economic or market issues and trends. This may lead us to collectively make wiser design decisions, or it may help us re-evaluate assumptions about how a marketplace should be structured or moderated with relationship to creative thinking and decision making.

My hope with this post is to identify the large areas of intersection between design and market forces, to describe places where further commentary, research and discussion are necessary, and to offer a view of where more or revised economic and policy interventions might be necessary.

Design-driven Intellectual Property is Uniquely Messy

Intellectual property, and the ability to patent a particular invention, has been a part of the fabric of American culture as long as our nation has existed. The amount and type of litigation related to IP enforcement has recently come under scrutiny, primarily driven by technology patents related to mobile phones and other hand-held devices. Larry Lessig, a well-known law professor at Harvard, has described that "'novel,' 'nonobvious' or 'useful' is hard enough to know in a relatively stable field. In a transforming market, it's nearly impossible for anyone - let alone an underpaid worker in the U.S. Department of Commerce who spends on average of eight hours evaluating the prior art in a patent and gets paid based on how many he processes - to identify what's 'novel.'" [4] Lessig's point is apt, and is more pronounced when considered in the context of interaction design or "user experience". Interaction design is frequently not visible, and although it can be described through narrative and other artifacts, the description is commonly not rich enough to appropriately capture the actual experience. It's quite common to hear designers say things like "you just need to try it," implying a sense of tacit knowledge established through experience. It's extremely likely that the same underpaid worker at the patent office is not likely to be trained in or experienced with judging the novelty, patent-appropriateness, and ubiquity of a flow through an interface or a designed-shift in behavior, especially if they need to actually experience the innovation to understand it.

Additionally, the uniqueness of an interaction in the larger context of a product suite or brand experience is difficult to rationalize. Consider the absurdity of Apple's granted patent application for Slide-To-Unlock [5]: it's hard to substantiate the need for protection on such an inconsequential piece of a larger whole, and it's easy to see how this type of nuanced protection can quickly become unsustainable. One might patent "Tap-To-Take-Photograph" or "Double-Tap-To-Check-In" with equal justification, and with equal absurdity.

Additionally, innovation always requires a creative recombination of existing ideas, which implies that there will always be some form of bleed-over from an invention into existing creative precedent. Designers learn—and are explicitly taught, in school—to utilize and generously borrow from existing ideas, themes, patterns, trends, and concepts—and recombine them in interesting ways. The majority of incremental innovations that occur in industry might be seen as obvious, but only in retrospect. It's difficult to discern what creative innovations should actually be protectable when comparing them to the fairly standard but dated test of "new, useful and non-obvious." The US Patent Office may have set an unfortunate precedent by allowing protectable but incremental innovations, and it's now necessary for a comprehensive re-evaluation of terms of protection for design patents, particularly for user interfaces, user services, and other forms of behavioral design.

Iterative Design Has Market Consequences

Designers work in an iterative fashion; they produce something, try it with people, learn about the results, and make changes. This process has recently been adopted by various startups under the guise of "lean"—rapidly producing the smallest possible thing, and then understanding how people respond to it (and learning if they are willing to pay for it). This idea of iterative design has consequences: it is not simply a neutral empirical test. Iterative approaches to product design actually change both individuals and the market in which these iterations are attempted. The first is less interesting in the context of economic observation (although of great importance for considering ethics of design); the second has tremendous, but subtle, consequences. These consequences are evident in the culture of silicon valley, where these iterations provide clues to large corporations as to potential new disruptive services and business models. Competitive audits, performed by consultants and innovation agencies, constantly identify fledgling design activities in incubators and accelerators and map these to market axis in an attempt to drive corporate repositioning. The iterations leave traces, and the traces infiltrate the less agile corporation—which is a financial powerhouse, able to influence, lobby, or otherwise buy a competitive edge.

There is a consequential result of this type of fast-follower culture, and as our financial systems struggle and discontent grows with the financial divide in the US, a re-analysis of Joseph Schumpeter may be necessary, particularly to understand his prediction of the demise of capitalistic structures. Schumpeter identified a form of "creative destruction", upon which disruptive innovation emerges to challenge and ultimately erode old, tired ways of approaching business. Iterative design is the spark of these disruptive efforts—the first glimpse of them in the marketplace—and begins to support this notion of constant and dynamic market momentum. But Schumpeter goes on to argue that a form of congealing of creative efforts will naturally take over the free market, where "Innovations would no longer be connected with the efforts and the brilliance of a single person. They were increasingly to become the fruits of the organized effort of large teams. This would be done most effectively within the framework of large corporations." [6] As the single entrepreneur was supplanted, Capitalism would give way to a form of Corporatism, which would encounter increasing critique and violence from the masses.

And this is precisely the social, economic and political climate we seem to find ourselves in today. If Schumpeter was correct in predicting these changes with such accuracy, it is useful to consider the remainder of Schumpeter's argument: as he describes, socialism will eventually replace capitalism, unconditionally.

