(FORTUNE Magazine) – REEBOK HAD a terrific idea: a basketball sneaker with inflatable air cushions for better ankle support. But the idea had a problem: how to inflate the air bags? Some at Reebok suggested an ugly box that clumsily attached to the heel of the sneaker. Seeking something better, the company hired John Zoccai, 43, a Boston designer with clear plastic glasses and a taste for red paisley ties. From visiting playgrounds around Boston and talking to young hoopsters, he and his team kept refining the features of the new shoe. For example, he helped Reebok design a pump that tucked neatly into the shoe's tongue. Aspiring Michael Jordans simply pushed an orange button that, fittingly, looked like a basketball. When Reebok introduced the Pump, as it's now called, at an Atlanta trade fair in February 1989, archrival Nike showed up with a similar inflating shoe that had a major difference. The Nike required playground stars to carry a separate hand pump. Preferring Reebok's design, retail buyers flocked to the Pump. Nike eventually dropped its shoe. To date, Reebok's revenues from the Pump are approaching $200 million. With success stories like this around, it's little wonder that many American corporations are embracing design as the hot strategic tool for the 1990s. After a decade of restructuring, many corporations have improved operations to the point where they can match each other on price, quality, and technology. How, then, to differentiate yourself? Design. Says Robert Hayes, a professor at the Harvard business school, which is teaching case studies of industrial design this year for the first time in its history: ''Fifteen years ago companies competed on price. Today it's quality. Tomorrow it's design.'' Taking design seriously is one thing. Using it right is quite another. Managers typically fail to give designers enough authority to be effective, or, worse, they look upon design as pure aesthetics, a matter of simply dolling up a product long after it has been engineered. To smart managers, design is aesthetics, certainly, but it also means solving the problems of the customer. Good design addresses the consumer's every concern -- how a product works, how it feels in the hand, how easy it is to assemble and fix, and even, in this era of environmental concern, whether it can be recycled. When all these elements come together, a well-designed product exudes quality, integrity, and assurance. As Zoccai aptly sums up: ''It's what makes you fall in love with a product.'' The results can be impressive. At Black & Decker last year, designers radically improved the looks, balance, and features of the Dustbuster vacuum, whose sales had been slumping. So far the new model is cleaning up. Germany's Braun this spring introduced the world's first electric foil razor with a double-sided pivoting head, which gives a closer shave as it automatically adjusts to your face. Demand is so strong in Europe that the company has delayed the razor's launch in the U.S. for lack of production capacity. At Sony a team of designers concocted the idea for one of the company's most recent successes, My First Sony, a line of colorful, high-quality, easy-to-use audio equipment for kids. Companies like Motorola, Braun, Sony, and IBM believe the best way to get business-smart designers is to grow them internally. The theory is that over the years an in-house designer can learn the needs and restrictions of engineering, manufacturing, and marketing. Among U.S. companies, carmakers have the largest staffs, with as many as 600 designers. Outside the auto industry, Matsushita has the biggest international staff, with about 450 industrial designers. Philips comes next with a staff of 250. IBM's product- design staff numbers about 40. THE DANGER of relying on internal designers is that they can get stale. One who has spent his whole career working on refrigerators may end up believing there's only one way to design them. Smart corporations often hire small independent firms to bring in fresh ideas and inspire the insiders. Mario Bellini is one of Italy's top independent designers and has worked with Olivetti, an international leader in design, for over 25 years. Says he: ''You have to bring something substantially new, different, and controversial.'' The best independent design firms are scattered about Italy, Germany, England, and the U.S. Design Firm Management, an industry newsletter, says revenues at the ten largest U.S. firms grew 22% in last year's first half. America's biggest firm is Walter Dorwin Teague of New York. It employs 225, has been in business 65 years, and last year chalked up over $7 million just in product design fees. Some firms -- Design Continuum (Zoccai's outfit), Fitch RichardsonSmith of Worthington, Ohio, and San Francisco's I D TWO -- also know engineering and manufacturing. Half of Design Continuum's staff, for instance, are engineers. What does it all cost? Surprisingly, the typical salary of a U.S. industrial designer is only about $35,000. A large corporation's manager of design usually earns $100,000 or so, much less than his counterparts in engineering and marketing. (The exception is the car industry, where a top design manager can make up to $350,000 a year.)

