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State of Design: The Canadian Report 2010

The Product Design and Development Service Industry

The PD&D service industry is an important part of the Canadian service economy that supplies critical innovation services to many other industries such as manufacturing, distribution, and retail. The PD&D industry is primarily engaged in developing professional designs and specifications through a pragmatic development approach that optimizes the function, value, usability and appearance of products. These services can include material selection, construction, mechanisms, shape, and surface finishes of the product, taking into account a host of considerations such as human needs, safety, the environment, development timeline, production cost, maintenance, and distribution.⁹

Geographic Distribution

In 2008, the majority of PD&D service providers were located in central and western Canada with approximately 2,400 establishments in Ontario, 1,000 in Quebec, 1,900 in Alberta, and 980 in British Columbia (Figure 9). Most PD&D service firms are small in size — between 1 and 19 employees — with a number of them focusing on only providing upfront strategic PD&D planning and assessment services; a high value–added activity for their customers' business strategy.²

Figure 9: Geographic Distribution of Product Design and Development Service Providers

[Description of Figure 9]

The highest concentrations^{Footnote G} of PD&D service providers are found near large metropolitan areas. The most geographically concentrated regions are located around Montréal, Toronto, Calgary, and Vancouver — all of which have strong design communities (Figure 10).

Figure 10: Geographic Concentration of Product Design and Development Service Providers

[Description of Figure 10]

Between 2000 and 2008, some product design firms have consolidated, boosting the number of medium and large firms in Canada. This is partly due to the fact that some Canadian service providers are seeking to be total package providers and offer a full spectrum of design services — not uncommon considering the most commercially successful design service providers in the United States, United Kingdom, Italy, and France operate as total package providers.² Firms are increasingly seeking complete design service solutions to avoid scattering their outsourcing contracts across too many channels and to minimize transaction costs.¹¹

Performance ^{Footnote H}

The Canadian product design service industry has outperformed the Canadian economy by 60 percent in terms of revenue growth over the 1999 to 2007 period. Revenue for the Canadian consumer fashion design sector has increased by 10 percent a year over the same period, and revenue growth for industrial design services has also been strong with average annual growth of 9 percent (Figure 11). Also in 2007, the industrial design and consumer fashion design industries had profit margins of approximately 12 percent and 11 percent, respectively.¹²

Figure 11: Product Design Industry Revenue Growth
1999 to 2007

[Description of Figure 11]

With a relatively small domestic market, Canadian design firms focus more on exporting their services compared to U.S. design service providers. In fact, the export intensity^{Footnote I} of Canadian product design industry is 2.25 times greater than U.S. firms, with exports totalling $83 million in 2007 (Figure 12).

Figure 12: Product Design Industry Export Intensity - 2007

[Description of Figure 12]

The majority of Canadian product design services exports are to the United States, with a large proportion being industrial design, product modelling, and prototyping services. A sizable portion of design exports to other markets are clothing, textile, and jewellery design services. The industrial design service industry exports 78 percent of its services to the United States and an additional 7 percent to Mexico. The consumer fashion design service industry is focused more on export markets outside of North America (Figure 13).

Figure 13: Product Design Industry Export Destinations - 2007

[Description of Figure 13]

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