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How To Increase Revenue Through Design

Faisal Mumtaz
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How to increase revenue through design

Design has the power to form opinions and change perceptions, yet it still does not have a seat at the table right next to technology, sales, and marketing within most organizations. Most companies would consider design's impact on business success to be marginal, and as a result, is consistently undervalued. These assumptions are now changing as companies like Apple, Microsoft, Google and Netflix continue to invest in and operationalize design.

Innovation and design go hand in hand, not just in a generic sense but in an absolute sense. Companies that are not dedicated to innovation would invariably not consider design to be a critical aspect of growth.

A study conducted by Lindgaard and others in 2016 found out that users can form attractiveness judgment of a website within a mere 50ms of exposure. These preconceived opinions of aesthetics or visual appeal influence the users' evaluation of other attributes of the website. In psychology, this is often referred to as Halo Effect - A cognitive bias that causes people to extend positive judgement onto an unrelated attribute after having a pleasant first impression.

The same holds true for negative impressions, a website lacking visual appeal would force users to carry over the negative bias towards other aspects of the website.

This, from a User experience/interface designers point of view, is really fascinating. You have 50ms to make an impression which will most likely determine how users will perceive the rest of the website. How do you estimate what your target audience would find appealing?

Enter Iterative Design.

What is Iterative Design?

A trial and error cyclical process of ideation, prototyping, building and analyzing. Great designs take time and require an objective understanding of the problem the product is trying to solve.

Iterative design is a subset of design thinking - A human centered approach to innovation focused on aligning organizational structure to optimize for creativity, innovation and efficiency. It's not about "design" in the sense most would interpret, in fact it has very little to do with graphics design. It's about innovation and user experience - understanding problems from the users perspective, testing hypotheses and making incremental changes to physical or digital products and services.

By continuously improving the product based on feedback, new ideas and previously unknown issues come to light and understanding of the product evolves as designers gather more information.

Every product change at Netflix goes through rigorous testing before its deployed to production. The scale at which this happens its truly extraordinary because you're not just testing one or two variable but thousands across different regions. This empirical approach to design ensures the experience is led by users themselves and not by the designers' subjective bias.

By making feedback and iteration part of the design process, your product evolves until each functional requirement is met.

Wistia ran through 5 iterations of A/B tests in the pursuit of increasing signups to their video hosting and editing platform. Their first iteration involved setting up an entirely new and interactive experience on the homepage where users could play around with the core functionality of the product.

This, however, did not yield the results they were hoping for.

So Wistia's team sat down with users and watched them go through the new page. They found users were not interacting with the new experience and likely thought it was an image. This was in part due to removing additional from the layout to get rid of any distractions. But it wasn't panning out to be as intended.

With the new learning's in mind, Wistia iterated the design and immediately noticed an increase in sign ups. The interactive experience was now working as intended.

Design isn't finished until somebody is using it ~ Brenda Laurel

This happens more often than you might imagine. People involved in the design process make decisions based on preconceived notions of the product, something that does not apply new users. That is why exploratory research should always be a part of product design.

Aesthetics, Usability and Content

Visual appeal or aesthetics is a complicated construct, it is unclear whether the perceptions of beauty in the context of web design, relate to subjective perceptions and emotions or is it an interpretation of cognition. The role of aesthetics in creating an immediate positive first impression however, is quite clear and far easier to measure.

The three variables of a website - aesthetics, usability and content determine how a website is perceived, from an immediate response to long term interaction. Each variable fulfilling a specific purpose -

  • Aesthetic: Positive first impression; Halo Effect
  • Usability: Easily Navigable; Guided Experience
  • Content: Solves user intent

Simply having a stunning website with non traditional and unguided experience is like a Mercedes Benz with a 747 cockpit interior. Sure, it looks great but using it is a nightmare. It will stay in the garage and look pretty.

Beauty and brain, pleasure and usability - should go hand in hand ~ Donald Norman

Studies have shown that although visual appeal is able to make people stick around a little longer, it's the content which gets them to revisit and recommend the website.

Understanding the value and impact of each of these attributes will allow organizations to allocate resources and budgets. It also paints an objective view of how the different components of a website work together and drive value to the business.

Research Driven Design

One of the main reasons why iterative design is so effective is because it's data driven. The intent behind each design iteration is to fix functionality or usability gaps derived from quantitative and qualitative research.

By understanding customer journey and mapping their pain points, you would be able design around the problem rather and improve on it, iteratively, rather than using the specs of a previous product or copy a competitor.

There are numerous ways to collect data; finding the right methodology depends on your research question(empirical or conceptual), budget and resources.

  • Surveys - One of the most common research methods involving in-person, telephone or online questionnaire. It enables collection of large amounts of data relatively quickly, but being a generalized research method, it is subject to biases desirability bias.
  • Focus Groups - Put a dozen users in a room and engage in an open ended discussion about the research topic. Guided by a moderator, these type of interactions help discover two things:

    1) Are users taking the expected path?
    2) What additional features/functionality are users expecting from the product.
  • A/B, MVT Testing - This method uses analytics to determine which version of the design has the most desirable impact on user experience. For A/B testing, traffic is split into two pools and each pool of users is shown different versions of a page, one being the control and the other, a hypothesis. The version with a high enough statistical significance gets implemented permanently and is served to the entire audience.