A Pursuit of Scale Drives Blanding

Design is about humanizing technology and increasing the quality of the human experience. But as design is seen as a differentiator in big business—a way to escape commoditization, and a way to drive branded change—success becomes inextricably tied to marketing efforts related to scale, units sold, profitability, and the amplified spread of a design through mass production and social distribution or sharing. This pursuit of scale has a natural tendency towards "blanding", as features, aesthetics, and designed personality and eccentricities seem to regress to the mean of acceptability. Put another way, a company will minimize innovative components to mitigate the risk of adoption and to overcome the cost of execution, while emphasizing components that are considered "normal", "tablestakes", or "expected." This can be attributed to the need to map a design solution to marketing segmentation, in order to cater towards an aggregate and amorphous representation of a user. This has the confusing and subtle consequences of offering a product that provides some experiential value to everyone, but never provides all of the value to anyone.

This is most striking in the determination of feature sets for mobile devices. Typically, a marketing team will conduct a competitive audit in an effort to understand the various elements necessary to achieve brand parity. This audit, combined with a focus on internal strategic imperatives ("focus on social sharing!" or "celebrate device convergence!") will result in a feature specification, or product requirements document, which is then used to provoke design activities. Market segmentation will create tiers of product offerings, adding or removing features and creating bundles of capabilities in an effort to appeal to a particular user group. Customization and pricing is tied to this segmentation, resulting in the types of devices, service offerings, and product releases we see at various consume electronic conventions.

This process is a result of a homogenized view of the "right way to launch a product", much of which is codified in MBA programs and in the early experiences marketers have when entering the workforce. And as a result of this homogenization in process, which is itself a result of a focus on scale and sharability, we diminish the value of the innovative "design thinking" that might come from an extremely local focus on user wants, needs, and aspirations, or that might arrive as a result of playful creative exploration. These local solutions will, by their very definition, appeal to fewer people, but will have a higher degree of appeal; this is the problem, and opportunity, of breadth vs. depth.

Big-Data Experiences Are Colliding With Advertising Intent

We're only beginning to understand the promise of Big Data, which has been afforded to us by cheap hardware sensors, a ubiquity of data capture infrastructure, and the human urge to share interesting content. Big Data has the powerful ability to change the way we see the world around us; it encourages "regular people" (read: people who aren't technologists or designers) to understand their bodies, their actions, and their environments with a more nuanced and thoughtful level of detail, and to make changes to their behavior based on this understanding. For example, products like Fit Bit, Nike+, or the Body Media arm band allow us to gather different feeds of data related to our bodies—body temperature, pulse rate, blood pressure—and see relationships between this data and our food intake, our interactions with our friends, and even the way we choose to go to work or attend different events.

This is a huge advance for the human race, as we can begin to visualize and understand how complicated natural phenomena occur over time, without really needing to understand the complex science behind these phenomena. We can identify potential correlated or causal relationships in our own lives. And, once we visualize and understand these phenomena, we can take action to correct things we don't like—such as unhealthy but habitualized behavior.

But while we now face a huge opportunity in understanding the patterns that surround our lives, this opportunity is running head-first into advertisers, who see a different but equally massive potential in Big Data. Google, Facebook, and likely Apple, Microsoft and other large device and software manufacturers are in a unique position to sell this data to those who want to optimize their marketing efforts through unique profile-based targeting. It is only when one purchases a Facebook Ad or launches an AdWords campaign that one truly understand the frightening power of profile-based advertising, which leverages the same Big Data to display advertisements only to those likely to transact. The intent for these companies is not to use Big Data to empower consumers, but instead to utilize the same data to treat consumers like consumptive sheep.

There exists a need for legislation in the US to define policy related to data ownership and portability, providing power to individual consumers to own, audit, loan, and retract data about themselves, and to manage the increasingly vast digital definition of themselves.

Equally problematic is the existence of often misaligned privacy laws in foreign countries, forcing irrationally branched design solutions based on locale. While the promise of a unified, world-wide privacy policy is quite obviously a pipe-dream, it would behoove the United States government to understand this issue and begin discussions with policy makers in other countries around unification of ideals.

We Need Legislation In Support of Remix Culture

Some of the most interesting services to launch in the last six months emphasize a second-generation of user-generated content related to content organization and containment, where people are able to organize, remix, share, and discuss media in structured environments. Pinterest and tumblr offer services that focus on unique "containers" or "objects" for content, where a user acts as a curator or organizer rather than a producer or creator.

Design-driven solutions typically recognize the limitations of a given audience and attempt to support that audience by offering optimized tools and capabilities. In this case, audiences of both services may not have the ability to create raw content from scratch, but are afforded the ability to mix, mash, and otherwise combine content into new forms.

