The simple choice of in-house design versus external consultancy is being challenged by the latest in creative environments - a subtle hybrid of the two.
It was Thomas J Watson Jnr, the chairman of IBM in its glory days, who coined the phrase that 'good design is good business'. His unusual policy of working closely with his personal choice of designer - the versatile Eliot Noyes, creator of Mobil petrol stations as well as IBM Selectric typewriters - underlined that commitment to design.
Watson copied the practice from the Italian manufacturer, Olivetti, which, since the 1930s, has engaged an unbroken succession of distinguished designers to oversee its product development. In both cases, the designer was not in the employ of the manufacturer, nor was he merely hired on a jobbing basis as an itinerant consultant. Instead, he was retained by the major client but free to spend any spare time going about his designing business for all manner of other clients.
IBM and Olivetti's ground-breaking approach to design has not, of course, cushioned them from other commercial problems. But their ethos of support for design at the highest level is now widely accepted. Design matters - both for successful product innovation and in projecting an attractive corporate image.
Despite the IBM exemplar, when it comes to managing design, most manufacturing companies believe they have a simple choice: either to employ a full-time, in-house design team; or to use an external, independent design consultancy on an as-needed basis. Typically, large companies have taken the former route and small ones the latter, for reasons to do with volume and new product development workload.
Those in favour of the in-house design option argue that it cuts overheads (provided there is a constant and sufficient volume of work) and facilitates close co-operation with engineering and marketing and other in-house functions. But this liaison is often achieved at the expense of creativity as the imagination of the design team becomes cramped by the narrow range of products it has to work on. The unquestioned advantage of an in-house studio is that designers can be involved at the early stages of a project at little or no cost. Early design input frequently benefits the product development process and reduces the ultimate costs of manufacture. Yet this benefit has often been overlooked even at such major manufacturers as Philips, where until the 1980s, according to Christopher Lorenz's book, The Design Dimension, designers were merely brought in late in the product development process in order to devise some superficial styling.
A well-run, in-house design department can clearly contribute greatly to the success of large-scale manufacturing companies. Lord Eatwell, Labour spokesman in the House of Lords for economic affairs, believes that British industry could profitably lock the design function more closely into the company. 'We should consider whether the very success of our design consultancies is damaging the performance of British industry,' he said at a conference last autumn. 'The structure of a company or an industry in which the design function is offshore, so to speak, in the hands of outside consultancies, will tend both to downgrade the design function in the overall planning and production process, and subject the design function to persistent downsizing financial pressures.'
While this can sometimes happen, Eatwell ignores the benefits that many companies feel arise from employing an external independent consultancy. Going to a design consultant brings a fresh viewpoint and offers greater flexibility as well as reduced overheads. The broader perspective that consultancies offer - for example, a wide experience of international markets obtained through work for a variety of clients - is a valuable resource in its own right, and companies are increasingly employing design firms to advise on strategic planning as much as to create new products.
On the down side, however, companies often fear loss of control when outsourcing design work, and assume that external creative suppliers will be hard to manage. (Some designers do their best to live up to this image, but most are quite capable of keeping to budgets and schedules.)
The consultancy option has certainly caught on in Europe, the US and Japan, although each country has started from a different base and moved towards consultancies at a different rate. 'Abundant anecdotal evidence,' says design commentator Jeremy Myerson, 'suggests that in-house departments have been axed or slimmed down. At the same time, during the 1980s, the design industry expanded. So the work must have been done by consultants.'
In the US, according to the Industrial Designers' Society of America, 55% of all designers are now employed by consultancies, and this figure is increasing. Earl Powell, director of the Design Management Institute in Boston, cites the case of the in-house design department at Hewlett-Packard, which reduced its numbers from 33 to two in just four years. Many corporations could provide similar figures.
Despite the continuing drift towards greater use of design consultants, the simple choice of in-house versus external consultancy is now being challenged. Subtle hybrid arrangements are emerging which aim to combine the best of the in-house policy advocated by Eatwell and the consultancy approach.
In California's Silicon Valley, Apple Computer has established an in-house design studio which aims to capture the character and advantages of an outside supplier, but within a corporate fold - the goal being to match the creativity achieved while Steve Jobs and John Sculley were at the helm and the company relied on leading local and international design consultancies.
