When I studied basic accounting and finance at business school some 20+ years ago (INSEAD,  Singapore, 2003), no one ever asked “where does great design get attributed on a company’s financial statements?”  Or if they did, I never remembered it!

Anyway, after bouncing around a couple of finance jobs in China, I realised that I enjoy working with people that are building stuff way more than I like working with people who are trading stuff and so I’ve been working in the world of software and digital experience ever since.

It’s really only been in the last decade (++ showing my age!!) with the take-off the iPhone and the celebration of Apple as the single most profitable company in human history, have people asked “How the **** did Steve Jobs achieve that?” Or more likely “How can we bottle some of that Apple secret sauce and re-apply it profitably to businesses elsewhere?”

“What value is great design? And how do you measure it?” are still questions that vex me and ones which Private Equity and other investors ignore at their peril. 

Over the last decade or so I’ve been lucky enough to work with some design superstars both at IBM and at Apple and it’s their thinking that’s helped guide me ever since. 

Before we try and measure outcomes (by counting how many times the dog wags its tail!), let’s take a moment to address fundamentals and ask ourselves: “What is Design? And what aspects of Design matter most in the technology business?” (what’s this dog look like from the head up? what’s it  been bred for? And how does it make me feel?).

What is Design?

Design is a big word ripe with ambiguity. It means different things to different people. Great design doesn’t just happen; it’s a process - at the end of which you get one or more aesthetic outcomes. The Aesthetic is the look and feel of the product, service or thing. Each aesthetic outcome has a different layering of shape, colour, texture and meaning; and depending on the product, don’t forget its sound and smell too! Those outcomes inevitably link to the product vision and goals. No great product came from an ambiguous product vision or contradictory set of product goals. So it’s  definitely worth the time iterating and striving for clarity about the problem your product is trying to solve. And if you listen to Steve Jobs or read Vitruvius, Design is also just as much about the Engineering behind how something is built as much as it is the look and feel. The hardware as well as the software. That’s what sets Apple apart from its competitors.

Two great quotes that I’ll always remember:

“Form follows Function” - Vitruvius - Roman architect, 1st Century BCE.

“Design is the rendering of intent.” - Jared Spool, 2013.

Design can be learnt in School; and that’s where all those categories come to mind: Industrial Design, Product Design, User Experience Design, User Interface Design and more. Each has its own purpose and goals. Equally, Design can be learnt as an apprentice on the job, working closely with more experienced designers. And then there’s trial and error. There’s always going to be a need for prototyping and testing preliminary versions with customer friendlies; but trial and error without designer guidance; that one is really to be avoided; and when it’s not, it really shows!  Otherwise, you’re just going to stumble into a series of costly errors and dead-ends that could easily have been avoided.

User Experience Design

My particular interest is User Experience Design; the design of joined up digital (and physical) experiences. Primarily software focused but sometimes overlapping into hard product design, User Experience Design as the name suggests focuses on identifying the needs and goals of your end users. Typically this starts with User Research, both qualitative and quantitative - understanding who your users are, the tasks they are performing and the tools they are using today. At IBM IX we had our Enterprise Design Thinking method inspired by the phenomenal Karel Vredenburg which formalised some fantastic industry standard design techniques. Things like Personas and Empathy Maps for delving deep into the likes/dislikes, feelings and emotions of your customers (or employees). Personas are exemplar user archetypes, whereby you create 3, 4, 5 (or sometimes more) examples as representative groupings to describe the character traits of your many tens of employees or 100s, 1,000s, millions of customers.  

And if you’re designing something completely new, all the more reason for getting that Minimum Viable Product (or Minimum Lovable Product - even better!) out there in the marketplace as a restricted access beta pilot to get feedback from real customers.

Why value User Experience?

One of my favourite videos on the topic is this one, The ROI of User Experience. Susan Weinschenk of Human Factors International quotes an IEEE.org paper from 2005 “Why does Software Fail?”. Both are very well worth viewing if a little dated. In 2005, a typical US company was spending 4-5% of revenue on information technology, with banks and telecoms companies among the biggest spenders at 10%. According to Deloitte those percentages haven’t changed massively by 2023. However, how the industry develops software today and what we use it for has changed hugely in the last 20+ years. The values at stake are many times more; and I doubt there are many people who would disagree when I say that information technology is even more crucial to business in 2024 than ever before.

Of the Top-10 reasons cited for IT project failure in 2005, Susan suggests that at least three of them can be fixed by better User Experience Design. These are:

• Badly defined system requirements
• Poor communication among customers, developers, and users
• Stakeholder politics

Susan recommends iterating with standard User Experience techniques like customer/stakeholder interviews and user journey mapping in the design process to help get things right before any software code is written, let alone put live into production. 

The 2005 IEEE report suggested that “software specialists spend about 40 to 50 percent of their time on avoidable rework rather than on what they call value-added work, which is basically work that's done right the first time. Once a piece of software makes it into the field, the cost of fixing an error can be 100 times as high as it would have been during the development stage.”

