15 March 2023
Design Practice

The Role of Design in an Increasingly Financialized Business Environment

In recent years, businesses have become increasingly decoupled from traditional outcomes like profit, and many are now seen as financial instruments whose value is primarily driven by shareholder sentiment and market perception. This shift towards financialization is evident in many industries, from tech startups to established corporations, and has significant implications for designers who work in these businesses.

In more traditional businesses, designers are focused on creating products which satisfy user needs, improve the brand and deliver long term value. While this is obviously still important, as businesses become more financialized, a greater focus in being placed on generating shareholder value. This means that designers must now balance the demands of financial markets with the needs of end-users; a challenging task that requires a more holistic approach to product development.

To do this, designers need to understand how their designs fit into the company's overall strategy and how they can contribute to achieving its financial goals. This includes knowing what the quarterly targets are, what promises the business has made to investors, and how hitting certain milestones can impact the company's financial performance and stock price. 

One thing to bare in mind is that businesses in private ownership are generally able to maker longer term bets because they will still be the owners when those bets come to fruition. This is true of family owned businesses like those which make up the famous Mittelstand sector in Germany. However it’s also true to some extent with venture backed companies, as these new owners are making a bet that the money they invest now might not get returned for another 10 years. Publicly traded companies generally think slightly differently as people buy and sell shares on a much shorter term basis. This forces company leadership to be a lot more reactive to market changes. Why is this?

Well in part this is because boards and senior executives often get a significant part of their employment package from shares. As such they are obviously predisposed to want to see share prices rise. In fact many people would argue that the main focus of a board is to increase shareholder value. This can be perceived as fairly selfish behaviour. However don’t forget that a lot of tech workers are willing to take lower salaries in exchange for share options, so it’s generally in their interest for share value to go up rather than down. As a result, share value can have an outsized affect on a company's ability to acquire and retain top talent. 

Actual share value (in publicly traded companies) or the perception of value in privately owned companies can also have a big effect on their ability to get loans or raise additional investment. This is one of the reasons why heavily financialized companies tend to think a lot shorter term. They have likely made promises to shareholders around what they are going to deliver over the next quarter or year, and their ability to hit these targets is going to dictate how much money they’ll be able to raise (in direct investment or loans) as a result. This can cause companies to focus on speed of delivery over quality or even solution fit. 

A lot of designers find this short term thinking incredibly frustrating. After all their focus is on building the best product possible. This usually requires research, exploring a range of different options, testing solutions in the market, and iterating when things don’t work.  As such, designers will regulally push back against this thinking, often shooting the messenger in the process. While this is understandable in a traditional business context, it’s becomes problematic inside heavily financialized organisations. 

Another key challenge facing designers in a financialized business is the pressure to create products that are seen as innovative and cutting-edge, even if they may not necessarily live up to their promise. This is because financial markets often place a premium on companies that are perceived as being at the forefront of their industry, regardless of whether their products are actually meeting a real need. As such, financialized companies are often more focussed on how innovative and customer centric they appear to the market, rather than how they actually operate internally. 

So what can designers do? To succeed in this new environment, designers must find ways to balance the needs of users with the demands of the financial markets. This includes realising the importance of speed and momentum as well as quality and fit. Designers also need to work closely with other departments within the company, such as marketing and finance, to ensure that their designs are aligned with the business's broader goals. They need to communicate with business leaders to understand what their priorities are and how their designs can help achieve them. While the focus on share value and market perception may seem daunting, it also presents new opportunities for designers to innovate and create products that appeal to both users and investors. By finding ways to balance these competing demands, designers can help their companies succeed in an increasingly financialized economy.