The business value of design
How do the best design performers increase their revenues and shareholder returns at nearly twice the rate of their industry counterparts?
We all know examples of bad product and service design. The USB plug (always lucky on the third try). The experience of rushing to make your connecting flight at many airports. The exhaust port on the Death Star in Star Wars.
We also all know iconic designs, such as the Swiss Army Knife, the humble Google home page, or the Disneyland visitor experience.
All of these are constant reminders of the way strong design can be at the heart of both disruptive and sustained commercial success in physical, service, and digital settings.
Despite the obvious commercial benefits of designing great products and services, consistently realizing this goal is notoriously hard—and getting harder.
Only the very best designs now stand out from the crowd, given the rapid rise in consumer expectations driven by the likes of Amazon; instant access to global information and reviews; and the blurring of lines between hardware, software, and services.
Companies need stronger design capabilities than ever before. So how do companies deliver exceptional designs, launch after launch?
What is design worth?
In short, the potential for design-driven growth is enormous in both product- and service-based sectors. The good news is that there are more opportunities than ever to pursue user-centric, analytically informed design today.
Customers can feed opinions back to companies (and to each other) in real time, allowing design to be measured by customers themselves—whether or not companies want to listen.
Lean start-ups have demonstrated how to make better decisions through prototyping and iterative learning.
Vast repositories of user data and the advance of artificial intelligence (AI) have created powerful new sources of insights and unlocked the door for new techniques, such as computational design and analytics to value.
Fast access to real customers is readily available through multiple channels, notably social media and smart devices. All of these developments should place the user at the heart of business decisions in a way that design leaders have long craved.
What research demonstrates, however, is that many companies have been slow to catch up.
Over 40 percent of the companies surveyed still aren’t talking to their end users during development. Just over 50 percent admitted that they have no objective way to assess or set targets for the output of their design teams.
With no clear way to link design to business health, senior leaders are often reluctant to divert scarce resources to design functions.
That is problematic because many of the key drivers of the strong and consistent design environment identified in our research call for company-level decisions and investments. While many designers are acutely aware of some or all of the principles, these typically can’t be tackled by designers alone and often take years of leadership commitment to establish.
Top-quartile companies in design—and leading financial performers—excelled in all four areas. What’s more, leaders appear to have an implicit understanding of these themes. When senior executives were asked to name their organizations’ single greatest design weakness, 98 percent of the responses mapped to the four themes.
More than a feeling: It’s analytical leadership
The companies in our index that performed best financially understood that design is a top-management issue, and assessed their design performance with the same rigor they used to track revenues and costs.
In many other businesses, though, design leaders say they are treated as second-class citizens. Design issues remain stuck in middle management, rarely rising to the C-suite. When they do, senior executives make decisions on gut feel rather than concrete evidence. Designers themselves have been partly to blame in the past: they have not always embraced design metrics or actively shown management how their designs tie to meeting business goals.
What our survey unambiguously shows, however, is that the 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.
More than a product: It’s user 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 your smartphone can warn you to leave early for your next appointment because of traffic, and your house knows when you’ll be home and therefore when to turn on the heat.
The boundaries between products and services are merging into integrated experiences. In practice, this often means mapping a customer journey (pain points and potential sources of delight) rather than starting with “copy and paste” technical specs from the last product.
This design approach requires solid customer insights gathered firsthand by observing and—more importantly—understanding the underlying needs of potential users in their own environments. These insights must be championed at every meeting. Yet only around 50 percent of the companies we surveyed conducted user research before generating their first design ideas or specifications.
Combining physical products, digital tools, and “pure” services provides new opportunities for companies to capture this range of experience. A hotel, for example, might do more than just focus on the time between check-in and check-out (the service element) by promoting early engagement through social media or its own apps (the digital dimension) and providing physical mementos aimed at encouraging customers to rebook.
The reception team of one big hotel chain we know gives departing guests a rubber duck adorned with an image of their host city (such as clogs and tulips for Amsterdam). The team includes a note suggesting that guests might like to keep the duck at home as a reminder of their stay and could build a collection by visiting the group’s other properties. This small touch led to a 3 percent improvement in retention over time.
More than a department: It’s cross-functional talent
Top-quartile companies make user-centric design everyone’s responsibility, not a siloed function. In the tired caricature of traditional design departments, a group of tattooed and aloof people operate under the radar, cut off from the rest of the organization.
Considered renegades or mavericks by their colleagues, these employees (in the caricature) guard access to their ideas, complaining that they have too often been burned by narrow-minded engineering or marketing heads unwilling to (or incapable of) realizing the designers’ grand visions.
We are not suggesting that this stereotype is still common—or that other functions are necessarily to blame—but it can be surprisingly resilient.
