In this article we cover:
- The business value of design
- Four groups of design actions to take
- How to start implementing design into your business
The business value of design
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. Read the full report here.
How can you measure the value of good design?
How did they come to this conclusion? McKinsey 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. Meaning, it actually shows the business value of design.
They then grouped the design actions into four bigger categories or themes. This extensive and rigorous study about the correlation of design investment and revenues has a peer only in InVision’s recently published Design Maturity Model.
What is the catch?
At the time of the study, lots of companies hadn’t caught up with the difficult adaptation despite its enormous business potential. This difference in revenue and total return to shareholders (TRS) only applies to the top quartile of companies related to their design scores. Many companies have still failed to adapt.
Also, these themes that the report describe don’t come as news to a lot of designers. They have a painful awareness of these problems but to tackle them, companies need a strong commitment from the leadership over an extended period of time, possibly years. Better start as soon as possible!
Four groups 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 busines value of design scoring system they used include:
1. Analytical leadership
Measure and drive design performance with the same rigor as revenues and costs.
2. User experience
Break down internal walls between physical, digital and service design.
3. Cross-functional talent
Make user-centric design everyone’s responsibility.
4. Continuous iteration
De-risk development by continually listening, testing and iterating with end-users.
Again, these categories might not surprise people working around design, but it might for senior-level executives or others working isolated from design efforts. The level of understanding in those parts of a company greatly impacts the quality of design work through the flow of resources, information etc.
At UX studio, we have regular workshops on improving our services to add more value to our clients’ business. Unsurprisingly, these four themes perfectly describe the problems we face with our clients.
1. Analytical leadership
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
Participation of business leaders proves a good practice to start sowing seeds of design culture in an organization. When we start working with a client at UX studio, we always try to get access to the highest level decision maker in the project.
We involve them in the design process as much as possible. We feel the importance this holds for the success of any project firsthand. We share our experiences with clients unwilling to participate so much.
For CEOs, spending time with the customers and getting familiar with their needs first hand provides not just valuable experience and knowledge for them. It also sets an example throughout the company by placing the users first.
They should make conscious efforts to maintain this baseline level of customer understanding throughout the C-level management.
Who calls the shots?
Unfortunately, design issues often get stuck on a middle management level. Executives make decisions based on gut feelings rather than rigorous metrics and benchmarking like they would in virtually every other segment of a business. Measurement holds the key to making good decisions and investing most effectively.
Historically, measuring design performance and the business value of design has not come so easy. Now we have a burgeoning economy of tools designed for exactly that and business is slowly adapting them. Measuring customer satisfaction on site with a simple survey or having regular usability assessments provide good examples.
We must realize that these metrics and processes should make up part of any design specification of the future. Designers have to realize the importance of involving the leadership level.
They must also strive to provide information for all parts of the company about their work that creates transparency and facilitates decision making.
2. User experience
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.
Cross-platform services are becoming more and more common. We must craft the integrated experience of the customer or client meticulously across all touchpoints.
Base the crafting of these experiences on “understanding the underlying needs of potential users in their own environments”. This requires solid customer insights gathered through observation, conversation and other qualitative and quantitative types of research. These insights should then become a point to reference on every meeting related any kind of design action.
Start with research
For this reason, we at UX studio never do design without research. In some cases, we do provide research only. In every project we participate in, we try to constantly remind others of the users’ underlying needs and motivation to drive back every single design decision to that context.
Treating the customer experience as an integrated, multi-platform entity instead of separated instances provide great opportunities for businesses to provide more value.
Truly design-driven companies should consider stepping out of their own ecosystems and partner with different service from different backgrounds.
3. Cross-functional talent
Designers have to open up towards other parts of the company. Other departments have to accept user-centricity as one of their responsibilities as well. In the McKinsey report, overcoming the isolation of different functions within the organization showed one of the strongest correlation with top financial performance.
Work against isolation
When working with a client, we at UX studio 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.
Design touches upon many different parts of a business. From the classic human-machine interaction to psychology and the development of new business models. In order to thrive in this situation, designers have to become “T-shaped”. This means they can work and relate to many different functions and at the same time retain in-depth knowledge and practice in their own design skills. It guarantees the ability to make as big as an impact as possible.
Throughout the year, we find many ways to share our knowledge internally and externally as well here at UX studio. These should help our team members gain horizontal knowledge about multiple aspects of design and business while the one initiating the knowledge sharing has the opportunity to dig deep in that specific field, even to revisit it from time to time.
Retain top design talent
According to McKinsey, the top 2% of employees make exponentially greater contributions to in all businesses. Unsurprisingly, top performing companies had some kind of incentive system in place in order to keep their best designers. They generally linked these incentives to design performance measured and evaluated by analytical leadership, as mentioned in the first of the four themes.
However, choose the incentives carefully as designers make up a peculiar breed. The obvious big bonuses and career path advancements may not enjoy priority in the hearts of the most talented.
Most talented designers want to work on projects they care about and see projects that get to the market at a fast pace as challenges. They want to share their passion with their peers through articles, conferences, and other community building channels. They also value good workplace culture characterized by diversity and fun.
4. Continuous iteration
Regard speed to market as essential
When extended to design, we have to adapt agile practice to its special needs but the gist remains the same.
Learning, testing and iterating with users both help to reduce risks early on and to discover great opportunities in developing breakthrough products. This is a tangible business value of design.
Keeping the user’s underlying needs in our viewport lets us realize first when new needs emerge or to increase our resolution of understanding of the current ones.
Diversify your sources
According to McKinsey, the best results from continuous iteration come from combining multiple sources and types of information to base design decisions on. Considering user research, we must combine qualitative research like ethnographic interviews with quantitative methods like large sample size surveys (conjoint analysis).
We must combine market analytics like competitor research and patent scans with business concerns from the financial department as well. If these data points are not connected to the risk of executing otherwise great design work that ends up not generating revenue grows proportionally higher. This makes designers and business alike sad.
This means designers have to share their work as early as possible and strive to get as much feedback as feasible. Shielding early mockups from others for too long does not lead to a great product. On the other hand, product release cannot represent the end of their design efforts either.
Where to start?
I know I’ve written a lot and many of you might be wondering how to magically transform your whole organization into a top-quartile, extra-high-McKinsey-Design-Score company to achieve those sweet TRS and 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 their own way to adapt 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.
Is there more?
Check out our free e-book, the Product Manager’s Guide to UX Design. In it, we describe the basics of our process.
Our CEO David Pasztor actually wrote a whole book about it as well. Buy the hard copy Product Design book today – with free shipping to Europe and the US.
More into in-person learning. Reach out to if you are thinking about organizing an in-house UX training for your team. We sure have some ideas! 😉
Moreover, reach out to us, if you feel like you could benefit from our learnings about design.
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