T H E D E S I G N

M A N A G E M E N T
I N S T I T U T E

D ESIGN
M ANAGEMENT
J OURNAL
Article Reprint

Structuring Strategic
Design Management:
Michael Porter’s
Value Chain
Brigitte Borja de Mozota, Maître de Conférences, Université René
Descartes

Copyright © Spring 1998 by the Design Management Institute. All rights reserved.
No part of this publication may be reproduced in any form without written permission.
To place an order or receive photocopy permission –
(617) 338-6380 x223 Tel • (617) 338-6570 FAX • E-mail: dmistaff@dmi.org

Reprint #9892BOR26
 D ESIGN
M ANAGEMENT
JOURNAL
VOL. 9, NO. 2 SPRING 1998

Design Management Education: Bridges Between Practice and the Academy JNL-V9N2

EDITOR 'S NOTES

Sharing Design Management Wisdom 9892WAL05
Thomas Walton, Ph.D., Editor; Associate Dean, School of Architecture and Planning,
The Catholic University

KEYNOTE ARTICLE
Education as Salad Bar 9892WAL10
David Walker, Harrow Business School, University of Westminster

THE EXECUTIVE PERSPECTIVE

What Makes a Design Manager? A Conversation with the Design Management 9892GRE18
Journal
Lee Green, Director, Corporate Identity and Design, IBM
Bonnie Briggs, Manager, Corporate Identity and Communication, Caterpillar, Inc.
John Lombardi, Executive Vice President, Creative Services, Revlon, Inc.

ACADEMIC THEORY AND STRATEGY

No More Heroes: From Controller to Collaborators 9892MOR22
Lesley Morris, Education and Training Development Manager, Design Council
Jason Rabinowitz, Organization Practice Specialist, McKinsey & Co.
Jeremy Myerson, Visiting Professor, Department of Design Management, De Montfort University

Structuring Strategic Design Management: Michael Porter’s Value Chain 9892BOR26

Brigitte Borja de Mozota, Maître de Conférences, Université René Descartes

DEGREE PROGRAMS
The Design Management Program (DMP) at Pratt Institute 9892AND32
Robert Anders, Professor, Design Management Program, Pratt Institute

MIT’s SDM Program: Educating Technologically Grounded Leaders 9892FRE38

Daniel Frey, Assistant Director, System Design and Management Program, MIT
Suzanne Weiner, Director, Engineering Library, North Carolina State
Mats Nordlund, Director, Technology, Strategy and Acquisition, Saab AB

A New Management Role: The Designer as Strategist 9892GOR43

Naomi Gornick, Director, MA Design, Strategy, and Innovation, Brunel University

CORPORATE EDUCATION
Research in the Business of Design: Denmark’s Center for Design and Business 9892KRI49
Development
Tore Kristensen, Ph.D., Director, Center for Design and Business Development

Go East, Young Man: Design Education at Samsung 9892BRU53

Gordon Bruce, Chair, Product Design, IDS

TEACHING PROPOSALS
Design Education: Out of the Closet and Back into the Curriculum 9892BLA59
Richard S. Blackburn, Associate Professor of Management, Kenan-Flagler Business School
Barry L. Bayus, Professor of Marketing, Kenan-Flagler Business School

Learning Theory Through Practice: Encouraging Appropriate Learning 9892ASH64

Philippa Ashton, Course Leader, Design Management MA Programs, Staffordshire University
 ACADEMIC THEORY AND STRATEGY
....................

