The Business Value of Design

Creative companies instinctively know the value of design. But often when creative agencies and design firms are asked why a company should invest in great design the answers can largely be philosophy-based. While companies like Apple, Warby Parker, and Nike instinctively know its value many organizations, rightly, need more evidence.

So it’s helpful that McKinsey recently released a new report: The Business Value of Design.

Why is investing in design important? How can great design help increase revenue? These are good questions that are now answered by McKinsey who ranked 300 leading companies for how strong they were at design and then examined their revenue over a five-year period. What resulted was the MDI model, a way of scoring companies based on their revenue performance and their focus on design.

What did they find?

Companies who scored in the top quarter of McKinsey’s MDI model returned 2x the revenue over their industry peers on an annual basis. Further, over a five year horizon these companies returned +32% higher revenue growth and +56% more shareholder return.

It also turns out that the top MDI companies had many similarities, which led McKinsey to organize four themes of good design practice that all companies can use:

1. Companies that perform the best financially understand that design is a top management issue and they apply the same rigor to design performance that they use to track revenue and costs.
2. The top MDI design companies start with user needs first. This seems obvious to some yet 40% of companies in the McKinsey report say that they are not talking to users during the development of their products/services.
3. The best MDI performers make sure they arrange enough budget to allow for multiple rounds of revisions and user testing.
4. The companies who top the MDI scale and outperform industry peers in revenue growth are the same companies who also report to apply continuous iteration to their business practices.

It’s exciting that such a well-known and credible firm like McKinsey has been able to apply solid revenue metrics to great design.

*And if you’re curious, our featured image is Warby Parker’s Green Room.