The Business Value of Design

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

How do the best Contents design performers increase their The Business revenues and 2. Value of Design shareholder returns 5. An Elusive Prize at nearly twice the 8. More Than a Feeling: rate of their industry It's Analytical Leadership counterparts? 10. More Than a Product: It's User Experience More Than a Department: By Benedict Sheppard, Garen Kouyoumjian, 11. It’s Cross-functional Talent Hugo Sarrazin and Fabricio Dore. 13. More Than a Phase: It's Continuous Iteration 14. A First Step Toward Great Design 1

"The most extensive and rigorous The Business research undertaken anywhere to study the design actions that leaders Value of Design can make to unlock business value." e all know examples of bad product To answer these questions, we have conducted Our research yielded several striking findings: and service design. The USB plug (always what we believe to be (at the time of writing) lucky on the third try). The experience the most extensive and rigorous research 1. We found a strong correlation between of rushing to make your connecting flight at undertaken anywhere to study the design actions high MDI scores and superior business 5 many airports. The exhaust port on the Death that leaders can make to unlock business value. performance. Top-quartile MDI scorers year period. Star in Star Wars. Our intent was to build upon, and strengthen, increased their revenues and total returns previous studies and indices, such as those to shareholders (TRS) substantially faster We also all know iconic designs, such as the from the Design Management Institute. than their industry counterparts did over Swiss Army Knife, the humble Google home a five-year period—32 percentage points page, or the Disneyland visitor experience. We tracked the design practices of 300 publicly higher revenue growth and 56 percentage 300 All of these are constant reminders of the listed companies over a five-year period in points higher TRS growth for the period way strong design can be at the heart of both multiple countries and industries. Their senior as a whole. publicly listed companies tracked. disruptive and sustained commercial success business and design leaders were interviewed in physical, service, and digital settings. or surveyed. Our team collected more than two 2. The results held true in all three of the million pieces of financial data and recorded industries we looked at: medical technology, Despite the obvious commercial benefits more than 100,000 design actions.¹ consumer goods, and retail banking. >100k of designing great products and services, This suggests that good design matters consistently realizing this goal is notoriously Advanced regression analysis uncovered the whether your company focuses on physical design actions recorded. hard—and getting harder. Only the very best 12 actions showing the greatest correlation with goods, digital products, services, or some designs now stand out from the crowd, given improved financial performance and clustered combination of these. the rapid rise in consumer expectations driven these actions into four broad themes. by the likes of Amazon; instant access to global 3. TRS and revenue differences between information and reviews; and the blurring of The four themes of good design described below the fourth, third, and second quartiles >2m lines between hardware, software, and services. form the basis of the McKinsey Design Index were marginal. In other words, the market pieces of financial data collected. Companies need stronger design capabilities MDI , which rates companies by how strong disproportionately rewarded companies that than ever before. So how do companies deliver they are at design and—for the first time—how truly stood out from the crowd Exhibit 2 . exceptional designs, launch after launch? that links up with the financial performance What is design worth? of each company Exhibit 1 . ¹ An example of a design action would be putting someone on the executive board with a responsibility for design, user The Business Value of Design experience, or both. Another would be tying management bonuses to design quality or customer-satisfaction metrics. 2

Blended teams at work in a McKinsey Design Studio, Stockholm Exhibit 1 / 5 Companies with top-quartile McKinsey Design Index scores outperformed industry-benchmark growth by as much as two to one. Annual growth (normalized) % Top-quartile McKinsey Design Index performers Industry benchmarks¹ Revenues 180 160 10% 140 3-6% 120 100 Total returns to shareholders 300 250 21% 200 12-16% 150 100 4 017 012 013 01 015 016 Dec 2 Dec 2 Dec 2 Dec 2 Dec 2 Dec 2 ¹ The envelope was set by the minimums and maximums of three independent data sets: MDI 2nd, 3rd, and 4th quartiles; the S&P 500; and a McKinsey corporate database of 40,000 companies. 3

