Beyond GDP (and its microeconomic equivalent)

In my last blogpost Service design within the business model canvas I raised the question of how the business model canvas, service design and service-dominant logic approaches can be incorporated into performance management, balanced scorecards and strategy maps, by identifying the Key Performance Indicators of successful companies and public services within changing markets. Although not being able to provide a lot of tangible answers right now, I want to add some thoughts.

In this recent contribution Tim Brown from IDEO also asks the question about metrics:

“How should we assess a company’s permission to innovate? Could we create a brand innovation quotient—a set of measures that, taken together, would allow us to value a company’s capacity to innovate consistently? It would be interesting to quantify the extra market value gained from the anticipation of innovation. We could look at less-direct benefits as well, such as the effect on a company’s ability to attract the best employees. In the past we’ve struggled to find effective measures for innovation and growth. I believe in the notion that what you can’t measure you can’t get better at. So we need to get the metrics right.”

I also believe that what you can’t measure you can’t get better at. As user-centered-innovation consultants, we have to develop the metrics for the things we preach: how to measure the efficiency of service design, customer experience management, design driven & user centered innovation, social CRM, enterprise 2.0 tools, social innovation…etc ? We all know from case studies and other empirical evidence that human centered innovation and customer focus is a path to profit. But we will have to develop the metrics and key performance indicators (KPI’s) that can be included into strategy maps, deduced from balanced scorecards as these are the tools businesses & public services use to lead their organizations on a daily basis and to define their short & mid term objectives. “Strategy” in itself is a neutral concept, what is changing in the context of the new economy and the new emerging social, environmental  & political systems is the way strategies are defined, the type of strategic goals to achieve and the actions to get there. These metrics will contain qualitative criteria and not only quantitative criteria and we will have to agree on a common language and common way of “evaluating” qualitative criteria, as well as on what kind of quantitative & qualitative criteria to include. We also have to define these criteria for individual actions: a social media campaign, a redesigned service with better service quality, a new service recovery plan, a new design thought internal process or HR management policy…etc.

At the macro economic level these discussions about redefining the metrics for growth & wealth started with the publication of The Limits to Growth by the Club of Rome in 1972 and gained more attention during the last two decades now where concepts like the Human Development Index have emerged as a complement or alternative to GDP.

More recently, and under the impression of the financial crisis the commission on the measurement of economic performance and social progress has been created at the beginning of 2008 on the French government’s initiative. The Stiglitz-Sen-Fitoussi Commission (or SSFC) commission is chaired by Joseph E. Stiglitz, a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and former World Bank Chief Economist & Senior Vice President and published a report on the Measurement of Economic Performance and Social Progress :

“Increasing concerns have been raised since a long time about the adequacy of current measures of economic performance, in particular those based on GDP figures. Moreover, there are broader concerns about the relevance of these figures as measures of societal well-being, as well as measures of economic, environmental, and social sustainability.”

Following the publication of the Stiglitz-Sen-Fitoussi Commission report, the Franco-German Ministerial Council decided on February 4, 2010 to ask the French Conseil d’Analyse Économique (CAE) and the German Council of Economic Experts (GCEE) to follow-up on the outcome of the Stiglitz-Sen-Fitoussi Commission. The result is a paper called Monitoring economic performance, quality of life and sustainability published in December 2010.

These efforts were flanked by an initiative of the European Commission, DG Environment and DG Eurostat called Beyond GDP, together with  their partners The European Parliament, The Club of Rome, the WWF and the OECD resulting in a paper called GDP and beyond: Measuring progress in a changing world.

Some additional resources:

“Too often, the economists note, a narrow measure of market performance, such as gross domestic product, has been confused with broader measures of welfare. Governments may focus everything on increasing their GDP growth rate, treating it as an end in itself when it should not be.

This can lead to distortions of policy and unsustainable growth, as the financial crisis has vividly illustrated” and “national accounting systems no longer reflected people’s aspirations, values or experiences – creating a source of distrust between citizens and governments.”

Source: http://www.ft.com/cms/s/0/a157142e-a15c-11de-a88d-00144feabdc0.html#axzz19ugONg4X

or

“Economists have warned since its introduction that GDP is a specialized tool, and treating it as an indicator of general well-being is inaccurate and dangerous. However, over the last 70 years economic growth—measured by GDP—has become the sine qua non for economic progress.”

Source: Beyond GDP: The Need for New Measures of Progress

By reading these critics of the current GDP measurements and the proposed alternatives and adaptions from such renowned authors and institutions it seems to me that this is a legitimation for design thinking & user centered innovation and their applications as they exactly represent the mind, frame & toolset to fill these propositions with life, actions and tangible outcomes.

In the light of these rather difficult discussions, concepts like Corporate social responsibility (“CSR” – also called corporate conscience, citizenship, social performance, or sustainable responsible business) which is a form of corporate self-regulation integrated into a business model have emerged in recent years. In the private sector, a commitment to corporate social responsibility implies a commitment to some form of Triple-Bottom-Line (TBL – or Profit, People, Planet) reporting. In November 2010 the new ISO 26000 international standard on providing guidelines for social responsibility (SR) has been released. This standard offers guidance on socially (and environmentally) responsible behavior and possible actions.

Furthermore, in 2005 the United Nations Secretary-General invited a group of the world’s largest institutional investors to join a process in developing the Principles for Responsible Investment. The result is the creation of the United Nations-backed Principles for Responsible Investment Initiative (PRI) which is a network of international investors working together to put the six Principles for Responsible Investment into practice.

ICLEILocal Governments for Sustainability is another initiative worth mentioning in this context.

A whole bunch of new consultancies (rather originating from the traditional management consultant side) are emerging right now offering assistance and advice for certification to companies and governmental agencies in these areas and the big five consultancies are also massively entering this market (as they don’t know what else to do anymore….). But these standards and initiatives have the merit of representing some kind of metrics and measurement frameworks as well as certified labels against which it is more easily possible to assess the performance of a particular organization and to compare it with others. Business & consulting history shows that having these frameworks, standards, training programs for consultants and the validating organizations behind them induces perceived legitimation and reassures client organizations (same thing for business coaches, six sigma & lean consultants…etc).

As a community of design thinkers, service designers, social innovators and customer experience consultants, we have to trim these efforts of developing more accurate measures and metrics for sustainable growth and well being from the macroeconomic level to the microeconomic level where we operate on a daily basis when bringing human centered innovation into the processes and production outputs of the organizations we work for & with. We have to show that these actions have positive financial impacts for them. We also have to develop some kind of standards for our actions and maybe align on the above mentioned already existing standards for part of our work. This is not an easy task and worth a whole academic program in which we should contribute as a crowd with our collective intelligence and experience.

Contributions are highly recommended ;-)

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