“Design is a top-management issue” - McKinsey Design Index

Week 51 - 2018

The Case for Strategic Design

Hi . Each week I share three ideas for how to make work better. And this week, those ideas are plucked from the recently published McKinsey Design Index (MDI) — the most comprehensive study ever done on the topic of Strategic Design.

Conducted over the course of 5 years, the study tracked “design actions” (e.g., creating a design strategy, embedding design in the C-suite, employing design metrics) at 300 organizations across retail banking, medtech, and consumer goods.

Importantly, the study also cross-references this data with that of financial performance. And in doing so, it found that "top design performers" (see below) increased their revenue and shareholder returns at nearly twice the rate of the industry average.

What it is

Top performers where distinguished by excellence in four areas of strategic design. First, these players measured design with the same rigor as they measured revenue and cost. They showed Analytical Leadership. Second, they created Cross-Functional Teams by embedding design talent throughout their organization. Third, they made efforts to de-risk experimentation and promote Continous Iteration. And fourth, they tore down silos to make Customer Experience everyone’s responsibility. And while other organizations focused on one or perhaps two of these areas, top performance managed to do them all.

What it does

Top performers (i.e., the top quartile of organizations in the study) outperformed industry benchmarks by a wide margin. Regardless of industry, these organizations showed 32% higher revenue growth during the 5-year study. And they generated 56% higher shareholder returns during that same period. There is, in other words, a clear correlation between design leadership and financial performance. Whether that extends to a causal relationship the study does not say. And indeed it should not. But the numbers are convincing. Where you find design leadership, you are also likely to find financial excellence.

Getting started

Organizations looking to improve their design capabilities won’t find much meat in the report. There are a few pointers (e.g., measure quality of experience alongside quantity of sales, prototype with external audiences early in the process, send a designer into the board room), but practical advice needs to be sourced elsewhere. And that’s OK. Personally, I’d recommend the new Design Leadership handbook from Invision as a first step. It’s an easy hands-on read for people building design teams. For everyone else, I’d suggest perusing Lean Enterprise which, although not a design book per se, provides a ton of practical advice for how to get big organizations onto the build, measure, learn bandwagon.

For people like me (i.e., designers that design organizations and rather than deliverables), this report is a godsend. It’s justification — tangible evidence — for something we’ve suspected for a long time: that Strategic Design works and that it delivers superior results. Only difference now is that we know exactly what’s at stage. We’ve got numbers to prove it.

Next week, I hope to draw a few parallels between MDI and Modern Agile which, to me at least, looks very much like two sides to the same coin. Until then, stay calm.

WORK! is a weekly email newsletter about the future of work — written and curated by me, Andreas Holmer. I'm a designer, reader, and founder based in Bangkok, Thailand.