What’s the ROI of Design?
We’ve all been there at some point, where we as designers and design leaders have been asked that seemingly fateful question of…
“What’s the ROI of Design?”.
The mere thought of having to provide an answer to that question likely gives us the chills! On the face of it, while reasonable and logical, it challenges our fundamental values and principles. The act of posing that ROI question puts us on the defensive, and rightly so, at least to some extent.
We’re compelled at that point to justify our practice as we attempt to boil our contributions down to a number. The benefits of great Design are obvious, aren’t they? We’re creating simple, intuitive and delightful experiences for those who purchase and consume our products and services.
What could be more valuable than that?!
Design as a function of the business
Yet, the notion of an “experience” is hard to define. It is quite opaque and often intangible, and is by its nature more tacit and emotive, as opposed to something we easily describe, quantify or measure.
What is more explicit, however, are the artefacts and deliverables we produce as designers; yet, as we know, outputs do not equate to outcomes and the act of creating more artefacts does not equate to better design.
But, to respond to this pragmatically and professionally we need to understand the intent behind this question before we recoil in horror. Furthermore, we need to remind ourselves that the practice of Design, and we as individuals, are part of a wider business ecosystem.
As with any organisational function, it’s an investment and therefore part of the operating costs of doing business. Here, the most simple math for any sustainable business is that revenue exceeds costs. It follows then, that this is a sensible and necessary line of enquiry for those who are ultimately responsible and accountable for the health of the business.
So, to invest in Design, as a function of that business, beyond the good faith of delivering intrinsically better products and experiences, there is often a need to make the implicit explicit. Surfacing the levers we as designers can pull on that influence — or at the very least contribute towards — the measures that the business cares about i.e. reducing costs and increasing revenue.
As such, the positive reframing of this line of enquiry is to instead ask, how can we better demonstrate the impact of the practice and its contributions to business growth? This shifts us from defensive accounting in retrospect, to active alignment around impact.
A positive implication of our efforts to measure impact is to surface, and better still quantify opportunities for Design. It takes us down the path of asking how our products and services are performing, whether they are genuinely meeting the needs of our customers and the degree to which they are happy with the experience.
It’s less about the team and outputs of a given team and more about how our products and services are performing, relative to the needs of our customers. In this scenario that ROI question can be a catalyst for investment and an opportunity to focus the function on where it can have the greatest impact.
The lenses of Design value
So, when we think about business value, with a focus on revenue and costs, we can look at Design’s contribution through two lenses:
- The internal value derived through improving speed, reducing waste and improving decision-making.
- The external value of improving the fit of a product/service, reducing friction and driving customer satisfaction.
(1) External Value
External Value can be summarised as Design’ ability to contribute towards generating new revenue or securing existing revenue. In other words, how easy it is to sell the same product to more people and retain their business by creating something genuinely valuable and delightful to use.
This is about how we improve the fit and applicability of our products and services through the practice of Design; reducing the friction associated with adopting and using the product, once it’s in customers’ hands. Here, Design is actively influencing the customer’s purchasing decision and driving their onward engagement.
(2) Internal Value
Internal Value can be summarised as Design’s ability to contribute towards driving down development inefficiencies, speeding up the lead time to test and validate new ideas and improving the rigour and quality of our decision-making. In essence, helping to both fuel the machine and set the trajectory of product development.
This is about how we standardise, scale and leverage common design patterns, speed up our design to development workflows and utilise mature discovery practices to help teams determine what to build before they invest in building it. Here, Design is helping us make better choices and working to increase our velocity of learning.
The Design Value Wheel
With those lenses in mind, we can start to think about the specific attributes or aspects of the work we do, as part of the system of value creation and value delivery and how they contribute to business value (an increase in revenue or reduction of costs).
I’m going to illustrate this system using this Value Wheel, in an attempt to map activities through to outcomes, along with examples of proximate measures. Stripping this back in the first instance, I’ll begin by describing those attributes that are core to the proposition of Design.
