VALUE OF DESIGN FOR BUSINESSES
Arnab Chakraborty
Strategy | Marketing | IoT | AI | Cloud | Smart Cities | Intersection of Data and Design
DESIGN'S ROOTS RUN DEEP
We have all seen from our experiences that how behind almost every successful product out there in the market, there is thoughtful and neat design. This is evident when we look at iconic examples such as iPhone, Post-it note, Swiss Army Knife, Gillette safety razor etc. This is proof that design is at the epicenter of disruptive commercial success of products or services. Design is at the heart of companies like Google, Facebook and Amazon. The iconic simple homepage of Google, the access to instant global reviews on millions of products at Amazon prove that by blurring the lines in between software, hardware and services, topped with world class design, you go ahead and create world class products. And only the very best of the designs stand out in the plethora of options available today.
“Good design is good business,” coined by Thomas John Watson, Jr., the former CEO of IBM in 1973. He introduced the modern design DNA into the company. Steve Jobs' once said, "Design is not just what it looks like and feels like. Design is how it works." Following suit, there have been organizations that were born and still live by these concepts such as Nike and Netflix. Then there is another set of companies - those not known for market-disrupting innovation -- who today understand and emphasize on good design in the development of products and customer experiences.
DOUBTS ON DESIGN
The impact of design was not realized yesterday. Events in history like the invention of Wheel, use of compass, introduction of railways are all glowing examples of how design has helped man conquer the world. Yet after so many years and after so many successful case studies man seldom appreciated the value of design. Design is not amongst the top priorities in most organizations today. There always are conflicting theories about how effective is design in the given business context, or is it important enough to be prioritized above other burning issues in the organization. Also, how do you measure the RoI of design implementations in the company?
Many organizations assume that when engineers start laying out a product, design process happens almost automatically and magically. That is generally not the case. Hence, in such cases, there is a clear lack of awareness and education of design, and the fact that someone has to think about the way everything looks and works. In design-mature organizations design teams work very closely with engineering and product teams and help their vision come to life.
PROVEN STATISTICS: DESIGN SELLS
Awareness of the value of good design is at an all-time high. Good design is recognized as a major differentiator in ensuring product success in a crowded global market.
—Paul Hatch, Design House and Deana McDonagh, University of Illinois
From an Economic Impact perspective, there’s a general perception that design only delivers economic value for the design industry. By design industry, I mean the media, the creative and the cultural industries. This post aims to prove how inaccurate this is. There is enough prove that design has a high economic impact in the non-design-led industry and how mistaken this assumption is.
Across industries today, design can literally make the difference between success and failure. In 2005, The Design Council studied 63 portfolios of companies that traded on the Financial Times Stock Exchange over the course of a decade. They discovered that companies that put an emphasis on design performed at a much higher level than those that didn’t. They outperformed the FTSE 100 index by a whopping 200%.
And the numbers don’t stop there. The National Endowment for the Arts released a report on the influence of design on the US economy. This study shows that there were some design-led companies—like Apple, Coca-Cola, and Nike— which outperformed the S&P 500 Index by 219% in between 2004 & 2014.
UK Design Index. Copyright UK Design Council.
Here are some data points from UK. Over the past three years, if we compared companies which are design-led and non-design-led, the facts to prove the value of design continue to solid:
· 80% of the design-led companies have introduced new products or services. Twice as much as the average UK companies
· 83% of the design-led companies have seen market share increases, which is again twice as much as the average.
· 80% of the design-led companies have penetrated new international markets in the last three years. The average in the UK is 42%.
“The Design Index proves that companies which make effective use of design out-perform their peers, and it confirms design to be an integral part of good management.”
— Sir George Cox, Chairman, Design Council
DESIGN MAKES YOUR BRAND UNFORGETTABLE
Design is the silent ambassador of your brand.
—Paul Rand, Design Guru
Design increases the stickiness quotient of your brand. That’s right, you don’t just want one-time clients who think you’re great. You want loyal customers who come back again and again. By engaging your clients through neat and consistent design, you make your brand unforgettable.
