The Soda Academy
"After struggling to get attention and respect from businesses for decades, design now has a seat in the boardroom."
"We need to embrace the broader, more integrated role of design, in which value is rendered above and beyond design artifacts."
"The value and craftsmanship of a design firm must be communicated on multiple levels: through the utility and beauty of the design solution, the measurable impact in users’ lives, and by way of a compelling story that a prospective client can relate to."

Carston Wierwille, Method

Creative Creative Destruction

Creative Creative Destruction

“The end is nigh,” my friend Jeff announced. “The design industry is toast. Eventually, we will all be working for the man.”

Designers love doomsday rhetoric. Professionally, they embrace the future with sincere optimism, even abandon. But in private, their outlook often turns bleak.

But Jeff has a point. Design firms are experiencing an unprecedented brain drain. In the last three years, roughly a third of my LinkedIn contacts have switched from design consultancies to in-house teams at Google, Samsung, Facebook, etc. Even accounting, construction and fast food companies are building their own design teams. Jeff, who owns a design firm in the Bay area, has lost many of his best designers and is struggling to hang on to clients considering a move from external to internal resourcing. Companies have hired designers as long as the design profession has existed—but arguably never at this scale and pace.

So what’s going on here?

Design firms won the battle for relevance but are losing the war for minds and market share. After struggling to get the attention and respect from businesses for decades, design now has a seat in the boardroom. The rise of design-led companies such as Apple, AirBnB, and Instagram has turned the perception of design from a largely aesthetic pursuit into a business imperative. However, design has not only become more strategic, it’s also become more commoditized. The “Design Thinking” movement and the codification of “UX” gave organizations simple formulas as well as the confidence to pursue design on their own. Companies went from ‘we don’t know how to do this’ to ‘we can’t afford not to do this.’

In well-functioning markets, non-competitive products and services are replaced with better ones. This is what the economist Joseph Schumpeter called “creative destruction”. Are we witnessing a creative destruction of the design services industry? Have we reached “peak design?”

Unlike my friend Jeff, I don’t like gloomy predictions. Here are three different strategies for design firms to stay competitive and vibrant in a shifting environment.

Strategy 1: Demonstrate Quality Beyond the Portfolio. For most design firms, the knee-jerk response to new competitive threats is to double down on quality proof points: “We need to show that our work is better.” “We need to invest in our portfolio.”

Of course, the portfolio is the heart and soul of every design firm. It is their calling card, shop window and holy scripture. During the height of industrial design in the seventies and eighties, it was possible to discern a designer’s work primarily through expressive form, color and material choices. With today’s digitally-dominated portfolios, however, it is increasingly harder to recognize work on its own merits. At first blush, almost all mobile apps look alike.

Design languages such as Apple’s iOS or Google’s Material Design are more prescriptive, leading to more homogenous interaction models and visual design expressions. Add to that a client team that may not be able to decipher the nuances that separate good work from great work. All of this makes it an increasingly daunting task to showcase quality and talent through a portfolio alone. The most important function of the portfolio may be to offer “social proof” through the client list, providing the type of assurance afforded by framed academic degrees in a doctor’s office.

The value and craftsmanship of a design firm must be communicated on multiple levels: through the utility and beauty of the design solution, the measurable impact in users’ lives, and by way of a compelling story that a prospective client can relate to. Quality considerations also have to permeate the client interaction. If we truly care about designing experiences, we need to curate and orchestrate our client’s experience throughout an engagement in the same way that we care for the end user experience.

Strategy #2: Think Different. Think Bigger. Businesses are rapidly adopting the tools and language of design. Executive management teams visit D-School. New downtown lofts are rented and equipped with white boards, post-its, and open office layouts. UX teams feed the IT pipeline with shiny prototypes. In this new world in which design is part and parcel of doing business, design consultants have to justify their existence and in many cases, transform themselves.

