13 November 2006
But Be Careful Which One You Call
Maxine J Horn, CEO, British Design Innovation
But Be Careful Which One You Call
Maxine J Horn, CEO, British Design Innovation

Now more than ever, due to the growing understanding of the benefits of design to business, UK design firms have the opportunity to articulate their offer and evolve their business model. Maxine J Horn, CEO, British Design Innovation presents a view on the process of change the design sector needs to go through to secure its future professional status.

Brand Owners understand the value of design
Due, in part, to the high profile success of design-led brands such as Apple, Nokia, Dyson, Green & Blacks, brand owners have a heightened interest in design as a critical discipline that will enable it to engage with consumers in a more emotional as well as a more profitable way.

The value of design to business is far better understood today than it was a decade ago; however the understanding of design as a methodology and process driven activity rather than a visual translation of strategy or a commodity production process still has a long way to go.

There are many barriers to the deepening of that understanding. The first is that not all design firms are process and methodology driven and not all designers practice identical process or methodology. The second is that currently those that are strategically-led; user centered designers are not easily identifiable from the mass who are not.

Design as a term is a homogenous lump. If those seeking to buy into high-end strategic design thinking are to be assisted then the design industry needs deeper categorisation. Designers have to demystify the process of design to enable business to not only understand the thinking and skill base they are buying but also enable the client to participate in the process by way of creative knowledge transfer. Only then will true partnerships between designers and industry become more common place.

Educate the client?
We often hear the phrase educate the client but most often this is presented in a the client is a philistine manner and comes across as arrogant. The responsibility for transparency and involving the client in the design process and imparting creative knowledge is the responsibility of the designer not the client.

The process of change will be led by those designers who truly add-value to a clients business and do understand and continuously practice user-centered strategic design and have the confidence to transfer that knowledge.

Following the highs and lows of the design sector through the annual BDI Design Industry Valuation Survey we have been predicting this change for the past two to three years. Designers have been slow to respond to the point that change is now inevitable if the design sector is to be ready to take advantage of the growth in demand for design thinking from tuned in brand owners.

If high-end strategically-led, user centered design is identifiable and accepted by industry then the design sector also needs to accept that mid-point and low-end design services exist. A large part of the design sector needs to let go of the need to lay claim to the same quality of thinking and user-centered design methodologies that should separate the design leaders from the pack. Over stating capabilities in blind belief is not beneficial to design firm or client. It is totally acceptable and good practice for those offering a very competent and high quality visual translation of a client strategy to accept their role and position their offer accordingly.

Design firms at a lower end of the supply chain providing competent and cost efficient design and production services equally need to recognise and accept their core competence and thereby their place.

Categorise or accredit design firms?
Potentially designers could be categorised by their position in the supply chain with the high-end strategic, user-centered designers much nearer the top of the chain bought in as consultants at the early proposition development stage; and the others lower down the chain.

If it were a clean canvas, an accreditation system might categorise the three design types as Consultants (high-end); advisors (mid level agencies) and suppliers (low-end design and production studios).

Currently in a sector where any design firm can describe itself as consultant, agency or studio but with no official accredited meaning to the description, leaves industry struggling to easily identify one offer from another. As a consequence many inappropriate appointments occur and client expectations turn to disappointment, which affects the reputation of the entire design sector.

Additional categorisation by design discipline and sector specialisation would also help industry to determine those best qualified. Sustainable design, inclusive design, service design, proposition design etc matched to industry sectors, disciplines and high; mid or low end positions in the value chain enable clients to select design offers appropriate to their own need.

What is clear is that the design sector has been on a treadmill for a decade or more and it needs to change.

Innovation is the new buzz word.
It has been kicking around for a few years but until recently it wasn t linked hand in hand with design. Argument ensued about whether design led innovation or innovation led design. Personally, I feel that design has a fundamental role to play in the innovation process it is a translation partner to innovation.
Where scientific research might spawn new technology design can make sense of it.

In education, government and business the Science, Engineering and Technology disciplines are commonly linked together. User-centered design needs to take a prominent place in that line up.

