Return on Investment of Design

Having worked for product companies and service companies, I was frequently faced with the question of what is ROI of design? What return will a designer bring in? How to measure his/her usefulness and, most irritatingly, what the design is really for.

In this article, I attempt to find persuasive indicators of successful design. The article is also a kind of mental drill for better answering if confronted again with them — questions. And thirdly, it will be a kind of reflection on Design Thinking.

Who is it for?

I believe the article to be helpful for design leaders and managers. To help justify their decision in front of the Board, but also I believe every designer should posses some business acumen, and wear the shoes of business, to better understand those guys behind strategic decisions.

Table of content

1. About the Return
2. About Product Vision
3. Internal and External value of design
4. Design Debt
5. Summary

But what the Return on Investment really is?

Return on investment is how much we get from money we invested, so it is the total investment divided by total costs.

ROI= (Cost of Investment / Net Return on Investment​) × 100%

Cost is the aggregate of the various types of costs, fixed and variable, that make up a business’ overall expenses. So among expenses on advertisement, operational costs, there are wages of designers, working hours of other team members spent co-jointly on meeting with designers, and cost of research and experimentation. It’s impossible to separate Return on Design form Return from Development, Marketing or Return from process organization. It’s simply a syntactic element of ROI. So if the Board asks you to know the ROI of Design, they „simply” want to know if the costs put into design activities will augment the overall return strong enough.

So, can we measure the impact of design by simply observing the margin growing? Not exactly, because investment on design hardly goes ever alone, without organizational changes, advertising campaigns or other activities. But surely, we shall try, to justify our impact — by overall ROI raise — but having in mind that ROI is calculated periodically, and many other phenomena may interfere in the time span given, we need more time frames to deduct a comparative data.

So we have to find another way — more granular — to find how much of success in the success is owned by design.

Define Design’s Success

To tell what the design is for, and how to define its success, we shall start from the end. First, we have to define the end state. The aim we want to achieve. What we are designing for. The product or project has to have a clear vision, and the vision must be stated in measurable terms. It cannot be: „Provide a top-notch experience for users” nor „Orchestrate all energy resources”. It is like defining a dream. We have to see it, see the time frame, to work for it. And it is crucial, if we want to drive a team of individuals, to work that dream out.

The vision should sound like:

„Provide women with a cheap and safe car lift at any time, joining trustworthy car-owning individuals with demanding commutes in any highly populated city”. For a ride-sharing app.

or:

„Provide a tool to monitor, manage, plan, respond to, and remotely solve issues across various energy resources of different makes and models, interconnected into the grid, and allow for operating them as one, reliable and predictable energy generator.”

or:

„Optimize the last kilometre delivery in congested city centres by focusing on foot delivery by neighbours doing their courses in the similar direction, making people doing two things at one time, raising efficiency and time occupation of particulars, in the same moment, growing neighbourhood awareness”

All these visions can be, and must be, broken down into constituents. For the way they are formulated, allows easy and clear statement of the „dream”. So, the dream is no more vague.

The Vision

But when do we have the vision ready? As per proper Design Thinking process, we coin the vision iteratively. First we have an initial idea (guesswork vision), a presumption of what the problem is and what a possible solution to it could be. Not sinking too much attachment in it, we research and then define it anew, based on root causes we had learnt and insights from possible users. It’s the vision enclosed in the design statement, it gives us direction and performance indicators, but it is not written in stone. Once we tested our solution and planned it, we reviewed then our vision. And the vision, owned by a Product Owner, is reviewed and updated after every Sprint Review until the final release.

The vision tells us, what do we want to build, but also how can we track the progress, and measure the success. The product vision describes the purpose of a product. A good product vision expresses the value the product should deliver and to whom that value is delivered.

Product Vision Breakdown

Product vision is appealing and concise, it presents the product’s unique selling point and is the kernel for a roadmap, yet it can be broken down and further specified. We need to define:

• who is the user
• what are their goals
• what is the context of our product
• how can we monetize our product
• when it’s going to be ready

Breaking it down:
„Provide women with a cheap and safe car lift at any time, joining trustworthy car-owning individuals with demanding commutes in any highly populated city”.

Two types of users:

• women who want to travel safely (no sexual abuses, no robbery, no vulgarities) and for little money;
• trustworthy car-owning individuals willing to share the ride and earn back.

Context:

• all-day times, in densely populated cities.

Goal:

• provide an app for introducing drivers to travellers;
• provide logistic back-end system to manage rides, payments and customer complaints

Money flow:

• Commission on travel fee, drivers admission fee

Time frames:

• Put any realistic time frame.

Now it looks like a precise matrix for setting Objective Key Results (we can specify: cities, demographics of users, commission, deadline) — that we will check on, after a defined milestone. Following vision and fulfilling OKRs is the ultimate indicator for business success. Design, development, and product management are there for making the vision happen.

Let’s boldly assume, our OKRs are filled in, it says to us only that the whole product team did well and that our business is success. But we still can’t name the design the driver of ROI.

Design Value

We have two hemispheres of Value, affected by design. All two impact on users, directly or indirectly. There are Internal values:

• everything that helps define goals, take up decisions, experiment with solutions, name features and attenuate risk;
• smooth the process, simplify user flow, optimize interaction;
• shorten development time spent on task, clarify uncertainty, automate hand-over.

