Design has long struggled to justify its value as a business activity, and while it has gained ground it is still losing too often. Designers know it is the primary source of innovation, problem solving, and is one of the few truly sustainable competitive advantages.
What designers don't realize is that most business activities are either belief or superstition, rather than based on a reliable return on investment (ROI) calculation. Business people and designers lack a shared understanding of how design creates value, and so they use their specialized language to defend their position, and ultimately reduce the competitiveness of the business.
This is a work in progress on that issue, by Chris Finlay and Jason Gaikowski, focused on creating a critical chain of logic to help both business people and designers understand how to create value together.
2. AKA
How do you get more resources to do
your job & deliver more success?
3. The long struggle of Design has been to justify its value.
Design has been lacking a kind of science that supports
its value and impact on business performance.
Our goal is to create a strong chain of logic that empowers
designers & design advocates to succeed in business
conversations about the value of design.
4. Business say they want creativity & innovation.
Design delivers both, yet is regarded more like
art than science.
5. Why are some business activities
mandatory when others are
discretionary?
6. Inputs of most business activities
are too complex to accurately
predict their returns yet design is
held to a different standard.
29. Past
business -> product / service -> marketing -> customer
Today
business -> experience design -> product / service -> marketing -> customer
People
Business
Technology
30. Design is strategy fused with a
problem solving methodology that
helps companies know why, how,
and what to make in order to help
people feel how they want to feel.
40. The value of these experiences accrue to the
brand and then flow to sales and future sales
Expectations
Future Sales Potential
Emotional Experience
Functional Experience
Brand Asset
Actual Sales
42. Investments in designing brand experiences drive
performance in established business metrics.
Near term Sales
margin
loyalty
share of wallet
customer acquisition at lower cost
marketing roi
product development
product lifecycle
returns/warranty
brand asset
Long term cost of capital (borrowing, ratings, analyst reports)
43. Designing great brand experiences pay dividends in good times
Firms that continue to increase investments enjoy returns 400%
versus firms that cut investment levels
40%
Revenue Returns
Expenditure Increases
30%
4x
20%
10%
Expenditure Reductions
0%
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Based on Natalie Mizik and Robert Jacobson “Marketing Strategies Across Economic Conditions” Columbia University Working Paper, 2009.
Recessionary times are determined using the Chicago Fed National Activity Index (CFNAI). Sample period 1989-2005
Changes in operating income are based on unanticipated earnings. Operating Income is measured relative to Assets
Expenditures includes Marketing, R&D, and Corporate costs (=[SG&A-R&D]/Assets|. Relative returns are risk adjusted stock returns.
44. Even in bad times, it makes sense to invest for the future
Investing is also the best strategy for firms with net operating loss
enjoy returns 200% versus firms that cut investment levels
0%
Revenue Returns
Expenditure Increases
-10%
2x
-20%
-30%
Expenditure Reductions
-40%
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Based on Natalie Mizik and Robert Jacobson “Marketing Strategies Across Economic Conditions” Columbia University Working Paper, 2009.
Recessionary times are determined using the Chicago Fed National Activity Index (CFNAI). Sample period 1989-2005
Changes in operating income are based on unanticipated earnings. Operating Income is measured relative to Assets
Expenditures includes Marketing, R&D, and Corporate costs (=[SG&A-R&D]/Assets|. Relative returns are risk adjusted stock returns.
45. The experience of the brand supports
or hinders the company’s market
performance.
46. Market valuation of experience
design is signaled by acquisition
price of experience led
companies.
47. And the talent that has shown it
can create those experiences.
There is a new word for that,
“acquihire” = Acquisition + Hire
48. Instagram acquired for ~$1 billion
Snapchat rejects $3 billion offer
Mailbox acquired for $100 million
Nest acquired for $3.2 billion
57. Don’t fear the ROI question
Learn to speak the language of business
Connect the dots for finance, marketing, & IT
Create a coalition and movement
Create passion & commitment
Find & use the vocabulary business needs to
do what we know works
58. Deep valuation of design will require longitudinal
measurements, we need to embed a mindset of
experimentation in the projects we work on and
follow up on performance. We need to design
analytics attached to business metrics in our
work & share the results with each other.
59. Remember & be confident that
experience design deserves to
be embraced as a management
discipline.
60. That you, a designer, can drive the
business outcomes that the company
needs, investment in you is justified
in economic terms.
61. Repeat after us:
Design delivers desirable experiences
Experiences lead to better or worse customer
relationships
The quality of customer relationships is recognized in
the market as brand asset valuation
Brand value = shareholder value
What creates value to shareholders gets invested in
62. The science we need
Design
Investment in activities
Experiences
Stock Value
Brand Asset
Customer
Relationships
Economic Value
Brand