Great design, good business?

recent study by consulting firm McKinsey shows that companies who perform best in terms of design outperform their industry peers by up to 2x in terms of revenue growth. While this relationship has always been obvious, there is now data that shows particularly how much design could impact a company’s business performance and how to integrate it in processes to drive growth. We look at how design can help your business achieve more revenue and shareholder value in this blog series.

Great design drives growth

The study found that top quartile companies with good design practices performed 32% better on average on revenue than their peers, irrespective of whether the products were physical, digital or even services. More strikingly, companies that stood out from the crowd concerning design, disproportionately outperformed their peers.

The design index was constructed from four design priorities:

Analytical leadership – this is the interest and ability of top-level management to make objective design decisions about their products. It results from a metrics-based approach to design that not only quantifies customer value but relates it directly to business value, much as cost and revenue.
Since many design decisions rise above the authority of design teams, the ability of top management to make decisions based on concrete evidence rather than gut-feel separates winners from their peers.

Cross-functional solutions: is the contention that successful designs arise at the intersection of different departments rather than iterations on current blueprints by siloed design and engineering teams. One of the strongest correlations uncovered in the study linked the top financial performers to companies that said they could break down functional silos and integrate designers with other departments.
There is an unprecedented level of expectation from customers as well as an abundance of competition. Therefore, taking a holistic approach to design, and consequently, a multi-criteria approach to decision making, may be the deciding factor of whether a product is successful or not.

Continuous iteration: refers to the approach of continuous learning, testing and iterating with teams & customers which boost the odds of creating breakthrough products while reducing the risk of big, costly, misses. This stands in contrast to the prevailing norms which emphasize discrete, irreversible design phases in product development. Lean start-ups have demonstrated how to make better decisions through prototyping and iterative learning but many companies have been slow to catch up with over 40 percent of the companies surveyed not talking to their end users during development. The key challenge being the agility with which companies can connect new information to decision making within the design process.

Full user experience: is the concept of developing integrated experiences instead of products, which demand a broad-based view of where design can make a difference irrespective of the internal barriers between physical, digital and service design. This provides a much greater business opportunity and higher retention rates.

The study contends that companies that do well on these priorities boost their odds of designing great products and are arguably more successful as a consequence.

Great design needs great data

While the impact of design on business is well known, lots of companies still struggle to use it as a growth driver. We find that one of the common underlying themes that inhibit business from generating and leveraging great designs is the lack of accessible design-related metrics and product data across the organization.

Consider the design priorities above. Without understandable and accessible metrics on what customers want and how designs fulfill that need, senior leadership will obviously resort to decisions based on gut-feel. Collaboration across different departments does not happen without the right tools, data, capabilities, and infrastructure to support it. The lack of these results in back-and-forth between the different departments which often stifles innovative initiatives. Continuous iteration is also expensive and time-consuming without the ability to quickly integrate new information into designs and see how it affects performance across all dimensions.

All this is compounded by the fact that traditional systems of information storage and retrieval are isolated and single-purpose by design with each department having their own systems to rely on for their tasks.

For example, studies found that product teams spend up to 20% of their time looking for data that they only find half of the time. Over 30% of R&D spend duplicates research work previously performed resulting in waste and a protracted time-to-market. Companies spend substantial resources on systems, consultants, and research to handle their own product data which often needs to be reconfigured across systems, every time the slightest change has to be made. Some of the most successful companies of the past have invested in such systems and they have contributed to their success to date. However, today, these very processes and systems inhibit their agility and their ability to create great designs as we’ve seen across all industries, but most notably, the automotive sector.

A novel way to boost your business performance

Yesterday’s tools are simply not designed for the growing intricacy of new products and supply chains, making it difficult for companies to be quick enough to capture trends and meet customer expectations.

Companies can rely on new technologies to integrate these changes. Actually, more and more options exist to strengthen the dialog between users and businesses. Designers can share early prototypes design on social media like Behance or Instagram to test the waters and get immediate feedback on how to improve their work. But companies can also go deeper into their customer understanding by using combinations of artificial intelligence and big data to uncover hidden patterns and test innovative approach. Companies like Apple are quite famous for having design at the heart of their concern. Design teams are as prevalent as financial and other operational teams, and keep on iterating even after the beginning of manufacturing phases. Same for Google, where design teams are small but mighty.
IDEO, a renowned international design and consulting firm, is also applying these principles to create engaging and successful products, like an acoustic amplifier for Fender or an IoT devices assortment for SimpliSafe.

At Makersite, we already know that design is a key driver for growth and success. That is why we worked with our clients to help them to innovate faster and create better products. We provide product teams with a cross-functional tool to analyze, assess and compare design choices against several parameters including customer preferences, performance, sustainability, compliance, and cost. Combined with constantly updated data, Makersite is the tool that product teams need to innovate faster.