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Understanding the impact of Design Debt.
The ROI (Return on Investment) is a profitability metric calculated as a ratio between the investment net profit and initial costs. In the design world, similarly to traditional investments, the ROI can be used to measure the effectiveness of a given initiative and compare it with other available opportunities.
When measuring the ROI of managing Desing Debt (paying it off and using it strategically), we need to consider two dimensions:
- Impact over time
- Short-term — some effects, like improved processes, will become noticeable instantly and will be affecting the team directly on a daily basis;
- Medium-term — some results, like a positive influence on company goals, will take time to become observable;
- Long-term — some outcomes should be treated as an investment that pays off in the distant future, like harvesting the results of supporting innovation.
2. The impact’s range
- Internal — changes affecting how the team works and feels (more efficient processes and decision-making, a happier team, etc.);
- External — influence on the new and existing revenue (serving the customers better, ability to ‘unlock’ new markets, etc.)
Read more about the external and internal value of design in
Matthew Godfrey’s ‘What’s the ROI of Design?’.
Design Debt management can influence various areas of product development and the company. I’ve listed the most important categories within which the returns can be gained:
- Unlocking new opportunities by paying off excess Design Debt that used to be blocking innovative solutions, as well as using Design Debt for experimentation.
In my opinion, this is the most important return, as it allows for creating key differentiators crucial for growth.
With fewer constraints, the team can enjoy the freedom of discovery that leads to uncovering new JTBDs and developing creative ways to serve them. This results in finding new markets as well as expanding the existing ones, therefore generating a bigger pool of users and potential customers.
- Escaping the linear growth — innovation has the potential to impact the revenue and steepen the growth curve.
In this case, the role of managing Desing Debt (and Technical Debt) is to lay the foundation for initiatives that eventually lead to exponential growth.
- Attracting and retaining high-quality talent
The reputation of an innovative company that provides its employees with unusual opportunities for growth makes it possible to work with the best people.
Company goals and the bottom line
- Contribution to achieving the business objectives by addressing the most common concerns regarding the key workflows.
Reducing Design Debt impacting current and future customer workflows helps improve the product-market fit or feature-market fit.
- TTV (Time to Value) — it’s a metric particularly important for SaaS companies that focus mainly on recurring revenue.
TTV is the time it takes for a user to see the value they were expecting; the so-called ‘aha moment.’ Reducing TTV by paying off Design Debt and using it strategically can improve retention, MAU, and WAU — metrics key for SaaS products.
Reducing TTV can help reduce customer churn, provide better turnover from sales efforts and trials, and create the potential for expansion within the existing accounts.
Actively managing Technical and Design Debt signalizes the company’s maturity regarding the processes and the product itself.
It’s a great signal for the board and investors that the organization is focused on sustainability and is investing in long-term value.
The Team (internal impact)
- Team velocity — by reducing the Operational Design Debt and improving the processes, we can positively impact the decision-making, review cycle, and resources management.
- Team satisfaction — talented people feel fulfilled when they see the impact their effort makes on the company and its customers. Improving the processes and managing Design Debt will have a positive impact in this area.
- An experimentation-driven team — changing the company culture to manage Design Debt sustainably long-term will support sustainable innovation.
When analyzing the ROI on managing Design Debt, we must remember that it’s mainly a long-term investment.
Building the foundation is the first step that lays the foundation for future initiatives and multiplies the results over time because of the compound interest.
As good practices and improvements accumulate, we will observe faster growth, better adoption, ease in accommodating new features and requests, and consequently, a higher ability to serve more customers better.
The important element in supporting this system is creating a culture of sustainable Design Debt (and Technical Debt) management. To achieve it, we need collaboration between:
- Teams who need to consciously use Debt and actively prevent it from growing;
- Leaders who must be willing to invest the resources necessary for these efforts as well as actively educate their teams and other leaders.
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