Hi. Here is another question that has been discussed here for a while, and we’d like to get some outside opinions.
What are the various business models of organization of design firms? Pentagram has a partnership model, some firms have directly owned branches, some have kind of a design franchise. Which are the most efficient business models and under what circumstances? Are there models from other industries (law, management consulting, etc.) that can be applied to design firms?
where everything has a virtual value as well as a real one. that way it can be modeled and analysed.
the decision makers on each project can enter this virtual model and optimize their ideas by creating inputs and test them through the virtual tools they have created and review their own interactions and what it yeilds. that way they don’t have to do the actual physical work on real time to find out if they agree or disagree. therefore the plan of the process is viewed prehand, can even be modified or reconstructed without any actual work done.
i don’t have a good word or phrase to describe it but i think you get what i’m arriving at.
it might be hard for people who are scared of experimetation as a key principal for business and innovation in this model.
He asked about buisness models, how does what you say relate to a buisness model? Not a CAD model…
Business model means how a company is structured and the process by whitch it runs. IE a conglomerate of partnered small companies providing the bredth of services offered by entierly inhouse firms like HLB, IDEO, Fitch, Smart Design, etc.
Or a single partner pumping CAD from his mothers basement, claiming to have mastered design, engineering, and user research.
To answer the original posters question:
I see various models working for some firms, however I also see the same models failing with others. I personally have been debating this question as I look out over the horizon of this industry. I am beginning to think that business models are not as important as business focus, and reputation.
The comminalities in the firms both large and as small as 3 persons is that they are developing products in a methodical manner. What I mean is they employ or enlisst experts to assist their designers in the business, marketing, and extreamly upfront activities making them appear as direct partners in the success of the product/brand/company in the eyes of the client’s CEO.
It is indeed a brave new world. There are a few things that have recently happened in the market that will change the way design as a business is modeled.
Today you can be anywhere in the world and in some senses be more intimate and better as a creative group than if you were physically in an office together. Things like skype, IM conferencing, pdf publications, iges and stl files etc. allow for much more cross cultural communications in order to arrive at objective design related decisions.
Today I fly to a tradeshow or conference in NY or Korea and I make contact with desigers or other project related people and then go back to San Francisco and develop the relationship online including all of my other netowrk of designers, model makers, UI specialists marketers, VCs etc.
In the CAD area more tools hit the market each day that improve the communication part of design and development. This fact is making the physical office or studio unecessary and limiting. If you want to have a variety of desingers working in your firm, traditionally you had to move them to your city and uproot them from their culture.
The video game model is indeed the current state of the art and is in some cases even being obsoleted by multiple virtual office presences around the world. You want to enter the medical design market in Singapore, open an office there. You want to enter the toy design market, open a virtual office in New York. You can do these things and still maintain your home base where ever you want and not sign a huge $5000 monthly office lease.
In the model making and prototyping area, Clark foam went out of business last year. Inexpensive foam modeling is now obsolete. I had a SLA model made in Shanghai last year in 4 days at a price that will shock you.
Lower cost products driven by the Wal-mart model indeed translate to a different way of doing design business. It even touches high tech medical equipment design that isn’t even sold in Wal-mart…yet.
I’ve not heard the term “video game model” as applied to this virtual structure. Not sure I’ll be using that for what I’m doing though. Hard enough for average companies to want to bother understanding this. Right now the only interesting people contacting me are those from places like MIT.
For anyone interested in this though, my blog is basically covering topics related to this shift. Things like ID, Branding, Rapid Prototyping/Manufacturing, Intellectual Property, Videogames, 3D Tools, aso.
The moderator has an interesting question. There are quite a few diferent business models in ID (I even participated in an attempt in franchising an ID studio). But there does not appear, on the surface, to be a significant trend, or advantage to one strucutre vs. another. How come?
I don’t think the real advantage comes from the business model. I think it comes in how the business is managed. Any of the structures available can be successful, it depends on how the structure enables senior managment to implement strategy. That’s the million dollar question.
For example, I don’t like partnerships, because what happens when the economy changes and, let’s say, industrial design becomes a money-losing division. Since the ID leader is a partner (or partnerS) how can the business efficiently decide to close that division?
The challenge with sole-proprietership? Tunnel-vision and lack of range in ideas are two challenges just to begin with.
My current favorite; incorporations where the BOD includes the senior mangement (along with outside directors). This still allows the CEO to reorganize as necessary, but provides a forum for senior managers to vocalize their business needs and ideas.
Dosen’t it also seem obvious, accepting whole the idea that design thinking is the future and that design doing will be outsourced, that the next model is really the management consulting model which exists currentlyas an optimized vechile for selling thinking?
Not sure what you mean by “optimized vehicle for selling thinking”. Seems to me it’s a limited vehicle. Companies aren’t typically going to ID firms for brand management… even though one of the most obvious vehicles for communicating a brand’s message is the product itself. That’s a part of my thinking, yet it’s not a big part of what’s expected of me.
Seems to me that brand has been too closely attached to advertising. How else to explain some of the truly bewildering articles on sites like Ad Age where pundits are lauded for comments like “we have to connect with our customer”! No shit.
on one side it depends on how well the market research has been done while on other how well established is your relation with those who actually bring the concept to existance.
but i wouldn’t rule out the surprise element which is imo the key to right marketing in todays highly flexible yet highly targeted market.
old marketing approaches are not only slowing down the design process as a whole but actually damaging design, manufacturing, sales process itself.
thinking model requires specialized marketing personnel who hopefully either have a clear understanding of science and technology as a core prerequisite or have a natural talent for inspecting product concepts for such prospects and that is provided only through knowledge based marketing and research.
so the thinking model needs a highly advanced marketing mechanism as well as implementation.