Exhibit 2 / 5 Exhibit 3 / 5 Higher McKinsey Design Index scores correlated The financial outperformance of top-quartile companies with higher revenue growth and, for the top quartile, holds true across the three industries studied. higher returns to shareholders. 20.6% McKinsey Design Index: Difference between top quartile vs peers, 2013−18 Overall average Consumer Medical Retail banking packaged goods technology 15. 15% 3%15% 108% 10% 6.3% 56% 4% 4.6% 41% 42% .a.) 32% 25% 27% s (p .a.) 18% enue 1 (p v RS e T R 1 tile rd op tile tile rd op tile RS RS RS RS 2nd 3 T 2nd 3 T vnue T vnue T vnue T vnue T Bottom Bottom e e e e quar quar quar quar R R R R Companies’ McKinsey Design Index scores ¹ Total Returns to Shareholder. The Business Value of Design Source: Financial statements for consumer durables/apparel; S&P 500; 4 McKinsey Value of Design survey of 300 global companies, July 2018.

Exhibit 2 / 5 Exhibit 3 / 5 Higher McKinsey Design Index scores correlated The financial outperformance of top-quartile companies with higher revenue growth and, for the top quartile, holds true across the three industries studied. eturns to shareholders. higher r 20.6% McKinsey Design Index: Difference between top quartile vs peers, 2013−18 Overall average edical Retail banking Consumer M packaged goods technology 15. 15% 3%15% 108% 10% 6.3% 56% 4% 4.6% 41% 42% .a.) 32% 25% 27% s (p .a.) 18% enue 1 (p v RS e T R 1 tile rd op tile tile rd op tile RS RS RS RS 2nd 3 T 2nd 3 T vnue T vnue T vnue T vnue T Bottom Bottom e e e e quar quar quar quar R R R R Companies’ McKinsey Design Index scores ¹ Total Returns to Shareholder. The Business Value of Design Source: Financial statements for consumer durables/apparel; S&P 500; 4 McKinsey Value of Design survey of 300 global companies, July 2018.

An Elusive Prize Unpacking the MDI n short, the potential for design-driven Just over 50 percent admitted that they have growth is enormous in both product and no objective way to assess or set targets for the In the remainder of this article, we’ll describe service-based sectors Exhibit 3 . The good output of their design teams. With no clear way the four clusters of design actions that showed news is that there are more opportunities than to link design to business health, senior leaders the most correlation with improved financial ever to pursue user-centric, analytically informed are often reluctant to divert scarce resources performance: design today. Customers can feed opinions back to design functions. to companies (and to each other) in real time, Measuring and driving design performance with allowing design to be measured by customers "The good news is that there the same rigor as revenues and costs. themselves—whether or not companies want are more opportunities than ever to listen. to pursue user-centric, analytically Breaking down internal walls between physical, digital, and service design. Lean start-ups have demonstrated how to make informed design today." better decisions through prototyping and Making user-centric design everyone’s iterative learning. Vast repositories of user data That is problematic because many of the key responsibility. and the advance of artificial intelligence (AI) drivers of the strong and consistent design have created powerful new sources of insights environment identified in our research call De-risking development by continually listening, and unlocked the door for new techniques, for company-level decisions and investments. testing, and iterating with end-users. such as computational design and analytics to While many designers are acutely aware of some value. Fast access to real customers is readily or all of the four MDI themes, these typically available through multiple channels, notably can’t be tackled by designers alone and often social media and smart devices. All of these take years of leadership commitment to establish. developments should place the user at the heart of business decisions in a way that design leaders Top-quartile companies in design—and have long craved. leading financial performers—excelled in all four areas. What’s more, leaders appear to have What our research demonstrates, however, an implicit understanding of the MDI themes. is that many companies have been slow to catch When senior executives were asked to name their up. Over 40 percent of the companies surveyed organizations’ single greatest design weakness, still aren’t talking to their end users during 98 percent of the responses mapped to the four development. themes of the MDI Exhibit 4a and 4b . The Business Value of Design 5