According to AIGA, “When brands have communicated a given message for some time, their audiences start storing that information in their long-term memory.” From your logo to colour choices, branding decisions have a big impact on your brand’s retention.
Brands are created through thoughtfully chosen design decisions. They are more than simply the outward appearance of a brand, but all the other tiny details that create a truly memorable experience for your clients.
FIRST IMPRESSIONS ARE IMPORTANT
Never forget that you only have one opportunity to make a first impression - with investors, with customers, with PR, and with marketing.
—Dame Natalie Massenet, Chairman of the British Fashion Council
Studies show that visual appeal can make or break your assessment within about 50 milliseconds. This means that you have less than one-tenth of a second to make your brand memorable.
What first impressions do your designs create? Do people see you as life-changing? Dramatic? Professional? Reliable? Sophisticated? Even the minutest of changes to your branding and design can have a lasting effect on your buyers’ decisions and actions.
YOU SEE DESIGN’S POWER IN PACKAGING
According to Cincinnati-based research firm AcuPoll—every year, a whopping 95% of new products fail.
An article by Joshua Conran points out, “the reason is simple: Most customers don’t have the time or energy to weigh the advantages and disadvantages of the products in their shopping carts, so they use a shortcut to make their decision. That shortcut is your product’s packaging.”
The way we present our product or service has a dramatic effect on our success. Poor packaging has striking effects. Australia recently instituted a plain packaging law for cigarettes, with the goal of discouraging young people from smoking. Marlboro cannot use its logo, or its typeface. Their packages are covered in health warnings, with graphic images to deter smoking. What do you think was the result? The biggest smoking decline Australia has seen in 20 years.
CASE STUDY: BARCLAYS
Traditionally, Banking is not a sector you would associate design with. However, that’s not true with Barclays. Yes, they hold the credit of creating the first ATM business. How many banks have an in-house design department to work across the entire organisation? How many banks have a Chief Design Officer? Well Barclays has both.
Holding the reputation of digital pioneer, Barclays demonstrating the transformational power that Digital has. They use Digital to overturn old, hence declining, business models. The financial crisis and the increased tight regulation keep challenging the banking sector. This forced banks to think more out of the box and being more creative about their services and products. Barclays reframed these circumstances as opportunities to connect with customers and their needs.
We are bringing the organisation together — business, technology, control functions, all together centred and anchored on the customer or the client through human-centred design.
— Derek White, (former) Chief Design Officer, Barclays
The Barclays case proves that only after organisations being exposed to benefits of design they can understand its value and reinvest in it.
REQUIREMENTS FOR A HEALTHY DESIGN CULTURE
Analytical leadership
It can’t be overstated how important smart leadership is for good design, including measuring and driving performance, revenue and cost. Design leaders can’t be treated like second-class citizens. This prevents problems from being solved and leads to executive decisions being made based on gut feeling rather than concrete evidence.
The companies with the best financial returns have a bold, design-centric vision that’s clearly embedded in the top teams. When you incorporate an explicit vision about the importance of design in the C-suite, the entire company is much more likely to reap the financial benefits.
As evidenced by the McKinsey research, most companies don’t measure their design with the same rigor as time or cost. This is surprising given how easy it is to incorporate analytics that gather user feedback (such as satisfaction ratings and usability assessments), which can then be used to build a better product. Businesses must realize the importance of these metrics, as even small design changes can have a big impact on their revenue.
Cross-functional talent
People make a company, and the things those people do strongly influence its financial success. The research showed that nurturing the top design talent – the 2% of employees who make outsized contributions to the business – is of paramount importance. This means more than just offering them bonuses or promotions; it’s about giving them the freedom to work on projects that they’re passionate about, opportunities for public speaking and other meaningful perks.
The setup of design teams matters too. The top-performing companies all break down functional silos and integrate designers with other functions. On top of that, it’s also critical to invest in the right design tools and infrastructure in order to drive productivity and accelerate design iterations. Doing great work requires great tools, and it’s important not to skimp on those
Continuous iteration
Design teams often see the best results from combining quantitative and qualitative user research; for example, using both conjoint analysis and ethnographic interviews. Combining these with market reports, patent scans and other signals gives a 360-degree view of what’s needed to keep development standards high.
