The Economic Value of Design and Innovation in Federal Information Technology

FEDERAL SECTOR REPORT March 2006 IN THIS ISSUE Value of Design Link of the Month: Design Museum Consulting Services Home Page (c) 2006 by the P2C2 Group, Inc.	P2C2 Brochure
THE ECONOMIC VALUE OF DESIGN IN FEDERAL INFORMATION TECHNOLOGY Design and innovation need more attention in the U.S. Government's approach to information technology (IT). Guidance documents about the Federal Enterprise Architecture and IT investment management largely ignore design. This is a serious oversight, because the quality of design impacts the Return on Investment of the Federal investment in IT, which has a requested budget level of $64 billion in Fiscal Year 2007. Imagine building a baseball stadium in Washington for the Nationals without a discussion of design! Yet design is seldom a defined priority in Federal spending for IT. Not only does this make life more difficult for users (and IT support personnel) of many government systems, but ignoring design also misses out on the business opportunity to leverage fully the billions of dollars of potential value. Design Success in the Private Sector Design is a crucial source of value in the private sector. No one needs to look further than the ubiquitous iPod. Apple Computer Corporation estimates 2006 profits of approximately $2.15 billion, in large part because of the brilliantly designed iPoD and other innovative products. The $56.2 billion of market capitalization value (3/15/2006) enjoyed by Apple's shareholders is due largely to the fact that this is--and always has been--a design and innovation company. The value of design is more than slick consumer products. Amazon.com has extended good design to supply chain management, along with sophisticated search, database, and customer relationship management tools. The combination has so far enabled the company to grow to $8.4 billion in sales on paper-thin margins. It has become the 21^st century version of an encyclopedic department store, where customers can shop for pet flea medication, lighting, and kitchen knives in addition to books and DVDs. Good design is hard to define, but you know it when you experience it. Design establishes an emotional bond. It is pleasing to the user and often astoundingly simple. Take the Google web interface for example. The basic design is starkly plain and utilitarian. The sophisticated technology powering the search engine is invisible to users. It simply produces results quickly, efficiently, and happily. What should good design do in Federal IT? I'd love to hear your thoughts, and readers are invited to comment. But here's my starter list: Accomplishes something valuable with minimal fuss or bother Is pleasing or fun to experience Provides benefits and rewards for users right away Fits easily into work styles or lifestyles Is affordable and worth the cost/effort Becomes essential and often addictive Provides a positive return on investment for those paying for it. Economic Value Does design have value? Consider the Research In Motion's BlackBerry settlement of $612.5 million for patent issues. Other designs are worth far more, though the innovator does not always reap the benefits. Xerox PARC pioneered the graphical users interface and mouse back during the 1970s, but it took Apple and eventually Microsoft to reap the billions of dollars in economic value. The Defense Advanced Research Projects Agency (DARPA) was the grandfather of the Internet, and could we arguably conjecture that this innovation may have an ultimate global economic value of a trillion dollars?