Independent design firms usually work on an hourly basis, billing an average rate of about $75 an hour. As entrepreneurs, heads of these firms sometimes get rich. Hartmut Esslinger of frogdesign in Menlo Park, California, who designed Apple's computers and is creating the NeXT look for Steve Jobs, and Martin Beck of Fitch RichardsonSmith (he drives a Rolls-Royce Silver Spirit) are millionaires. I D TWO President William Moggridge, estimates that design costs only about 2% of the total expense of making, marketing, and distributing a product. Says he: ''For the amount you invest, it has tremendous leverage.'' Many companies don't achieve maximum leverage because a kind of plexiglass wall separates designers and managers. An executive may feel vaguely uncomfortable with a designer -- the guy's wearing a suit, sure, but underneath he's an artiste wearing a black silk T-shirt. Designers are just as much to blame for the breach. Many, trained at prestigious schools like Pratt (in New York City) or Cranbrook (in Michigan), never bothered to learn the language of business, looking upon the whole activity as beneath them -- mere commerce. Smart executives look for designers who can talk as easily about returns on investment or reject rates as about Rembrandts. Says Martin Beck of Fitch RichardsonSmith, America's second-largest industrial design firm: ''We should never be stars. The only stars should be our clients and their products.'' Indeed. Says Thomas Bidwell, executive vice president of Crown, which hired Beck's firm to help it design a line of prize-winning forklifts: ''There's none of the 'I know best' syndrome. Fitch's designers come in here, and the first thing they ask is, 'What is it? How does it work?' '' IT IS ALMOST IMPOSSIBLE to answer the question of which style of design is best. The old stereotypes of German, Italian, and American styles are fading as business internationalizes. What kind of design is the Mazda Miata sports car? It was done by an American for a Japanese company and based on the look of the British sports cars of the 1960s and 1970s. Or take the new spider- shaped aluminum orange juicer. It was designed by a Parisian, Philippe Starck, for an Italian company, Alessi, and is being sold in the U.S. and in Europe. So, as the Count of Buffon once put it, ''the style is the man himself.'' Today you can find almost as many styles as there are designers, and each country has many that are worldclass. Among broad schools currently ascendant, Black & Decker design chief Gary Van Deursen cites what he calls ''design animism.'' Van Deursen, who in his gray suit and neatly trimmed mustache looks more like a marketing executive than one of America's top industrial designers, oversees a staff of 16 in the company's Connecticut design center. Like a kid showing off his Christmas presents, he grabs from a wall of Black & Decker products the Power Pro Dustbuster, the new generation of the company's successful line of hand-held vacuums. As he slowly rubs his hands along its smooth black plastic, Van Deursen explains how the new Dustbuster differs from the old. ''We wanted a distinct design. The old Dustbuster was hard and rectangular. We felt people were getting tired of unfriendly sharp edges and Bauhaus simplicity.'' THAT DISTINCT design, or animism, is all about flowing forms, sculptural , shapes, and soft lines. At times it takes on human and animal characteristics. The vents on the side of the vacuum, for instance, look like gills. The overall shape could be an extension of your arm. When Black & Decker tested the new look with consumers, people used the word ''friendly'' and said the vacuum looked ''powerful and muscular.'' But the Power Pro is more than just a pretty shape. Van Deursen, who believes the American consumer is as concerned about ergonomics as about looks, reworked the design 30 times in six months until he got the balance just right. When you hold the vacuum it tilts slightly forward -- not so much as to strain the wrist but just enough to feel as if the machine wants to pick up those spilled Cheerios. Dieter Rams, design chief at Germany's Braun and one of the most passionate disciples of the Bauhaus school, couldn't disagree with Van Deursen more. As far as Rams is concerned, form follows function and that's that. No fishlike gills, no unnecessary curves, no sculptural shapes. Says he: ''Decoration lasts only for a short time. Bauhaus makes products that are long-lasting.'' He has a point. An early version of a food processor he designed in 1957 is still on the market in Germany and doing well. Not that he is totally rigid. Braun products can be any color as long as it is black, white, gray, blue, silver, or red. Rams, 58, in round tortoise-shell glasses, a blue jacket, and blue striped shirt, looks a bit like actor Richard Widmark playing an academic. For him, Bauhaus, which originated in Germany around 1920 as a movement to give the working class simple, well-designed buildings, furniture, and consumer products, is still a way of life. He drives a black-on-black Porsche 911. His stark office at Braun headquarters outside Frankfurt has white walls, gray carpeting, and a black and white desk. Just mentioning a toaster with flowers or oxen on it is enough to jolt him out of his usually pleasant self into a heated tirade against superfluous design. As conceived by Rams, a product never pretends to be anything it isn't. For example, Braun's electric razor, the world's No. 1 seller in its class, has small plastic knobs on the surface that not only look good but also keep the razor from