Structuring Strategic
Design Management:
Michael Porter’s
Value Chain

A S A RESOURCE, design management has an impact on a

broad range of organizational activities. Brigitte Borja de
Mozota conceptualizes this diversity in a framework, built
on the ideas of Michael Porter, that forms bridges between
design and business decision making—in operations, in support func-
tions, and in the development of long-term strategies. This clarifies the
areas in which design is a corporate asset, helps order design manage-
ment research and information, and offers pathways for creating effective
design management curricula.

by Brigitte Borja de Mozota

“Competitive advantage grows out of the
way firms organize and perform discrete
activities... The activities performed in
competing in a particular industry can be
grouped into categories... in what I call the
value chain.” Michael Porter, The Com-
petitive Advantage of Nations1
“Design: a powerful but neglected
strategic tool.” In 1984, Philip Kotler and
Alexander Rath wrote a well-known and
visionary article by this name.2 Now, 15
years later, we still seek to measure de-
sign as a potent strategic tool, one that
can help to gain and hold competitive
advantage. What is the value of design?
How do we measure design perfor-
mance? What do we mean when we say
that design is a strategic tool?
Studies, from academia or from the
“real world” of design practitioners,
usually answer these questions by dem-
onstrating design’s economic value,
thereby offering doubting managers a
valid demonstration of design’s contri-
DR. BRIGITTE BORJA bution to improving performance in
DE MOZOTA, MAITRE areas from corporate communications to
DE CONFÉRENCES, the competitiveness of a nation. But
TEACHES MARKETING none of these studies looks specifically
AND STRATEGY AT at the value of design for long-term
THE INSTITUT strategic thinking. For this, we are best
UNIVERSITAIRE DE directed to the work of Michael Porter.
TECHNOLOGIE DE
PARIS AND DESIGN 1. Porter, Michael, The Competitive Advantage of
MANAGEMENT AT THE Nations (New York: The Free Press, 1990).
POSTGRADUATE LEVEL 2. Kotler, Philip, and Rath, Alexander, “Design: A
AT THE UNIVERSITÉ Powerful but Neglected Strategic Tool.” 1984.
DE NANCY. Journal of Business Strategy, vol. 5, no. 2 (Fall 1984).