One company we know, for example, unveiled a new flagship design studio to much jubilation from the design community. Before long, all the designers had moved their desks inside the studio, and had deactivated door access for the marketing, engineering, and quality teams. These moves drastically reduced the level of cooperative work and undermined the performance of the business as a whole.
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. This was particularly notable in consumer-packaged-goods (CPG) businesses, where respondents from companies that were top-quartile integrators reported compound annual growth rates some seven percentage points above those that were weakest in this respect.
Design already touches many parts of a business: human–machine interactions, AI, behavioral economics, and engineering psychology, not to mention innovation and the development of new business models.
While not a new concept, “T-shaped” hybrid designers, who work across functions while retaining their depth of design savvy, will be the employees most able to have a tangible impact through their work.
More than a phase: It’s continuous iteration
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. Compartmentalization of this sort increases the risk of losing the voice of the consumer or of relying too heavily on one iteration of that voice.
The best results come from constantly blending user research—quantitative (such as conjoint analysis) and qualitative (such as ethnographic interviews). This information should be combined with reports from the market-analytics group on the actions of competitors, patent scans to monitor emerging technologies, business concerns flagged by the finance team, and the like. Without these tensions and interactions, development functions may end up in a vacuum, producing otherwise excellent work that never sees the light of day or delights customers.
In a successful effort to improve the user experience, one cruise company we know talked directly to passengers, analyzed payment data to show which food and activities were most popular at different times, and used AI algorithms on security-camera feeds to identify inefficiencies in a ship’s layout.
At a medical-technology company, blending sources of inspiration meant talking to a toy designer about physical ergonomics and to a dating-app designer about the design of digital interfaces. These moves helped the company to refine a device so that it appealed to customers with limited dexterity.
The resulting product was not only safer and easier to use but also beat the market by more than four percentage points when launched.
A first step toward great design
We realize that many companies apply some of these design practices—a strong voice in the C-suite, for example, or shared design spaces.
Our results, however, show that excellence across all four dimensions, which is required to reach the top quartile, is relatively rare.
The Index highlights four key areas of action companies must take to join the top quartile of design performers.
First, at the top of the organization, adopt an analytical approach to design by measuring and leading your company’s performance in this area with the same rigor the company devotes to revenues and costs.
Second, put the user experience front and center in the company’s culture by softening internal boundaries (between physical products, services, and digital interactions, for example) that don’t exist for customers.
Third, nurture your top design people and empower them in cross-functional teams that take collective accountability for improving the user experience while retaining the functional connections of their members.
Finally, iterate, test, and learn rapidly, incorporating user insights from the first idea until long after the final launch.
We all know examples of bad product and service design. The USB plug (always lucky on the third try). The experience of rushing to make your connecting flight at many airports. The exhaust port on the Death Star in Star Wars.
We also all know iconic designs, such as the Swiss Army Knife, the humble Google home page, or the Disneyland visitor experience.
All of these are constant reminders of the way strong design can be at the heart of both disruptive and sustained commercial success in physical, service, and digital settings.
Despite the obvious commercial benefits of designing great products and services, consistently realizing this goal is notoriously hard—and getting harder.
Only the very best designs now stand out from the crowd, given the rapid rise in consumer expectations driven by the likes of Amazon; instant access to global information and reviews; and the blurring of lines between hardware, software, and services.
Companies need stronger design capabilities than ever before. So how do companies deliver exceptional designs, launch after launch?
What is design worth?
In short, the potential for design-driven growth is enormous in both product- and service-based sectors. The good news is that there are more opportunities than ever to pursue user-centric, analytically informed design today.
Customers can feed opinions back to companies (and to each other) in real time, allowing design to be measured by customers themselves—whether or not companies want to listen.
Lean start-ups have demonstrated how to make better decisions through prototyping and iterative learning.
Vast repositories of user data and the advance of artificial intelligence (AI) have created powerful new sources of insights and unlocked the door for new techniques, such as computational design and analytics to value.
Fast access to real customers is readily available through multiple channels, notably social media and smart devices. All of these developments should place the user at the heart of business decisions in a way that design leaders have long craved.
What research demonstrates, however, is that many companies have been slow to catch up.
Over 40 percent of the companies surveyed still aren’t talking to their end users during development. Just over 50 percent admitted that they have no objective way to assess or set targets for the output of their design teams.
With no clear way to link design to business health, senior leaders are often reluctant to divert scarce resources to design functions.
That is problematic because many of the key drivers of the strong and consistent design environment identified in our research call for company-level decisions and investments. While many designers are acutely aware of some or all of the principles, these typically can’t be tackled by designers alone and often take years of leadership commitment to establish.
Top-quartile companies in design—and leading financial performers—excelled in all four areas. What’s more, leaders appear to have an implicit understanding of these themes. When senior executives were asked to name their organizations’ single greatest design weakness, 98 percent of the responses mapped to the four themes.
