The Value of Design Thinking

In the past 4.5 years with SAP I’ve conducted many sessions to let people experience and get a ‘taste’ of Design Thinking – both in terms of the method as well as the mindset. To reap the full benefits of the Design Thinking approach, however, it requires you to go beyond doing Design Thinking workshops and significantly invest in design thinking and design management practices.

Already in 2013, the Design Management Institute and Motiv Strategies created the so-called Design Value Index (DVI), a theoretical construct, to measure the value of implementing best-in-class design management practices. Based on a portfolio of 16 publicly-traded stocks from companies considered to be “design-centric” including SAP, the DVI in 2015 showed a 211% return over the S&P 500. It was the third Design Value Index in a row that showed such results in excess of 200% over the S&P.

Building on this, McKinsey researchers tracked the design practices of 300 publicly listed companies over a five-year period in multiple countries and industries and published their findings in the McKinsey Quarterly report of October 2018. The McKinsey Design Index (MDI) shows the link between design and the financial performance of each company. They found a strong correlation between high MDI scores and superior business performance. 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 whole period. The results held true in all industries researched: medical technology, consumer goods, and retail banking. Companies with top-quartile McKinsey Design Index scores outperformed industry-benchmark growth by as much as two to one.

In the same year (2018), Forrester Consulting conducted a Total Economic Impact™ (TEI) study to evaluate the potential financial impact of IBM’s Design over a 3-year period. Forrester concluded that for every dollar that IBM’s Design Thinking practice invested in Design Thinking capabilities, they earned 3 dollars back (based on a net present value calculation). Other key findings from their study:

• 2x faster go to market of projects, resulting in earlier benefit realization and the higher present value of expected profits
• 75% less time required for initial design and alignment reducing project costs
• 33% reduction in development and testing time as project teams leveraged better designs
• 50% less rework due to reduced design defects
• Reduced organizational costs by streamlining processes based on cross-functional teams collaborating to share problems and find solutions.
• Increased customer revenue from human-centred designed products or services, increasing the average product profits.

Whether your company focuses on physical goods, digital products, services, or some combination of these, design matters. Since Design Thinking can be applied in virtually any part of an organization, the impact can vary. Yet, Forrester found that interviewees and survey respondents consistently identified impressive returns versus modest costs.

At SAP, we started our journey into Design Thinking in 2004. Along the way we have been able to inspire other organizations to start their journeys as well and have helped them to become more customer focused (Rolls-Royce Power Systems); boost productivity of employees (SKF) and foster an innovation culture (Nestle).

Get more inspiration on how you can make Design Thinking work for you here and make sure that your ideas and plans for 2020 don’t stay on post-it notes!