26 DESIGN MANAGEMENT JOURNAL SPRING 1998

 DESIGN MANAGEMENT EDUCATION
STRUCTURING STRATEGIC DESIGN MANAGEMENT: MICHAEL PORTER’S VALUE CHAIN
Strategic Thinking and Michael Figure 1
Porter’s Competitive Advantage
Since 1950, the theory of corporate
strategy has developed into a complex
subject, with many currents of thought.
Nevertheless, thought has tended to
coalesce around four basic views (figure
1), summarized as:
• The teleo-logic: The firm seen as a
Relations between actors
system that managers can and must
govern, animate, and organize. Strat-
egy is seen as if it were a military
campaign, with an emphasis on man-
agers’ aptitude for decision making.
Diversification, internationalization,
alliances—all are important.
• The eco-logic: This perspective
gives a major role to the environment Michael Porter’s place in the various theories on strategic thinking. Adapted from Cahiers Français de
or, at least, to the market. Emphasis is la Documentation Française: Les stratégies d’enterprise no. 275. A.C. Martinet, 1996.
placed on how well firms satisfy the
needs of customers and markets; concepts of
efficiency, cost, and competitiveness are key.
Managers are expected to convince their various
publics that the firm is well managed.
• The socio-logic: Many studies see the firm as
a social organization that is characterized by
personal and divisional power struggles and
political games. In this logic, strategy appears as
an a posteriori result of the socio-economy of
the organization.
• The ideo-logic: Stresses the mental, cognitive,
and verbal processes by which strategies are in-
vented. Strategy is seen as a mental construction,
discourse, or temporary stage-setting.
Michael Porter’s work, developed during the past
16 years, falls somewhere between the teleologic
and the ecologic positions. Porter’s formulation
posits industry as the basic unit of analysis for
understanding competition. Two central concerns
should underlie a company’s choice of strategy: the
industry structure in which it competes and its own
positioning within that industry.
Industry attractiveness and competitive position
can both be shaped by the firm. Successful firms
not only respond to their environment, they also
attempt to influence it in their favor.
At the heart of positioning is competitive advan-
tage and competitive scope within an industry. The
type of advantage and the scope of advantage can be
achieved through one of two generic strategies: cost
leadership and differentiation.
To gain competitive advantage over its rivals, a
firm must either provide comparable buyer value but
perform activities more efficiently than its competi-
tors (resulting in lower cost) or perform activities in
a unique way that creates greater buyer value and
commands a premium price (differentiation).
Teleo-logic
The finalized organization
Ansoff
Andrews, LCAG,
Chandler Hamel Pralahad
BCG
Lindblom
PORTER
Socio-logic Mintzberg Weick Ideo-logic
Cognitive and mental
Williamson
Freeman Aldrich
Eco-logic
Environment or market
Competitive advantage grows out of the way
firms organize and perform discrete activities. Firms
create value for their buyers through performing
these activities. The activities performed in compet-
ing in a particular industry can be grouped into cat-
egories (figure 2) in what Porter calls the value chain.
The Value Chain
“Every firm,” says Porter, “is a collection of activities
that are performed to design, produce, market, de-
liver, and support its product. All these articles can
be represented using a value chain. A firm’s value
chain, and the way it performs individual activities,
are a reflection of its history, its strategy, its approach
to implementing its strategy, and the underlying
economics of the activities themselves.”3
Figure 2 depicts a generic value chain. However,
the value chains of firms in the same industry will
differ as a result of their histories, strategies, and
success at implementation. Also, a firm’s value
chain is embedded in a larger stream that Porter
calls the value system. A company’s product eventu-
ally becomes part of its buyer’s value chain.
Within this context, design, like any other corpo-
rate activity, can create value on three levels:
• Primary activities: Tasks belonging to the
ongoing production, marketing, delivery, and
servicing of the product. These include product
design, engineering design, package design,
and retail design.
• Support activities: Tasks providing purchased
inputs, technology, human resources, firm infra-
structure. These include design for office space,
corporate graphic design, product design in R&D.
3. Porter, Michael, Competitive Advantage (New York: Free
Press/Collier, 1985).
DESIGN MANAGEMENT JOURNAL SPRING 1998 27
 DESIGN MANAGEMENT EDUCATION
STRUCTURING STRATEGIC DESIGN MANAGEMENT: MICHAEL PORTER’S VALUE CHAIN

Figure 2 has to penetrate. Linkages require activities

to be coordinated, whether they change the
new product development process or im-
ACTIVITIES

