The Business Value of Design

4 min read

The McKinsey Design Report in a Nutshell

In October 2018, McKinsey & Company challenged our hunch about the business value of design. They carried out “the most extensive and rigorous research undertaken anywhere to study the design actions that leaders can make to unlock business value.”

300 publicly listed companies across three industries (medical technology, consumer goods, and retail banking) were studied over five years, where they ran a series of interviews with both senior business leaders and design leaders.

By the end of their research, they’d recorded over 100,000 design actions and produced more than two million pieces of financial data alongside it.

The result? 12 design actions which showed heavy correlation with improved financial performance – which they’ve handily compiled into four broad themes which make up the foundation of the McKinsey Design Index (MDI).

The MDI rates companies by their strength in design and how their activity translates into real business value. With the aforementioned themes they found in their research, building the foundation of this index, they found a quantitative way to measure design.

The Report’s Outcome Defined Design’s Business Value

McKinsey’s report found that good design is reflected in the figures – quite dramatically.

“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.”

This was true across all three industries studied.

The four MDI design themes you need to apply…

…which also happen to be design actions and methodologies that Marvel can help you achieve.

User Experience: Make it delightful

“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.”

Rather than beginning with the same technical specs from the last product, it’s important to map customer journeys, potential pain points and sources of delight. MDI elaborate that this approach needs to be supported by solid customer insights which must be gained firsthand. User research and testing helps you to understand the needs of potential customers in their own environments. “These insights must be championed at every meeting.”

Combining physical products, digital tools, and “pure” services provides new opportunities for companies to capture this range of experience.

“Design-driven companies shouldn’t limit themselves to their own ecosystems. The best businesses we interviewed think more broadly.”

Analytical Leadership: A design mindset from the top down

In McKinsey’s research, they found that the companies in their index who assessed their design performance with the same rigor they used to track revenues and costs, understood financially that design was a top-management issue. It’s all about having a leadership-level curiosity about what users need.

“Companies with the best financial returns have combined design and business leadership through a bold, design-centric vision clearly embedded in the deliberations of their top teams.”

However, at the top of several organisations there is a lack of design understanding. In fact, less than 5 percent of the businesses studied in the report feedback that their leaders could make objective design decisions.

“In an age of ubiquitous online tools and data-driven customer feedback, it seems surprising that design still isn’t measured with the same rigor as time or costs.”

Cross-Functional Talent: Investment in design

The report reinforces that user centric design is not supposed to be a siloed function, it’s everyone’s responsibility.

“Our research suggests that overcoming isolationist tendencies is extremely valuable. One of the strongest correlations we uncovered linked top financial performers and companies that said they could break down functional silos and integrate designers with other functions.”

The results showed that companies in the top quartile were three times more likely to have incentive programmes for designers – tied to outcomes like user satisfaction or major awards. This active nurturing of top design talent has been highlighted as an important dimension of team dynamics.

“Strong correlation was found between successful companies and companies that resisted the temptation to cut spending on research, prototyping, or concept generation at the first sign of trouble. Formal design allocations should be agreed to in partnership with design leaders instead of appearing (as they often do) as line items in the marketing or engineering budgets.”

Continuous Iteration: Design never stops

“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.”

By compartmentalising design and user research, you increase the risk of losing the consumer’s voice – or simply relying too much on one iteration of it.

To get the best results, it’s crucial to combine user research in its quantitative and qualitative forms. Then this data can be included in reports with market-analytics on competitor actions, business concerns, emerging technologies monitoring and more – otherwise how can we product excellent work that gets in front of customers.

60 percent of companies studied said that they only use prototypes for internal testing, and if they do, then it is late in the development process. As opposed to the most successful companies, which adopt a ‘share early’ culture when it comes to prototypes – and not just internally, but with all stakeholders.

“Design-centric companies realize that a product launch isn’t the end of iteration.”

Learn more about the business value of design

This data gives companies of all sizes and industries the back up it needs to encourage and implement a design-led mindset – with the proof being in the numbers.

To get the details behind the data, read the full report here.

To find out how Marvel can help you implement these actions, speak to one of our team members.

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