The following post is by Jules Ehrhardt, (@ezyjules), partner at digital design studio ustwo’s New York outpost. Jules offers his thoughts on where the digital design sector might be headed following the recent ﬂurry of acquisitions.
State of the digital design nation
This week, service design studio Fjord announced its sale to the management consultancy behemoth Accenture. This move follows a dizzying ﬂurry of industry acquisitions, pivots and mergers on both sides of the Atlantic. Big group moves: AKQA selling to WPP, LBi selling to Publicis (to subsequently merge with Digitas), Rokkan selling to Publicis. TechGiant acqui-hires such as Hot Studio selling to Facebook and NYC design studio 80/20 selling to Square. Not to forget last week’s pivot of London boutique consultancy Berg into a cloud services company.
Whilst this is not an exhaustive list, there is clearly a great deal going down in the digital sector. Most of these plays are driven by the shift towards user experience and digital product design. Under the ‘experience is the brand’ mantra, these moves are an effort to integrate such capabilities into an all-encompassing, 360, integrated service offering. The reality is that for those in digital product design*, these ecosystem changes present us all with a number of challenges and opportunities.
*By ‘digital product design’ I refer speciﬁcally to companies with the capacity to design and build digital products and services in house. This includes a range of companies from boutique mobile studios, interactive marketing agencies and design consultancies, to global management consultancies and the exciting new wave of digital product studios.
In the same way that consultancies such as IDEO and Frog achieved permanent association with innovation and industrial design in people’s minds, and consequently safe commercial orbit; the same opportunity and path is emerging for digital product design.
Importantly the opportunity to become truly great is about more than just financial reward. It’s about the chance to become a recognised design leader and partner to the brands whose digital products and services shape our world. It’s about the experiences and opportunities presented, which cannot be bought. The one shot you might be lucky enough to have at all this is however all too easily sold.
Boutique mobile studios focused on apps have made an impact in the last few years. However, the focus on an app or mobile experience is not holistic enough to cover the full cycle of a user’s engagement with a product or service. Service and product design instead requires wider thinking and expertise. Worryingly for pure play mobile studios, development is becoming rapidly commoditized, just as web development did in the noughties. Mobile shops are also often under heel to digitally naive ad agencies, standing in the way of the vital direct client relationships. In terms of scale it’s hard to win or manage certain types of business, let alone international accounts, if you are a ten or twenty person company in a single location. As the bottom slowly falls out, members of this group will need to scale, evolve, sell or die.
Interactive marketing agencies including RGA, AKQA, Razorﬁsh, SapientNitro, Huge etc, are all highly successful and established businesses. They possess genuine design cultures, as well as the people and the components required to deliver digital product. All of these players are no doubt looking hard at which direction to go in. Will the lure of the marketing dollar prevent them from arranging themselves internally to truly excel in digital product for clients? That million dollar gig to handle media buying and social media for bleach brand X is hard for them to resist. Why should they care about digital product when there is simply too much money to be made in marketising and too much business to grab from the traditional advertising shops who have been fumbling the digital ball. Sitting within a group structure, does lack of autonomy prevent them from steering the ship in anything other than the most proﬁtable short to medium term direction?
Old guard design consultancies such as IDEO, Frog, Cooper and Continuum have superb design credentials built over decades of outstanding work, delivering iconic innovation and industrial design. But digital and implementation have historically not been part of their DNA. Have decades of working in high-level innovation, in abstract, research and industrial design left them poorly positioned to respond to the opportunity around end-to-end digital product design? Some of the aforementioned care more about following through and implementing their visions to deliver digital products than others. Whatever their intentions, I suspect it will be no small challenge for them to reconﬁgure for the digital future.
The giant advertising holding companies or global management consultancies – will they ﬁnally get digital right through their acquisition strategy? I fear that their size, culture and commercial objectives do not accommodate the key tenets of good practice in digital product design such as (forgive the cliches) rapid innovation, fail early & fail fast, UCD, product budgets (rather than campaign budgets), running small, tight and efﬁcient teams etc. Will innovation even scale in these environments? I guess we will see this play out live with the integration of Fjord into Accenture’s design and marketing arm. It could be argued that they aren’t institutionally passionate about great design and experience but no doubt some of their people are. For the big boys, digital design is a capabilities play rather than a passion play and that will always translate into their design culture and ultimately their output.
The future is happening – The best chance
The fact is that for most of these companies things are going rather swimmingly. There is really little incentive to take focus off the cash cow and change course. This leaves the gates open for the next few years before some of the old guard get their act together on digital product. One thing is for certain – it’s going to be interesting to see how these major players position themselves in the coming years.
The next (ﬁrst?) great digital product design studio will not come from these legacy companies, but from the emerging generation of focused digital product studios. These studios are born digital, and their DNA is design, code and product. With focus on product and experience they are not blinkered by marketing bounty. Their independent status allows them to pursue an ideal and a mission. They understand that digital product is a ﬂedgling industry in its own right and not a subset of any other. Aside from their client work they invest their time and money in their own product explorations and they do this not as a cynical client winning initiative, but because they believe in it. These nimble, hungry and focused studios have the chance to navigate their way through the crowded ﬁeld, establish themselves and get a shot at greatness. The studios of the likes of Made By Many in London and Teehan+Lax in Toronto are ﬁne examples of these types of studios and ones to watch.
The designers, developers and strategists who actually make it all happen are characteristically idealistic people who want to believe that their work has impact and consequence. They are looking for the right home and a vision aligned with their ideals, which is increasingly less to do with a campaign and is certainly little to do with enterprise by spreadsheet. Mission based companies are magnets for those ideals because deep down we want to change the world.
Can the best talent ultimately be retained within large legacy institutions, or post acquisition in a culture and vision they did not sign up for or post acqui-hire at a tech giant where they may work on only one product? Will the shift towards digital product as the leading edge make the focused product players the most appealing proposition for the best talent and fuel opportunity? Again, the next few years will answer these questions.
The real opportunity
The discussion so far has centered around the agency/client model for digital product design, where one is paid for services rendered. This work can be truly inspiring and provides the opportunity to help deﬁne experiences for millions of people through client’s products. Where do you go from there? A proven track record in digital product will allow you to extend the traditional model by negotiating alternative commercial terms with companies, for example leveraging expertise for equity payment or under a JV arrangement. However, if you have that capability and spend the next three years only working for clients, you will have missed a far greater trick.
Real success in this area creates a far greater opportunity, which is to fundamentally reshape the the studio model. It has never been easier to build and distribute and market a digital product and those with a capability in digital product design who have been successful in delivering for clients, can and should aim to build capacity to explore their own digital product initiatives. Success here will generate passive revenue streams from the licensing or selling of a digital product or service as well the opportunity to augment the unscalable client service model. That in turn opens up remuneration models for the people that made it all happen which others cannot come close to.
The future, truly great digital product design company will have a stellar client service division, be running successful own product initiatives and will have equity stakes in select ventures where their skills can be leveraged best. Lots of legs on the table and one hell of an adventure.
Over the next few years there’s everything to play for. It’s game on.