How do the best design performers increase their revenues and shareholder returns at nearly twice the rate of their industry counterparts?

July 30, 2023
Posted in Blog
July 30, 2023 pg-admin

Design is not just about aesthetics or functionality. It is also about creating value for customers and businesses. In a competitive and dynamic market, design can be a key differentiator and a source of competitive advantage. But how do some companies manage to excel at design and achieve superior business performance?

A recent study by McKinsey & Company reveals some insights into the design practices of 300 publicly listed companies across three industries: medical technology, consumer goods, and retail banking. The study uses a metric called the McKinsey Design Index (MDI), which measures how strong companies are at design and how that links up with their financial performance.

The study found a strong correlation between high MDI scores and superior business performance. The top-quartile MDI scorers increased their revenues and total returns to shareholders (TRS) substantially faster than their industry counterparts did over a five-year period—32 percentage points higher revenue growth and 56 percentage points higher TRS growth for the period as a whole.

The study also identified four broad themes of good design that are associated with improved financial performance. These themes are:

  • Analytical leadership: The best design performers have strong design leadership that sets clear design visions and goals, integrates design metrics into business decision-making, and fosters a culture of continuous learning and improvement.
  • User experience: The best design performers put the user at the center of everything they do. They invest in user research, testing, and feedback, and use data and insights to create products and services that meet or exceed user needs and expectations.
  • Cross-functional talent: The best design performers collaborate across functions and disciplines, breaking down silos and fostering cross-pollination of ideas and skills. They also attract, develop, and retain diverse and talented design teams that have the right mix of capabilities and mindsets.
  • Continuous iteration: The best design performers embrace experimentation and innovation, testing multiple ideas and prototypes, learning from failures, and scaling successes. They also iterate on existing products and services, making them better over time based on user feedback and changing market conditions.

By following these four themes of good design, companies can create value for their customers and their businesses, achieving higher growth and profitability. Design is not just a matter of taste or preference. It is a strategic lever that can drive business outcomes.