slipping when put down on a wet sink. Rams wondered last year why electric razors required you to move your wrist at awkward angles to get a close shave, so he designed a new double pivoting head that moves with the hills and valleys of the face. Demand is soaring. AT ONE POINT this reporter, foolishly thinking he saw a hole in Rams's armor, asked him about a Braun coffeemaker sitting in his office that had vertical lines on the surface, giving it the look of a fluted Greek column. ''Ah,'' said Rams in his excellent English. ''The lines in the coffeepot are definitely not decoration. The lines add strength and hide imperfections, which lets you use a cheaper plastic.'' Bottom line: Adding the lines reduced Braun's plastic costs by nearly 70%. As much as Dieter Rams believes that design represents seriousness and high- mindedness, some Italian designers, God bless them, believe that design should be colorful, whimsical, and just plain fun. Ettore Sottsass, 73, is an independent designer who started working for Olivetti some 30 years ago and who, in the early 1980s, founded Memphis, a school of design known for its wildly colorful and wackily shaped furniture. His white hair swept back and his handlebar mustache impeccably trimmed, he works in a studio on an elegant Milan side street and can count among his accomplishments the Valentine, a bright red, almost huggable typewriter he designed for Olivetti in the 1960s, now part of the Museum of Modern Art's permanent collection. On a blustery day in his office, he glances at a gray ceramic vase full of wilted flowers, and with a mischievous glint in his soft brown eyes explains his design philosophy. ''We think that life is a sort of comedy. So we design the stage for the comedy. Every day we play our role. The man who has a Ferrari plays the role of the young, macho speedy man. Everybody needs to design themselves to exist.'' ANOTHER HALLMARK of Italian design is its eye for something known as design integrity. Difficult to define, it has to do with a product's gestalt, the overall image it projects. A product with design integrity reflects the corporation's culture, for better or worse, and the customer's expectations of quality, performance, and reliability. A Ferrari simply looks fast and expensive (and is). The cut and fabric of an Armani suit always say the wearer is very serious about his clothes and image. A master of design integrity is Giorgetto Giugiaro, head of Giugiaro Design in Turin. Famous for his car designs -- the Volkswagen Rabbit, the Audi 5000, the Saab 9000 -- Giugiaro also heads a rapidly growing product-design business that caters mostly to Japanese companies like Nikon, Bridgestone, and Makita. ! Giugiaro, 52, with Italian movie-star good looks, understands that design should reflect a company's spirit. As an example, Giugiaro cites his popular design of Nikon's top-of-the-line cameras, the F3 and F4S. He improved the ergonomics, making the F3 the first camera with one end sculpted like a handle for easier use. But the design was much more than that. Says he: ''I always take into consideration the history and culture of the company, which in Nikon's case was one of selling to professionals. The camera had to express its technical aspects, it had to look serious, it had to have not my personal style but that Nikon look.''

Recently Giugiaro designed what may be the best expression of his own company, a sleek-looking sports car called the Aztec. It's what you would imagine the Batmobile would look like if designed by an Italian -- sheer luxury and fun. When he designed it, Giugiaro never thought it would go into production. But Japanese buyers have placed 52 orders for the $500,000 roadster, built by Compact, a Japanese manufacturer, for delivery next year. Some Italian designers, like Anna Castelli, who became famous in the 1960s and 1970s for her elegantly simple plastic tables and chairs, care deeply how a product fits into one's life. One morning she noticed that her husband had to walk to his closet, pick out a tie, and then walk back into the bathroom to tie it in front of the mirror. Looking to make her spouse's life just a bit more pleasant, Castelli designed a sleek, mahogany dresser with folding tie racks and a triptych mirror. Today copies of the bureau sell in Milan for $8,000. Says Castelli: ''Design should give you pleasure whenever it can.'' A designer's name can be a strong selling tool in Italy. Many people know who designed their cars, their furniture, and their sunglasses. As the example of Giugiaro's Aztec suggests, the Japanese are also keen appreciators of Italian design. Toshiba hired I DE A, a Turin firm known for its cars -- its Fiat Tipo was European car of the year in 1989 -- to design its high-end television. The black and red streamlined set, meant to stand in the center of a room and be seen as sculpture, has ''Designed by I DE A'' prominently scrawled on its front. The slick sales pamphlet, which shows a young, naked woman sitting next to the TV, stresses not the set's many features but its design. At $2,000, it was an overnight sensation in Japan. One of the most difficult design challenges facing managers today -- tougher than figuring out why the Japanese would use a naked woman to sell an Italian- designed TV set -- is fully integrating designers into the heart of the corporation. In too many cases companies merely hire a couple of artistic types, give them drafting tables, and have them provide a slick envelope for a product that has already been engineered. Braun, Black & Decker, Ciba Corning, Motorola, and