Cost Benefits Analysis So how do you justify excellence in design and innovation in Federal IT capital investment budgets? You need to justify it using alternatives analysis and cost benefits analysis, or another value measuring methodology. Here are examples of the types of thinking that might help when seeking to demonstrate the financial value of investments in design: Speed the change management process by making the replacement system more pleasing to use Save citizen time during required, OMB-sanctioned Information Collections Increase the speed of federal response to natural disasters, potentially reducing damage and economic dislocation by billions of dollars Reduce error rates in Medicare/Medicaid payments Increase the number of taxpayers filing electronic returns Reduce the cost of Help Desk operations by improving the design of automated solutions Eliminate unnecessary inventories and warehousing through well designed supply chain management. The Essence of Innovation "Genius hits a target no one else can see," according to philosopher Arthur Schopenhauer. Design requires a leap of faith, which may be a disquieting notion to organizations that are risk averse. You won't find innovation simply by surveying stakeholders or conducting a requirements analysis. People simply don't know they need blockbuster change until they experience the invention. Who could guess we would want or need transistors or digital photography or voice over IP telephony? Who a century ago would guess the impact of Frank Lloyd Wright on architecture? Only a few innovative ideas thrive and succeed. Others wither and fade, or they are choked out by alternatives. That is the risk, and the only way to grow a few blockbuster designs is to manage (and weed) an entire hothouse of budding ideas, much the way DARPA did historically. In other words, you need a portfolio management process for overseeing your investments in design and innovation. Valuing Innovators and Designers Good design is based on talent and a touch of genius. It can't be manufactured by directives, position descriptions, certifications, CMM and ISO processes, or Federal compliance paperwork. If you want to achieve excellence and gain the economic value of design, you will need talented individuals who have the time and latitude to invent. They will need to work with managers who are focused on the business issues and return on investment--but they need the freedom to work outside the box, to challenge assumptions, and to redefine. Much of the talent already exists within the Federal Sector. I recently observed a group of Federal employees and contractors toiling into the wee hours, preparing a demo of a breakthrough solution. But these heroic efforts need to be acknowledged, organized, supported, and rewarded on a Federal-wide basis. The United States spends approximately 2.7% of its gross domestic product in Research and Development, according to a recent report by the United Nations Conference on Trade and Development. This perhaps would a realistic target for innovation, design, and other R&D in Federal IT. That would yield $1.7 billion for FY 2007. While only some of the investment will yield blockbuster innovations, the potential return on investment to agencies, government employees, contractors, and taxpayers is huge. Bottom Line Federal Enterprise Architecture and IT capital investments will be lackluster and miss out on significant economic value unless more emphasis is placed on excellence in design and innovation.
LINK OF THE MONTH: DESIGN MUSEUM One of the online joys is the Design Museum, which can be accessed at http://www.designmuseum.org/. Its home base is London, where it is "concerned as much with the future as the past." The museum seeks to capture "the excitement of design's evolution, ingenuity and inspiration through the twentieth and twenty-first centuries." It includes a Flash^TM based presentation and provides examples of digital design. The Design Museum's first Designer of the Year prize went to Jonathan Ive, senior vice president of design at Apple Computer Corporation. According to the Design Museum, Jonathan combines "fanatical care beyond the obvious stuff" with relentless experiments into tools, materials and production processes. He and his design team have developed the iMac, iBook, Cube, Powerbook G4, and iPod. He previously worked for a London-based consulting firm where he designed a wide range of products including power tools and wash basins. CONTRACT VEHICLES The P2C2 Group, Inc. is a leading independent management consulting firm serving the federal sector. It is widely accessible through world-class prime contractors, GSA schedules and other multiple-award contracts, and 8(a) firms. Call Jim Kendrick at 301-942-7985 to discuss vehicles appropriate to your agency.	DESIGN MUSEUM
HOME PAGE One of our great pleasures over the past few months has been supporting a comprehensive technology modernization solution for a Federal enterprise. It has encompassed strategic planning, the complete system development cycle, capital planning documentation, information security, acquisition planning, and the Exhibit 300. We've had an opportunity to work with a cross-section of stakeholders and enterprise leadership, and the potential for leveraging mission results for the organization is outstanding. Elsewhere, we have been busy with alternatives analysis and financial modeling, CPIC training, IV&V of Exhibit 300 business cases, and collaboration about case management systems. In my "free time," I'm preparing a presentation on agency-wide implementation of EVMS policy. Today's business and work environment is a pleasure. The P2C2 Group is able to operate as a network, combining its core consulting activities with additional independent consultants and teaming partners with specialized capabilities. Telecommunications keeps us in ongoing contact with our customers, including those located hundreds or thousands of miles away, and we're thinking about adding collaboration tools and video conferencing to leverage this environment even more. In short, life is pretty good these days. Our consulting team is utstanding, and our teaming partners are excellent. Best wishes, Jim Kendrick Enterprise Management Consultant P2C2 Group, Inc. 4101 Denfeld Avenue Kensington, MD 20895 kendrick@p2c2group.com 301-942-7985	P2C2 Services Strategic Planning IT Capital Planning Exhibit 300s IV&V New Projects SDLC Documentation Security Documentation Acquisition Support Enterprise EVMS PMO Support Research Evaluation Bringing the Vision of E-Government to Life

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