Design as a New Vertical Forcing Function

From Microsoft’s latest radical reorganization and subsequent purchase of Nokia’s devices unit toGoogle’s acquisition of Motorola, it’s clear that after decades of horizontal integration, high tech is in an age of increased verticalization. Samsung is customizing ARM Holdings’ processor chips, and Google is producing everything from operating systems to consumer hardware. What is driving this change? The objective today, for companies like these, is to control the end-to-end customer experience as much as possible. As Apple demonstrates, in order to deliver coherent experiences across multiple touchpoints — ideally, all of them — you need control. And to meaningfully convert this control into consumer value, you need design.

Design has emerged as a new forcing function in the historical cycle of business integration. It’s what lets companies monetize the intangibles — especially the all-encompassing “experience.” The ability design has to make this possible is fairly well understood, as evidenced by Apple’s continued profitability. The lesson is not that Apple makes simple, beautiful, shiny proprietary objects, but that it creates value by considering the consumer experience holistically.

Careful attention to design means Apple’s retail environment feels consistent with the way its brand is presented online, just as its industrial design supports its interactive experience. Increasingly, its devices are always-open touchpoints, and therefore continuous revenue generators. Your iPhone is more valuable because it syncs seamlessly with your iPad and MacBook; the value of all these devices is enhanced because you know exactly where to go should you have a question about how something works. It’s a level of control over the details that would be impossible in an aggressively partnership-driven industry.

Unfortunately for many companies, the scramble for verticalization is primarily reactive, and it will take time for them to create real value from the reorganization. Apple is firmly established, and as one of the world’s most profitable companies, it has the resources to continue investing in bolstering its position. On the other end of the business spectrum, nimble consumer-driven startups likePinterest and Square attract significant attention from consumers while driving new types of engagement. No wonder it seems that established technology providers have little choice but to reorganize around consumer experience, and establish greater control. If they don’t, they may not survive this industry-realigning disruption.

But a shift toward increasing control means more than just addressing the functional side of holistic consumer experience. It’s one thing to have all the capabilities your business requires under one roof; it’s quite another to have the courage, vision, and culture to use them to present a coherent experience to your consumers. Making a well-designed, end-to-end consumer experience your top priority requires substantial organizational shifts, and a radically different management mindset. Microsoft’s reorganization was their first step, and replacing the PC-biased Steve Ballmer is a critical second. Apple’s creation of a new SVP of Retail and Online Stores position for former Burberry CEOAngela Ahrendts indicates that their emphasis on highly integrated, user-experience-focused premium devices is here to stay.

Being design-driven means more than simply applying design; it’s surprisingly easy to fail at that. We already see companies addressing this new forcing function through the rise of design leadership, but it remains to be seen if the culture of these companies can truly shift to become design-driven. Google appears to have what it takes, but it’s not at all clear where Sony, BlackBerry, or Dell will end up. There’s already talk of computer OEMs being dead in the water, in fact, and this is surely not the only category of high tech that will be left out in the cold when this cycle is complete. Regardless of what happens, consumers stand to be the primary beneficiaries of this industry shake-up, while companies look to design for an edge in the battle for their hearts and minds.

Harvard Business Review