Shuffling the full stack design agency

I thought I knew the design industry.

I studied design in high school, graduated design college and have worked for about 5 years across boutique design studios, full-service advertising agencies and internal product teams. Yet, it’s still so new to me.

This wonderful conversation with Peter Merholz (Director of design @ Jawbone, coined the word blog), illuminated and tied together many strings of thought I’ve had recently on the state of design in corporate America. 

It’s worth listening to the full episode, but for the last 8 minutes of so Peter discusses his explanation for the decline of signature’ design firms like his alma mater, Adaptive Path.

I’m writing this down mainly to have it all in one place, and consolidate my thinking. Most of it is paraphrased.

Design thinking has come of age. Companies have recognized a different order of the value of design. Previously, design was understood as a execution function, an extension of the brand, to be appealing, desirable and to differentiate yourself in the market. 

Now, design (and design thinking), is seen as a core competency to any business that has customers. As companies accept this idea, they are naturally spinning up internal or ‘in-house’ teams. 

Design agencies are getting squeezed in all directions.

The willingness to buy offerings from design firms is decreasing, as companies bake design into their organization. Previously, the design budget might have been spent largely on external work (this is where agencies make money). Now, it’s starting to inverse. This is simply a case of moving money around. And the big names are investing in themselves.

Design agencies are not only competing with other agencies for talent, but also in-house design teams at big companies (who can afford to out-bid on salaries). Google & Facebook decided to throw giant sums of money at design 5+ years ago, which has totally reshaped the hiring market (especially in San Francisco). Smaller startups (and agencies) now need to offer competitive salaries. Everyone is paying more for design. 

Another developing story, is that the biggest management consultancies (McKinsey, Accenture, PWC, Deloitte) are investing heavily in design (as a strategic practice). 

These firms had seen companies like IDEO and Frog get big billings for projects of the sort that used to only go to them. They realized they needed a design competency to stay relevant in the 21st century…(they are now) deploying design practices at the highest levels of global corporations as a tool for creating strategy.” - The bifurcation of design services

These guys are really doing the lords work for design.  They’re influencing the highest level of strategy, from the top-down in some of the biggest companies in America (and the world).

As a response, agencies who offer more execution’ based work and lower level strategy practices are finding themselves ‘plugged in’ to companies and working more like internal teams (agile, fast), again, leaving the middle to stagnate and lose clients.

This looks to be the way the work, money, and jobs will continue to split in our industry.

For now, I see design thriving in high level firms, where it is treated as a razor sharp consulting practice, and continuing to grow as an industry as it normalizes itself internally.

September 6, 2015