Apple's new approach arose from the appointment of a leading Silicon Valley design consultant, Robert Brunner, as director of industrial design in 1989. Brunner saw that the Apple style was by then widely copied by competitors as well as being unsuited to new types of product that the company was planning. First attempts to develop a new design style were delegated to consultants, but with poor results. Based on this experience, Apple decided to develop an in-house design resource - a quasi-independent design studio to handle most of the company's work and oversee the remainder done by other consultancies. Brunner was keen to incorporate the vitality typical of a consultancy. The key was hiring the right people. 'We don't get into the situation where we have to hire someone within a month,' says Brunner. 'Instead, we try to identify somebody and then find an opportunity for them to come aboard.'
Today, only about 30% of Apple's design workload is taken by consultants. Any more and the company begins to lose control of the corporate image expressed in its products - a key factor in the company's success to date. The consultancy share also leaves a plump cushion of freelance work that can be cut back if business conditions take a downturn. Cost is only a marginal advantage.
'If we hire consultants, we tend to hire good ones who are expensive,' explains Brunner. 'So per dollar it's cheaper in-house. On the other hand, consultants work longer hours, and you can turn them on and off. But it's still probably 30% less expensive if you've got the work.' Even when overheads such as studio space and materials are taken into account, the in-house option is still slightly cheaper.
Samsung Electronics has taken a different tack. The Korean company has moved design outside the organisation by not only appointing a consultancy on a long-term basis, but through that consultancy setting up a 'Samsung studio' in Palo Alto, California. The studio is fully dedicated to Samsung products yet nevertheless remote from its head office or other R&D outposts. This approach gives Samsung some of the control over the design process that it might otherwise lose, but also ensures a measure of freshness by maintaining a psychological and physical distance from the corporate centre.
Following Japanese manufacturers such as Nissan and Mazda which set up California design studios in order to gain first-hand experience of the culture of a key market, Samsung sought to develop a pre-existing relationship with IDEO, an international design consultancy with offices in Palo Alto. As a large consultancy, IDEO has engineers and other specialised staff who work closely with designers in the development of sophisticated electronic products. With offices in London, California and Japan, IDEO also has a global outlook. 'IDEO knows about people's lifestyles in the regions we want to target and provides us with a design that is appropriate,' says Kookhyun Chung, director of the Design Institute at Samsung Electronics in Seoul.
The joint studio (iS) set up in April 1994 is near IDEO's other offices but separate from them, providing notional confidentiality from other IDEO clients. Initially, there were thoughts that the studio might spend its time developing futuristic concept products, but the more pressing matter was to improve the design of the present stream of products, ensuring they were better focused on their target markets. In time, the arrangement could expand to include the development of new product concepts and to have a key role in improving the liaison between the design and marketing functions.
Typically, the iS studio houses a handful of designers from both Samsung and IDEO on a rotating basis as well as additional IDEO specialists as necessary. It serves to bridge the cultural divide between the Korean manufacturer and its western markets. An important additional function is to channel best practice back to Samsung's main design centre in Korea. 'It helps change the culture in-house,' says Ingelise Nielsen, head of marketing at IDEO in London. 'They have got vast design departments but, by our standards as a consultancy, they are not using them to innovate.'
The main drawback is the time lost in sending work from the studio back to Korea and waiting for translation, reaction and a response. 'They aren't able to respond as rapidly as we are able to do the work,' says Clive Grinyer, the designer who heads the iS studio. This experience is causing Samsung in Korea to streamline its communication and decision-making processes.