Yet existing copyright law and the precedent of DMCA-driven takedown notices have forced a strange set of rules for these companies, which manifest in their terms of services. The original terms—which were recently revised, due to a public outcry of dissatisfaction, included:

By making available any Member Content through the Site, Application or Services, you hereby grant to Cold Brew Labs a worldwide, irrevocable, perpetual, non-exclusive, transferable, royalty-free license, with the right to sublicense, to use, copy, adapt, modify, distribute, license, sell, transfer, publicly display, publicly perform, transmit, stream, broadcast, access, view, and otherwise exploit such Member Content only on, through or by means of the Site, Application or Services. [7]

These services, likely by both legal and financial need, transfer litigation responsibility to end-users. This presents a strange collision of innovation related to the "network effect", where mass audiences consume, change, and share content, and the existing legal structures related to copyright enforcement. This may soon create an equally strange clash between existing media conglomerates, like News Corp or NBC, with equally affluent financial services offerings, like Union Square Ventures—VC for the aforementioned services. But irrespective of this potential fallout between financial powerhouses, there exists a need for forward-thinking legislation related to the existing fair-use doctrine, with a redefinition that expands the boundaries of an individual creating an entertaining or satirical mash-up. And, there exists a need for social-media companies like pinterest and tumblr to take a more progressive stance towards their user-base, embracing the experiential qualities of their design over the legal norms of protecting their own interests. These companies need to support their users in challenging unforgiving and irresponsible copyright laws.

Normal Incentive Structures Are At Odds With Design Intent

In both large corporations and startups, an incentive structure focused on growth and wealth is colliding with the incentive most designers realize and embrace: making quality products that improve the quality of life. In large corporations, a pursuit of quarterly profits provides a constant distraction from execution and follow-through. Reorgs, refined priorities, and a knee-jerk reaction to industry news constantly confuses and disrupts design-driven approaches to product development, with valuable work shelved or redirected as a result of a stock-price-driven fire-drill.

The same incentive structure, albeit with a much longer outlook, exists in circles of venture capital. For startups funded by a typical VC, there is an expectation of a financially solvent exit within 3-5 years, producing 5-10 times the original investment in newly created wealth. This exit is usually in the form of a buyout or merger, but could also be the result of taking a company public. But the pursuit of the exit places constraints on the original product offering, including an artificial timeframe for success, artificial financial goals based on initial valuations, and an artificial demand to scale, quickly. Counter-intuitively, these pressures can serve to actually stifle innovation, as evidenced by the education startup space and the role of Blackboard, the industry incumbent. Rather than compete with startups, Blackboard buys them, and this acquisition strategy leads not to a better product for consumers but instead to the extermination of existing innovations.

In a healthy market, a product or service acquisition should be a positive event, producing value not only for those acquired and their investors, but for the consumer and community at large. That statement is echoed by both Henry Ford and Peter Drucker. Drucker says that "It is the customer who determines what a business is ... what the business thinks it produces is not of first importance", [8] and Ford agrees: "Power and machinery, money and goods, are useful only as they set us free to live." [9] Clearly, the intent of our capitalistic structures are failing us with defensive, non-productive acquisitions like those described above.

Summary

I've described six problems in the way design is considered within the context of business. I do not purport to have the solution to these problems, although I have suggestions to managers at large companies, founders at startups, and to our politicians, based on my own experiences. The fact that design is finally considered of consequence within the larger conversation of capitalism is extremely positive. The fact that there exist so many areas of opportunity for improvement is to be expected, given the relatively shallow understanding of design within most decision making circles. My hope is that this article is sufficient in causing executive-level decision makers to question their behavior and habits, and in causing the conversation of design-driven innovation to elevate to a level of policy and responsibility.

1. Nussbaum, Bruce. http://www.fastcodesign.com/1665120/designers-are-the-new-drivers-of-american-entrepreneurialism Accessed on March 19, 2012
2. Williams, Luke. http://designmind.frogdesign.com/blog/how-to-develop-ideas-that-will-disrupt-your-industry.html Accessed on March 19, 2012
3. Shih, Gerry. In Silicon Valley, designers emerge as rock stars. http://www.reuters.com/article/2012/04/13/designers-startup-idUSL2E8EDADQ20120413 Accessed on April 16, 2012
4. Lessig, Lawrence. The Problem With Patents. http://www.lessig.org/content/standard/0,1902,4296,00.html Accessed on March 18, 2012
5. Spradlin, Liam. Apple Granted Slide-To-Unlock Patent, Bearing On Android Yet To Be Seen. http://www.androidpolice.com/2011/10/25/apple-granted-slide-to-unlock-patent/ Accessed on March 18, 2012
6. http://swopec.hhs.se/iuiwop/papers/iuiwop0533.pdf
7. Yung-Hui, Lim. Pinterest Revises "Terrifying" Terms of Service, Soon To Release Private Pinboards and API. http://www.forbes.com/sites/limyunghui/2012/03/24/pinterest-revises-its-terrifying-terms-of-service-soon-to-release-private-pinboards-and-api/ Accessed on April 16, 2012
8. Drucker, Peter. Management: Tasks, Responsibilities, Practices.
9. Ford, Henry. My Life and Work.

Originally posted on Mon, 16 Apr 2012