    Multi-variate testing is similar to A/B testing, but instead of two versions, you can test multiple versions at the same time. This obviously requires a big enough audience size so that it has enough users in each pool to generate statistical significance.
  • Ethnography - An early design state qualitative research method where users are observed in their real life environment - at home, work or school. This enables designers to get a deeper understanding of the problem they are trying to solve through design by immersing themselves into the mind of product users.

    MBLM conducted an ethnographic research study for Apple in 2015 to find out how Apple Watch impacts people's lives. By observing people use the device in their daily lives, they concluded that Apply Watch had the ability to create an intimate relationship with its users, they checked their phones less often and walked more by receiving notifications on their watches. There were also a lot of usability issues and bugs reported, most of which were resolved by Apple before it went to market.

With all the data gathered and analyzed, you would be able to realize not just the problems users are facing but ones that a majority of them do not know exist. Upon creating a solution to those problems, you don't sell the product, you sell the problem.

McKinsey Study: Business Value Of Design

Mckinsey conducted one of the most exhaustive and compelling researches to unearth the answer to an age old question - What value does design add to my business?

The team at Mckinsey did not just empirically prove it, they shut the door to design cynicism forever.

The 5 year study tracked design practices of 300 publicly listed companies across multiple countries and industries in an effort to map the impact of design on business.

5 Year Study
3 Industries
300 Public Companies
2M Financial Data Points
100,000 Design Actions

The extensive and rigorous research led to the formation of McKinsey Design Index (MDI) - a metric based on four themes which rates companies on how good they are at design and how that relates to business success.

The four themes of MDI:

  • Analytical Leadership - McKinsey observed that companies with the best financial returns tracked and valued design like revenue and cost. Being led by top management, designers at these organizations are not second class citizens but important assets critical to the success of the business.

McKinsey discovered one gaming company was able to increase sales by 25% simply by making small usability adjustments on its homepage.

  • User Experience - Top quartile companies companies on MDI bridge the gap between products and services to provide an integrated experience to their users. With technology breaking down the barriers between digital and physical, businesses can design experiences that create an emotional and long lasting impact.

One hotel chain does this by giving away mementos to their guests that represent the host city and encourages guests to collect similar ones from other branches.

  • Cross-Functional Talent - Top quartile companies were able to breakdown functional silos and integration designers into other functions. Designers are typically isolationists and creating an atmosphere for them to interact with other areas of business, thereby creating T-shape hybrid designers, is correlated to top financial performers.

Nurturing and retaining top design talent is also found to be quite a challenge since they are not primarily motivated by bonuses and career path. Rather, those incentives have to be accompanied by - freedom to work on passion projects, speaking at conferences and engaging with the design community.

McKinsey mentions a well known CPG company started to lose its design talent because they were asked to spend time styling slideshow packs for marketing teams.

  • Continuous Iteration - Design is an ongoing process, refined by quantitative and qualitative research overtime. McKinsey recommends combining this with reports from market analytics groups on competitor actions, patent scans to monitor emerging technologies and business concerns flagged by finance teams.

Product development doesn't end at launch, continually iterating and improving the product ensures you're keeping up with rapidly evolving customer expectations.

Design flourishes best in environments that encourage learning, testing and, iterating with users ~ McKinsey & Company

Tesla is a prime example of continuous iteration; they analyze large amounts of data gathered from all vehicles and use that to improve their existing features such as autopilot and advanced summon. Software updates are released regularly to improve the driving experience of their cars.

Image Credit - McKinsey & Company

McKinsey found a strong correlation between high MDI scores and superior business performance. Very few companies scored high in all four areas, the ones that scored in the to quartile outperformed industry benchmarks - 32 percentage points higher revenue growth and 56 percentage points higher total return to shareholder (TRS) growth in all three industries within the 5 year period.

Design is more than a feeling: it is a CEO-level priority for growth and long term performance ~ McKinsey & Company

Another similar study, funded by Microsoft, was conducted in 2005 by Design Management Institute (DMI) and Motiv Strategies. They tracked the value of 16 publicly listed companies that met specific design criteria and monitored the impact of their investments in design on stock value over a ten year period and benchmarked it against the overall S&P Index.

Together, DMI and Motiv strategies created Design Value Index (DVI) to measure best in class design practices. The following criteria determined DVI ranking:

  1. Design operates at scale across the enterprise.
  2. Design holds a prominent place on the company org chart, and either sits on the leadership team or directly reports to a leadership team member.
  3. Experienced executives manage the Design function.
  4. Design sees a growing level of investment to support its growing influence.
  5. Design enjoys senior leadership support from the top tier of the organization.
  6. The company has been publicly traded for the last ten years

The study revealed a minimum of 200% return over S&P 500 consistently over three years.