Within the last year or so, a number of British manufacturers have begun to review their traditional views of design management. Last September, the kitchen appliance manufacturer Kenwood set up the Kenwood Design Office (KDO) in Bramley, an hour's drive from its head office in Havant. The director at Kenwood's wholly-owned, 'in-house' but off-site design operation is Johan Santer, who has worked for the company for 15 years, mostly while at the design consultancy, Pentagram. KDO aims to expand during the course of 1995 until it is able to take on a proportion of third-party design projects, although for the moment, Santer and his colleagues are kept busy simply servicing Kenwood's product design workload. 'The real intent is to maintain a creative base beyond that which is typical of an often stultifying in-house base,' says Santer. 'The distance between us gives me an independence. I'm not tied to the infrastructure they have already set up for product development. It enables us to treat high-priority projects with total concentration, and, as with any independent consultancy, it generates a creative edge.' 'Our products are pretty mundane - so sometimes all we are selling is design,' agrees Kenwood's engineering director, Mike Lapham. 'Consumers in the shop faced with 20 kettles with good brand names and similar specifications make their decision on design.'
Psion, the maker of electronic personal organisers, has gone a step further. Like Kenwood, it had retained a consultancy for many years, building a relationship with a particular designer, Martin Riddiford. When Riddiford left the consultancy, Psion wanted to keep up the relationship. Chairman David Potter proposed a joint venture in which Psion would hold a minority stake in Riddiford's new consultancy, Therefore Design, in return for which the consultancy would spend a certain proportion of its time on Psion projects. This proportion lies between upper and lower limits that are subject to regular review.
Therefore Design benefits from the management advice given by Psion which began with a disciplined management structure laid down by Potter at the outset of the partnership. 'Such close monitoring and quality of advice - not otherwise easily affordable to an organisation of our size - has allowed us to develop with considerable confidence,' says Therefore Design partner Graham Brett.
Since April 1993, the consultancy has grown to a staff of 11, a more rapid expansion than an independent design firm could expect to enjoy. The growth has allowed it to take on third-party work while continuing to meet its commitment to Psion. Work for Psion accounted for almost half of Therefore Design's billings in its first year, but no more than 30% in the second year just ended. Psion retains the freedom to place work with other design consultancies, although Therefore's familiarity with Psion's requirements frequently gives it a head start. Equally, Therefore is free to work with other clients, the only exclusion being direct competitors of Psion.
At both Kenwood and Psion, technology has driven the need to close the gap between client and consultancy. 'Computer-aided design (CAD) is blurring the edges between aesthetics and engineering,' says Kenwood's Lapham. The investment in equipment is prohibitive for most consultancies. But in both these cases, there is now compatibility in CAD between the remote design office and the in-house engineering departments that did not exist when the manufacturers used independent consultancies.
Although technological compatibility is increasingly important, personal rapport at the highest level remains perhaps the single most significant factor behind successful design. Such liaisons have always been a rarity, however, and companies such as IBM and Olivetti remain exceptional in their commitment to design. Contemporary echoes are hard to find, but the Virgin Group's decision in June 1994 to take a 50% interest in Rodney Fitch and Company has this promise. Fitch's previous eponymous company was one of the design success stories of the 1980s. The designer had established a working and social relationship with Virgin Group chairman Richard Branson, through work done for Virgin Atlantic Airways. Branson put in equity finance and provided an 'introduction' to the other companies in the group. As with the Psion/Therefore Design venture, the bulk of Fitch's time is currently spent on work for Virgin, but this proportion is expected to fall in time.
The arrangement is more informal, however. There are no prescribed upper and lower bounds for the way Fitch apportions his work, nor are there restrictions on whom he may work for either inside or outside the Virgin Group. 'It is important for me,' says Fitch. 'I don't want to be thought of as Virgin's design company, by them or the outside world. Equally, it's important that they don't feel constricted. So there are plenty of other design companies working with Virgin.'
Since June last year, Fitch has continued to work on corporate identity, aircraft liveries and airport lounges for Virgin Atlantic, and has gone on to advise other Virgin companies, for example, on the redevelopment of London's County Hall and the launch of Virgin Cola. The breadth of work across the group enables Fitch to move from providing a hands-on service to strategic consultancy on the management of the corporate image, brand policy, and cross-promotion of Virgin products within the group. 'He's really become part of the management resource of the Virgin empire,' says corporate affairs director Will Whitehorn.
Designers are neither the free spirits of consultancy myth nor the time-serving drudges of in-house folklore. As these management structures reveal, there are ways in which it is possible to maximise the benefits of each design environment while eliminating many of the drawbacks. Companies are increasingly using their creativity to invent novel solutions to their particular design management problems.