Design practices that deliver business value

Amazon Prime. Apple iPhone. Netflix. Tesla.

For those companies that get design right, the prizes are rich.

The S&P 500 companies that invested most in design processes, capabilities, and leadership over the past decade, including design stalwarts such as Disney, Nike and P&G, outperformed the rest of the index by 211 per cent.

There are three things that stand out for these companies.

NOT JUST A DEPARTMENT

First, for these firms, design is more than a department.

Design-led companies are structured in ways that encourage all functions to focus on their customers.

This generally means that design is not a single department; rather, design experts are everywhere, working within small, cross-functional teams with shared incentives and regular customer interaction.

Companies with a central, siloed design department (sometimes subsumed into marketing or R&D) generally perform less well financially than those that distribute design experts into cross-functional product-focused teams.

Whether you are developing a vehicle, a medical device, or a banking service - physical, digital and service designs are converging.

Companies increasingly recognise that such distinctions aren't meaningful to customers.

We saw improved financial performance in those companies that broke down barriers and cross-trained designers in skills like industrial and user-interface design, compared with those that maintained divisions with little cross-fertilisation.

NOT JUST A PHASE

Second, design is more than a phase.

Design-led companies use quantitative and qualitative research during early product development, combining techniques such as warranty-data analysis, social-media scraping, focus groups, and ethnographic research to better understand customers' needs.

The best companies continue listening long after the initial conceptual phase, remaining invested in improving customer experiences post-launch.

A design-led approach to product creation means that design happens throughout development, not just at the early concept phase.

From laying out a product roadmap, through preparations for production and launch, and all the way to in-service support, design should keep true to customer needs for the life of the product.

Nespresso, for example, involves designers throughout its products' life cycles and throughout the business system. Designers observe customer reactions both in-store and online and have evolved a museum-like retail experience, mobile ordering and two-hour delivery, a loyalty club, an online magazine, and more.

NOT JUST A 'FEELING'

Finally, successful design-led companies don't act on gut alone. For them, design is more than a feeling. They measure and manage design as rigorously as they do cost, quality and time.

Qualitative research through user groups, interviews, and field observation is a powerful tool to understand consumer desires and motivations. Augmenting this with quantitative analytics, such as harvesting online reviews or analysing warranty service, can detect underlying behaviours and lay a deeper foundation on which to build winning design concepts.

The key to connecting design with commercial success is the ability of leaders to eschew subjective opinions or personal preferences and instead make decisions based on a factual understanding of the customer.

Design metrics - such as customer-satisfaction scores and human-factor risk calculations - give leadership hard data on which to base crucial decisions.

Some companies have developed metrics that allow them to measure design during product development as rigorously as they measure quality, cost, and delivery.

Benedict Sheppard is a partner in McKinsey's London office, where Garen Kouyoumjian is a consultant. John Edson is a LUNAR partner in San Francisco. This article appeared in The Business Times on March 9.