Business Value

The Business Value of Design

Measuring the impact of User Centred Design (UCD) and Design in general has been for a long time a hot topic in our community.

When I started doing UCD in the early 2000s our discipline was still in its infancy. Most of the investments in digital were about marketing or branding. There were only a few digital products that we could consider mature. We often had to go and justify the investment on an end-to-end design process that would take into account users’ needs and goals, rapidly iterate design solution and learn from the insights gained.

My clients would often ask:

  • What is usability?
  • What is the value to my business?
  • How do you measure it?
  • What is the Return on Investment (ROI)?

Design as a differentiator

After 2008/9, the business value of design has almost been given for granted.

I believe the launch of the iPhone was the watershed moment for many of us. Smartphones and other personal digital devices became a huge part of our everyday lives. The importance of a well crafted user experience became much more tangible. Our clients started to be aware of the importance of Design as a differentiator. Apple, Google, Amazon and other major companies went on to lead their industries based on their ability to stand out from the rest of their competitors.

I recently came across a piece of research from McKinsey that further demonstrates and measures the impact of Design on business metrics.

The McKinsey Design Index (MDI)

McKinsey recently tracked the design practices of 300 publicly listed companies over a five-year period in multiple countries and industries (medical technology, consumer goods, and retail banking), and measured the correlation with their financial performance.

Their analysis shows that top-quartile MDI scorers increased their revenues and total returns to shareholders (TRS) substantially faster than their industry counterparts did over a five-year period — 32 percentage points higher revenue growth and 56 percentage points higher TRS growth for the period as a whole.

Source: The Business Value of Design (McKinsey)

The diagram below shows that the top quartile annual growth is 10%, while the industry’s benchmark value ranges from 3 to 6%. Same goes for TSR (21% vs. 12–16%).

The Four Enablers of Business Value

Business leaders were asked what their greatest strengths and weaknesses were. Based on their answers, McKinsey identified four themes:

  1. Measure the change in customer behaviour and its impact on the business metrics
  2. Nurture your top design talent and empower them in cross-functional teams that take collective accountability for improving the user experience
  3. Focus on the total user experience of your service/product, not just the physical or digital part of it
  4. Iterate, test and learn rapidly, incorporating user insights from the first idea until long after the final launch.

These four themes are effectively the enablers of design excellence at the organisational level.

Source: The Business Value of Design (McKinsey)

The ROI of Usability

Despite all the buzz that the McKinsey research got on the social media, it was not the first attempt of measuring the business value of Design.

People would often talk about ROI and find effective ways of calculating the value of adopting a user centred design process for a new product or service.

For example:

  1. Errors
  2. Cost of development and Maintenance
  3. Productivity.

Interestingly, I think these early frameworks for calculating the ROI of Design are still valid today. The only differences are:

  • The evolution from waterfall to agile & lean development methodologies. This has made the whole idea of rapid iteration & cross-functional teams more acceptable and understood across all the industries
  • The shift from ‘Usability‘ to ‘Design‘ to better reflect the evolution to a holistic design perspective embracing the visceral, behavioural, and reflective dimensions of the user experience.

More on the Business Value of Design

Why are we still arguing for the business value of design? (Quartz)

Design Value (Design Management Institute)

The Design Economy (Design Council)

Design in Tech Report (John Maeda)

Get in touch

Would you like to discuss:

  • How you can measure the ROI of Design for your product or services?
  • How to help your design team to achieve excellence in all of the above areas?

Feel free to get in touch for a chat!

(Cover photo by PhotoMIX Ltd. from Pexels)