What do Apple, GM, and P&G share? Design.

Companies increasingly are turning to design to boost the bottom line, but the transformation isn't always easy.

By , / Correspondent

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    The dramatically-designed 2010 Cadillac CTS Sport Wagon is shown in this Feb. 18, 2010, photo. Former GM Chairman Robert Lutz brought design pizazz to the CTS as well as several other GM cars.
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The need to hire 100,000 more teachers in science, technology, engineering, and math to make American students globally competitive is so urgent that President Obama has called it a "Sputnik moment." Yet a growing chorus of educators say something is missing in the plan.

"It's necessary but not sufficient" to focus on science, technology, engineering, and math (STEM), says Larry Thompson, president of Ringling College of Art and Design in Sarasota, Fla. "You don't go anywhere with STEM if you don't have STEAM – and that's [adding 'A' for] the arts, the creative part."

Already, incorporating art and design into business has become a key strategy for firms like Google, Pixar, Target, and Starbucks – even old-line giants like General Motors and Procter & Gamble. But teaching firms and business students to value novel ideas more broadly remains challenging. The Great Recession has made many companies more conservative. There's also a potential culture clash when MBAs, who know their way around a spreadsheet, interact with creative types bubbling over with free associations. Yet the potential is enormous.

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"Science and technology at the frontier are as much art as science," says Eric Darr, executive vice president at Harrisburg University of Science and Technology in Pennsylvania. "It's the ability to take a bet on a hunch, to design where there are no blueprints, and think much like an artist at a blank canvas."

Apple is the premier example of a company that has combined technical excellence with design brilliance. Under chief executive officer Steve Jobs, groundbreaking products like the iPhone, iPod, and iPad became objects of consumer desire: sleek, futuristic, cool, and refined. The payoff has been huge. In the last quarter of 2010, Apple's profit jumped 78 percent to a record $6 billion from a year earlier. Under the visionary Mr. Jobs, Apple's stock has soared from $3 to $340 a share; revenues have increased 10-fold.

"Design has played a huge role in Apple's success," says Josh Linkner, chairman of ePrize, a brand marketing company based in Detroit whose clients include Coca-Cola, AT&T, and Microsoft. "It's proof that design drives economic gain."

Other corporations have seen big gains from design. "I see us being in the art business," General Motors's design guru, Robert Lutz, told The New York Times when he took over at floundering GM in 2001 and brought pizazz to the Chevy Camaro, Volt, and Cadillac CTS.

Procter & Gamble, under former chief executive A.G. Lafley, doubled sales and quintupled profits from 2001 to 2009 by hiring design staff to inject "wow" into stale product lines. Mr. Lafley rejuvenated dowdy Oil of Olay by rebranding it to dispel the suspicion it was greasy. Then he launched a consumer-driven packaging and marketing campaign for Olay Regenerist, now the world's top antiaging cream. The make-over boosted sales from $300 million to $2 billion.

Making money with design is not just for big corporations. A 2003 study from the London Business School found that for every 1 percent of sales invested in product design, sales and profits rose by 3 to 4 percent.

Turning design into dollars "has become an enormous trend in the business world for really good reasons," says Kelly O'Keefe, professor and former managing director of Virginia Commonwealth University's Brandcenter in Richmond. "The commodity that becomes most valuable is the ability to design new, fresh, exciting, innovative products that change the game."

Perhaps that's why a 2010 survey by IBM of more than 1,500 global chief executives in 33 industries found that executives rate creativity the most crucial factor for success. The idea "has flipped over from something that's a bit fringe to a company being defensive if it's not incorporating design," says Roger Martin, dean of the Rotman School of Management in Toronto. "They have to explain why they're not hiring designers."

Teaching managers how to design remains a work in progress, however. Fred Collopy teaches "how to manage by designing" at Case Western Reserve University's management school in Cleveland. The MBA students create visual representations and practice methods like making prototypes and generating ideas. Class time includes studio sessions that combine statistical analysis with continually sketching alternatives. The emphasis is not on problem solving but on how to twist a problem to see it from different points of view and speculate on offbeat solutions.

Design schools are also teaching skills to apply in the business world. Syracuse University's School of Art and Design program prods students to come up with ideas for a breakthrough product or service. Students develop their inspiration through brainstorming, making prototypes, and role-playing scenarios, then hone their pitch to attract investors.

While US schools lag behind several Asian countries in science and math test results, the United States gets high marks for inspiring creativity. Top-ranked math nations like Singapore, China, South Korea, and Hong Kong are trying to hybridize the best of the US approach with their disciplined, rote-based learning. Starting in 2012, China's Ministry of Education is expected to send 40,000 teachers to the US to observe high schools with the aim of learning how to encourage creativity and innovation.

"If you put the two systems together," says Mel Schiavelli, president of Harrisburg University of Science and Technology, "it's probably a world-beater education system."

Yet with the current emphasis on test-taking and state budget deficits that cut art and music classes, the US educational system is tacking in the opposite direction, says Mr. Martin of Rotman. "It's a tragedy we're taking all the resources out of broad education and putting them into the narrowest possible goal of graduating all these scientists and engineers. That's about as wrong as you can be."

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