Firm infrastructure
SUPPORT

Human resource management

prove the coherence of a corporate image.
From a strategic viewpoint, a more careful
Technology development
management of linkages can offer decisive
Procurement competitive advantage throughout the
Margin
value system, as when design helps by
Inbound Operations Outbound Marketing After sale creating interdependencies among a firm
Logistics (manufacturing) Logistics Sales service and its suppliers and distributors.
The value-chain concept is a useful
research and academic tool for understand-
P R I M A R Y A C T I V I T I E S ing the sources of cost advantage through
Introducing design (in boldface type) in Michael Porter’s value-chain concept design’s impact on manufacturing and
after-sales costs, as well as costs of product
development and marketing. It can also be
• Activities that support the value system of used to identify the sources of differentiation—
the industry: These include all tasks that affect product performance and aesthetics, of course, but
the firm’s environment. They relate mainly to also less-direct effects, such as a more efficient user
suppliers and distributors. interface or easier maintenance for products—and
These three levels offer a framework for a value- means savings on company communications and
creating system of design management. management costs.
Design that contributes to improved perceived
Design as Strategy customer value in various industries can then gener-
Porter’s theoretical background changes the way we ate the macroeconomic differentiation so valuable
perceive the strategic value of design. Traditionally, for competitive advantages between nations. Sus-
researchers link design to strategy only when an taining this competitive advantage requires voluntary
organization has enough experience with design for pressure and depends on making strategic decisions
it to have been adapted at board level. Under the that can help formulate a design strategy.
value-chain concept, we can structure research into
and education for design management as a three- The Value Chain as Teaching Tool:
level value-creating process. Rather than stress DMI Case Studies
design’s usefulness at the top level of the value chain, The Design Management Institute’s library of case
we can stress design’s strategic value even at the lowest studies provides a great variety of materials on how
level— in other words, at the level of operational design creates value in different companies, from
design management. Thus our three levels become: Erco to Apple to Crown Equipment. In 1995, DMI
• Operational design, or design creating value created a “case study map”4 to help academics
for the company’s primary activities. Design is choose appropriate case studies for their course
strategic because it creates customer value areas. The study also investigated the stage of the
through differentiation perceived by the market. new product development process, in each case, at
Design is an economic competence. which design was integrated.
• Functional design, or design creating value Using this material to research the variables most
for the company’s support activities. Design is relevant to the value-chain concept, I ranked 47
strategic because it creates value through coordi- design and management variables according to their
nation of functions (especially if it improves degree of occurrence for use in my postgraduate
the new product design process). Design is a courses. The results of this study show that the
managerial competence. following management concepts were the most
• Anticipative design, or design creating a vision frequent:
for the entire value-chain system. Design is stra- • Market positioning
tegic because it adds value through anticipation • Corporate image
of changes in the firm’s environment, whether • Product strategy
internal or external. Design is a core competency, • Interface with other functions (R&D, marketing,
a psychological competence. manufacturing)
Strategy guides the way an organization performs all • Project management
its activities and arranges its value chain. A firm’s
value chain is an interdependent system or network 4. Freeze, Karen, Case Study Issues Map, (Design Management
of activities connected by linkages into which design Institute, 1995).

28 DESIGN MANAGEMENT JOURNAL SPRING 1998

 DESIGN MANAGEMENT EDUCATION
STRUCTURING STRATEGIC DESIGN MANAGEMENT: MICHAEL PORTER’S VALUE CHAIN

• Competitive environment mation. It has two functions: first, to produce in-

• Management of teams formation; second, to manage information on a
• Technological change technological, economic, and social level. Conse-
• Global marketing quently, the information concept is two-sided: It
This pragmatic approach gives relevant manage- offers information as a process (communication)
ment guidelines for measuring design performance and information as a result (content). From a design
according to the value-chain concept: point of view, both raise interesting questions.
• Design in principal activities: market posi- • Information as a process: What actions, in
tioning and corporate image; product strategy. what order, must we take in order to be in-
• Design in support activities: project manage- formed? All functions, including design, should
ment; management of teams; design interface have easy access to information. Design should
with other functions; technological change. be concerned with the way in which design in-
• Design as vision: global marketing; competitive formation is circulated and with the way in
environment. which design management gets access to perti-
In our experience of teaching postgraduate courses, nent information within the organization and
this concept has been effective for sparking ani- from the external environment.
mated discussions of design management case • Information as a product: For instance, what
studies and for reinterpreting management theories. types of information are the responsibilities of
It also helps integrate design into managers’ and graphic design in the company? What docu-
students’ cognitive structures. ments do they work on? What information is
necessary for the design process? What informa-
Information in the Value Chain tive role does product design play in innovation
Information plays a preeminent role in any firm’s management?
value chain. Porter insists on the importance of Here again, Porter’s three-part value chain provides
chance and discovery, which create discontinuities a model for structuring a DMIS and improving the
that can reshape an industry. Management informa- practice of design management. Information is an
tion is key to helping firms deal with the unpredict- activity that can add value on all three value-chain
able, the conflicting, and the frustrating. A design levels (figure 3).
management information system (DMIS) provides
OPERATIONAL INFORMATION SYSTEM:
data for each task and ratios for control in the design
DIFFERENTIAL DMIS
function, and it is a valuable tool for the achieve-
ment of design management excellence. Design managers have to establish standards of
The DMIS is a feature of organizational design, performance for each task in the design department,
but it is not the responsibility of the design func- gather the information required for the perfor-
tion. It is the responsibility of top executives and of mance of each task, and carry out the monitoring of
computer specialists, who have the task of designing that performance. In addition, the chain of authority
an architecture for the multidimensional
information flows going into and out of Figure 3
the organization. Design Information System Creating Value
It is a real competitive advantage to
have the capacity to convert design data Information Differential Influential Antipicitative
into revenues, costs, profits by customer,
by product, by function, and by geogra- INSIDE/ Production project Journal
phy. It gives the design function visibility INSIDE Design process
Design tasks Meetings
in the decision and financial system and
Business data
makes the design manager an integrator
with cross-company visibility and a ca- INSIDE/ Customer invoice Financial data Advanced design concept
pacity to influence others. OUTSIDE Supplier order Annual report
A DMIS makes design managers Distributor Advertising
Products brochure
aware of information flows through the
Corporate identity
design department and, by extension, the
information flows through the organiza- OUTSIDE/ Supplier invoice Client claims Database press
tion itself. INSIDE Customer order Sales reports Technological watch
An information system can be either Shareholders & bank Client surveys Strategic scanning
Image audits Design schools & competitions
a communication system among actors
or a management system that trans-
forms elementary data into useful infor- The design management information system (DMIS)