Thereby high-end designers need to start collaborating with university researchers, scientists, engineers, technologists and understand their role on equal terms via a common language that language might be collaborative (creative) knowledge transfer.

From user-centered viewpoint designers bring together disparate parts of information and technology and create commercial market applications at the same time as evoking emotions and communicating brand values to consumers through new products and services.

Design leadership high-end strategic-led user centered designers
These designers will identify themselves and they will become the lead consultants over the next few years. The design sector has commonly run shy of the star designer system preferred in other markets such as Scandinavia, Japan, Italy the USA. However, whilst agency team work results in solutions that require equal credit; and named design firms such as IDEO have star like qualities, it is design-leadership and thereby individual design leaders (who may or may not be designers themselves) who stand out from the crowd and gain the trust of major businesses. A company is unlikely to appoint a design firm to advise its board but increasingly named design consultants are being appointed.

Identifying and building the profiles of key UK design leaders might also have a more positive impact on perceptions of British design abroad. The BDI Valuation survey shows that at least 25% of all UK design firms are exporting to more than one Country. Using 4500 commercial design agencies as the benchmark means that in any given year more than 1000 examples of British designed projects, products, buildings, services and brands are exported. But as designers are rarely credited for their work the UK design sector and hence UK plc does not benefit from this. If UK creative industries (creative knowledge economy) is so key to the UK s economic performance and design has been cited as key to UK business success both at home and in export markets should not industry and government be eager to credit the designers?

Building the profiles of the user-centered designers might also have direct benefits to them and their firms when it comes to designing their own products to license to manufacturers and service companies.

International competition versus new income models
Due to the increasing competition from China and India who are already providing high quality design services UK design fees can only expect to suffer. Presently we are being protected by our understanding of European cultures, consumer trends and user-centered design but that will not last forever. Product design development agencies; service designers and high-end brand packaging consultancies need to review their business models and move away from fees for services contracts towards licensing and royalty deals. Or at least balance their portfolios between fees for services and license fee income. Some consultancies are already doing this and have set up spin-out companies such as PDD s Carbonate. Other firms took the licensing route many years ago and benefit very well from it, such as; David Morgan Associates and individuals such as Julian Brown earn nearly 100% of income from licensing work predominantly to overseas manufacturers. And we all know the Dyson success story.

Whilst licensing can be more complicated and risky than simple fees for services models, for some design disciplines it represents both an opportunity and a survival necessity.

Equally it potentially provides a means for SME s to afford to buy into the design & innovation investment message. Shared risk and shared rewards is a partnership in itself and both parties have much to gain.

Opportunities and issues affecting middle ground design firms
For design firms operating in the middle ground providing high quality visual interpretations of the client led strategy there is also benefit to be gained from industry change. Many of these design firms have built up strong industry sector expertise and within those sectors a reputation for high quality creative solutions. Some however mar their otherwise good reputation by poor budget control or lack of transparency regarding costs; poor communication skills and/or lack of attention to detail or responsibility during implementation phases. The BDI Pitch versus Productivity client view research results cited all of these issues and more as dissatisfactions between client and design firm. Design firms need to take the time to identify their weaknesses and invest in training rather than just hope their creative prowess will result in clients forgiving their weaknesses. They won t.

Some of these design firms might also benefit from trying their hand at a license deal with a small but attractive client. It is common practice for designers to reduce fees for a smaller brand if they feel it will be a good portfolio piece. They could go further and negotiate a license agreement this might also be a way out of the fee price war for the more savvy designers.

The BDI Pitch versus Productivity results published in November put the cost of free pitching at 38,000 per annum, per design firm. Again using the base of 4,500 commercial design firms this represents an industry cost of 1.7bn. The research also confirmed that 26% of all pitches or tenders were never placed. Top reasons cited were change of marketing strategy or no budget to proceed.

Thereby it is way over due for a re-negotiation of the terms. If design firms offered clients alternative business models rather than leaping in and ignoring the pitch danger signs or not asking the right questions in the first place, it would save a lot of time, angst and soured relationships for both parties.

