(FORTUNE Magazine) – She took it off only for the swimsuit segment of the competition. The rest of the time, she hid it under her formal gown, in a little holster attached to her thigh. Pistol-packin' mama? Nope--Miss America 1999 with an insulin pump. An insulin pump so attractively designed that when she received her crown last spring, Nicole Johnson drew the device from its hiding place and told her huge audience that diabetes sufferers need no longer feel ashamed. She would use her pump to help spread the word.

Miss America's fashion-forward insulin pump is in the grand tradition of good design, a tradition that enriches us every time we hop into a Volkswagen Bug or covetously eye our neighbor's iMac. But VW and Apple are big, global companies that measure their sales in billions. Many small-company owners, without thinking much about it, figure that good design is a luxury they can't afford. More companies these days, however, are rethinking that equation. One of two whose stories we examined is MiniMed Inc. of Sylmar, Calif. Since the company introduced its 507 insulin pump in June 1996, it has seen sales increase by 357% and has restored its share of the expanding world market for computer-programmable insulin-infusion pumps to about 85%.

So can a small company afford good design? The real question, says Lorri Veidenheimer, director of marketing at Sassy Inc., is this: "Can a small company not afford good design?" Sassy makes baby-care products and recently introduced a line of toys. Good design, says Veidenheimer, has helped the company go from zero to 60 mph in three years. But watch out for whiplash. Even these success stories reveal risks you can incur when you take the plunge.

MiniMed suffered fits and starts mostly because of its own management's ambivalence toward the redesign. Lawyers from Sassy and its designer are trying to resolve a dispute over money. Still, both companies' tales support the idea that good design is important and offer lessons in how to get it.

The phrase "good design" is redundant. By its nature, design is good. It's the art and science of making a product work well--and look and feel and sound good. When form and function complement each other, that's design. "If you can delight the consumer with a product, he'll buy the product," says Veidenheimer. "And you need design to get delight."

Consumers took little delight in MiniMed's insulin pumps until stiff competition from abroad forced the U.S. company to pay attention to design. Diabetes is a leading cause of blindness, kidney failure, and death by disease in the U.S. As many as one million of the nine million people who have the illness require insulin. Before pumps were developed, they had no choice but to inject themselves three or four times a day. Since 1983, patients like Nicole Johnson have been able to wear a MiniMed pump 24 hours a day to provide continuous insulin delivery, controlled by the pump's tiny custom-programmed computer. But by the mid-1990s, a new model from Disetronic Medical Systems in Switzerland was grabbing market share from MiniMed. When patients saw a MiniMed pump, it seemed, they saw safety, reliability, and performance. When they saw a Disetronic, they saw a lighter, friendlier, even glamorous product. MiniMed was making a classic mistake about design: "We all thought a medical device should look like a medical device," recalls MiniMed's senior design engineer, Paul Cheney. Disetronic understood that medical devices should be more like "consumer electronics, things like beepers and cell phones," says Cheney.

To regain its edge, MiniMed hired an industrial-design firm, RKS Design of Thousand Oaks, Calif. Cheney went outside MiniMed, he says, because he had little of his own time to devote to the problem and wanted "more minds and more ideas thrown at it." RKS's most successful design until then, oddly, was the Teddy Ruxpin toy bear. But MiniMed chose RKS because a sister company had used the firm and liked the results. MiniMed's engineers had already identified technological improvements for the next-generation pump. RKS's job was to contain those improvements in the same tiny package--about the length and width of a credit card and 0.8 inches thick--and improve the look, even while cutting costs. To arrive at the new design, RKS interviewed pump users and doctors. Four RKS designers strapped on MiniMed's existing pumps, receiving saline instead of insulin over four days, 24 hours a day, through a plastic catheter inserted under the skin over the tummy.

It all paid off. At first glance, the new pump could indeed pass for a beeper. "It's more flashy, more elegant, like it's worth the expense," says Cheney. (It costs several hundred dollars more than the old version.) The sculpted exterior makes it comfortable to wear, and its tactile ridges provide a secure grip during programming. But the process wasn't exactly elegant. MiniMed's chief executive at the time was skeptical about reworking a product that was still highly profitable. Adding colors such as blue and charcoal to the traditional off-white was a particularly tough sell, recalls RKS President Ravi Sawhney. And management kept ordering new features, such as a backlit LCD display. "We fell into the trap of trying to design an ultimate device," says Cheney, "the kind of thing you never end up introducing."

Under new leadership, MiniMed did make its deadline, launching the model--with backlight--at the 1996 meeting of the American Diabetes Association. MiniMed's sales rose from $45.1 million in fiscal 1995 to $171 million in the year that ended July 2.

Design has delivered similar rewards to Sassy, although the financial details have to be taken on faith. (The company won't reveal figures.) But Sassy's path was even bumpier than MiniMed's. In the mid-1990s, the Northbrook, Ill., company decided to expand beyond its existing line of baby-feeding and bath items. The investment in a toy line would be large and the competition stiff; the top maker of toys for infants is Mattel's Fisher-Price. To get its foot firmly in the door, the company wanted a distinctive look that would say "Sassy" across a whole line of toys. Its past ventures with designers hadn't worked. This time it hired Michael Pogue, whose designs range from electronics to space-based habitats.

The Sassy team--including child-psychology experts and a graphics designer--began brainstorming for "developmental" toys that would help babies grow intellectually, physically, and emotionally. Pogue describes the design effort as "a balancing act. We wanted to challenge kids but not frustrate them." For example, the classic stacking ring toy requires a baby to place rings of varying diameters in a set order on a tapered pole. Pogue's own small daughter had become so frustrated with one such toy that she would fling the rings away. Sassy's team decided to make all rings the same size so that they could be stacked in any order. But the team also gave the rings textures, bright colors, and more weight, and made some of them out of clear plastic, with colored beads inside.

As the team worked, child-development specialists would talk about babies' needs--small hands need texture, for example. Then the graphics designer would make a sketch, and Pogue would make models. In 1997, when the first toys debuted, Sassy's sales grew 20%. The line now has close to 40 items. But on the next design project, the relationship between Sassy and Pogue deteriorated into arguments over deadlines and fees.

Sometimes disputes are unavoidable. But to make them--and other problems--less likely, experts offer a few basic rules:

Get referrals. Talk to people who have used the designer. If you use professional listings, hold an audition. "Start with a small project," advises Veidenheimer.

Step outside. An insider's view isn't enough, says Cheney. "You get constrained by stereotypes."

Know what you want, and spell it out. "It's like getting a haircut," says Cheney. "The more you tell them, the more satisfied you'll be when it's done." And agree ahead of time on deadlines and fees.

Even Pogue and Veidenheimer agree on one thing: No one can ignore the question of design. "If you have a monopoly, or the competition is asleep at the switch, you don't need good design," says Veidenheimer. But not many industries are that static, says Pogue. "Look at all the things that have been done with the screwdriver."