Why is a company that invests in design more successful?

Why is a company that invests in design more successful? It's easy to underestimate the challenges facing business owners, but the reality is that they often have much more than design issues to address. As a design business, we know the true value of design, but it is often difficult to communicate that value in a tangible way. Particularly for business owners when they have to deal with several important things at once. That's why we've drawn on a number of studies from recent years to outline how the value of design activities can be measured, and the real profitability of these activities for the business, and how investing in design can help a business grow faster.

There seems to be a preconception that design is a purely aesthetic discipline. An example of this is digital design, which can be seen as a broad spectrum of activities, including visual design, content creation, user experience (UX) analysis, user interface (UI) analysis and service design, not to mention user research. Design has an intrinsic value in our lives, but it has been relegated to a superfluous activity rather than a key driver of change and value creator in its own right. This is why it is important to understand the profitability of design activities, whether the investment is in a retail e-shop, a B2B website development, the creation of a corporate visual identity or a design system.

Over the past few years, a number of think tanks and consultancies have published studies and proposed models for calculating the value of design. Studies from various organisations such as Mckinsey, Forrester Research, etc. describe how companies that invest in design are more successful and achieve higher returns. Based on its own research, McKinsey has created the McKinsey Design Index, or MDI. Over a five-year period, they tracked the design practices of more than 500 listed companies and evaluated each company to produce an MDI score. They found a correlation between the companies that had adopted the best design practices, with the overarching commonality being that companies that invested in design had higher growth in the stock market, earned higher profits, and provided higher returns to shareholders than their peers.

Design profitability - A company investing in design is successful

Studies by think tanks such as the Design Council and the Institute of Design Management, and consultancies such as McKinsey and Forrester Research, have convincingly shown that companies that have adopted best design practices and who were classified as design-investing companies outperformed their competitors - often by a large margin. McKinsey, for example, has found that design-driven companies outperform their competitors in the marketplace two-to-one in terms of both turnover and profits. One of the problems with these studies is that they focus on large corporations and, furthermore, often define design very broadly as a process rather than a set of discrete activities. The story is somewhat different for small companies, and design should be seen as a set of activities that help to transform a company into a design-investing enterprise.

Small businesses are often run by people who are experts in their field but who have a predisposition to depreciate the value of anything that is not directly related to the job. For example, if you run an accounting firm, you are likely to devote more resources to getting accounting work done in your firm and developing work processes rather than to marketing and design. Or if you own a construction business you are more likely to focus on solving day-to-day problems related to the day-to-day running of the business than on marketing and design. Based on both of these examples, the mere thought of investing time and money in these activities probably seems to an entrepreneur to be a secondary activity at best. But here it is worth thinking about the benefits that can be gained by opening up new sales channels for the business, such as the website and social media. The following example demonstrates the return on investment of a simpler website design.

Let's say you are a company without a website. So far, it has been operating in the market through personal contacts and referrals and has not yet seen the need to launch a website as a successful sales channel. The company has been on the market for 3 years and has achieved a steady sales growth of 5-10% every year. The last year's sales turnover is €120,000. In the last quarters the number of enquiries has been decreasing and the company wants to increase its visibility to the customer.

Let's assume that the initial cost of developing a new website is €2,300, with after-sales maintenance and support costing €1,068 for a year and a quarterly SEO service costing €720 per year. Thus the cost of the new website including development and support services in the first year will total: 4,088.00 €, an investment of 3,41% of the previous year's revenue. Let's assume that the successfully launched website will generate additional sales revenue of 10%(12000€) for the company in the following year, i.e. 12000 - 3908 = 8092 €, i.e. the return on investment in the first year is already 193.54%. In the following years, the development costs will be much lower and the return on investment will increase even more.