Just over 50 percent admitted that they have no objective way to assess or set targets for the output of their design teams. Over 40 percent of the companies surveyed still aren’t talking to their end users during development. 6

Just over 50 percent admitted that they have no objective way to assess or set targets for the output of their design teams. er 40 percent of the companies Ov surveyed still aren’t talking to their end users during development. 6

Exhibit 4a / 5 Exhibit 4b / 5 When senior executives were asked to name their organizations’ single greatest design weakness, their unprompted responses indicated an implicit understanding of the four themes. % of respondents Analytical leadership Cross-functional talent Create a bold, user-centric strategy 10% Measure and drive design Make user-centric design Analytical Embed design in the C-suite 10% performance with the same rigor everyone’s responsibility, leadership as revenues and costs. not a siloed function. Employ design metrics 17% Nurture top design talent 8% Cross- functional Convene cross-functional teams 9% talent Invest in design tools 4% and infrastructure Balance qualitative and quantit ative 8% user research Integrate user, business, competitor, Continuous 5% iteration and technological research Test, refine, repeat. Fast! 6% Continuous iteration User experience Start with the user, not the spec 8% De-risk development by Break down internal walls User Design a seamless physical, service, 4% between physical, digital, experience and digital-user experience continually listening, testing, and iterating with end-users. and service design. Integrate with third-party 9% products and services Note: The 2% of leaders who provided answers outside the MDI four themes are not shown. The Business Value of Design Source: McKinsey Value of Design survey of 300 global companies, July 2018. 7

Exhibit 4a / 5 Exhibit 4b / 5 When senior executives were asked to name their organizations’ single greatest design weakness, their unprompted responses indicated an implicit understanding of the four themes. % of respondents Analytical leadership Cross-functional talent Create a bold, user-centric strategy 10% Measure and drive design Make user-centric design Analytical Embed design in the C-suite 10% performance with the same rigor everyone’s responsibility, leadership as revenues and costs. not a siloed function. Employ design metrics 17% Nurture top design talent 8% Cross- functional Convene cross-functional teams 9% talent Invest in design tools 4% and infrastructure Balance qualitative and quantitative 8% user research Continuous Integrate user, business, competitor, 5% iteration and technological research T est, refine, repeat. Fast! 6% Continuous iteration User experience Start with the user, not the spec 8% De-risk development by Break down internal walls User Design a seamless physical, service, 4% continually listening, testing, between physical, digital, experience and digital-user experience and iterating with end-users. and service design. Integrate with third-party 9% products and services Note: The 2% of leaders who provided answers outside the MDI four themes are not shown. The Business Value of Design Source: McKinsey Value of Design survey of 300 global companies, July 2018. 7

More Than a Feeling: It's Analytical he companies in our index that performed A strong vision that explicitly commits best financially understood that design organizations to design for the sake of the is a top-management issue, and assessed customer acts as a constant reminder to the their design performance with the same rigor they top team. The CEO of T-Mobile, for example, Leadership used to track revenues and costs. In many other has a personal motto: shut up and listen. businesses, though, design leaders say they are IKEA works to create a better everyday life treated as second-class citizens. Design issues for the many people. And as Pixar cofounder remain stuck in middle management, rarely Ed Catmull told readers in a McKinsey Quarterly rising to the C-suite. When they do, senior interview, to “wow” movie-goers continually, executives make decisions based on gut feeling his company encourages its teams to take risks rather than concrete evidence. in their new projects: Pixar considers repeating "The CEO of one of the world’s the formulas of its past commercial successes a much greater threat to its long-term survival largest banks spends a day than the occasional commercial disappointment. a month with the bank’s clients It’s not enough, of course, to have fine words and encourages all members stapled to the C-suite walls. Companies that of the C-suite to do the same." performed best in this area of our survey maintain a baseline level of customer understanding among Designers themselves have been partly to blame all executives. These companies also have a in the past: they have not always embraced design leadership-level curiosity about what users need, metrics or actively shown management how their as opposed to what they say they want. One top designs tie to meeting business goals. What our team we know invites customers to its regular survey unambiguously shows, however, is that monthly meeting solely to discuss the merits of the companies with the best financial returns its products and services. The CEO of one of the have combined design and business leadership world’s largest banks spends a day a month with through a bold, design-centric vision clearly the bank’s clients and encourages all members embedded in the deliberations of their top teams. of the C-suite to do the same.> The Business Value of Design 8

