How to estimate the ROI of design work

According to a February 2020 McKinsey study, 66% of CEOs don’t understand what their senior designers do. While many business people read that design-driven companies outperform their competitors and thus invest in design programs, design’s concrete benefits are still an enigma for most. As designers, we have two options: We can wait for business people to learn design’s value or we accelerate the process by better communicating our work’s value.

Designers are biased towards actions, and it makes sense for us to do the latter. However, there’s a hurdle designers face: We try to explain design’s impact through qualitative thinking: empathy, aesthetics, and user experience, for example. While these are important factors, they’re not what business people understand, nor are they what drives business people towards action. Instead, we need to be able to speak the language of business—or quantitative thinking—and help translate design’s impact through numbers, metrics, and strategic arguments.

So, how can we start speaking the language of business? Start with quantifying your design work.

The three step method for quantifying design work

Whenever I mention “quantifying” to our designers at the d.MBA, I hear them say: “I am not a numbers person.” Luckily, you don’t have to be. For estimating design’s business impact, you just need basic math.

The whole process comes down to three simple steps:

1. Define a business lever.
2. Estimate the financial impact.
3. Communicate with hypotheses.

Let’s break this process down with an example:

“Sorry, a design system is not a priority right now.”

A fellow designer and friend works for a digital bank startup. Let’s call her Hannah. She recently said she wants to build a design system.

Her startup grew rapidly and they’re now dealing with the results of having no firm brand guidelines or a design system. Photography and other asset use is inconsistent across different touchpoints. In banking, trust is crucial, and these discrepancies can easily erode trust and prevent people from signing up as customers.

The speed of design work is a problem, too. Without a design system, each designer must create new visual assets for every product, which slows down development cycles.

When she asked her managers for resources, they told her to focus on the product roadmap instead. That especially frustrated her, as she thought this project would speed up the roadmap, too.

Together, we found an alternative approach for pitching the project: creating hypotheses and quantifying the design system project’s potential impact.

1. Use a profit tree to define business levers

Companies need to earn more money than they consume. In other words, they need to be profitable. So, whatever we do as designers should ultimately lead to increasing revenue or decreasing costs.

A profit tree easily illustrates how your design work fits into the larger picture. It breaks down companies’ two basic goals into four basic business “levers”, or measurements towards a desired impact on the business state:

Increasing revenue

• Attract more customers (conversion rates, referral rates, etc.)
• Increase customer value (price, purchase frequency, and retention)

Decreasing costs

• Decreasing fixed costs (rent, utilities, etc.)
• Decreasing variable costs (marketing, materials, hosting, etc.)

Hannah identified that the design system could decrease costs through speeding up the design project process. (And, in reality, the system would help the whole product team, not just designers. But let’s focus on the design team for now.) She also believes that the project would increase the brand’s visual trustworthiness, help the business gain more customers, and increase revenue.

2. Prototype with numbers to estimate financial impact

To calculate the business impact, we need two things:

• Status quo: What is the current business state (lever) I want to improve?
• Impact estimation: How much will the project improve the business?

First, find people in your organization who can help you uncover the most important metrics and assess what impact you can realistically expect. Try talking to product managers, sales people, market department, or your accounting team.

Hannah did exactly that and created two scenarios:

How a project could decrease costs:

If Hannah’s hypothesis is correct, a design system would save 25 hours per designer per month. That translates to three working days to invest in new projects. If a design team has 10 members, this equals $150,000 in saved time in a year. Not bad.

Now, let’s look at the second hypothesis.

How can a design system increase revenue?

If Hannah’s project increases the conversion rate by 0.5 percentage points, the company would land 5,000 more customers and raise revenue by $500,000 in just year one—a 25% increase!

Together, these two hypotheses conclude that implementing a design system could equate to a $650,000 opportunity. 

3. Communicate with hypotheses

More than half a million in business value is impressive, but Hannah’s response was nerves rather than excitement: “These numbers are just guesses,” she said. “I am not confident to present that.”

Hannah is exactly right. These numbers are guesses. But you know what? Managerial work mostly boils down to making educated guesses.

Rather than guesses though, these should be framed as assumptions. Luckily, designers do this constantly, for example, when we create A/B test prototypes. Here, we’re just doing the same thing with numbers: We make educated assumptions using historical data, examples from other companies, and expert opinions.

Before Hannah presented her case to managers, we worked together to frame the message and use the right tone. Here is the pitch draft we prepared.

“According to our analysis, a design system project could help us in two ways. First, we can increase revenue through a more trustworthy brand. We’ve explored the potential effects and found that even a 0.5 percentage point conversion rate increase would lead to half a million dollar revenue increase per year. We talked to companies X, Y and Z and they had similar results.”

“Second, a more streamlined design process would save time. Our projections show that we could save three working days per designer per month, which we could invest in other projects. Our design team has 10 members, and if we assume a $50 hourly rate, this is equivalent to $150,000 in saved time.”

As designers, we should tell stories, too. If you can find any similar company work examples or case studies, add this to your argument.

When Hannah presented her case, she received a few funny looks. Managers were surprised to hear her talking in numbers. Initially, they challenged her estimates. You should expect the same. Business people feel confident talking about numbers. Let them come up with new estimates for you. They may even create a more positive scenario.

And that’s exactly what happened to Hannah. Her manager gave her the green light for the project, and she’s now measuring the impact to prove her hypotheses.

How can I do the same?

If you want to convince a business leader, figure out where the potential business value is. Draw a profit tree and identify which lever will improve.

Once you identify the impact, figure out which other teams would also benefit. Go talk to them and make them your project partners. They can help you find the right metrics and assumptions. For example, Hannah found a strong ally in the CTO who leads a development team. He saw a great benefit to streamline his team’s process, so he advocated for her.

Using hypotheses and numbers is a great way to demonstrate design’s business value. But don’t forget who we are. As designers, we should still focus on user experience, brand, and empathy. But tying our work to four fundamental business levers can elevate our conversation with business people and improve our positions within companies.