In 2011, Marc Andreessen famously predicted that software would “eat the world.” Although the trend lines were already clear at the time, that statement has proven remarkably prescient nine years later. Software companies have since grown to become three of the five most valuable public companies in the world. Even compared to 2011, our lives are dominated by the code that powers our phones, computers, and other connected gadgets.
But a world eaten by software is also one of overwhelming choice. The internet connects more than five billion people, who have collectively created 130 trillion web pages. We have instant access to those web pages along with all of their untold millions of apps, videos, photos, articles, and goofy memes.
It follows that a world of overwhelming choice is also one of overwhelming competition for attention. To have any chance of competing, products and services need to be easily understood, compelling, and even beautiful. With the internet now providing the most potent means of distribution, design has become the most potent means of differentiation.
The ROI of design
Younger generations intuitively understand this dynamic and, accordingly, show a lower tolerance for bad design. When I was a kid in the ’90s, and I couldn’t figure out how to program our VCR, I blamed myself and cracked open the instruction manual. Today, kids and young adults who can’t figure out how to change episodes on HBO’s streaming service blame the product, not themselves—the onus is on companies to help us intuit their products.
Predictably, the most successful companies have adjusted. According to McKinsey, between 2012 and 2017, companies that prioritized design increased both their revenues and their shareholder returns at nearly double the rate of design-negligent counterparts.
It’s no coincidence that Apple, the most profitable technology company in the world, also maintains the most famously design-centric organization. But even traditional laggards have caught up. Microsoft was once best known for clunky hardware and “Clippy,” the anthropomorphic virtual paperclip that infuriated Office users. Now it makes software that is easy to understand and devices that are legitimately beautiful. At the time of this writing, its market capitalization is $1.2 trillion.
In other industries, design has become the key competency of category winners. Direct-to-consumer companies such as Glossier have made significant investments in attractive brands, slick products, and dead-simple purchase experiences, displacing decades-old corporations in the process.
These companies illustrate an important phenomenon: small, resource-strapped startups can now design their way to competing with larger incumbents. I remember watching the rise of Soma a few years ago, a beautifully conceived water filter that stole market share from Brita through superior design. Tarform, a small company with an electric motorcycle, may be poised to do the same with a product that, to my eye, far exceeds anything produced by Harley-Davidson, Yamaha, or Honda.
The best thing about design for a small company? It rarely takes piles of cash or massive infrastructure to compete. Many times, it takes only talent.
What makes a company good at design?
Emotionally, good design comes from a low threshold for frustration. The quicker you find a product intolerable, the more easily you’ll find a way to make it incredible. A sensitivity to your own annoyance can provide one of your most valuable assets. Imagine the obviousness of the Nest thermostat to someone who has a narrow band of temperature comfort.
For those who lack this innate sensitivity, the common conception of good design might conjure up tattooed Brooklynites rather than org charts, but it’s to the latter that they should pay more attention. As the McKinsey report outlines, the impetus for good design begins at the top, with folks who value both the aesthetic nuances of the discipline and the appropriate metrics for measuring its impact.
Admittedly, startups that begin with a design-centric mindset often ignore these metrics and instinctively prioritize aesthetics for their own sake. Luckily, this approach often results in lower customer acquisition costs, higher retention, and the ability to charge higher prices. For older companies that lack design DNA, it’s this impact on fundamental metrics that should convince them to invest accordingly.
More broadly, those metrics should inform a continuous process that begins with a deep, fanatical understanding of the customer experience. At MasterClass, we learned early on that potential students thought our courses looked too expensive, so we completely redesigned our course marketing pages. After reducing the amount of text and emphasizing photography and visuals, we found that students suddenly thought our courses looked like a bargain, even though they were the same price as before. We may not have had a successful company if not for this change.
While companies will win or lose, consumers will just win
All of this is bad news for companies that are unable to bring effective design into their businesses, but universally good news for consumers. In my view, we are entering a Golden Age of product design, where even niche enterprise products are finally becoming sensible, easy to use, and even beautiful on occasion. We’ve come a long way from the dark days of VCR programming.
Aaron Rasmussen is the cofounder and former creative director of MasterClass and now the founder and CEO of Outlier.org.