What’s the value of design for businesses? Here are the hard facts

Some key finds I came across about the value of design for businesses

Last January I joined the MA programme in Digital Experience Design at Hyper Island in the UK. Until now, the syllabus did not intersect design and business domains.

However, I came across some interesting facts while doing research about the value of design for businesses. These findings are particularly relevant for the role that Design can have in disrupting markets. The module name is thus aptly named“Design in Business”.

In a nutshell, Sam Dunne is the industry leader for this module. He is coaching my batch, code-named #DXD2 (to get to know some of us click here), in how design can boost business transformation. I was thrilled when I found out the overarching questions being address during these module:

1. How to discuss and critically evaluate cutting-edge thinking related to business strategy, while identifying specific opportunities and challenges?
2. How to initiate the digital business transformation and apply new business models?

For the current project, my team faced some processual and cultural challenges. It is always challenging to align new teams, isn’t it? Moreover, if each team member has a different understanding of what success looks like when defining it in a business context.

On one hand, we have to consider business-led decisions, on the other we have the design-led decisions to be made. But which one comes first? Which one is more relevant?

It is complicated to draw where one ends, and the other begins. Even so at this stage, it was key having the time to define what each team member wanted to take out of the project and to agree on goals and principles. We decided to get the project going by having a lean approach to it. Damien Newman brilliantly explained some of the design process’s struggles with visual that become famous as the Design Squiggle.

Damien Newman’s Design Squiggle

This visual representation of the process is quite obvious, right? This how my team was feeling for a good part of the project.

The random line in first part of the squiggle (left side) reminds me how we — designers — still struggle to understand businesses in its multiple contexts. We might identify its different parts and components, and we might know how to tell a story, but we struggle to find a direction in the sea of possibilities.

The straightforwardness in the second half of the squiggle (right side) is what designers should always aim for. To use design as an agent to transform business. This way, designers will realise that Design is helping multiple stakeholders and organizations work better as a system — like Tim Brown’s (IDEO) said.

Old business approaches took us this far. Let Design take the steering wheel. The next section of this post aims to help designers, who like me want to have a more systemic approach to design, being more confident about design’s real value for business.

Introducing some Design Council (UK) reports

I started by reading different reports done by the researchers at the Design Council. It is overwhelming the amount of useful and insightful data design practitioners, students, and researchers (or anyone else who’s interested in this topic) can find there.

Let me share with you some not-so-new facts on the impact of design on business results. For this post, I used the following three reports :

Insights on the economic impact of design

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.

In a nutshell, this is how design is boosting business growth in the 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

The Value of Design Factfinder (2007) report, shows that in the UK rapidly growing business extract more value from design than other business.

Almost half (47%) of the UK’s rapidly growing businesses see design as crucial to business success. (UK average 15%)

There is also a relation between the size of the business and the value given to design as a success factor.

Only 5% of businesses with a turnover of under £250,000 rank design first, in contrast to 23% of businesses with a turnover of over £2million.

Even if not all the companies are design driven, almost all (93%) agree with the principle that it’s important to have a reputation for design and innovation.

Design Council used an approach that allows analysis of the design sector to be contextualised within the wider economy.

Design in the banking industry

The Barclays case study

Traditionally, one would not associate the banking sector with Design. However, Barclays is proving this assumption wrong. Yes, they hold the credit of creating the first ATM. And also, they were the first credit card in the UK. But innovation at Barclays didn’t stop there, long back. The Leading Business by Design (2013) report also suggests that the bank keeps showing a high track for change and innovation. 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.

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.

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

Barclays sees design as a strategy to transform the value proposition, the customer experience, to launch new products and take full advantage of the digital channels to leverage big data and analytics.

Good design = Good profits

The Barclays case proves that only after organisations being exposed to benefits of design they can understand its value and reinvest in it.

The Value of Design Factfinder (2007) also shows other striking evidence on the stock market value that design delivers. For this study, the Design Council has created what they called Design Index. — an index of 61 design-led businesses. In this report, one can read the proof that design-led businesses had outperformed the FTSE 100 by more than 200% over a ten-year period (1995–2004). This proves the efficiency on long-term that design has on businesses. And it’s clear evidence of a relationship between design investment, business performance and long-term stock market value.

UK Design Index. Copyright UK Design Council.

In the report is stated:

Not only has the Design Index outperformed the FTSE 100, but that out-performance has been constant. The Index rose more in good times, and fell less in bad times. The difference hasn’t been fleeting or fluctuating, but solid over a decade.
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

Over the past three yes, 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%.

So what needs to change?

Designers need to learn the business language

But is this value being perceived at all? What happens when it comes to communicating the design value?

In the UK, it seems that the design industry, together with the designers themselves could be doing a better job in explaining the value of design.

Two in five designers feel they don’t explain the value of their services well.

Whose responsibility is this? Is it the design industry or the design education? That’s a whole different topic. Jonathan Ive — Chief Design Officer of Apple — pointed some reasons why he thinks design education is tragic. It’s consensual that Apple is a role model concerning design-driven organisations, and it’s looked up to by many other companies regardless of their size and sector. The flags that Jonathan raised in his speech are a word to the wise

In an era where change is a currency business as usual stopped being good enough. In ten years time, at the current churn rate, 75% of the S&P 500 will be replaced.

61-year tenure for average firm in 1958 narrowed to 25 years in 1980 — to 18 years now. To survive and thrive, leaders must “create, operate and trade” their business units without losing control of their company.

Yes, things are changing faster than ever…

… and design will keep being the driver of change, making innovation tangible and disruption possible and all this, being invisible like it always is.

In your opinion, how do you think designers can translate the value they are delivering to businesses?

Let me know your thoughts on this topic.

Now that you read this blog you might want to find out what my Master’s colleagues have been writing so far. If so, you can find a collaborative publication here.

Special thanks to AG for her editorial input.