More Than a Feeling: It's Analytical he companies in our index that performed A strong vision that explicitly commits best financially understood that design organizations to design for the sake of the is a top-management issue, and assessed customer acts as a constant reminder to the their design performance with the same rigor they top team. The CEO of T-Mobile, for example, eadership used to track revenues and costs. In many other has a personal motto: shut up and listen. L businesses, though, design leaders say they are IKEA works to create a better everyday life treated as second-class citizens. Design issues for the many people. And as Pixar cofounder remain stuck in middle management, rarely Ed Catmull told readers in a McKinsey Quarterly rising to the C-suite. When they do, senior interview, to “wow” movie-goers continually, executives make decisions based on gut feeling his company encourages its teams to take risks rather than concrete evidence. in their new projects: Pixar considers repeating "The CEO of one of the world’s the formulas of its past commercial successes a much greater threat to its long-term survival largest banks spends a day than the occasional commercial disappointment. a month with the bank’s clients It’s not enough, of course, to have fine words and encourages all members stapled to the C-suite walls. Companies that of the C-suite to do the same." performed best in this area of our survey maintain a baseline level of customer understanding among Designers themselves have been partly to blame all executives. These companies also have a in the past: they have not always embraced design leadership-level curiosity about what users need, metrics or actively shown management how their as opposed to what they say they want. One top designs tie to meeting business goals. What our team we know invites customers to its regular survey unambiguously shows, however, is that monthly meeting solely to discuss the merits of the companies with the best financial returns its products and services. The CEO of one of the have combined design and business leadership world’s largest banks spends a day a month with through a bold, design-centric vision clearly the bank’s clients and encourages all members embedded in the deliberations of their top teams. of the C-suite to do the same.> The Business Value of Design 8

Less than 5 percent of the companies we surveyed reported that their leaders could make objective design decisions (for example, to develop new products or enter new sectors). Through personal exposure or constant "Through personal exposure engagement with researchers, executives or constant engagement with can act as role models for their businesses researchers, executives can act and learn firsthand what most frustrates and excites customers. Many companies, though, as role models for their businesses acknowledge a worrying gap in understanding and learn firsthand what most at the top of their organizations. Less than 5 frustrates and excites customers." percent of those we surveyed reported that their leaders could make objective design decisions (for example, to develop new products or enter The value of such accurate insights is significant— new sectors). In an age of ubiquitous online tools one online gaming company discovered that and data-driven customer feedback, it seems a small increase in the usability of its home page surprising that design still isn’t measured with was followed by a dramatic 25 percent increase the same rigor as time or costs. Companies can in sales. Moreover, the company also discovered now build design metrics (such as satisfaction that improvements beyond these small tweaks ratings and usability assessments) into product had almost no additional impact on the users’ specifications, just as they include requirements value perceptions, so it avoided further effort for grades of materials or target times to market. that would have brought little additional reward. The Business Value of Design 9