DESIGN MANAGEMENT JOURNAL SPRING 1998 29

 DESIGN MANAGEMENT EDUCATION
STRUCTURING STRATEGIC DESIGN MANAGEMENT: MICHAEL PORTER’S VALUE CHAIN

and responsibility for carrying out each design task
and for dealing with variations in performance
should be clearly set out. Operational information
is thus necessary for the everyday mechanical func-
tioning of the design department and for most
effectively differentiating the company’s products
from those of its competitors. This information can
be broken down into three types:
• Information to control all design tasks—
methods associated with the creative process
(internal flow).
• Information needed by the design function to
perform departmental tasks—information on
quality, marketing, production, R&D, corporate
communications, strategic goals, audits, and
market research.
• Information concerning general business activ-
ity; customer orders, invoicing and financial
systems— information coming from financing
and investment policies.
SUPPORT INFORMATION SYSTEM:
INFLUENTIAL DMIS
Information for support activities is developed in
order to influence organizational behavior; in fact,
that is what keeps the organization together. Design
management is a primary actor in the production of
such information and in its diffusion during the
strategy implementation process.
This information, when formalized, is shaped
into documents—product brochures, annual re-
ports and journals, brochures, and the like—by the
design department. This is a task that goes beyond
the simple production of documents. Most design
departments, for instance, do not think of graphic
quality in terms of information flow except in terms
of, say, coordinating the graphic identity manual.
Improving the efficiency of the corporate identity
manual, however, would be thinking in terms of
document processing and of the efficiency of inter-
nal information flows.
Such documents come from decisions made
after an elaborate analysis of the results of question-
naires, surveys of clients, and customer claims.
Designers are affected by documents that generate
design projects—customer surveys, image audits—
and they should integrate design policy into the
questions asked and information gathered in order
to help in the consensus-building process during
new product development.
The marketing and communications depart-
ments also receive valuable information through
customer claims and sales reports. What part should
design management take in the organization of

