Read the Spanish version here.
This isn’t just another provocative post headline. It is the truth. The ROI of design as a generic formula or specific metric -which is what most designers and executives expect to find- doesn’t exist.
Last month I was asked to give a talk about the ROI of Design. Part of my answer was that the ROI of Design is like trying to determine the sex of the angels: there’s much talk about it, but no one really knows.
Yes, there are a lot of articles about the ROI of Design, but all of them offer a generic answer, cite a few metrics but no one answers the questions everybody has: what is *THE* number that you can use as a benchmark? What is the magic formula that you can plug into excel to make all the execs happy?
The truth is that no one has the answer because the ROI of Design doesn’t exist in that generic sense.
There are metrics that you can use and there are formulas that you can create, but for each product, each company and each project the metrics and the formula will be different.
Why is there no ROI of Design?
There are three main reasons (although not the only ones) for this.
The first one has to do with the very concept of ROI.
ROI isn’t a universal metric like MRR (monthly recurring revenue) or MAU (monthly active users). ROI is the comparison between Return and Investment. Therefore, each project will have a unique definition of what it includes as an investment and what it expects as a return.
In addition, the definition of return and investment varies from company to company and even from project to project.
- Return: each company will expect a different return from its projects. There are companies that have defined at a corporate or strategic level the return they expect from their projects. I worked in a company that required a 12% return for every project considered an investment. But other companies may consider certain projects or certain functions (such as design or development) a “cost”, and therefore don’t expect a return.
- Investment: the investment is specific for each project and for each company. While there may be similar costs, each company has a unique way of measuring them. Two companies can pay the same for design or development resources but have different associated costs (overhead, profits, etc.) and different ways of accounting for costs.
The second reason why the ROI of Design doesn’t exist as a universal measure is that each project solves a specific business problem. So you can’t define a universal measure of ROI that fits any type of project.
The ROI of a new feature isn’t the same as the ROI of a new flow or that of an improvement or a totally new product.
And the third reason is more of a qualitative one. Usually, when someone asks for the ROI of Design, they don’t really mean ROI in its true, technical sense. What they actually want to know is the expected or accrued benefit of the project.
Once we understand that what we need to calculate is benefit, and that what is expected from us is a set of metrics and not a technical calculation, then the issue of the ROI of Design disappears.
In this case, the real “problem” is identifying which metrics help us identify the benefit.
So… can you determine the ROI of Design?
Yes, you can. There is no unique or universal metric, but there is a process that you can follow.
The first step is identifying the ROI of what? Is it a large project? An improvement? A new feature? A small project will require to consider different variables than a larger one that has more risk and a higher cost, and the need for control and accuracy may differ as well.
The second step is understanding what you are trying to accomplish with the project. What problem are you trying to solve? What is the expected outcome (for the business, for the user)? Not all projects aim to improve sales. Some projects focus on internal improvements (like increased productivity), others expect a benefit for the business (like lowering operating costs) and others simply try to eliminate friction in order to improve the experience and the relationship with the client (where more sales is not necessarily expected in return).
Lastly, you need to define what you are trying to measure:
- Are we going to measure ROI in the literal sense? If so, then we need to define what we consider cost and what is considered investment.
- Or are we just going to measure expected/accrued benefit? Since cost information is hard to come by, for smaller and medium projects just calculating the expected return will suffice.
One last consideration
When we define profit, it must be expressed in terms of benefit to the business, not in terms of design.
In other words, saying that this design raised the SUS from 58 to 72, or that we improved the usability of the login flow by 23% speaks of the performance of the design but doesn’t say anything about the benefit for the business.
A more effective way to show the impact of design is by aligning design metrics with business results:
- The improvement in the usability of the site (reflected in an increase of the SUS from 58 to 72) had a positive impact on sales by eliminating friction in the purchase flow and improving communication of products.
- The 23% improvement in the usability of the login flow implies that more customers can use digital channels. This reduces customer care costs and increases operational efficiencies.
The key is to tie design activities to to business results. Only then we can start talking about ROI.