Less than 5 percent of the companies we surveyed reported that their leaders could mak e objective design decisions (for example, to develop new products or enter new sectors). Through personal exposure or constant "Through personal exposure engagement with researchers, executives or constant engagement with can act as role models for their businesses researchers, executives can act and learn firsthand what most frustrates and excites customers. Many companies, though, as role models for their businesses acknowledge a worrying gap in understanding and learn firsthand what most at the top of their organizations. Less than 5 frustrates and excites customers." percent of those we surveyed reported that their leaders could make objective design decisions (for example, to develop new products or enter The value of such accurate insights is significant— new sectors). In an age of ubiquitous online tools one online gaming company discovered that and data-driven customer feedback, it seems a small increase in the usability of its home page surprising that design still isn’t measured with was followed by a dramatic 25 percent increase the same rigor as time or costs. Companies can in sales. Moreover, the company also discovered now build design metrics (such as satisfaction that improvements beyond these small tweaks ratings and usability assessments) into product had almost no additional impact on the users’ specifications, just as they include requirements value perceptions, so it avoided further effort for grades of materials or target times to market. that would have brought little additional reward. The Business Value of Design 9

More Than a Product: It's User op-quartile companies embrace the full (the digital dimension) and providing physical user experience; they break down internal mementos aimed at encouraging customers barriers among physical, digital, and to rebook. The reception team of one big hotel service design. The importance of user-centricity, chain we know gives departing guests a rubber demands a broad-based view of where design duck adorned with an image of their host city Experience can make a difference. We live in a world where (such as clogs and tulips for Amsterdam). The your smartphone can warn you to leave early team includes a note suggesting that guests might for your next appointment because of traffic, like to keep the duck at home as a reminder of and your house knows when you’ll be home their stay and could build a collection by visiting and therefore when to turn on the heat. The the group’s other properties. This small touch led boundaries between products and services to a 3 percent improvement in retention over time. are merging into integrated experiences. "Only 50% of the companies In practice, this often means mapping a customer we surveyed conducted user journey (pain points and potential sources research before generating their of delight) rather than starting with “copy and paste” technical specs from the last product. first design ideas or specifications" This design approach requires solid customer insights gathered firsthand by observing Design-driven companies shouldn’t limit and—more importantly—understanding the themselves to their own ecosystems. The best underlying needs of potential users in their businesses we interviewed think more broadly. own environments. These insights must be For example, ready-made meals are popular with championed at every meeting. Yet only around the hard-working singles who grab them on their 50 percent of the companies we surveyed way home. A retailer of these meals has considered conducted user research before generating teaming up with Netflix to devise a one-click their first design ideas or specifications. meal-ordering system, which would come into play two hours into an evening’s binge viewing Combining physical products, digital tools, and when the customer would receive a screen prompt. “pure” services provides new opportunities for Mobile-payment services such as Google Pay companies to capture this range of experience. and Apple Pay were the result of a willingness to A hotel, for example, might do more than just think across boundaries to devise easier ways to focus on the time between check-in and check access cash. A piece of plastic in your wallet is one -out (the service element) by promoting early solution, but how much easier is it to use a device engagement through social media or its own apps you already carry in your pocket? The Business Value of Design 10

"One of the strongest correlations More Than a we uncovered linked top financial performers and companies that said they could break down functional silos and integrate Department: It’s designers with other functions." Cross-functional This was particularly notable in consumer-packaged- goods (CPG) businesses, where respondents from Talent companies that were top-quartile integrators reported compound annual growth rates some seven percentage points above those that were weakest in this respect. Nurturing top design talent—the 2 percent of employees who make outsized contributions in op-quartile companies make user- One company we know, for example, unveiled every business—is another important dimension centric design everyone’s responsibility, a new flagship design studio to much jubilation of team dynamics. Getting the basic incentives not a siloed function. In the tired caricature from the design community. Before long, all the right is a part of this: in our survey, companies of traditional design departments, a group designers had moved their desks inside the studio, in the top quartile for design overall were almost of tattooed and aloof people operate under the and had deactivated door access for the marketing, three times more likely to have specific incentive radar, cut off from the rest of the organization. engineering, and quality teams. These moves programs for designers. These programs are tied Considered renegades or mavericks by their drastically reduced the level of cooperative work to design outcomes, such as user-satisfaction colleagues, these employees (in the caricature) and undermined the performance of the business metrics or major awards. guard access to their ideas, complaining that as a whole. they have too often been burned by narrow- Crucially, though, retaining great design talent minded engineering or marketing heads Our research suggests that overcoming requires more than promising a big bonus or a career Nurturing top design talent—the 2 percent of unwilling to (or incapable of) realizing the isolationist tendencies is extremely valuable. path as a top-flight manager. Carrots such as these employees who make outsized contributions designers’grand visions. One of the strongest correlations we uncovered are not enough to retain top design talent if not in every business—is another important linked top financial performers and companies accompanied by the freedom to work on projects dimension of team dynamics. We are not suggesting that this stereotype is still that said they could break down functional silos that stir their passion, time to speak at conferences common—or that other functions are necessarily and integrate designers with other functions. attended by their peers, and opportunities to stay to blame—but it can be surprisingly resilient. connected to the broader design community.> The Business Value of Design 11

