The Business Value of Design by McKinsey

The elusive question for many leaders comes down to the potential contribution of design to business performance. Where is the evidence that investment in the talent, skills and culture change needed to facilitate a design thinking approach is more than just a nice-to-have? Apart from intuition, anecdotal evidence and some high-profile cases, this question has been a difficult one to answer quantitatively for the majority of companies.

To test the correlation between good design and good business, McKinsey & Company undertook a global study of over 300 publicly listed companies over a five-year period in multiple countries and industries. They interviewed senior business and design leaders, collecting more than two million pieces of financial data and recording more than 100,000 design actions.

To interpret it, they devised the McKinsey Design Index (MDI), a single score which rates companies by how strong they are at design and how that links up with the financial performance of each company.

Rakhi Rajani, Foresight, Futures and Innovation – Associate Partner, Design + Innovation at McKinsey & Company shared the results of this study with us at Design Thinking Ireland. What they found was that the companies in the top quartile of the MDI score outperformed all other companies, generating 32% more revenue, and 56% more in terms of total return to shareholders as opposed to their industry peers over the 5-year period.

These were impressive scores and really did demonstrate that design can make a significant contribution to business.

Understanding exactly how the companies in the top quartile unlocked that business value came down to studying the four clusters of design actions that showed the most correlation with improved financial performance. These were the key elements:

1. Design is more than a feeling. It’s about analytical leadership.
Design is a top-management issue, and design performance is assessed with the same rigor used to track revenues and costs across all other functions.

2. Design is more than a department. It’s about cross-functional talent.
Designers are part of all functions in the business, and are not just housed away in a siloed department. Design skills and talents are proactively integrated with all knowledge sets across the business to bring a user-centric culture to all areas. Hence it is seen as a responsibility, and natural behaviour, of all employees.

3. Design is more than a product. It’s about a seamless user experience
Leading companies capitalise on all user insights to embrace the full user experience, breaking down internal barriers among

4. Design is more than a phase. It’s about continuous iteration.
The opportunity to de-risk development by continually listening, testing and iterating with end users is a vital part of the innovation process. Ultimately, design in these companies plays a role from strategy to product launch to post launch.

“We all know examples of bad product and service design. The USB plug (always lucky on the third try). The experience of rushing to make your connecting flight at many airports. The exhaust port on the Death Star in Star Wars. We also all know iconic designs, such as the Swiss Army Knife, the humble Google home page, or the Disneyland visitor experience. All of these are constant reminders of the way strong design can be at the heart of both disruptive and sustained commercial success in physical, service, and digital settings.”

The Business Value of Design, McKinsey & Company Rakhi Rajani, Foresight, Futures and Innovation – Associate Partner, Design + Innovation at McKinsey & Company

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