creative finance

CREATIVEFINANCE

© now+om | September 2010 | kelly@nowtom.com

INDEXCreative Finance.

1.0 Intro.2.0 Value creation.3.0 Difference between design and marketing.4.0 The value of design.5.0 Measuring company innovation.6.0 Measuring the design process.7.0 Measuring design risk.8.0 Accounting for design.9.0 Summary.

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1.0INTRO

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CREATIVEFinance

… is not what caused the recent “financial meltdown”, (that was “creative accounting” — and an entirely different story).

1.0 INTROThe Imagination Economy.

Creativity is no longer enough. Creativity can only add value. Nowtom can help corporations create value from the challenges facing them:

What can we dream about? How far can we dream? How can we make these dreams a

reality?

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2.0VALUE

CREATION

2.0 VALUE CREATIONQualitative.

Nowtom Is a design company, but in the “value creation”

business, not only for ourselves (as in any business) but it is our ultimate client delivery.

Focus (and increasingly becoming ever so important) on compelling quantitative financial and economic arguments for design!

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2.0 VALUE CREATIONQuantitative. Influence on the purchasing decisions. Enabling strategy (new markets). Enabling product and service innovation. Reputation/awareness/brand value. Time to market/process improvement. Customer experiences. Cost savings/ROI. Developing communities of customers. Good design is good for all: triple bottom line

accounting for social, environmental, and business impact.

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2.0 VALUE CREATION“Evolutionary Economics”.

Key Concepts: Creative finance can guide organisations out of

well-practiced routines and product creation patterns.

Can help continuous search to improve dynamic capabilities (“Kaizen”).

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3.0DIFFERENCE

BETWEENMARKETING

& DESIGN

3.0 DIFFERENCE BETWEEN MARKETING & DESIGNTalking VS Listening.

Fundamentally, marketing is about talking to a group, design is about listening to an individual.

Both are important skill sets at different stages of the process. But in the end, would you rather buy from a company that talked or one that listened?

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3.0 DIFFERENCE BETWEEN MARKETING & DESIGNApproach.

Using a marketing approach too early on in the process leads us to ask: What will please the greatest number of people just enough to buy our product?

Using a design approach at first tends to lead us through empathy, user centeredness and the creativity to ask: What will delight those who buy our product so much that they tell other people about it?

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4.0VALUE

OFDESIGN

4.0 VALUE OF DESIGNGood Design is More than Just Profit. Good design and creative finance have

significant implications across four areas of a companies internal capital markets:

Profits, assets, investments and shareholder value.

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Profits

Assets

Profits from the radically innovative product

Shar

ehol

der v

alue

Goo

d D

esig

n

Investments

Brand equityCompetitive position

Customer loyaltyKnowledge

Network position

Marginal investment

Unique value for people. Longevity

Direct connection withBrand

Definition of competitive field.

Definition of new archetypes of meaning (not easily imitable)

Learning from people’s interpretation

Early access to key resources

Halo

Cumulative investments

Appropriability

Price

Cost

Volume

Margins Profits from other products

5.0MEASURING

COMPANYINNOVATION

5.0 MEASURING DESIGN INNOVATIONCompany Innovation Culture.

How to help convince senior management of the value of design thinking, innovation, empathy, and of being more user-centered across their whole organisation.

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5.0 MEASURING DESIGN INNOVATIONCompany Innovation Culture.

Metrics to measure design impact within a business (not to be confused with design effectiveness or activities performed at each specific step in the development process).

Competitor innovation benchmarking (when/where are competitors investing in innovation).

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5.0 MEASURING DESIGN INNOVATIONNowtom Valor ToolBETA

Vi + Cm + Bv + Ra + Rip

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Vitality indexSales from products

created in last 3 years / Total sales.

Contribution margin(Sales - Direct costs) / Total sales

Return on assets

Net profit before tax / Total assets

Return on intellectual

propertyTotal sales /

(Market capitalisation - Physical assets)

Brand valueExpected net annual cashflow from

your branded products / Your target annual return on

investment percentage

6.0MEASURING INNOVATION

MANAGEMENT & PROCESSES

5.0 MEASURING DESIGN PROCESS.Existing Metrics.

Innovation Management Dilemma. Careful balance of structure and co-ordination

with looseness and flexibility.

Methods. DIFOTAS (delivery in full on time as specified) ROII (Return on innovation investment) TTM (Time to market) Etc. TBC

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7.0MEASURING

DESIGNRISK

5.0 VALUE OF DESIGNMeasuring Design Risk.

Key Concepts: Allocating Innovative capital Creative destruction (B > C). Innovation sustainability.

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8.0ACCOUNTING

FORDESIGN

3.0 VALUE OF DESIGNAccounting-speak. In accounting terms the impact of design will be

similar to the "economic impact”, but the language you use to articulate the impact will be very different. The financial controller, CFO and accountant will be interested in any project that can:

Increase your revenue. Lower your cost of goods sold. Deliver a higher contribution margin (and gross margin). Lower your overheads from capital costs. Create more earnings before interest in tax (EBIT). Ensure ongoing positive cash-flow.

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9.0SMARTER

CONVERSATIONS=

SMARTERORGANISATIONS

9.0 SUMMARYConversation Starter.

Using design thinking in your business is all about organisational culture.

To change culture, you need to change conversations.

Creative finance can be that conversation starter.

Design vision twinned with creative financial strategy are the new competitive battleground.

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9.0 SUMMARYSo, Give Me Some Examples! Muji’s new design vision is to achieve

“consensus” between consumer and designer. Price a major factor. Supported by strong internal cultural alignment. Only good design AND a creative financial

strategy will tie everything together…

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KIITOSTHANK YOU

DANKEGRACIAS