Exhibit 5 / 5 Initial survey results reveal a wide range of design performance. McKinsey Design Index: companies’ score vs the average (n = 173) 95 90 85 80 75 Average score Talented designers at a CPG company well- They will only be able to do so, though, if they have 70 respected for its design credentials started the right tools, capabilities, and infrastructure. leaving because of the amount of time they That calls for the sort of design software, 65 had to spend styling slideshow packs for the communication apps, deep data analytics, marketing team. Conversely, Spotify’s appeal and prototyping technologies that drive 60 to top designers is often attributed to its productivity and accelerate design iterations. autonomy-with-connectivity culture and 55 to a working environment characterized All of this requires time and investment. by diversity, fun, and speed to market. We found a strong correlation between successful 50 companies and companies that resisted the Design already touches many parts of a business: temptation to cut spending on research, 45 human–machine interactions, AI, behavioral prototyping, or concept generation at the first economics, and engineering psychology, not sign of trouble. Formal design allocations should to mention innovation and the development of be agreed to in partnership with design leaders 40 new business models. While not a new concept, instead of appearing (as they often do) as line T-shaped hybrid designers, who work across items in the marketing or engineering budgets. functions while retaining their depth of design savvy, will be the employees most able to have a tangible impact through their work. Source: McKinsey Value of Design survey of global companies, July 2018. The Business Value of Design 12

More Than In a successful effort to improve the user experience, one cruise company we know talked directly to passengers, analyzed payment data to show which food and activities were most popular at different times, and used AI algorithms on security-camera a Phase: feeds to identify inefficiencies in a ship’s layout. At a medical-technology company, blending sources of inspiration meant talking to a toy designer about physical ergonomics and to a dating-app designer about the design of digital interfaces. These moves It's Continuous helped the company to refine a device so that it appealed to customers with limited dexterity. The resulting product was not only safer and easier to use but also beat the market by more Iteration than four percentage points when launched. 60% "Design flourishes best in environments that encourage learning, testing, and iterating with users." Despite the value of iteration, almost 60 percent of companies in our survey said they used prototypes only for internal-production testing, late in the Almost 60 percent of companies in our development process. In contrast, the most successful survey said they used prototypes only for companies consciously foster a culture of sharing internal-production testing, late in the esign flourishes best in environments that The best results come from constantly blending user early prototypes with outsiders and celebrating development process. encourage learning, testing, and iterating research—quantitative (such as conjoint analysis) embryonic ideas. They also discourage management with users—practices that boost the odds of and qualitative (such as ethnographic interviews). from driving designers to spend hours perfecting creating breakthrough products and services while This information should be combined with reports their early mock-ups or internal presentations. simultaneously reducing the risk of big, costly from the market-analytics group on the actions misses. That approach stands in contrast to the of competitors, patent scans to monitor emerging Design-centric companies realize that a product prevailing norms in many companies, which still technologies, business concerns flagged by the launch isn’t the end of iteration. Almost every emphasize discrete and irreversible design phases finance team, and the like. Without these tensions commercial software publisher issues constant in product development. Compartmentalization and interactions, development functions may end updates to improve its products postlaunch. of this sort increases the risk of losing the voice up in a vacuum, producing otherwise excellent work And the Apple Watch is one among many products of the consumer or of relying too heavily on one that never sees the light of day or delights customers. that have been tweaked to reflect how customers iteration of that voice. use them in the wild. The Business Value of Design 13