One approach is to focus on BIG design problems —to be a change agent for design-led macro transformations. When organizations try to pioneer new areas, they are more open to collaboration and engaging outside help.

What are the major new design challenges that have not yet become commoditized or codified? New technologies give rise to new design challenges and opportunities. While there’s no shortage of vendors that can design a mobile app, few design firms really understand the interaction models, technological infrastructure and business challenges associated with designing for the Internet of Things. How does the connected home become meaningful, usable and profitable, for example?

One of the BIG design problems that many organizations are trying to figure out today is how to remain relevant in a software-dominated world. This “digital transformation” is vexing for retailers, car manufacturers, health care providers and many other traditional industries.

The digital transformation also issues in a knot of complicated design problems: how do companies choreograph as seamless a customer interaction as possible across digital and non-digital touchpoints? How do they realign business incentives and behaviors to focus on customer experiences rather than short-term profit? At Method, we believe that a successful digital transformation requires radical customer empathy, and the ability to reconcile the “why” (brand) with the “what” (product and services definition).

Strategy #3: Experiment with New Business Models. Designers love the idea of product ownership—of getting compensated wholly or in part through equity and royalty rather than consulting fees. Alternative compensation models for design have existed for decades, and have produced great partnerships (Smart Design and Oxo, Ammunition and Beats, Fuse and Jawbone, to name a few).

[Note: Roughly 1 in 6 agencies are experimental with such alternative compensation models. Click here to review those findings from the 2016 Digital Outlook Study SoDA conducted in partnership with Forrester Research]

Much less talked about are the frequent startup failures or the inability of design firms to recover discounts through royalties. Realistically, design firms can only consider equity and royalty as “gravy” after a stable cash flow and profitability has been assured. During the 2001-02 downturn, the digital agencies with significant startup exposure went belly up (March First, Viant, etc.).

There are intriguing side effects of alternative compensation models. The nature of the client relationship changes when the design firm is not only a vendor but also a partial owner. In the process of negotiating equity or royalty terms, clients have to disclose financing details, board priorities, corporate milestones, and other sensitive information that otherwise would not enter the contract discussion.

Such increased transparency breeds trust and a different level of client empathy on the part of the creative team. Design teams that regularly work with startups appreciate the need to hit the ground running. They know that for a startup, shipping product is the only thing that matters. Designers can also hone their skills to develop a complex story in a concise format, for example for a Kickstarter or Indiegogo fundraising video.

Today, entrepreneurship is no longer just a startup topic—it’s become an alternative to lengthy and expensive corporate research and development. Organizations are looking to go to market for new product ideas more quickly, as well as to establish customer validation earlier on. Smart design firms and digital agencies have begun to extend startup engagement models to larger organizations. R/GA is now running accelerator programs on behalf of clients such as Metro AG and the LA Dodgers. The agency is curating and mentoring startups that provide innovations relevant to a particular client’s industry. In this engagement model, design firms and agencies act more as a broker and agent of innovation than as a pure “creator.”

Embracing Creative Destruction. Creative destruction is about taking things apart and putting them back together again in a smarter, better way. This is precisely what designers know how to do so well. As an industry, we have to start applying the tools of the trade to ourselves.

No, design is not dead. Far from it. But it is ever-evolving. We need to embrace the broader, more integrated role of design, in which value is rendered above and beyond design artifacts. We need to demonstrate the impact of design through thinking, making, and “making things happen”, as my colleague Roberto Veronese puts it. And we need to embrace destruction as a natural and necessary part of the creative process—in the work, in our clients’ business and especially in ourselves.

About the author:

As SVP / General Manager, Carsten leads Method’s business globally. He is passionate about the business of design and the design of business, focusing on aligning Method’s creative talent with client needs. Carsten has over 15 years of experience in design, technology and general management, and has worked extensively with clients in a variety of industries – including automotive, financial services, media and telecommunications.

Creative Creative Destruction: Illustration by Uruguay-based illustrator , Martín Azambuja