The Design Council's ground breaking study shows direct relationship between use of design and corporate financial performance
A new study published today (Thursday 4 March 2004) has demonstrated for the first time the direct relationship between the effective use of design and financial performance.
The study, which examined UK quoted companies over a ten-year period between 1994 and 2003, found that a group of 63 companies identified to be effective users of design outperformed the FTSE 100 index over the full period by 200%, and also surpassed their peers in the recent bull and bear markets.
David Kester, Chief Executive of the Design Council, which funded the study, said: 'The research shows that design is an important indicator of good management, and that this feeds directly through to the financial performance of these companies. Any investors who backed this group over the last ten years, through the bull and bear markets, will have seen a consistent and significant outperformance in their portfolio versus the FTSE All-Share index.'
The Design Council has asked FTSE Group to calculate a new index, which will be launched later this year, to measure the performance of design-led companies on an on-going basis. This index will help the investment community select companies on the basis of their design use.
In the research, the companies were organised into two categories - a 'Design Portfolio' and an 'Emerging Portfolio'. Among the companies in the Design Portfolio - the most design-effective, high-performing businesses - are many of the UK’s leading brands.
The companies include Royal Bank of Scotland, HSBC, Barclays and Egg in financial services; Tesco, Marks & Spencer, J Sainsbury and Boots from the retail sector; air transport companies such as British Airways, EasyJet and BAA; together with a wide variety of companies representing the UK's industrial and manufacturing base, such as ICI, BAE Systems, Rolls-Royce and Shell.
A significant aspect of the research is that investors would have achieved outperformance by investing in these shares throughout the cycle. During the bull market, both portfolios beat the FTSE All-Share by in excess of 120% while, during the bear market, they outperformed the FTSE 100 by more than 17%. In recent months, as the economy has been recovering, the portfolios have been running at between 14% and 38% ahead of the FTSE 100.
David Kester commented: 'There have been many studies focusing on the application of effective design but no project as inclusive and comprehensive as this new study. The research establishes, for the first time, that a commitment to design - throughout an organisation - delivers benefits to a company and its shareholders in terms of long-term financial performance.'
For further information, please call:
Paul Philpotts, Chief Executive, Kinross Render PR - 020 7592 1996 (direct) or 07776 237 492 (mobile)
Helen Thompson, Manager, Media Relations, Design Council Press Office - 020 7420 5286 (direct) or 07977 544 635 (mobile)
Notes to Editors
1. Copies of the full report are available for download from: www.designcouncil.org.uk/performance/corporatefinance.pdf
2. The Design Council's purpose is to inspire and enable the best use of design by the UK, in the world context, to improve prosperity and well-being. It helps people and organisations in business, education, public services and government understand design and use it effectively as part of their strategy.
3. Appendices attached:
Portfolio companies: Design Portfolio and Emerging Portfolio
Chart 1: Full Period Performance 1994-2003
Chart 2: Bull Market Performance
Chart 3: Bear Market Performance
Chart 4: Recovery Performance
© Design Council