Design Knowledge Can Help Identify Scalable Concepts
The technology readiness level (TRL) is a system used to estimate the maturity of given technologies. Used by organizations such as NASA and the US Department of Defense, the TRL is a scale ranging from 1 to 9, where 1 indicates that research is just beginning and 9 indicates that a specific technology is “flight proven” or ready to be implemented. So, how do you identify the TRL of any given solution?
As consumer ambassadors, designers play a critical role in determining how close concepts are to being “flight proven.” In short, they possess the expertise needed to identify what consumers need, want, and are most likely to adopt. When investors partner closely with designers, they essentially gain the ability to more accurately predict the TRL of the product or service in which they are thinking of investing, and, by extension, mitigate at least some of the risks that accompany investing in early-stage companies.
Design Knowledge Can Put Early-stage Startups on the Right Course
Nearly all VCs now recognize that it is rarely sufficient to throw money at a startup. If you want a startup to succeed, you likely also need to invest in its people. As a result, many VCs now invest heavily in coaching for the leaders of the startups in their portfolios. But what if VCs invested in design expertise as well?
According to McKinsey, over 40 percent of companies don’t consider end users during the development stage. As a result, products and services are often developed with little or no concern for their potential market. The problem with this thinking is that by the time a product has been developed, it is often too late to make it market ready. If you’ve invested in building a product or service that consumers don’t need or want or one that is never going to prove scalable in a sustainable way, there is arguably little to gain from investing in design or in extensive market research and marketing on the backend of the project.
What if this cycle was reversed, and it became the norm to invest in design, especially in early-stage companies? Given the evidence that companies that invest heavily in design outperform companies that don’t, it follows that investors have much to gain by ensuring their startup leaders are focused on design—and, ideally, even creating Chief Design Officer positions—at the earliest stages.
Design Knowledge Can Help Identify Vertical Service and Product Opportunities
You only need to look at some of the twenty-first century's most successful companies to appreciate that successful growth increasingly means identifying vertical products. Google is more than a search engine, Amazon is more than an online book dealer, and even Uber is more than a car-ride service. All of these companies have been successful due to their ability to identify and scale one or more vertical products or services.
Designers are uniquely well-positioned to help companies identify and start developing and scaling potential vertical products. More importantly, understanding the entire life cycle of products and services, designers can also advise companies on when and why the launch of verticals may pose undesirable risks.
Design Knowledge Can Help Investors Activate Live and Dormant Patents
When startups fail, there isn’t much to liquidate. Unlike traditional manufacturing companies, when most twenty-first-century businesses fail, the only thing of value left to sell off is their IP (e.g., the patents they manage to file while operating). Notably, because startups often file patents early on to signal their value to potential investors, however, even failed startups frequently have multiple patents. The problem is that, on the surface, patents filed by failed startups can be difficult to value and, due to their association with a failed startup, are frequently undervalued. Fortunately, this is another potential area where design knowledge could make a huge difference.
Even when a startup has failed, designers are frequently able to salvage previously unidentified value from filed patents, including those that are currently dormant, and for a simple reason. Many patents fail because the proposed technology isn’t scalable. Designers are often able to identify what aspects of a patent is scalable.
As an example, consider Lightwash. Originally, the technology underpinning this innovation, which uses ultraviolet light as a sanitization method, was designed to sanitize rooms. The concept was sound but not immediately scalable for. Bringing a design perspective to bear on the existing patent revealed that while sanitizing entire rooms may not be immediately viable, sanitizing hands was already within reach. And, this is just one of the many ways in which design expertise can salvage value from patents that may otherwise never result in much-needed solutions.
Helping founders of early-stage companies understand and invest in design seems likely to significantly reduce the number of VC-backed companies that fail. But this wouldn’t just be good news for VC-backed companies or VCs. Yielding a higher return, VCs would also potentially be able to support a broader and more diverse range of founders.