Susan’s video suggests, depending on your goals, UX RoI can be measured by, for example, estimating the cumulative opportunity cost of revenue not received due to user drop-out in the shopping cart check-out process due to poor UX, or additional revenue generated by higher conversion rates or reduced costs from fewer errors and reduced development time, lower training costs and so on. These are all great, individual elements which at the micro level can be calculated and aggregated to justify the work of the UX team in a larger software delivery programme and illustrated with a Value Driver Tree.

User Adoption - a critical measure of value

For Consumer Apps, numbers for monthly new users, active users, average revenue per user, retention per sign-up cohort etc.. are fairly obvious KPIs as consumers decide pretty quickly and vote with their feet/eyeballs/wallets as to whether they want to continue to value using your App. For B2B and particularly for Employee Apps, User Adoption is the really critical KPI. During my time working with the Apple+IBM partnership, Apple came with an example from a major Wind Turbine Manufacturer that built a Site Planning App to support its service technicians installing onshore turbines. The App was able to achieve an RoI improvement from 0.25x to 8x as the technicians  began to actively use it. The App had a €1M build and integration budget and the company cost savings grew from €1.8M to €8M per year as User Adoption increased from 25% to 75% across its Installation Team. Apple and its partners achieved these stellar RoI results because they think about User Adoption as “the willing acceptance and integration of a solution into a workflow”; because Employees are using the App whenever they can, not because they have to, but because it helps them in their roles. A well-designed app simplifies their tasks, is enjoyable to use, and helps them be more productive. Mandating an app for usage just doesn’t work. 

Every one of us has suffered the consequences when our employer has force-fed a poorly designed app or algorithm on the workforce that ends up making things harder rather than easier. If a solution is a bad fit, mandating its use will not disguise that problem. The company itself will only see minimal productivity or efficiency gains because employees will use it as little as possible or find workarounds and therefore negate the investment made in the app in the first place. The company will likely suffer from greater employee and customer dissatisfaction, increased processing time and increased errors. The solution will fade away or have to be rebuilt, adding more costs. 

Solutions are not widely adopted typically because of three things:

• They don’t help the user by simplifying tasks—they make the user’s job more difficult.
• They aren’t useful—they don’t relate to the key responsibilities of a role.
• They are slow, buggy, or non-intuitive.

So if mandating doesn’t work, what really drives user adoption? A great app solves a problem, is engaging, is intuitive, is meaningful, saves time, is convenient, is actionable, is fast, is easy to use, works anywhere, and exceeds expectations every time. If users have a great user experience when interacting with a solution, they will look for ways to use it in their role which drives higher adoption. Apple thinks of the user experience as being more than just the user interface (UI). It's the total user engagement while using the app, from the interface through to what it does, and how it does it. And how do you get that right? Well it’s the combinatorial mix of great User Experience Design and great Technology (hardware and software).  And then finding the right use cases to prioritise in order to maximise Business Value.

Other indicators

However, it’s still tough to get away from a better indicator than Apple’s share price over the last decade (++) or more. That’s what investors remember. Exceptional Product Design is what made Steve Jobs and Jony Ives famous and it’s why consumers still love Apple to this day. And it’s what every other great Tech company including Amazon, Dyson, Meta, Google, Samsung, Tesla have been trying to replicate with varying degrees of success ever since. And needless to say Design is just one key element among many that all those great companies take seriously; and sometimes it really is hard to measure - but then again so is Magic!!!

Ooh - and for those of my INSEAD classmates asking “was Matt paying attention in the legendary Professor David Young’s Basic Accounting class?” Well I think I was! Intangible Assets include the value of brands, patents, trademarks, copyright etc. And design is key to at least the first three of those elements. As a balance sheet line item, Intangibles are used only as a means to record the value of assets obtained via company acquisition at a premium to book value via Corporate M&A. Under US GAAP, the value of internally generated Intangibles’ cannot be properly and fairly determined, so under GAAP, they are not placed on the balance sheet. Interesting article on this topic here and worth noting that reporting differences exist on this between GAAP and IFRS. 

Hence, the value of the Coca Cola brand cannot be recognised on the Coca Cola Company’s own balance sheet.  And it’s the same for Apple! However, that’s not to say the value of brand and great design do not go completely unnoticed. Both those values do get intrinsically recognised by Investors as reflected in the company’s respective share prices; even if it’s difficult to directly apportion an exact percentage!

Final thought

And why’s that important? As one of my IBM IX colleagues (Paul Papas) once said “a user’s last best online experience anywhere becomes the minimum expectation for what they want everywhere!” 

Well if Apple and Amazon can make their tech this easy to use, why can’t you???

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Photo credit: Estudio Bloom‍

Estúdio Bloom (@estudiobloom) | Unsplash Photo Community

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