The URGA Motorcycle: A Case Study strategy after seeing the URGA bike. Until then, they had
Design students are like entrepreneurs: They generate new directed their LED efforts toward automobile distributors;
market visions through their projects. Take, for example, the after learning of the URGA concept, they began to directly
URGA motorcycle, which was conceived by a team from the contact design studios for developing LED sales rather than
Institut Supérieur de Design in Valenciennes, France, and rely on automobile distributors only. As Tamisier said, “What
headed by Philippe Tamisier. Starting from the paradox that is important is the sociological watch that enables concept
market sales in motorcycles are stable, whereas the demand transfer from other universes. The URGA concept of practical
for motorcycles is high, Tamisier changed the whole vision of and fun already exists in the automobile industry.”
the market. He revolutionized the architecture
of the product, starting with the idea that the
bike should be conceived as if it were a global
system of transportation and pleasure encom-
passing the bike itself, its user, and its security,
as well as outfit, helmet, and luggage. The
URGA cycle offered space for luggage, helmet,
and outfit where other motorcycles store gas:
The rider could store his or her riding outfit
and helmet rather than carry them
into the office.
Developing this prototype and product form
stimulated innovations in multiple links of the
value-chain system. For instance, the strategy of
the luggage specialist, who had difficulty seeing
the value in hidden luggage, was threatened by
such a concept. Meanwhile, management at
Hewlett Packard, which was developing LED
sales for the automobile market, changed their

30 DESIGN MANAGEMENT JOURNAL SPRING 1998

 DESIGN MANAGEMENT EDUCATION
STRUCTURING STRATEGIC DESIGN MANAGEMENT: MICHAEL PORTER’S VALUE CHAIN
these documents? Or on the diffusion of market
information? The information captured in these
documents is potentially crucial for excellence in
design management.
The information flowing during committee and
other internal meetings is also influential informa-
tion. These meetings are important for strategy
formulation and for cohesion of personnel. Many
one-to-one meetings, in fact, lead to decisions from
which action flows. Many meetings and documents,
as well, take place partly to rationalize decisions that
have already been made. Designers have a place in
this symbolic, but necessary, legitimizing of admin-
istrative action through information design.
Innovative organizations know the importance of
generating innovative ideas. These ideas come from
marketing, R&D, and design, but also from any
person in the firm—if he or she is encouraged to
offer them. Incorporating the necessity to be in-
formed of all ideas can be a good way to develop
design integration and to stimulate the consensus
process that has to take place around any idea.
ANTICIPATIVE INFORMATION SYSTEM FOR DMIS
In order to analyze its business context, competition,
and technology and to understand its global envi-
ronment, an organization refers to databases, jour-
nalistic and expert sources, and specific studies—all
fundamental for prospective and strategic decisions.
Organizing a “technological watch” and doing
strategic scanning in order to see in advance certain
changes in a company’s environment is basic for
strategic diagnosis—especially where information on
competitors, patents, and technologies is concerned.
Design managers need this information to
nurture the creative process for advanced concept
design. These concepts can also valorize design
through publicity in the specialized press and trade
fairs. Look, for example, at the automobile industry.
Environmental scanning is a key issue for strat-
egy. It is also key for strategic design management.
Being able to classify design trends, to anticipate and
transform sociological changes into ideas and design
knowledge, reinforces design as a competitive
advantage. Some design firms specialize in this ac-
tivity, often issuing “trends” documents. Design
schools and design competitions that attract young
designers play an important role in this kind of
strategic thinking.
Conclusion
Michael Porter’s value chain offers a useful
framework for synthesizing research on design
management and structuring design management
knowledge. Design managers and those who want
to promote design as a critical component of
corporate strategy will do well to study the value-
chain model. l (Reprint #9892BOR26)
Suggested Readings
Porter, Michael E. Competitive Advantage—Creating
and Sustaining Superior Performance. New York: The
Free Press/MacMillan, 1985.
Borja de Mozota, Brigitte. “Challenge of Design
Relationships: The Converging Paradigm.” In
Management of Design Alliances, eds. Margaret Bruce
and Birgit H. Jevnaker. New York: John Wiley &
Sons, 1998.
A classification of published research on design
management under Porter’s three-level system, as
well as basic concepts for marketing and strategic
research, can be obtained from the author at the
address below.
Brigitte Borja de Mozota
Maître de Conférences
Université René Descartes Paris 5
48 rue Michel Ange
Paris, 75016
FRANCE
DESIGN MANAGEMENT JOURNAL SPRING 1998 31