But of course, you can’t just keep staring inwards. Instead you need to integrate the user, business, competitors and technological research. The most successful companies have made it a habit to share early prototypes with outsiders, celebrating embryonic ideas and enabling teams to focus on shipping rather than getting stuck trying to perfect internal mock-ups.
The recommended workflow is to test, refine and repeat as fast as possible. Key to this approach is realizing that a product is never really done, not even when it’s launched to the public. If people use your product differently than expected, you can incorporate this feedback in the next release. Take for example the Apple Watch, which pivoted to a health device in its later iterations.
User experience
At the end of the day, it’s all about the user experience. If the buyer can’t use the product without much trouble, why bother buying it in the first place? That’s why it’s important to start designing with the user rather than the spec: simply because it promotes usable, human design.
When all of this is merged in a seamless physical and digital user experience and combined with smart integration of third-party products and services, you’ve taken the right steps to ensure a good experience for your end users.
All in all, these guidelines give good insight on how to run a company that’s optimized to reap the benefits of good design. That doesn’t mean you should implement all of these measures immediately. It’s important to pick and choose the ones that could have the biggest impact on your business and think about how you could make changes to existing processes.
RECENT FLURRY OF DESIGN INVESTMENTS
One of the big developments in the creative industry over the past few years has been the rise of the consultancies – PwC, Deloitte, Accenture, E&Y, Grant Thornton, McKinsey et al – as major players in the mergers and acquisition (M&A) space.
Last year marketing consultancy R3 found that Accenture, Deloitte, IBM, KPMG and McKinsey had between them spent more than $1.2bn hoovering up marcomms agencies in 2017. By contrast, the big five marcomms holding groups (Publicis, WPP, IPG, Ominicom and Dentsu) spent $1.8bn on M&A over the same period – just half what they’d spent in 2016.
It’s fair to say that as the holding companies have struggled with the disruption wreaked on the marcomms industry over the past five years, it’s been the consultants who’ve kept M&A activity buoyant since 2015.
So, why are the consultants – big and small – moving into marcomms? The answer is simple – all businesses need to grow, and extending the range of services they can offer clients (including advertising, marketing, strategy and ancilliaries) gives them access to horizontals into which they can utilise their footprint and expertise. They have a great deal in their favour, such as existing client relationships in many cases; experience of operating at both global and local levels; understanding of both strategic disciplines and their importance; big budgets, currently much larger than the under-pressure holding groups can provide and large headcounts. Accenture has over 400,000 employees globally which, supplemented by creative talent from the agencies they acquire, means it can offer clients quick and effective end-to-end service.
Consultancies also have a reputation as cost-savers and problem solvers, whereas traditional marketing agencies are seen as cost drivers, which is a huge structural problem they need to solve (although agency chiefs quite rightly like to point out that they charge clients a lot less for their services than the consultancies do).
SUMMARY
While it may seem the ROI of design is hard to measure, while it's all too easy to see the costs involved to create it, consider the organic and far-reaching, positive effects. Following the recent Design In Business report from Accenture Strategy, “'Design-alert' businesses achieve a 125% return on their design-related investments.”
In a nutshell, this is how design is boosting business growth ( Geography -UK):
· Design increases turnover: For every ￡1 invested in design, businesses can expect over ￡20 in increased revenues
· Design is linked to profit: For every ￡1 invested in design, businesses can expect over ￡4 increase in net operating profit
· Design boosts exports: For every ￡1 invested in design, businesses can expect a return of over ￡5 in increased exports
However there are many companies, big and small, out there who have been slow to catch up. With no clear way to link design to business growth, senior leaders are often reluctant to deploy scarce resources to design functions. That is an issue because many of the key drivers of the strong and consistent design environment call for company-level decisions and investments.
RESOURCES
From <https://www.harvestmedia.com/blog/how-design-impacts-your-business-success>
From <https://miro.com/blog/business-impact-design/>
From <https://www.designcouncil.org.uk/resources/case-study/design-economy-2018-monzo>
From <https://www.harvestmedia.com/blog/how-design-impacts-your-business-success>