’Tis the season for resolutions. Personally, my resolutions this year include writing more, putting away my devices when I’m around my kids, and strengthening my core.
As I reflected over the last few weeks about my intentions and goals for the upcoming year, I began to think about value, and how we calculate it. After all, a resolution is just a decision to increase the value of something I might get later over the value of something I can enjoy today, right?
I choose to value stronger core muscles (something it will take a bit of time to realize) over lazing on the couch and watching a movie instead of working out (something I can enjoy today).
In economics, this relates to a concept called discounting. Generally speaking, we tend to value things we can have today over things we can have tomorrow. In other words, we discount the value of things in the future.
We do this for all sorts of reasons: the future is less certain, the value of future things may change, etc. A high discount rate means something loses value faster the further its result or impact is out in the future, whereas a low discount rate means I retain its value to me compared to things I can get today even if I won’t get that result for a while.
I place a lower discount rate on gold, for example, because I assume it will retain its worth even if I hold onto it for a long time. I’m less likely to spend gold in my savings in exchange for something in the short term, like a new coat. However, if that savings is kept in dollars, I might be more likely to dig into it to buy that fancy treat for myself for the holidays, because I have less trust that investing in it will have a high return.
A resolution is a mental game to lower the discount rate of some future value.
So what do discounts have to do with design?
There are three primary points that have been swirling around my head over the holiday break:
1. When design is valued for its outputs instead of its practice, businesses inflate the discount rate of design.
Like our peers in engineering, design has been valued for its short term gain: its outputs of production.
The more a designer could produce in the same period of time, the higher their value. If a designer making $60,000 annually could produce $80,000 worth of work, you would say that the Annual Return on Investment (ROI) for that designer is 133%.
Most people have a cap on the amount of work they can do in a day, and that cap is not likely to increase dramatically as they gain experience. So the ROI of design in these environments is relatively fixed and linear.
These types of businesses hold little incentive for designers to engage in work outside of producing the outputs of design. For every hour that a designer is doing research, that’s one hour that they aren’t producing, decreasing their return.
And because these businesses don’t have proof that some future work based on design research will be significantly better, they have no reason to ascribe a higher ROI to design practices.
Factor in the fact that I discount the value of that future work against today’s work and design research starts to look like a net loss.
The discount rate means that when design is valued primarily for its outputs, there is no business incentive to invest in design practices that support future work over work today.
2. Because of the inflated discount rate of design in an output-driven environment, the more design focuses on production, the less incentive there is for businesses to invest in the practices that lead to better design outcomes.
The problem with this incentive system is it’s based on a fallacy.
When design is applied as a practice, and not just a production role, it actually creates more value for the business. We see this in more mature organizations: design that is holistically integrated and applied across business processes (e.g. not just toward producing artifacts for development), the more value the business generates.
This is backed up by multiple studies. Design practices like design thinking, design research, and design strategy, have a positive impact on the bottom line.
But in order for businesses to recoup this value, they must transition the way they deploy and fund their design resources. This may lead to a temporary dip in the perception of the value of design as design teams re-orient their production work in order to focus on higher-value practices.
A great example of this is when leadership underfunds or puts off the creation of a design system, which they justify because it would require at least one designer to shift their focus from production work. However, we know that this short term decrease in production in order to give the team time to organize an effective system can actually increase velocity and value in the future, well beyond what is possible without a system in place.
Leaders continuously put off investing in work that will lead to faster and more consistent value after some period of work, because they presume that interim work is wasteful.
Therefore, there’s a contradiction to design value: the more teams focus on creating short term design outputs, the less likely they are to realize the full value of design.
3. Since the practices of design affect outcomes across the business, the investment in design practices is exponential: one designer can have an outsized impact by activating design practices within an entire segment of the organization.
Adding to the logic above, businesses caught in this fallacy act as though the ROI of design practices is the same as the ROI of design production. That simply is not the case.
When designers are focused solely on production, we see that the return on their work is fixed. However, when designers balance their focus on production with expanding the human-centered, creative mindset across an organization, they can positively impact far more people and processes than they would if those hours were only spent producing.
This network effect suggests that the ROI of design practices is more of a multiplier than an additive number.
I don’t claim to know what that multiplier is (…yet, but I want to find out). But if this thinking is correct, then we’re currently talking about the value of design all wrong.
The value of design practices is the ability to increase the efficacy, decrease the risk, and scale the impact of work across the business by a factor of x. X increases as the maturity of those practices expands (and not necessarily just the number of people doing them increases).
Therefore, the business value of design is directly related to its maturity and its multiplier effect, and will be seen not by looking at the outputs of design itself, but by assessing the outputs of the functions and outcomes that design influences.
But the business must resolve itself to get there.