The McKinsey Design Index highlights four key areas of action companies must take to A First Step join the top quartile of design performers. First, at the top of the organization, adopt an analytical approach to design by measuring and leading your company’s Toward Great performance in this area with the same rigor the company devotes to revenues and costs. Second, put the user experience front and center in the company’s culture by softening internal boundaries (between physical Design products, services, and digital interactions, for example) that don’t exist for customers. Third, nurture your top design people and empower them in cross-functional teams that take collective accountability for improving the user experience while e realize that many companies apply This approach showed far better financial results Cross-functional and co-located teams carried retaining the functional connections some of these design practices—a strong than trying to improve design as a theme across out more than two hundred user tests over two of their members. voice in the C-suite, for example, or the whole company—for example, conducting years, from the earliest concepts to the detailed shared design spaces. Our results, however, show trials of cross-functional work in isolation from design of features. In all, more than 110 concepts Finally, iterate, test, and learn rapidly, that excellence across all four dimensions, which is real products or services. and prototypes were created and iterated. The final incorporating user insights from the first required to reach the top quartile, is relatively rare. design’s usability score—a measure of customer idea until long after the final launch. We believe this helps account for the dramatic "One of the most powerful first satisfaction—exceeded 90 percent, compared with range of design performance reflected in the steps is to select an important less than 76 percent for the machines of its two observed companies’ MDI scores, which were main competitors. The ultimate solution combined Companies that tackle these four priorities as low as 43 and as high as 92 Exhibit 5 . upcoming product or service a physical device, a digital data pad that could boost their odds of becoming more creative and make a commitment seamlessly connect with more than 40 third-party organizations that consistently design great The diversity among companies achieving to using it as a pilot." operating-theater devices, and a service contract. products and services. For companies that top-quartile MDI performance shows that make it into the top quartile of MDI scorers, design excellence is within the grasp of every In the past six months, the company’s market the prizes are as rich as doubling their revenue growth and shareholder returns business, whether product, service, or digitally One medical-equipment group we know rallied share has jumped 40 percent, in part as investors oriented. Through interviews and our experience around the design of a new surgical machine understand the upcoming user-centric products over those of their industry counterparts working with companies to transform their as it sought to head off a growing threat from and services that set the company apart from strength in design, we’ve also discovered that competitors. The commitment of the CEO its competition and—even more importantly one of the most powerful first steps is to select and senior executives was intense; executive —that will improve patients’ lives. an important upcoming product or service and bonuses were tied to the product’s usability make a commitment to using it as a pilot for metrics and surgeon-satisfaction scores. getting the four elements right. The Business Value of Design 14

Benedict Sheppard is a partner in the London office, where Garen Kouyoumjian is a consultant; Hugo Sarrazin is a senior partner in the Silicon Valley office; Fabricio Dore is an associate partner in McKinsey’s São Paulo office. The authors wish to thank Becca Coggins, Volker Grüntges, and Michael Silber for their tireless support of the research behind this article. They also wish to thank Maxim Berdutin, Markus Berger-de León, John Edson, Sarah Greenberg, Rupert Lee, Randy Lim, Drew Mancini, Rob Mathis, Rashid Puthiyapurayil, Stefan Roggenhofer, David Saunders and Hyo Yeon for their substantive input. Want to know how your organization compares? Take the 30-minute assessment at designindex.mckinsey.com to understand where your design strengths and opportunities October 2018 lie, and the value at stake from further improvement. Copyright © McKinsey Design 15

"Design is more than a feeling: it is a CEO-level priority for growth and long-term performance."