other companies with successful records make sure the designer works as an equal partner in a product-development team that includes engineering, marketing, and manufacturing. This way the designer gets in on a project from the beginning and can influence almost every aspect of the product -- how it works, how many parts it has, whether it's recyclable. Says Ciba Corning design chief Robert Potts, who reports to the senior vice president of R&D: ''If you report to marketing or engineering, they're the ones who pay your bills and you end up carrying out their bidding rather than doing good design.'' Teamwork doesn't always go smoothly. Often there's antagonism between design and other functions. Typically, engineers and manufacturers believe that designers don't have the technical knowledge to be of much use. Marketers see designers as blue-sky creative types, more interested in winning awards than in making a product that sells. To get a feel for the depth of the antagonism, consider what happened last spring at a conference on Italian design in Chicago. Philip Kotler, professor of marketing at Northwestern's Kellogg business school, emphasized the important role of scientific market research in design. In response, Massimo Vignelli, a New York designer, pointed at Kotler and said, ''I hold you marketing people responsible for the downfall of American enterprise.'' Looking back on the incident, Vignelli quips, ''It's a good thing everybody doesn't carry a gun, or I'd be a dead man.'' Vignelli argues that marketers obstruct good design because their research is too statistical. Says he: ''Marketing people get on my nerves because they think of a person as an abstract entity, just one of a bunch of numbers rather than someone who responds to a product with emotion.'' While Kotler believes design is important, he believes it isn't everything. He explains: ''A design could be wild and wonderful and fall flat on its face if you don't do the research.'' Sony seems to have found a nice balance between design and marketing. The company sees the designer's role as answering questions that marketers might not think of asking. When developing its My First Sony line of radios and cassette players for children, the designers visited toy stores to talk to parents, kids, and clerks. Learning that parents like to know what they're buying, the designers suggested the front of the package have a clear cellophane window and the back complete operating instructions. Says Elizabeth Powell, director of Sony Corp. of America's design center: ''Design's function is to present the technology so it enhances the customer's life.'' Sony is keeping it up. Its newest product, the Data Discman, is a portable electronic book that uses compact discs holding up to 100,000 pages of text. On the market only in Japan, the Data Discman is selling faster than any new product since the Walkman. At Ciba Corning, a maker of medical diagnostic tools, design director Robert Potts takes a similar approach, requiring his designers to go into the field and gather information about the customers. ''If you know the specifics of how people use your product,'' he says, ''your engineers will take you more seriously.'' While designing a blood analyzer called the 550 Express a few years ago, Potts and his staff traveled to hospitals all over the world and studied how lab technicians used the machines. Older models of blood analyzers required technicians to enter information about each blood sample -- name of patient, blood type -- by keyboard. Potts suggested to engineering that they add a bar coding and scanning system capable of reading this information into the system from documents, which they did. It saves technicians two to five minutes per sample. Those and other improvements earned the 550 Express the Industrial Design Society's top award in 1988 and helped catapult Ciba Corning to No. 1 in its market niche. Potts adds that consistency is important. On its next project, a diagnostic tool called the ACS 180, Ciba Corning applied the same dogged approach to design. Although the machine won't be available until later this year, orders are coming in faster than for any product in the company's recent history. Good designers challenge engineers to think in new ways. Rudy Krolopp, Motorola's fast-talking and outspoken design chief, decided some years ago that it would be nice if people could have a speakerphone in their cars. He asked an engineer if he could make one. ''No way,'' said the engineer. After < thinking a few moments, Krolopp said, ''Can you build me a crummy one?'' ''Sure,'' replied the engineer. After beavering away at the car speakerphone, the engineer came across two ways to improve its performance and ended up with a product Motorola says is still selling well. Says Krolopp: ''Engineers are great, but sometimes they get too close to the problems. Designers are generalists who aren't bothered by specialists who say it can't be done.'' THERE'S ONE MORE element to successful design. Having all the right people and organizational structures in place won't help a bit unless you make sure design is respected and appreciated in your company. This means taking a personal interest in design. As Ettore Sottsass puts it, ''You have to develop the feeling that industry is not just a machine to make money, but something that creates the image of a nation and the happiness or unhappiness of its people.'' So read some books on design. Visit more museums. Maybe even take a designer to lunch. You could end up enriching not only your mind, but also your company.