How can I help you? (The ROI of UX)

In my previous posts (What UX is not and The process of UX) I talked about the user experience process and what UX is not about.

Ok but… What can I do for you?

Or should I say: what can UX do for you? Why spending money in UX? In this post I’m going to dig into the numbers and describe how a proper UX process and culture can make companies grow.

So, let’s cut to the chase:

  1. If you involve users in the design process, you’ll build products that meet their needs. Products that are useful to them. Evidence-based products. Those products have a higher commercial value. They benefit the company’s reputation. They are competitive.
  2. Product development will cost less. Paper sketches and prototypes are cheaper: you’ll refine the design with the stakeholders, building a well defined mockup that’s already been discussed, instead of redefining functions during development in a never ending cycle.
  3. Low-risk and low-cost of failure. Launching a product into large-scale piloting makes a possible failure risky and expensive. Testing prototypes with a small sample of users is cheaper, and failures become smart: you can fix problem before investing in dev and going public.
  4. Less tinkering after release: if you test mockups before going deep into development, you can fix problems before launching the product. This means less waste of money after release.
  5. Less customer support. If your product has a solid UX, meets your users’ needs, if it’s easy to use and information is easy to find, you’ll have less inquiries to customer support. And you’ll save money.

Ok but… do you have any numbers?

Graph depicting the performance of companies with different design indexes over a decade, between 1995 and 2004
Design-aware companies outperformed the FTSE-100 and FTSE-All Share indices over ten years (UK Design Council, 2005).

According to the UK Design Council, the share prices of design-aware businesses outperform the other businesses by a full 200%, consistently over a solid decade.

Again, in 2013 the UK Design Council found that businesses that invest £1 in design can expect over £20 in increased revenues and more than £4 increase in net operating profit. That is, besides indirect benefits like better strategic thinking, brand and business identity and a boost in confidence.

In 2012, Jon Picoult of Watermark Consulting took five years of data (2007-2011) and compared the 10 companies that scored best in the Forrester’s 2012 Customer Experience Index (customer experience leaders) with the bottom 10 (customer experience laggards): the customer experience leaders had a total return of +22.5%, compared with a -46.3% decline for the laggards.

Again in 2019, the Customer Experience ROI study by Watermark Consulting strongly supported these findings: in a 11-year time span, customer experience leaders generated a cumulative total stock returns that was 3 times higher (183.8%) than that of the laggards (63.1%).

Another recent study by Forrester Consulting (2018) evaluated IBM’s Design Thinking Practice and found that:

  • Project teams reduced development and testing time by 33% by leveraging better designs and user understanding, saving $223K for minor projects and $1.1M for major ones;
  • Project teams cut design defects in half and reduced subsequent rework by successfully meeting user needs, saving $77K for minor projects and $153K for major ones;
  • Project teams achieved a faster time-to-market, increasing profits by $182K for minor projects and $1.1M for major projects;
  • User-centered design improved the quality of products and reduced the risk of failure, increasing average product profits.

And the list goes on. The Business Value of Design by McKinsey (2018) found that companies with the highest McKinsey Design Index (MDI) had a superior business performance:

  • Companies in the top-quartile of the MDI score outperformed industry-benchmark growth by two to one;
  • Higher scores in MDI correlated with higher revenue growth and higher returns to shareholders;
  • The financial outperformance of top-quartile companies was solid across three industries: medical technology, consumer packaged goods and retail banking.

But how are these indexes built? In other words, how were these companies assessed?

  • The UK Design Council based their assessment on five different sources that provided a comprehensive database of the UK corporate sector: they collected and standardized the design performance scores of companies in four third-party previous competitions among awards and surveys, and they asked a panel of experts to perform an independent and blinded assessment of companies across five design categories: product, innovation, brand, retail and integrated.
  • Forrester’s 2012 Customer Experience Index was based on consumers’ perception of companies they did business with. Forrester asked thousand of consumers how each company met their needs, and how easy and enjoyable was working with them, building the Index on these scores.
  • Customer Experience ROI study by Watermark Consulting identified CX Leaders and CX Laggards based on third-party customer experience rankings based on surveys of thousands of U.S. customers, such as Forrester Research’s CX Index from 2007-2015, and Temkin Group’s Experience Ratings from 2016-2018.
  • McKinsey Design Index is maybe one of the most comprehensive and well-documented design indexes, and is based on four pillars: analytical leadership, continuous iteration, cross-functional talent, and user experience.

McKinsey Design Index

  1. Analytical leadership consists in measuring and driving design performance with rigor.
  2. Cross-functional talent consists in making user-centered design everyone’s responsibility in the company.
  3. Continuous iteration means continuously listen, test, and iterate with end-users.
  4. User experience has to do with breaking down the boundaries between products and services into integrated experiences.

Curious to know how do you score in MDI? You can assess it with the MDI online tool.

Sketch depicting the four pillars of the McKinsey Design Index: analytical leadership, cross-functional talent, continuous iteration, and user experience
The four clusters of actions that build the McKinsey Design Index: analytical leadership, continuous iteration, cross-functional talent, user experience.

As you can see, these four clusters are strongly related to a broad and long-term design culture, as opposed to a narrow and short-term approach that applies design to single products.

This introduces my next and final post on this matter. It should pretty clear by now that user experience is an investment that pays. Too good to be true? Not necessarily, but there are certain traps that you need to avoid if you want to get UX right. In the next post I’m going to talk about the ROI traps of user experience and what to do to avoid them (and save money).

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