I'm working towards my Master thesis with Design ROI as the focus. So , How can the value of design be proved by demonstrating the ROI?
I know design is used to differentiate and entice users and it would be invariably hard to pin down it's value but at the same would one be able to justify as to whether increased investment in design would generate increased profits ?
this is a crucial question and I would be interested to see you thesis when it's done :-)
ROI implies that for an investment, return has to be there: that's a Newtonian way of looking at things, it assumes that any action has an equal reaction. Sometimes though, the reaction comes in another form as the original action (which with investment often is equated to money) and this is how I would approach ROI on design: rather then measuring monetary return or gains, like turnover increase, gross margin increase or other similar properties, I would focus on other aspects like customer loyalty increase, engagement, etc. Measuring loyalty increase (with programs like NPS or conversion model) liked to design investment increase and combined with investment in design management would be interesting.
The biggest ROI a brand can have from investments in design, is a rapidly growing, loyal and motivated customer base.
Please let me know how you proceed!
:), yes it's definitely an interesting thesis topic and it will be nice to share the findings.
I like your way of approach towards evaluating the ROI of design. However, if am focusing on aspects like customer loyalty increase won't it mean that the ROI forever be changing, since consumers buying the said product might increase or decrease,fall into a slump pr shoot right up suddenly? Why, investment in design management would be a very good area to focus since people/management are always on the look-out as to why a certain product needs to be designed in said way or adding a feature to improve the functionality.
Having loyal consumer base is an asset in ROI but don't people tend to lean more towards figures Jan ? Do help me understand this. One can always demonstrate the success that a well designed product by statistics. Maybe also look into design for business aspect, communication, process thinking and such. I'm still looking into the way to proceed considering the fact the my focus company is 3M.
Looking to hear your thoughts...
true, figures help tremendously. They seem more important than common sense ;-)
But, customer loyalty is measured and is way less 'fluctuate' as you indicate, if linked to the brand as well. Try to look at the NPS methodology - www.netpromoter.com - or similar measuring methods: they all deliver figures and are used as long term indicators for business strategy.
Specially if you want to create indicators to measure if design investment lead to achieve set targets (which is the basis for measuring a return on investment) you can also pick targets other than financial ones. The targets (which are measured regarding the investments) have to be relevant to what design wants to accomplish, and that can be more that upping the financial return in the first place, but more 'indirect' as a consequence of a design strategy: e.g. improved usability, less return, increased brand advocacy and promotion, increased retention, decreased churn, etc.
These issues also count for 3M: if they invest in design to improve these aspects and then measure the return they get, it will deliver them clear indication whether get return, but foremost if they invest in a right way.
Hope this helps to scope out your approach!
Hi Maddy and All,
I have two rather short additions, I was missing when skimming the discussion:
1. You are right on looking for numbers, while all the other things said are valuable, at the end of the day most managers will be looking for some kind of KPI to measure and manage by.
2. You might also look for effects in the organization, we measure our work and the results indicate how dramatic the effect is on i.e. development time and -costs. That is something you can measure and every development manager will appreciate.
To conclude I'm also looking forward to your results, please don't hesitate if I can help i.e. providing a case study / negotiating access.
Apologies for my delayed reply, things have been tad crazy here.. Thank You so very much for you offer to guidance . I would be delighted & would utilize it to the max !
Yes suggesting to also look into the development time n cost is interesting !! All the more, since it's tangible.
Actually Maddy's topic is the SAME for my Masters Application essay . . this is the the following:
“Over the last fifteen years or so there has been a steadily increasing desire for design to prove its commercial value, to demonstrate to clients that their investment is tangibly worth it.” Design Council 2010
Please discuss how design can prove its commercial value with a measured ROI; explore two fashion case-studies citing relevant academic/industry references."
So somehow I am stuck on on the case-studies and references, any help is appreciated.
I've been pondering over what to think about the way ROI's are defined and used by business.
I think today we are dealing with the many negative side effects of decades of linear (left brain) MBA thinking and behavior (...there have been positiveness side effects as well). We are searching for a new balance. My main concern is the impact of the main incentives in our business culture: Money, Influence & Status.
So when you say ROI, I think we desperately need to redefine what the R stands for.
Like Jan-Erik says Return should also be Customer loyalty.
But the R should also stand for things like: made people happy & made people more healthy.
This is a great incentive for many people. And it might sound emotional (because it is) but this makes good business sense. A company that honestly (real intentions) finds making me more happy and healthy important gets my business.
And then we should redefine the I in ROI. We invest more than time, money and assets. We Invest our thinking, our talent, our social skills.... etc.
Find a measurement for all this, don't be too linear because this does not reflect reality. Numbers and Facts only measure a part of what is happening, but that is just half the story. And measuring half the story really makes no sense.
Investment = Money, time, love and our blood sweat and tears
Return = The positive impact we had on our customers, the planet, our business the people we work with and ourselves
I have been called naive before, but I think it's every designers right and duty to be naive ;-)
What do you think?
Great thoughts, Arne. It made me think.
Adding to your description of 'Return': since we are living in a service economy (80% of our GDP) it's all about relationships and experiences. Almost like in a marriage/relationship... wonder what the ROI for relationships would do, if applied to economic culture?!
What I somehow picked up from (my) relationships (which I think also seems to count for economic systems) is that the most desired return always seem to be trust. Trust = loyalty, motivation, cooperation, engagement, honesty, security, confidence, faith, naivety ...
If trust is the return you get from customers and stakeholders, economic gain is included/guaranteed.
And what do have to invest to get trust as return?
For me it's a simple equation: as soon as you need to 'measure' what you have to invest in order to get the desired return, you should not enter into a relationship. Designful companies don't measure RIO, they build trust.
@Maddy: but it still interesting to find out what improved ROI measurements could look like :-)
@Jan :True that design companies are divided off the opinion as to whether or not to measure ROI of design but then the fact remains that unless one gets say proof or some sorta of concrete evidence to back the design. Won't it be viewed with skepticism? I'm just thinking aloud !!!
It would I think quite a challenge of sorts to see if the emotional connect pertaining to human factor can be merged together with the statistical part . This is hard !!! Phew
I like the way you have approached the ROI concept Arne :).. It's something different when one considers Return as customer loyalty like Jan says and relates more to the emotional aspect .
Designers use attributes like usable, memorable, desirable etc while business folks use objective terms like increased revenue , brand awareness etc to speak about design. It would be interesting to see how these can be meshed and how can one measure 'usability', 'desirability' in ways that would relate to financial outcome??Again, the question as to how to ensure the top management the design needs, while ensuring they embrace the design centric needs and not just some R & D stance.
Hmm while it's true that 3M as an innovative company focuses on consumer based products, would it also help to look at the user experience as a KPI while dealing with ROI. I'm not sure to assume it right, it's just a thought at this point.
To the point that 3M has lot of R & D going on too, I'm a tad apprehensive about the approach to take regarding the ROI for Design.
True, people write off a new idea/thinking which sounds bullocks. But hey given sometime to make it more concrete, has its charm.
Let me know your thoughts on this Arne :D !!!
I think that design has proven itself already. Go to any shop and you'll see designed products. Top management already had prove many times over. Design is used to gain market share and to differentiate.
The point is now that design as cosmetics is no longer sufficient. It can be copied. Designing (eco) systems to deliver real value, or rather co-create value, is the next step (Google, Apple, Facebook, Amazon etc.)
Thinking about value co-creation... shouldn't we have a framework to measure ROI from the customers perspective... what does an end-user invest and get in return? That would be the best way to know how well you are doing on delivering real value...
We could use Customer Journey Mapping for that. We already do in a way...
What do you think?