Pitching has increased not decreased. It may never go away, however design firms at least have the right to ensure the opportunity is genuine and that the pitch is contractual; thereby should it not be awarded, due to reasons outside of the design firms control, costs should be reimbursed.

The current state of affairs is unreasonable.

The other negotiation that needs to be addressed is the lack of any contractual extended usage fees. Designers, unlike photographers and illustrators do not earn extended usage fees when their work is used outside of the contractual boundaries. Photographers and illustrators and others are paid a fee but retain copyright and gain usage fees. That is accepted by clients. So why do designers not exercise the same rights? Again it raises the question of whether design firms should license all work and retain copyright or negotiate a copyright assignment fee as part of the value of the project proposal. Designers give away copyright too easily.

The widening gap between small niche and global design firms
If the value of design to business continues to be promoted and courted then the cost of design has to have equal understanding. Running a design agency can be expensive. Clients expect agencies to have decent offices, P.I insurance and enough staff to manage their projects professionally. A recent Willett Kingston Smith survey through the DBA made the case very clear. Salaries and overhead costs are increasing whilst fees are going down. The BDI Valuation survey reports that 54% of design agencies employ less than five people. Over the past 5 years those employing 50 to 75 have shrunk to account, in 2004/5, for less than 10% of the design sector, those employing 76 to 100 have virtually disappeared.

A widening gap is appearing between the small agencies and the very large (100 plus) pan-European and global players. We see this trend continuing. The make up of the industry is heading towards small, niche sector players; small to medium specialists and generalists and top end global players. It is likely that many of the smaller more secure, entrepreneurial agencies will begin to collaborate with other small agencies offering compatible design disciplines. It is also possible that the larger agencies and global players will engage and manage small, specialist agencies and outsource production work to studios . This is almost a return to the early 1980 s when there were fewer design consultancies and many design studios who serviced the large advertising agencies. Those were the days when studios employed visualisers, art workers, illustrators and typographers and ad agencies employed Art Buyers.

Times have moved on a pace since then. However there are many production led design studios calling themselves design agencies when in reality they are more comfortable offering a non-strategic visualisation and implementation service. That doesn t mean that they should not work for clients direct, only that they should be clear about their offer and capability and not seek to pitch way above their capability.

The confusion regards having no accredited meaning behind the descriptive term of design consultancy, design agency, design company and design studio is preventing both designer and client from identifying and matching need to capability offer and thereby cost comparison.

All type and size of business is expressing a desire to recognise the role design - sometimes hand in hand with innovation - can play in communicating brand attributes to consumers through products and services and thereby assisting in increasing sales revenue. If the design sector is to take advantage of this desire then it must seek to allow differentiation of offer.

Any design company can aspire to be the very best in the sector, discipline and service it offers regardless of whether it is a high-end consultant, mid level agency or production-led studio.

A re-categorisation or accreditation of the commercial design sector is not only inevitable but a beneficial necessity to all parties concerned.

New income models such as licensing, royalties, extended usage fees and greater understanding and tighter control over IPR is essential to protect the future of the design sector.

A greater acceptance of responsibility over communication of capability and transparency in costs must be provided to clients. And the courage to walk away from clients and projects that cannot be delivered within the proposed budget or a negotiation of a more commercially savvy, shared risk deal is more appropriate than under-cutting fees.

There have been several wake up calls to the design sector.

1.7bn cost to the sector in free pitching (on a 4.6bn turnover) BDI/Firedog Pitch versus Productivity survey November 2005

Salaries increasing fees reducing Willett Kingston Smith/DBA fee survey February 2006

Drop in turnover and fee income over past five years down from 6.2bn in 2000 to 4.6bn in 2004/5 (recording an all time low of 3.9bn in 2003/4) BDI/Design Council/UK Trade & Investment Design Industry Valuation Survey s 2000 to 2005

It is time for the design sector to take serious note and decide how to move forward.

BDI would be interested to receive feedback to this article from anyone with an opinion for future articles on the subject of design sector changes or accreditation issues etc.

Maxine J Horn
T: + 44 (0) 1273 621378