6 basic business terms and concepts designer should know
About six months after joining Apple, I moved from a team focused on internal training to one responsible for customer-support programs. When I joined the new team, I struggled to convince my peers in Program Management that dedicated time for research was an important part of the design process.
As I reflect on that experience, I realize I simply lacked the language to get others on board with my ideas. I was speaking design, but my colleagues were speaking business. I didn’t take the time to get to know their unique needs and objectives before I made suggestions on how I could improve things.
To help you avoid my mistakes, here are some essential concepts you can add to your vocabulary to help you align design to business better with your colleagues.
Chances are, you already have a loose understanding of what these mean. But let’s nail them down.
Competitive advantage – A condition or circumstance that puts an organization in a superior business position relative to competitors.
Example: Apple uses design as a competitive advantage. Geico uses low prices.
Profit – The difference between the cost of making or buying something, and the price at which it’s sold.
Example: In 2022, it was estimated that it cost Apple $570 to make a single iPhone. Selling at $999 means Apple’s profit per iPhone was $429.
Profit margin – The profit a company keeps relative to the sale price. Typically referred to as high or low, companies use profit margin to determine whether they need to sell a lot or a little of something to achieve income targets.
Example: Apple earns high-profit margins on their iPhones, so they don’t have to sell a lot of them to make money. The fact that they sell a lot is a significant reason they have over $62B in cash. Conversely, Geico has low-profit margins on its policies. So they have to sell a lot of policies to make a meaningful amount of profit.
Trade-offs – Decisions companies make to reduce something in return for increasing something else. You might be familiar with the trade-offs in the good-fast-cheap scenario, where you can only have two of the three characteristics when making a decision.
Example: If you want to keep costs low, you must choose between quality (good) and speed (fast).
Supply and demand – The inverse relationship between the quantity of products or services a market can provide and the desire for them. Companies can affect demand by controlling supply.
Example: Diamonds, believe it or not, are not rare. They’ve been made rare in the marketplace by supplying less than what is available. This has helped create increased demand over the last 80 years.
Market forces – Pressures that change the supply and demand of products in a free market.
Example: The threat of new competitors or substitute products, the bargaining power of customers or suppliers, and the amount of competition a company faces are all examples of market forces.
That wasn’t so difficult, right? Most of us already know more about business than we may think.