And External values:

• functions allowing goals execution (end goals)
• engagement and user satisfaction (experience goals)
• market fit, viability of solution and business cases (business goals)

These two hemispheres are two sides of an apple. Internal values, experienced by the team, influence highly external values. Each internal value has an external representation or result visible to users.

Decision Axis

Decisions are influenced by discovery of user needs, goals definition, workshops, process optimization, ballpark, prioritization, roadmap and estimation. All these activities, done or supported by product design, result in what functions will user have, what goals will the product facilitate, what the Information Architecture will be and how the process will happen.

Its outcomes can be measured by functions desirability (how often users use a feature — quantitative measure, or what do they think about it — qualitative measure), or task completion rate. User satisfaction can be measured by SUS (system usability Score) or NPS (net Promoter Score). A great measure is Churn Rate, which says what amount of users abandon the product if it does not fulfil their goals, also DAU/MAU (Daily/Monthly Active Users).

Engagement Axis

It defines how the user feels using the product, it describes his/her experience, and overall satisfaction. It is how the intermission between user and goals execution happens, if it’s smooth, immediate, intuitive. It defines if the product is desirable. The foundation of user satisfaction is all the fruit of solution ideation. But how to measure a concept so vague?

Mapping the experience, means describing what the user does in a chronological order, including emotions, frustrations and pain-points. We define a baseline to compare adjusted, final experience. Designers should try to make these user emotions measurable. If mapping of experience pinpoints redundant steps, data loss or additional time for error correction, maybe we can sample more users and tell an average time spent for error correction, maybe rate of abandonment during the process, start-over attempts or redundant data entering time. All these instruments can be compared before and after.

We dispose of reviews and opinions, that give us a wonderfully pictorial emotion of users, although reviewers will be 3 detractors per one enthusiast. We also have a compelling tool of issues reported to customer support, categories, gravity and frequency of which can be of a great indicator of actual user problems. The ultimate measure of the interaction provided is the strength of the community around it and how expensive it is to persuade new users to try the product (Customer Acquisition Cost, which is money spent/users acquired). Also, we can measure extra time spent in the app, after users completed their goals; or even ask actual users for detailed feedback.

Execution Axis

It not only requires inventing a solution, and to design it to operate smoothly and skilfully. You also need to build it. The Execution axis describes how promptly a solution is delivered to market, and how it performs on the market…namely if it brings money.

Internal constituents of the axis are team cooperation, task burn-down chart and bugs count. External metrics are: Time to Market, downtime, MRR (Monthly Recurring Revenue) or LTV (Lifetime Value), market share

Design Debt

It’s always easier to prove flagrant failure than success. Easily, we can tell when we botched up completely, even if it’s hard to swallow it. But if we dispose of such comparable, historical data, comparing previous failures with change underwent may be a great internal measure of Design Success. So the negative measure of Internal Value is called Design Debt. It has disastrous consequences for teams and will encroach on a team’s ability to deliver any external value. When there is no or little design, the outcome is not simply none, but it strikes back.

Symptoms of wrongdoing on the Axis of Decision.

Any delays, scope re-negotiation, frequent backlog grooming (with always new means of prioritization), stories that linger for ages in the backlog, roadmap modifications and fluid priorities, and meeting engaging every team member to re-prioritize are signals that Definition has gone awry. These aren’t hard numbers, but can be compared if you are patient and have historic data.

Design is to set the objective. If it is neglected, and the team jumped into the solution, the backlog creeps, the roadmap becomes rubber, a lot of time is spent on meetings, morale of the team collapses, the product doesn’t end up notorious… and the cost is sunken.

Missing the design on the internal solution finding

Means that we as an organization deliver a subpar quality with predictable behaviour, we loose ways of winning the market over and simply copy solutions, without understanding what they really stand for. Satisfaction of our users will never become our unique selling point. This debt here is characterized by poor understanding of flows and processes, little workshops for inventing a solution and no experimentation nor user testing. Once in this blind corner, the team won’t improve on incongruous user experience without thorough rethinking of the solution.

Design Debt in Delivery

Symptoms are: time wasted for designing similar elements anew, redundant assets, little clarity and a steep learning curve for new team members. More time spent on maintenance, updates and corrections than developing new features. Strain atmosphere in the team, weak communication among team members, unclear business goals, and significant engagement of a quality assurance. If there is a debt in the delivery, the ultimate success is to push the product live, and there is no place for any business success.

Design Debt is a situation one should avoid as a burning coal, but once you bought in your teammates into strategical change and made them follow Design Thinking, design debt is something that should disappear, so measuring it disappear may be a great instrument for supporting your decisions.

Summary

So, to invest in Design, beyond the good faith of delivering intrinsically better products and experiences, there is often a need to make the implicit gains 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. Being a designer requires demonstrating the impact of our practice and its contribution to business growth. This shifts us from defensive accounting in retrospect, to active alignment around impact.

Design is not the artists’ work, but engineers’ work. It is not about building beautiful interfaces but about solving problems. Seen this way, it is countable. How well the problem is solved, how efficiently is remedied, can be at least measured and compared to the state before.