Companies Championing Design Thinking

Netflix

Very few companies have disrupted an industry like Netflix has, from introducing the subscription model in 1999 and launching in 190 countries to creating original content since 2011. Netflix's philosophy is to discover what consumers need through data, analysis and testing. Their addictive entertainment platform was built through research and experimentation allowing the subscribers themselves to guide the experience they love the most.

Being a data driven company, Netflix obsesses over creating personalized experiences for its 119 million subscribers worldwide. This hyper-personalization at the member level drives higher engagement and reduces churn rate. One example that demonstrates this obsession at Netflix is Artwork Personalization -  Instead of using one artwork/image per title, they create dozens, each representing a different theme and aesthetic. These artworks are then fed to a machine learning algorithm which analyzes the contextual signals - previous title plays, genre preference, language, location, time of day, day of the week etc. and serves the artwork that it statistically recognizes to be most appealing to that particular member.

This design thinking culture makes Netflix a force to reckon with. The status quo is always being challenged, and they strive to discover new ways to delight customers. Individuals or even team themselves can not drive research driven passion like this, it needs to trickle down from the top, and this at Netflix, is from the CEO Reed Hastings himself.

Airbnb

Founded by two designers - Joe Gebbia and Brian Chesky, user experience and design has always been at the forefront for Airbnb. As their customer base grew and Airbnb started to eat up the market share of major hotel chains, the need for quality homes that provide the same quality of service and amenities as hotels grew. This was an inevitable problem. With scale - 6M+ properties in 100,000 cities, user experience quality would drop as people would be spending more time finding the right apartment, cottage or bungalow.

In order to excel at providing a great customer experience from search to end of stay, Airbnb introduced advanced categorization on their website. With this, people are able to search at a whole new degree of granularity - Looking for a castle in Paris? There's 36 places to stay. They also introduced accessibility features to account for special needs such as disabled parking spot, handheld shower, accessible toilet height, fixed grab bars for toilet, electric profiling bed and a myriad of others.

While one might assume its easier for a large company with thousands of designers to operationalize design thinking but it's important to note that Airbnb was built on these principles. In 2009, Joe Gebbia was still in design school while running Airbnb, which at the time was generating $200/week. It was at that time when Joe developed the "being a patient" mentality - the result of him talking doctors, nurses, surgeons while working on a medical device for a school project. By putting yourself in the end users' shoes, not for a brief moment but throughout the entire journey, you begin to realize better ways of doing things and start asking the right questions. This way of thinking is now a part of Airbnb's culture, everyone takes a trip on their first week at the company and documents it to share with the entire company.

Tesla

From driverless capabilities with Autopilot to the upcoming advanced summon feature to autonomously pickup drivers from a parking lot - Tesla puts as much emphasis on software as they do on hardware and that cannot be said for every car manufacturer.

Tesla deserves credit for bringing awareness towards reducing emissions and creating a safer and cleaner environment, forcing other car manufacturers to invest in electric and low emission vehicles. Traditionally, car manufacturers kept improving existing technologies - better fuel efficiency, better driveability, powerful engine etc. Besides a few minor exceptions from top players such a BMW, Mercedes and Audi, no one was creating innovative solutions to complex problems. Then came Tesla and introduced a beautiful, eco-friendly vehicle with the longest range - 375 miles and features deployable over the air every few months.

The key to innovation is - find a problem, prototype, test and fail quickly. Design thinking, being a non linear human centric framework, focuses on understanding users more than anything else. Elon Musk himself delivers on this key component of design thinking by interacting directly with customers and even making changes to cars based on their feedback.

Google

It would be silly to talk about design thinking without mentioning Google, a pioneer in operationalizing design and innovation. Google's UX team introduced the concept of design sprint - a combination of agile framework and design thinking where teams of any size get together and go through 6 stages in 5 days - Understand, Define, Sketch, Decide, Prototype, and Validate. It allows teams to understand if a product is viable or not without having to spend months on building a production ready prototype.

In 2014, Google released Material Design, a design system enabling product teams to design efficiently while maintaining a shared brand experience across all touchpoints. Although it wasn't the first design system, Material design transformed the UI/UX field and inspired other companies to follow.

Their recent venture into gaming with Stadia is probably the most noteworthy example at the time of this writing. Unlike Xbox and PlayStation, Stadia will allow users to stream games directly on their chrome browser without the need of a console or powerful PC. All the graphical computation is done at Google servers, and players response is fed back in realtime, which means you can play 4K games on a 13inch Macbook with no lag (considering you have a fast enough internet connection). Companies such as OneLive have tried and failed miserably however, Google is probably the only company in the world who has the resources and software(chrome) to redefine gaming.

What stands familiar amongst all these companies is the ability to innovate, focus on customer centricity and leadership to drive change. With these qualities engraved into the culture and soul of a company, design thinking comes to life, resulting in better products, services and internal processes.

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