The big consulting firms (McKinsey, Booz Allen and BCG) would all love to get you to use more metrics to analyse innovation. Partly because it allows them to apply their existing left-brain analytical skills to your right-brain creative design challenges. Everyone has their own take on the role of metrics in design. Whatever side you take there is a lack of easy metrics that you can use to quickly explain to your CEO and CFO why design is important to your company’s growth.
Below are the top 5 metrics that you can pick up today to benchmark your business against your competitors. These are not the only metrics but they are the ones that you’ll be able to use to make a strong case for investing in design:
1. Vitality Index
Sales from products created in last 3 years / Total sales
2. Contribution margin
(Sales – Direct costs) / Total sales
3. Return on assets
Net profit before tax / Total assets
4. Brand value
Expected net annual cashflow from your branded products / Your target annual return on investment percentage
5. Return on intellectual property
Total sales / (Market capitalisation – Physical assets)
Warning, these are not measures that you will be using to manage your design process. Later on, we’ll cover metrics such as delivery in full on time as specified (DIFOTAS), Return on innovation investment (ROII), Time to market (TTM) and a whole host of activity measures.
Next week we’ll calculate the numbers for these metrics for a couple of example companies so that you can compare your own performance.
Hi Peter,
Interesting post and definitely some food for thought. However do you underestimate the power of design here by assuming a good design is all it takes to sell?
Please let me explain, a great design could die in poor product placement or horrible marketing communications. Therefore your 5 points does rely a little too much on sales forecasts which to me has too many variants to be an accurate measure to build a case for design.
@DesignTranslator You’re exactly right that as an in-house designer your team will see their “designs” live or die as they progress through processes way beyond their control.
The metrics proposed above are all organisation wide and are intended to help you convince the senior management of the value of design as a way of thinking across the whole business. That is, to persuade them of the value of design thinking, innovation, empathy, and of being more user centred. More specifically, these metrics measure design as a culture within your business not as an activity performed at one step in the development process.
I’m the first to acknowledge that this might be copout and that we do need good metrics to measure design effectiveness not just the impact of design. The risk with trying to unpick design metrics from business metrics and measure design in isolation is that the last thing we want to encourage is a designer saying: “Well, I met my metric XYZ. It’s not my fault that engineering couldn’t specify it, manufacturing couldn’t fabricate it and sales couldn’t explain it to our retailers.” – Those issues might not be in the job description of the design team but maybe they should be?