McKinsey on the Business Value of Design

If you’ve wondered whether investing in design research can really help your organization grow, you’ll be interested in a new study by McKinsey on the business value of design (PDF).

The report is the result of a five-year study analyzing 2 million pieces of financial data and 100,000 design actions from 300 companies.

The researchers found that design-driven companies had 32% more revenue compared to other companies. Those companies demonstrated four common qualities.

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The four themes that make up the McKinsey Design Index (MDI)

More than a feeling: Analytical Leadership

More than a department: Cross-functional Talent

More than a phase: Continuous Iteration

More than a product: User Experience

Analytical leadership (Theme 1)

The authors stress the value of data-driven decision making:

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.

The MDI recommends leaders track design’s impact as a metric just as rigorously as cost and revenue. I’d say that once you start tracking design’s impact, you’ll find that you’re often also tracking revenue. In other words, they’re not really different — design can be a significant driver of revenue. Once you start documenting design results, you may wonder why you hadn’t been doing it all along.

Prioritize user experience & break down silos (Themes 2 and 3)

Prioritizing user experience is about talking to your users, and then incorporating their voice and needs into your products and services.

The study found that more than 40% of companies don’t talk to users at all during development. I’d love to hear how many of those that do talk with users consistently go on to use the results in product development. Too often the customer’s voice drowns — it can’t survive the turf wars and egos within the company.

Which brings us to another of the 4 elements: Cross-functional talent.

It’s interesting that they distinguish prioritizing user experience and cross-functional teams (breaking down silos) as two separate themes. I think they’re so closely related; they should be considered one. I’d say you can’t prioritize user experience in a siloed environment. There’s no way to develop genuinely user-focused products and services when you have people guarding territory and hoarding information. Companies can’t look at the whole user experience if people in finance or legal can’t or won’t collaborate with product and service designers.

You’re going to be very limited in your ability to deliver a user-focused website, for example, if people in operations refuse to share insights from customer service call logs with designers seeking to create user-focused content that answers the questions customers value most.

Iteration (Theme 4)

Companies that continually listen to and test with users are more successful.

And iteration is not internal — it’s public.

So many companies are uncomfortable with that. The study found that “60% of the surveyed companies only use prototypes late in the development process, for internal use only”.

Too many companies feel that a project should be 100% done before it is released. As they point out in the report, the problem with this is that it increases the risk associated with development. By waiting to release a new product or service until it’s “perfect” or “done”, the company places enourmous bets. All it takes in one or two of those projects to fail or underperform for the organization to become allergic to experimentation. As the culture becomes more brittle and insular, it gets left behind as others in the industry embrace change.

But you can’t bet a nickel

Finally, the report suggests that for design to have an impact on revenue, it isn’t enough to invest a little more money in design and reap the benefits. Fast Company summarizes:

… for design to work its magic, a business has to really commit and excel across all four areas that McKinsey identified. For Sheppard, that was a surprise. The team anticipated that every dollar spent on design would improve the bottom line, but instead, it has a disproportionate financial impact for companies that are really good at design.

This lines up with how I described the relationship between cross-disciplinary collaboration and prioritizing user experience above. The elements of the MDI are interconnected. You won’t get far with one element without having the others in place; the whole is more than the sum of its parts.

How to shift the culture

It’s very hard to instill these values within an organization simply by designing stuff.

Plenty of designers still believe that if they can just model good practices, others within an organization will see the inherent value of user-focused design and begin making data-driven decisions that prioritize user experience.

The report's authors found that 50% of companies have no objective way to measure the success of design teams, and “less than 5% reported that their leadership can make design-related decisions in a data-driven, objective way.”

Think about that.

95% of companies are led by people who are basically guessing when it comes to decisions about how their products and services function and support their users.

There’s just no way company leaders who have spent decades making decisions based on instinct are going to infer the deeper value of a designer’s data-driven process.

So, if actually practicing design in a “normal” way won’t work, then what will?

Start with a pilot project

The report suggests using a pilot project to instigate change. That can work, but it needs some clarification. 

Let's use a website redesign as an example of a design project most people are familiar with.

If you call it a "website redesign" it will be doomed to failure.

Website design is an activity that leads to a limited change in the way a digital product looks. That’s not an outcome of any real consequence to the organization, and it’s definitely not going to change the way people operate or make decisions.

Rather than setting out to redesign a website, say:

We’re going to create cross-functional teams to develop content based on user research. Over the next year, we’ll use this model to test our hypothesis that diverse, user-focused teams produce content that converts more customers more quickly for the company.

Then communicate to turf guardians that this means that the normal order will be disrupted for a limited time on a limited project. And have that message come from the very top — not from a designer or a design agency.

Or you might say:

“We’re going to develop a system that will feed customer data to senior leadership. During the following 6 months, only product/service development ideas that are supported by that data stream will be pursued by the organization.”

It's not about a website — it's about how teams are behaving in light of a design system that happens to be called a website.


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Kyle Bowen