Proving a return on design investment
One of the reasons for publishing The business of design is our belief that Australia needs to increase productivity through investment that integrates business and design strategy. Our research showed that it’s possible in Australia to demonstrate the productivity and design investment success experienced in other countries.
Return on design investment (RODI) has been measured across many years by the UK Design Council and the U.S. Design Management Institute. This research shows that in the UK an average design investment will multiply the turnover by 2.25 when compared with the invested resources. In the U.S. the Design Value Index shows a 228% increase in value for listed companies rated as design led. In Denmark companies investing in design have gained a growth 22% greater than companies that have not invested in design and the difference will rise up to 40% when talking about continuous investing.
The link between good design and financial return has been measured in many ways. One measure of RODI has been developed by the Finns. In 2012 a Design ROI research project carried out in Finland aimed at developing a model and indicators to measure the benefits of design investments. This project created a common language between design and business.
Measuring quality and quantity
The principle of the Finnish design ROI tool is to measure the benefits offered by design using both qualitative and quantitative indicators. The quantitative tools are based on response measurement, investment calculations and information gathered through customer surveys.
The quantitative indicators have been divided into those based on money, time and quantity. For example the tool can be used to measure the effect of customer satisfaction on cash flow through increased sales.
The Finnish Design Return on Investment tool has five operational phases:
- entering the initial data,
- carrying out the underlying calculations,
- creating a forecast,
- carrying out the follow-up
- maintaining a data bank.
This process raises two important questions: firstly, what is ‘return’ and secondly, what is ‘investment’. Defining these at the outset is the most important step in proving how design changes made to a product or service have delivered a return.
A return might be a hard, definable measure such as sales, footfall or market share; but it might also be a ‘softer’ measure such as brand awareness, public perception or even staff morale, if the design project is about internal communications and branding, for example. Often it will be a combination of both types of impact.
The soft measures are harder to quantify but are still measurable using before and after research, which means it’s important to plan early and define exactly what you want to measure.
Here are just a few possible ‘returns’ that a client may want a design project to deliver:
- Rebranding shift – to change perceptions or to compete with a rival product or service
- Increased visitors or footfall and the corresponding sales increase
- Longer dwell time and the corresponding sales increase
- Clearer information on forms and leaflets – therefore fewer calls to customer helplines
- Use of more sustainable materials
- Innovation or conceptual research leading to possible new products
- Increased product sales or market share
This short list is illustrative of the range of possible ‘returns’ that might constitute a successful design project. The final one, ‘increased product sales or market share’, is often the ultimate goal. But not always: a company may want to use sustainable materials because of their own, wider benefits even if sales remain static; or a public sector body may wish to improve public understanding of an issue, without gaining any direct revenue.
Similarly, investment can be defined in different ways. Paying your design fees is just part of the investment in a design project. Implementation is an unavoidable cost in most projects, for example, and overall investment includes all sorts of other factors, perhaps including:
- Cost of materials/goods
- Possible changes to manufacturing processes
- Research costs
- Process change costs
- Distributions costs
- Staff time spent on a project
- Write-offs of old materials/products
- Other sales, marketing and promotional activity
Careful planning at the beginning of a project can help define the investment and design returns. This obviously relies on a client who wants to measure the return and is prepared to invest in the process that proves return.
Proving RODI will allow you to gain higher fees that are pegged to better results for a client.
If you would to learn more about developing an RODI approach contact Greg Branson.
Contact Greg Branson if you would like to learn more about the many programs the DBC offers.
SUBSCRIBE: Subscribe to get DMzine, Australia’s only online design management magazine.
Greg’s passion is the research and development of methods that improve design management and the role of design in business.
Greg has developed The Design Business School to help owners manage their business better along with showing designers how to get more involved in the studio and develop their career path. Contact Greg.