More than a feeling: It’s analytical leadership
The companies in our index that performed best financially understood that design is a top-management issue, and assessed their design performance with the same rigor they used to track revenues and costs.
In many other businesses, though, design leaders say they are treated as second-class citizens. Design issues remain stuck in middle management, rarely rising to the C-suite. When they do, senior executives make decisions on gut feel rather than concrete evidence. Designers themselves have been partly to blame in the past: they have not always embraced design metrics or actively shown management how their designs tie to meeting business goals.
What our survey unambiguously shows, however, is that the 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.
More than a product: It’s user 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 your smartphone can warn you to leave early for your next appointment because of traffic, and your house knows when you’ll be home and therefore when to turn on the heat.
The boundaries between products and services are merging into integrated experiences. In practice, this often means mapping a customer journey (pain points and potential sources of delight) rather than starting with “copy and paste” technical specs from the last product.
This design approach requires solid customer insights gathered firsthand by observing and—more importantly—understanding the underlying needs of potential users in their own environments. These insights must be championed at every meeting. Yet only around 50 percent of the companies we surveyed conducted user research before generating their first design ideas or specifications.
Combining physical products, digital tools, and “pure” services provides new opportunities for companies to capture this range of experience. A hotel, for example, might do more than just focus on the time between check-in and check-out (the service element) by promoting early engagement through social media or its own apps (the digital dimension) and providing physical mementos aimed at encouraging customers to rebook.
The reception team of one big hotel chain we know gives departing guests a rubber duck adorned with an image of their host city (such as clogs and tulips for Amsterdam). The team includes a note suggesting that guests might like to keep the duck at home as a reminder of their stay and could build a collection by visiting the group’s other properties. This small touch led to a 3 percent improvement in retention over time.
More than a department: It’s cross-functional talent
Top-quartile companies make user-centric design everyone’s responsibility, not a siloed function. In the tired caricature of traditional design departments, a group of tattooed and aloof people operate under the radar, cut off from the rest of the organization.
Considered renegades or mavericks by their colleagues, these employees (in the caricature) guard access to their ideas, complaining that they have too often been burned by narrow-minded engineering or marketing heads unwilling to (or incapable of) realizing the designers’ grand visions.
We are not suggesting that this stereotype is still common—or that other functions are necessarily to blame—but it can be surprisingly resilient.
One company we know, for example, unveiled a new flagship design studio to much jubilation from the design community. Before long, all the designers had moved their desks inside the studio, and had deactivated door access for the marketing, engineering, and quality teams. These moves drastically reduced the level of cooperative work and undermined the performance of the business as a whole.
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. This was particularly notable in consumer-packaged-goods (CPG) businesses, where respondents from companies that were top-quartile integrators reported compound annual growth rates some seven percentage points above those that were weakest in this respect.
Design already touches many parts of a business: human–machine interactions, AI, behavioral economics, and engineering psychology, not to mention innovation and the development of new business models.
While not a new concept, “T-shaped” hybrid designers, who work across functions while retaining their depth of design savvy, will be the employees most able to have a tangible impact through their work.
More than a phase: It’s continuous iteration
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. Compartmentalization of this sort increases the risk of losing the voice of the consumer or of relying too heavily on one iteration of that voice.
The best results come from constantly blending user research—quantitative (such as conjoint analysis) and qualitative (such as ethnographic interviews). This information should be combined with reports from the market-analytics group on the actions of competitors, patent scans to monitor emerging technologies, business concerns flagged by the finance team, and the like. Without these tensions and interactions, development functions may end up in a vacuum, producing otherwise excellent work that never sees the light of day or delights customers.
In a successful effort to improve the user experience, one cruise company we know talked directly to passengers, analyzed payment data to show which food and activities were most popular at different times, and used AI algorithms on security-camera feeds to identify inefficiencies in a ship’s layout.
At a medical-technology company, blending sources of inspiration meant talking to a toy designer about physical ergonomics and to a dating-app designer about the design of digital interfaces. These moves helped the company to refine a device so that it appealed to customers with limited dexterity.
The resulting product was not only safer and easier to use but also beat the market by more than four percentage points when launched.
A first step toward great design
We realize that many companies apply some of these design practices—a strong voice in the C-suite, for example, or shared design spaces.
Our results, however, show that excellence across all four dimensions, which is required to reach the top quartile, is relatively rare.
The Index highlights four key areas of action companies must take to join the top quartile of design performers.
First, at the top of the organization, adopt an analytical approach to design by measuring and leading your company’s performance in this area with the same rigor the company devotes to revenues and costs.
Second, put the user experience front and center in the company’s culture by softening internal boundaries (between physical products, services, and digital interactions, for example) that don’t exist for customers.
Third, nurture your top design people and empower them in cross-functional teams that take collective accountability for improving the user experience while retaining the functional connections of their members.
Finally, iterate, test, and learn rapidly, incorporating user insights from the first idea until long after the final launch.