Value Of Design In Business
This is going to be a long read, so grab a cup of coffee, sit back, relax and enjoy the ride.
In a nutshell, this is how design is boosting business growth :
- Design increases turnover: For every £1 invested in design, businesses can expect over £20 in increased revenues.
- Design is linked to profit: For every £1 invested in design, businesses can expect over £4 increase in net operating profit.
- Design boosts exports: For every £1 invested in design, businesses can expect a return of over £5 in increased exports.
- The Value of Design Factfinder (2007) report, shows that in the UK rapidly growing businesses extract more value from design than other businesses.
- Almost half (47%) of the UK’s rapidly growing businesses see design as crucial to business success. (the UK average 15%)
- There is also a relation between the size of the business and the value given to design as a success factor.
- Only 5% of businesses with a turnover of under £250,000 rank design first, in contrast to 23% of businesses with a turnover of over £2million.
Even if not all the companies are design-driven, almost all (93%) agree with the principle that it’s important to have a reputation for design and innovation.
Sources: The Value of Design Factfinder (2007), Design Delivers for Business (2012), Leading Business by Design (2013).
In October 2018 The McKinsey & Company international consulting firm conducted one of the largest worldwide studies ever to measure revenues and shareholder returns related to good design culture in companies. They found that best design performers increase their revenues and shareholder returns at nearly twice the rate of their industry counterparts. (Business Value of Design)
Here are what we believe are the most important take-aways from the study.
- The revenue growth of top performers in design is almost double compared to industry peers, and the shareholder value is more than 70% above that of industry-peers.
- The financial outcome compared to industry-peers can be seen across the three industries studied: consumer packaged goods, medical technology, and retail banking.
This shows us that design across many types of industries, physical products, services, and digital experiences have a positive impact on how companies and organisations perform.
You could argue that the more mature a business is in design, the more revenue is gained. The maturity of design is the level to which design is attuned to the values, operation, and level of problems of the business world. Therefore, it is crucial to think design into every aspect of the organisation to raise the design maturity of it.
How can you measure the value of good design?
So, how did McKinsey come to this conclusion? They tracked 300 companies for more than five years. Measuring design actions and collecting massive amounts of financial data showed the greatest correlation between twelve design actions to financial gain. That is, it shows the business value of design.
They then grouped the design actions into four bigger themes. This extensive and rigorous study about the correlation of design investment and revenues has a peer only in InVision’s recently published (The New Design Frontier )
Four themes of design actions to take
Interestingly, business leaders in companies with the best financial returns answered in a way that showed an implicit understanding of the four themes that the researchers uncovered when asked to name their single greatest design weakness. Only 2% gave answers not clustered in the themes below. The four themes that formed the basis of the business value of design scoring system they used include:
- Analytical leadership: Measure and drive design performance with the same rigour as revenues and costs.
- User experience: Break down internal walls between physical, digital and service design.
- Cross-functional talent: Make user-centric design everyone’s responsibility.
- Continuous iteration: De-risk development by continually listening, testing and iterating with end-users.
More than a feeling: It’s analytical leadership
This is about the companies being analytical. It is about them measuring and driving design with the same rigour as revenue and costs.
In order to increase the business value of design in your business, design has to become a top-management issue. First, we should assess and manage it based on measuring efficiency and value. Second, we must make executive decisions understanding what really constitutes design and the tools and processes it wields.
Get the boss involved
The participation of business leaders proves a good practice to start sowing seeds of design culture in an organization.
More than a department: It’s a cross-functional talent
Design is more than a department. In those cases where the design department has a beautiful design centre which was siloed from the rest of the organisation, it performed significantly less well than cases where the design department was de-emphasised, but the role of individual designers was elevated, and they were put in cross-functional teams working together.
Design touches upon many different parts of a business. From the classic human-machine interactions, AI, behavioural economics, and engineering psychology, not to mention innovation and the development of new business models.
In the McKinsey report, overcoming the isolation of different functions within the organization showed one of the strongest correlations with top financial performance.
Work against isolation
When working with clients, we at Argillic Brands always try to involve all kinds of stakeholders in design from business leaders to development and operations. We believe in the diversity of thought. We want to empower our clients to continue planting the seeds of design culture in their organization long after our partnership has ended.
More than a phase: It’s a continuous iteration
Design is a continuous process rather than a phase. So, if you’re just locking your design, then it hurtles unchangeably to launch, that’s a high-risk strategy, rather than continuous consideration with your users.
