Why designers should read annual reports
By Alen Faljic
Most people dislike annual reports because they are complicated. Indeed, they do feel like complex excel spreadsheets thrown into a pdf.
However, annual reports are one of the best resources for highly reliable business data. They are financial documents that publicly-traded companies have to share with their investors and potential investors. So, they are published on companies' websites and are available to anyone for free.
Annual reports are especially useful for designers who want to become more strategic and get a seat at the table. They can help us understand competitors' innovation plans, industry KPIs, other companies’ product suite, etc.
What can we learn from an annual report?
Here is a breakdown of a few things we can learn from a typical annual report:
Financials (revenue, profit, costs, etc.)
How profitable is company X versus ours? How much are they spending on marketing/R&D/sales/etc.?
Relevancy for designers: Understanding the distribution of power. How large is which company and how much power they have to affect our strategic plans?
Relevant markets
How much is a company selling in China/USA/Europe/etc.? Where are they planning to expand?
Relevancy for designers: Where do we want to expand? Should we be doing customer research in, for example, China? How should our product be adjusted for Chinese customers?
Offering
What products and services is a company offering? How much revenue is product X generating?
Relevancy for designers: How might we design products that are truly differentiated not merely different. What strategic choices have our competitors made?
KPIs
How does company X measure success?
Relevancy for designers: Ideas for metrics we can use to measure our design projects. Using metrics to communicate the benefit of our ideas.
Innovation
What is in a company's innovation pipeline?
Relevancy for designers: What products or features could we be developing too? Can we realistically beat them to market (i.e. be faster) or let them go to market first and learn from their mistakes?
Business Threats
What are our biggest threats that could hinder us from being a prosperous company?
Relevancy for designers: We can turn business threats into really cool design briefs. Instead of passively waiting for threats to materialize, we can proactively prepare for them.
Examples of annual reports
Now, let's have a look at these 3 great examples of annual reports:
Adidas' interactive annual report for 2018. Look how Adidas nicely presents its financial data (revenue, net profit, markets, etc.). Not that scary, right?
Netflix's 2017 annual report. Ever wondered how well is Netflix doing internationally vs domestically? Look at tables on pages 20 and 21. Average monthly subscription in the USA was $10,18 and $8,66 internationally. Design challenge: How might we create and capture more value internationally?
Audi's 2017 annual report. Skim through pages 40-87. You can learn so much about their innovation plans and how Audi thinks the future of automotive will shape.
This business data is very useful in the design process. It is a great resource for desk research. Whenever I start a new project or want to research a particular industry, I look for all the relevant public companies and skim through their annual reports. It is definitely worth the 90-minute investment!
For example, in Netflix's annual report (page 8) you can see that Netflix relies on Amazon Web Services for delivering content. Netflix is hosting and streaming content off of Amazons' servers. Interestingly, one of their biggest competitors (Amazon Prime) is also one of their biggest suppliers. Sounds like an interesting strategic design challenge, right?
By the way, you can find annual reports for publicly traded companies (and not for startups). You can find them by simply googling: "<company name> + annual report". For example "Adidas annual report".
10-minute challenge
I am challenging you to take 10 minutes right now and do the following:
Identify the largest publicly-traded company in your industry
Find its annual report by googling for "<company name> + annual report"
Go through the table of contents and skim through one chapter that sounds interesting
Share in the comments below what you found out and how it is relevant for design work.