The ROI of Design 

Of course, CEOs and other Business Leaders often start, as they should, with asking “Why should I invest time, energy and money into learning about design, and maybe even building a design team?”

These days, there are more reports about the value of design than you can shake a stick at. Maybe even too many, as there is a lot of noise out there and it’s hard to know where to start. I have pulled out a few interesting numbers and reports worth checking out…

  • The Business Value of Design, by McKinsey, has an online article and PDF. The upshot here: They created an “index” using their own criteria for what qualifies as a company “good at” design. Top-quartile design-invested companies had 32% higher revenue growth and 56% higher shareholder returns than their counterparts, over a 5-year period.

  • Design Value Index: Results and Commentary, produced by the Design Management Institute, is an oldie but a goodie. They consider a portfolio of 16 publicly traded stocks from companies considered to be “design-centric” versus the rest of the S&P 500. The report shows a 211% return over the S&P 500.

  • The Total Economic Impact™ Of IBM's Design Thinking Practice, is the grandaddy of these analysis, produced by Forrester in collaboration with IBM. There is an online article and PDF. The punch line: Forrester found a 301% ROI, and the index has a lot of great details about where that came from, both top-line and bottom-line. Here are some more detailed highlights from the exec summary:

    The following risk-adjusted quantified benefits are representative of those experienced by the organizations interviewed:

    • Project teams doubled design and execution speed with IBM Design Thinking. Profits from faster releases combined with reduced design, development, and maintenance costs to deliver $678K per minor project and $3.2M per major project, for $20.6M in total value.

    • Organizations slashed the time required for initial design and alignment by 75%. The model demonstrates cost savings of $196K per minor project and $872K per major project.

    • Project teams leveraged better designs and user understanding to reduce development and testing time by at 33%. This equates to cost savings of $223K per minor project and $1.1M per major project.

    • IBM’s Design Thinking practice helped projects cut design defects in half. Projects were more successful in meeting user needs, thereby reducing design defects and subsequent rework to save $77K per minor project and $153K per major project.

    • Faster time-to-market enabled increased profits from net new customers and the higher present value of expected profits. Faster time-to-market increased profits by $182K per minor project and $1.1M per major project.

    • Human-centered design improved product outcomes, reduced the risk of costly failures, and increased portfolio profitability. Refined strategic prioritization enabled investments in solutions that were less likely to fail. Better design increased average product profits. IBM helped expand design thinking at the organization over three years to penetrate one quarter of the entire portfolio, enabling $18.6M in increased profits.

    • Cross-functional teams collaborated to share problems and find solutions, reducing costs by $9.2M in streamlined processes.

    Unquantified benefits. The interviewed organizations experienced the following benefits, which are not quantified for this study:

    • Encouraged an empowered, engaged, and happy workforce.

    • Enhanced KPIs such as UI, UX, CX, NPS, and brand energy.

    • Perfected internal processes for HR, sales, and beyond.

    Costs. The interviewed organizations experienced the following risk adjusted costs:

    • Internal labor and IBM fees for projects totaled $6.8M, driven by distinct costs of $159K per minor project and $1.5M per major project.

    • Transformation costs reached $5M in IBM resources and internal labor.

    • Training incurred costs of $218K in IBM facilitation and internal labor.

    Forrester’s interviews with four existing IBM clients, data from 60 survey respondents, and subsequent financial analysis found that a composite organization based on these interviewed organizations experienced benefits of $48,360,958 over three years versus costs of $12,045,247 by engaging with IBM’s Design Thinking practice, adding up to a net present value (NPV) of $36,315,711 and an ROI of 301%.

  • Finally, Yes Alan, There is an ROI for UX Design, is an amusing article outlining the disagreement between two luminaries in our industry.

There is much more on this front, but hopefully these tidbits are enough to convince you that it’s worth learning more about what design can do for you and your organization.

I write much more about this, and about how to leverage the value of design, in the book. Please grab a copy for yourself or a friend, or get in touch.