The point of frustration for a lot of designers is when business factors, like reducing costs, becomes the deciding factor for projects. Designers and most company management know that design is important, but the question is often, “How important?”. In a world where decisions are made on the basis of dollars and cents, the link between good design and business value is simply hard to establish.

In October 2018, one company seek to solve that problem. Undertaking one of “the most extensive and rigorous research undertaken anywhere to study the design actions that leaders can make to unlock business value.”, they studied 300 publicly-listed companies over a five-year period, McKinsey & Company, funded by Microsoft, gathering more than two million pieces of financial data and comparing it to over 100,000 design actions. They interviewed senior business and design leaders. As a result, they discovered 12 design actions showing the greatest effect on financial performance and grouped them into four themes.

Using these four themes, they created the McKinsey Design Index (MDI), which rates the companies on how strong they are at design, and how it relates to financial performance as a way to quantitatively measure design.

Photo credit: McKinsey & Company

The conclusion is simple. Consistent in all three industries studied (medical technology, consumer goods, and retail banking), companies in the top-quartile MDI exceeds industry benchmark growth as much as two times. This suggests that good design matters whether your company focuses on physical goods, digital products, services, or some combination of these.

This also basically means that if you stand out in design, your revenue growth will beat that of your competition. In fact, the study found that TRS and revenue differences between the fourth, third, and second quartiles were marginal which meant that the market disproportionately rewarded truly stood out from the crowd.

Now, the most difficult part of any top-level study like this, how to practically apply it to an organization. From the four themes that the MDI is based on, there are four types of actions that your organization should take.

Photo credit: McKinsey & Company

Analytical Leadership

Top companies put importance in design analysis and track performance in design at the same level of revenue and costs. These companies, which have the best financial returns, have fully integrated design and business leadership with a shared vision embedded at the top tier of the company. Simply put, design has an equal seat on the business table.

Apart from recognizing the importance of design, these top companies have executives who have an understanding of what users need, as opposed to what they say they want.

Beyond Product: User Experience

Instead of limiting the user experience to just the product, top-quartile companies break down silos between physical, digital and service design. User experience is not limited to interfaces, but rather it should be seen as an end-to-end, integrated experience.

For example, a typical Repro customer’s journey begins from learning about our product from an event, to becoming a paying customer and growing their business with our services. There are plenty of potential pain points and sources for delight along the way that should be mapped out to understand the entire customer journey. To achieve this, solid customer insights have to be the backbone on which each product specification is based on.

Customer insights serves as the foundation, yet “only around 50 percent of the companies we surveyed conducted user research before generating their first design ideas or specifications.”

User-centric Design as Everyone’s Responsibility

The research found that making design more than a department is extremely valuable.

One of the strongest correlations links top financial performers and companies that said they could break down functional silos and integrate designers with other functions. This means making designers integral in every process and not just an afterthought.

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.

To do this, you need to nurture top design talent. The research found that companies in the top quartile for design overall were almost three times more likely to have specific incentive programs for designers, with rewards tied to design outcomes, such as user-satisfaction metrics or major awards. They were also given the right tools, capabilities, and infrastructure.

McKinsey found a strong correlation between successful businesses and companies that “resisted the temptation to cut spending on research, prototyping, or concept generation at the first sign of trouble.”

Continuous Iteration

Many might have the image of a genius designer, spending days and months on a design and finally showcasing their final masterpiece. The research shows the opposite, that the best results come from company that encourages testing, learning and iterating.

Top companies understand this and encourages trying ideas and failing fast. The best results come mixing qualitative and quantitative user research. An example being a medical-technology company, talking to a toy designer about physical ergonomics and to a dating-app designer about the design of digital interfaces to refine a device to be not only safer and easier to use but also beat the market by more than four percentage points when launched.

How to Start?

McKinsey recommends selecting a single upcoming product or feature to put the four themes into action. Since you’re able to start small, learn fast, and scale appropriately, it’ll be helpful building up working towards an organizational level change.

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About the Author
Alex Kwa

Design Lead, Repro
Alex has been designing for Repro since the company begun. He worships his design heroes, Dieter Rams, Tokujin Yoshioka and Naoto Fukasawa. He's an occasional digital nomad and is obsessed with the streetwear brand, Supreme.