Design flourishes best in environments that encourage learning, testing, and iterating with users—practices that boost the odds of creating breakthrough products and services while simultaneously reducing the risk of big, costly misses.
That approach stands in contrast to the prevailing norms in many companies, which still emphasize discrete and irreversible design phases in product development.
Design-centric companies realize that a product launch isn’t the end of an iteration. Almost every commercial software publisher issues constant updates to improve its products postlaunch. And the Apple Watch is one among many products that have been tweaked to reflect how customers use them “in the wild.”
More than a product: It’s user experience
Companies need to look beyond products and employ design in every aspect of their business.
Cross-platform experience: Top-quartile companies embrace the full user experience; they break down internal barriers among physical, digital, and service design. The importance of user-centricity, demands a broad-based view of where design can make a difference.
We live in a world where our smartphones can warn us to leave early for our next appointment because of traffic and or even track where your car is at any particular moment if paired together. The boundaries between products and services are merging into integrated experiences.
The companies that are performing best in this regards are the ones that said let’s start by drawing a customer journey, rather than with a spec from engineering. Let’s work out what the customer actually needs and do what the customer is asking of us.
Embracing the full user experience by breaking down barriers among physical, digital and service design internally forms an important step in prioritizing the user experience. Companies have to understand all the different possibilities where design can make a difference.
Start with research
Companies with top design practices outperformed industry-benchmark growth by almost 2-to-1, according to McKinsey & Company report.
Indirect Business Value Of Design
Design can help with creating value, managing risk, and performance. These effects are all indirect. It’s not necessarily the best-designed solution that makes the most money. There are also other factors in play. Like the solution with the most marketing budget. Or the solution with the best distribution platform.
The only direct contribution to the bottom line that I can think of at the time of researching and writing this is that design can bring is the attractiveness of products and services, the beauty, that will allow the business to sell them for a premium or position themselves better in relation to the competition. That is, design increases products and services brand value and in essence, improves brand perception.
Design brings value in a lot more ways than direct measurable ones. If you try to measure the business value of design indirectly, you create a narrative around design that doesn’t do it justice.
If you try to measure the business value of design directly, you miss all the indirect ways design adds value to a business. The bottom line is that design is not only the creation of beautiful surfaces but also a way to look at the world.
Trying to measure that is like trying to measure the business value of the scientific management way of looking at the world. If you want to assess the value design can bring to an organization, you first have to be aware of the ripple effects on people, processes and organization that design can bring.
Make design part of your business strategy
Design deserves more attention than it frequently receives from business owners and managers. It’s often seen as a finishing touch in product or service development – something to be used after the strategy has been formulated, key decisions have been made and budgets have been allocated.
Successful businesses include design as part of their business strategy from the outset. This is because involving design at an early stage can save you money and result in a better offering and a better experience for your customers.
How to boost revenue growth through design
Now that we have determined the importance of integrating design into organisations, we have a few suggestions as to how we can all start reaping the benefits of great design.
Your first steps to using design more strategically should include:
- pinpointing where and how design is currently being used within your business
- identifying ways of improving the design process – such as increasing management involvement or using a professional design consultant
- looking for areas of your business where design opportunities are being missed
- making sure design considerations are featured in all your business planning meetings and documents
- conducting market research to ensure you know what your customers need
- Business advisors with design knowledge can provide guidance on using design and working with designers.
Where to start measuring the value and ROI of design?
I know you might be wondering how to magically transform your whole organization into a top-quartile, extra-high-McKinsey-Design-Score company to achieve those good looking revenue numbers.
McKinsey advises starting small on a single project. Use that as a pilot and make a hard commitment to sticking to the point above. Ultimately, every organization has to find its own way to adopt these attitudes. The learnings from trial-and-error make up an essential part of that.
If you were wondering where your company stands on the McKinsey design index, you can take a 30-minute survey that will tell you exactly that and download the original report as well. Go here.
Are you thinking about implementing some of the suggestions mentioned? Here at Argillic Brands, we take great pride in our design-approach and are experts in integrating design into all processes.
Our user-centric design thinking enables us to create valuable and engaging user experiences. Combined with our deep technical knowledge our projects turn out successfully and our products are both visually appealing and technically feasible.
Take a look at how we can support your organisation in creating business value through design here.
