What Is the Business Value of Design?
In this article, we will look at the many ways design creates value, produces measurable results, and makes a digital product stand out from competitors.
What value can design bring to your business
Design can determine a company’s success and provide significant business value. However, it's important to note that enhancing the aesthetics or presentation of a product or service alone does not guarantee its success.
Design activities include the way of thinking, making business decisions, and building processes within an organization. By taking a comprehensive approach to design, businesses can create products and services based on actual user needs instead of preexisting notions. This, in turn, can significantly affect business profits.
Creating a design strategy brings lasting business value: it makes collaboration within the organization easier, increases customer satisfaction, and gives an advantage over the competition.
So how can you bring the business value of design into your digital product, and how can you use design thinking for your business needs? We'll examine how design affects KPIs (key performance indicators) and the tangible outcomes of implementing a design process in an organization.
The business value of design in research
On an intuitive level, most of us probably feel that good design is important and can help sell a product or service. That intuition has empirical evidence – the halo effect. It describes the tendency to assume that what looks good has other positive qualities.
When a company invests in branding and design, it serves as a sign that they prioritize providing a positive experience for the customer. Excellent design can serve as an indicator of this commitment.
The halo effect is also reflected in brand valuation: a strong brand increases the company’s perceived value. Examples can be companies like Coca-Cola or Nike that have strong design values and achieve high brand equity.
An extensive McKinsey survey has shown that companies incorporating design-driven approaches into their business outperform their non design-focused competitors. That turned out to be applicable for companies selling either physical goods, digital products, or a combination of both.
According to McKinsey, a good design puts companies in a winning position to outperform the market even by two to one. In other words, the design-focused frontrunners have an advantage over the competitors.
But the survey further shows that to land on the market leader position first, companies must put design into their DNA: implement it through all departments and phases of product development.
What can the results of good design be for your company?
Outstanding design profoundly changes the way a client can interact with a digital product on a few crucial levels:
- Customer interaction and engagement – refers to the various ways in which a customer interacts with a company, including communication channels. Exceptional design makes interactions with a digital product easy for the customer, increasing engagement and building long-term relations.
- Customer experience (CX) – the overall experience a customer has when interacting with a business. This includes all touchpoints with a company, such as browsing their website, contacting customer support, purchasing a product or service, receiving delivery, and after-sales service. With great design, the CX is optimized and adjusted to the customer needs.
- Brand consistency – the practice of ensuring a consistent brand representation across all touchpoints and interactions. This includes design elements such as logos, visuals, colors, messaging, voice, and tone. Brand consistency helps to build recognition, familiarity, and trust with customers.
These aspects can be extremely valuable for any business to achieve measurable results through the following:
- Increased conversion – potential customers are more likely to purchase the product.
- Increased loyalty – current customers are more likely to stick to the great product.
- Better brand recognition – it becomes easier to tell the product apart from others in the industry.
How design adds value to the business and impacts KPIs
Design adds value to the company at many stages: starting with the development of the product, through internal operations, to market reach. Here's how design influences operations and adds real value, combined with the impact on specific KPIs.
Increases speed to market
Increasing speed to market delivers a competitive advantage that enables organizations to outpace rivals or react more quickly to change. Techniques applied to increase speed to market include:
- Rapid iteration – a product development method ensuring that models are put into production as soon as possible. Later, these models can be updated and modified. This reduces development cycle time and promptly validates new business opportunities.
- Co-creation with key partners, employees, and end-users allows for a constant feedback loop that limits the time put in producing a product that doesn't meet client expectations. On top of that, adding other viewpoints accelerates innovation.
- Lean methods are based on continuous experimentation with the goal of creating value with fewer resources and less waste. They can support building MVPs, which are released quickly and then tested with customers to gather input for further product development iterations.
- Costs and time of development – the design approach reduces both, as it supports releasing the MVP quickly. This way, you won’t spend a lot of resources on developing a product with excessive features.
- Customer feedback – by releasing MVPs, design-focused companies generate a constant loop of customer feedback that reduces friction and leads to fewer costly mistakes.
