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The Business Value of Good Design

Julian Zeng

designer sketching

Companies with top design practices outperformed industry-benchmark growth by almost 2-to-1, according to a report by McKinsey & Company

Superior design drives significant business growth opportunity, according to a report by McKinsey & Company titled, “The Business Value of Design.” The survey studied the design actions of 300 publicly listed companies over a five-year period, collecting more than 2 million pieces of financial data and recording more than 100,000 design elements. The four main themes that emerged formed the basis of the McKinsey Design Index (MDI), which exhibits the correlation between best design practices and business performance.

Unpacking the MDI

These four clusters of design actions showed the most correlation with improved financial performance:

  1. Measuring and driving design performance with the same rigor as revenues and costs.
  2. Breaking down internal walls between physical, digital and service design.
  3. Making user-centric design everyone’s responsibility.
  4. De-risking development by continually listening, testing and iterating with end users.
McKinsey & Company Business Value of Design stats

Investing in good design pays off. The top-quartile Mckinsey Design Index scorers in McKinsey’s report experienced 32% higher revenue growth and 56% higher total returns to shareholders than their counterparts over the five-year period. In all three industries analyzed—medical technology, consumer goods and retail banking—those results held true. Good design matters whether companies offer services, physical goods or digital products.

Despite design’s clear impact on business performance, many companies are still slow on the draw. More than 40% of surveyed companies aren’t talking to their end users during development, and just over 50% admitted that they don’t possess an objective way to assess or set targets for their design teams’ output. With no discernible link to the health of a business, senior leaders are reluctant to provide resources to design teams.

Image courtesy of Unsplash.

Julian Zeng is assistant managing editor at the American Marketing Association. He may be reached at jzeng@ama.org.