External Proposition
Fit
Defining the fit and relevance of our products relative to the jobs (JTBD) of our customers. This speaks to the fundamentals of establishing and retaining Product-Market Fit and how your offering meets the needs of a target market.
Function
Ensuring the capabilities of our products are desirable, usable and deliver value. This looks at the role of Design in ensuring that established products are and remain to be desirable, easy to use and that customers are able to realise the value they purchased.
Friction
Improving the adoption, usage and satisfaction when consuming our products. This considers the wider journeys of customers as they onboard and adopt the product post-purchase; focusing on Design’s role in reducing friction and driving satisfaction.
Internal Proposition
Discovery
Maximising the impact of engineering by de-risking our critical assumptions. This speaks to the value of ongoing discovery efforts necessary to determine what problems to solve; mitigating the risk of investing effort into building the wrong things for the wrong people.
Decisions
Producing rapid experiments that allow us to quickly evaluate the impact of our ideas. Here Designers support the early stage of the product development process by quickly testing concepts/ideas to help shape and inform what to build before we build it.
Delivery
Reducing waste and accelerating delivery through better design-development workflows. This sees some investment in the processes, tooling and systems that close the gap between concept and code; reducing the lead time to learn and deliver value.
The proximate measures of Design
As I mentioned earlier, the focus here isn’t one of driving outputs for output sake. More discovery for example doesn’t in and of itself lead to better outcomes for the customer or the business. This is about focusing on and being able to influence a handful of key measures that serve as the leading indicators of design impact.
As such, edging out from this core proposition, we can start to map these activities to some of the business outcomes we’re looking to influence.
For example, in a SaaS context, retention and recurring revenue is a primary driver for growth. So, to that end, we can focus on attributes like Function and Friction. Here, we can align our design efforts to target how we might address key usability issues with the product or pain points in the post-purchase journey that will likely correlate with our ability to retain existing customers. The easier products are to acquire, the simpler they are to use and the quicker we can demonstrate value, the more likely customers will renew.
As another example, duplication and waste lead to inefficiencies in Delivery, which ultimately costs a business money. This is the opportunity cost of spending time and effort working on things that aren’t going to add value. Here, from a Design perspective, we can leverage investment in our design system (Honeycomb) to reduce duplication, both in terms of design and code. The more these components are used to solve common problems, the more we can speed up development and drive down costs.
However, correlation isn’t the same as causation.
While making an exact inference between a design activity and the business impact is always going to be complex and subject to attribution, we can step back from that to identify some proximate leading indicators, which can serve as more reasonable measures of Design’s contribution. These are measures that we could plausibly influence and can more directly attribute to our design activities.
For example, it’s reasonable to assume that if a customer is not able to experience the value of a product within 30 days then the odds of them churning are high. And so, by designing out some of the friction and proactively onboarding the user, we can directly target a reduction in their Time to Value (TTV); which is a leading indicator of retention.
Or, if we were testing competing ideas to help us decide what to build, we can rapidly experiment, prototype and test to see which is most likely to influence the behaviours we care about. This improves the efficiency and efficacy of our internal decision-making and increases the odds of the team spending time on the idea(s) that will have the greatest impact.
While most businesses will likely have a similar model for value, these proximate measures, attributable to Design activities, are going to be a lot more subjective. The key, however, is identifying the measures that you, as a function, can legitimately and reasonably influence.
Being able to draw a lineage between these, and the outcomes the business cares about, is how we begin to answer the ROI question.
Whether it’s specific customer behaviour — such as their adoption of a core feature, or an internal behaviour — like teams use of shared components, tracking how you’re able to influence these behaviours, over time, provides us with some tractable and quantifiable measures of functional impact.
Yes, Design is absolutely fundamental to creating great products and experiences our customers love — that’s a given, but it also plays a critical role in the end-to-end process of value creation and in helping create a sustainable and profitable business.
And so, beyond the intrinsic value of Design and our innate belief that good design is good business, it is possible to answer that ROI question from a more pragmatic, less emotive and more quantitative standpoint.
Cover image courtesy of pch.vector via www.freepik.com.