- Breakeven and cycle times – releasing a digital product in small fractions shortens cycle times and facilitates achieving breakeven earlier.
- Target revenue – design plays a critical role in creating a product that is desirable, easy to adopt, and shareable with others. By prioritizing design, companies can increase the chances of meeting their revenue goals.
Extends market reach
For extending market reach, design thinking is invaluable. It’s a methodology that strictly focuses on the user. Design thinking tries to understand their needs and come up with creative solutions to meet them. This doesn’t guarantee market success, but it does help organizations minimize pitfalls, launch successful products, and extend market reach.
Many designers use specific tools to achieve that, such as:
- Deep user insights – user research in design goes beyond classical market research, as it's driven by empathy toward the user and tries to identify their actual needs. Relying on such extensive techniques as in-depth interviews or observing how customers use the app, researchers are able to understand and document the user journey. That offers unparalleled insights into how products provide value and is often the base for discovering new opportunities.
- Breaking market segments – companies often think in segments and categories, but customers do not. Good designers think more like customers, embracing their varied perspectives and, as a result, creating more original products.
- Treating strategy as a dynamic act – the traditional product strategy has a limitation in that it heavily relies on extrapolation, which involves drawing linear conclusions from observable trends and tendencies. In contrast, design offers an alternative approach by helping to identify an ideal state that is closely aligned with customer goals and a strategy to achieve them.
- Market share – a measurement of the size of a company's business in relation to its competitors and the overall market. It is calculated by measuring total sales revenue or unit sales relative to the market size. A design-centered company can increase its market share, as its products better target customer needs versus competitors. It can also adapt to the market by addressing previously ignored customer niches.
- Share of wallet – the percentage a customer spends in a particular market captured by the business. It shows customer loyalty and the effectiveness of a company's marketing efforts. In the context of market reach, the share of wallet refers to the portion of a market that business can capture by appealing to their existing customer base rather than solely focusing on new customer acquisition. Design-focused companies can create products or services that are emotionally resonant with existing customers, thereby fostering customer loyalty.
- New product revenue – generated by introducing new products or services to the market. New product revenue is a key performance indicator for businesses, as it provides insights into how well they can effectively launch and attract customers to new offerings. By leveraging innovative and visually compelling designs, companies can attract new customers and expand their market reach.
Drives engagement and loyalty
To drive customer engagement and increase loyalty, designers analyze and improve customer interactions with the company at all stages – that's what forms a customer experience (CX).
A design team can use a three-factor framework to assess CX:
- Breadth is the number of interactions with the customer.
- Depth measures the quality and meaning behind each interaction.
- Consistency ensures a cohesive feeling and promise to each interaction.
Consistent iteration of all three improves CX, engagement, and brand loyalty.
- Conversion rate – the percentage of users who take a desired action when using an app or a website. Design makes it easier for the user to identify and take these actions, whether when contacting the company, signing up for their newsletter, or becoming a customer.
- Customer acquisition – means bringing new clients to the business. Good communication, a clear and well-functioning website, and easy payments are all design elements that help turn visitors into customers.
- Customer churn and retention – customer churn happens when existing clients stop purchasing a product or service. Retention, on the contrary, refers to the number of customers who stay with business over a certain period of time. In design-centric companies, the solutions come from listening to clients. Knowing and answering their needs can make them stay longer.
- Net promoter score – a metric measuring customer satisfaction. It gives insights about customer loyalty toward the brand, service, or product. To influence NPS, companies can focus on several areas such as improving the quality of their products or services, enhancing the customer support experience, and streamlining the buying process. They can also collect and analyze customer feedback to identify pain points and areas for improvement, then implement changes accordingly.
- Customer satisfaction (CSAT) – measures customer satisfaction with a company's product or service. Surveys ask customers to rate their satisfaction and provide feedback, allowing companies to identify areas for improvement and refine their offerings. Good design enhances usability, accessibility, and aesthetics for a positive customer experience, leading to higher satisfaction.
Enhances internal capabilities
Even if decision-makers say they value innovation, organizations are often biased toward reliability and time-proven methods. The status quo in such cases remains strong because the systems in use have worked demonstrably well in the past.
Collaborative design processes, on the other hand, seem to invite more risks because they create a dynamic environment. By building a compelling vision that appeals across divisions and drives stakeholder alignment, a design approach enables a firm to pursue coherent, longer-term plans.
- Talent acquisition – identifying and recruiting employees that best fit the company’s needs. The design approach attracts talent willing to participate in a collaborative culture and create innovation.
- Employee NPS – a metric used to measure employee engagement and loyalty toward a business. Open communication and listening to the feedback from NPS surveys can help address problematic issues.
- Employee engagement and productivity – employee engagement is defined as the extent to which employees are motivated to do their jobs and committed to their organization’s goals. It’s closely connected with employee productivity, which assesses employees’ efficiency. Design-led organizational changes, like granting employees more autonomy and flexibility, can increase their engagement.
- Internal promotion rate – measures the rate at which open positions are filled by internal hires. Design-centric companies promote a learning culture that enables internal candidates access to know-how.
Empowers visionary transformation
Visionary transformation can occur when a company is able to reframe the challenges it’s facing, find new opportunities to bypass competitors, and reset customer expectations. Design helps to identify those opportunities and craft them as appealing offerings.
At the heart of all such transitions are teams and leaders with the courage to think broadly from a long-term perspective and the broader business context.
- New product revenue – generated by introducing new products to the market. Design is the foundation for creating innovative and marketable products, driving sales from product launches.
- Talent acquisition – identifying and recruiting employees that best fit the company’s needs. Design can influence this metric by creating a strong employer brand through visually appealing and compelling design elements in recruitment materials and company branding, helping to attract top talent and enhance the overall recruitment process.
- Cultural metrics – a set of beliefs, behaviors, and practices of your employees that might not directly impact business outcomes but do have an impact on the brand. Design can influence these metrics by promoting a culture of creativity, collaboration, and inclusivity.
- Brand reputation – the outside image of the company and its offerings. It reflects how a company is perceived in the market and among its customers. Design plays a crucial role in shaping brand reputation by creating consistent and visually appealing brand elements that convey the brand's values, leading to enhanced brand perception.
- Brand value – measures the monetary value of a company's brand. Design can influence this metric by creating brand equity, leading to increased brand value and potential for premium pricing.
Why companies should be design-driven
The difference between design-driven companies and others is putting the customer-first theory into practice: design leaders don’t make assumptions about the customer, but instead learn what the customer wants.
Why are brands like Airbnb, Apple, Asos, and Google almost universally set as examples of design-driven companies? Their products are created by listening to, interacting with, and taking inspiration from customers. Design-focused companies aim to serve the user.
Airbnb, for instance, started as a website listing accommodation. Through listening to its users’ expectations, it transformed into much more – a global brand for travel and online experiences. They state, “we believe that design is contextual, inspiration comes in many forms, and that collaboration with our community is the key to well-designed experiences.”
Apple is well known for its excellent product design. It's also organized around design: the company doesn’t have separate departments with competing managers, but a functional structure in which different divisions align their expertise.
Asos grew in online fashion shopping by placing the user first early on. For example, over four months in 2018, it made 700 consumer-facing improvements.
Google, which started as a tech company, is now widely regarded as a design-first one with the motto: “Focus on the user and all else will follow.”
Being design-driven means focusing on empathy, inclusion, and open communication with customers and employees. This approach leads to smoother collaboration and the ability to make better-informed business decisions.
Luckily, not only can world-renown brands have outstanding designs. Start-ups and small companies can also take advantage of design value by investing in design teams or hiring a design consultancy.
They need to consider that design is much more than meets the eye; design is a way of thinking, researching, and communicating with people. It’s a process that develops as you grow, but will also encourage that growth and lead you through it.
Becoming a design-centered company doesn't happen overnight. Still, the value of design will be notable for the organization long term. Design-related investments will add to the brand’s value in the future and enable the creation of products that customers need and are eager to use.