Royalties are not what I was proposing. I think design firms basing their profits off of hourly design rates alone will keep thinning out at an astounding rate unless they adapt their business models. A more progressive business model for the product development world would be based on a manufacturing for their main source of income. So the design firm would have two branches-- the manufacturing side and the consulting side.
For manufacturing clients, the hourly design & development rate would be waived, and the profits would be derived from units shipped to the client. The design firm can develop a top-notch product without being slaves to the billable hour, and in the end see greater profits with more sucessful product sales. They also get full control all the way thru manufacturing, so design intent will not be sacrificed by a third party vendor.
For the other branch, the design firm would then be able to pick and choose more interesting consulting clients since they have a “safer” (and more lucrative) cash flow from the manufacturing branch. Again they won’t need to worry about every billable minute, and will actually have the opportunity to perform at the top of their game. No longer will they have to take on less desirable projects to fill the gaps between their A-game clients.
I work at a firm now that operates on a model similar to what I am describing, so this is not based on a “a bevy of missinformation and third person related stories”. This is the real deal-- certainly possible and definitely achievable…
That’s great, but your firm is then teathered to the manufacturing process that your other half posseses. To me that is not a consulting firm, it is a design service within an OEM. A great thing, just not a blue sky generator. Just my opinion. I have seen quite a few of these masked as design firms.
The more solvent firms that are not tied to a manufacturer have a much broader client base and work within as many different industries as possible. They tend to be more consumer oriented than manufacturing oriented. This model is strengthing as products offer more than simple reliabilty and tie more to lifestyle. For example, the firm I worked for did projects in the consumer electronics, toys, housewares, glassware, footwear, eyewear, and medical products industries. That variety wouldn’t have been possible if we where tied with an injection molder in China.
I agree that the firms that cannot offer the consumer connectivity, or don’t hook up with a manufacturer, will drop out. That’s capitalism. Evolve or eliminate.
You’re right-- that business model will not yield a purely conceptual company, since manufacturing actual product plays a large role. However…
…I am not proposing that the firm would be “tied” to any certain manufacturrer. You would have a manufacturing/sourcing team that would have a knowledge of an array of factories to get the job done. Additionaly, the consulting half of the firm would have the freedom to take on jobs in a diverse array of fields. In fact I think that ideally the business model would allow the the firm to take on only the “best” consulting gigs, since their profits are more heavily based on the manufacturing. So if a really hot blue-sky gig comes along that has a tight budget, you could take it without an overwhelming fear of maxing out your budget, and you can work the project the way you see fit-- creating the best possible deliverables in the end.
I see what you are saying. So there would be a design team in the US and a development team in Asia, makes sense. The manufacturing word made me think it was a specific manufacturer you had a relationship with, like the flextronics set up.
There already are many established manufacturing “brokers”, essentially middlemen efficiently connecting ideas with manufacturing capacity anywhere in the world, and it’s far from being cost-oriented only.
Nothing stops design consultancies interested in surviving beyond the next decade or so from partnering with such individuals or manufacturing consultancies (another inexplicably underserved business niche) to offer their client a truly complete solution while still remaining specialists in what they do best - design.
That’s added value. Nothing wrong woth hourly or lump sum fees in design consulting but the complaint I’ve been hearing by far most frequently from ex-clients of design consultancies is they never really complete the work required to get to market. And even the design work is sometimes half-assed.
Clients really want to go to the mall with this, get everything done in roughly the same place, not wander around among unrelated service providers. Many good design firms are and will be going down because they never really bothered to understand their customers’ own struggle to survive a competitive market, nor the true meaning of a mutually profitable turnkey service proposal.
The sooner people realize that the USA only helps those who help themselves, the sooner everyone here will be happy. Design a widget, hire cheap CAD from overseas, put it on QVC or Ebay and make a million. Start a business. This is the advantage of today’s industrial designer.
Between what I read, hear and experience, One should either manufacture thier own designs or work for a giant like Nike, GM, etc. Would-be domestic clients are migrating to Asia/India for cheap CAD. The only value an ID’er can bring to the table is “Phase 1”, the concept. After that, everything can be farmed out. All that schooling to just be shafted by cheaper overseas sourcing. No one cares about CAD skills except other industrial designers. Any client just wants to get the job done. So some poor bastard has logged 40,000 hours on Pro E and has become a fantastic technician. Thats awesome…I think it is time for the design world to regroup, again.
Steve, they don’t call “common sense” an oxymoron for nothing. Product designers are just so in love with their oversold and overhyped brand image as originals they just never saw it coming, let alone from where.
You sum it up well. As large-scale ID and engineering services gradually melt into outsourced manufacturing for obvious reasons, the main local casualties will be all the clueless designers still looking for traditional design work but graduating into a drying industrial landscape where humming production machinery will eventually be a distant memory.
History shows that once industries disappear, they are gone for good, along with the expertise and way of life they entailed. Designers are in a privileged position to re-imagine our entire process of interaction with our physical environment, from concept to disposal, but precious few seem interested.
As you mention, this entire profession is ripe for renewal from the ground up.
Exactly Egg! At this point being a industrial designer doesn’t mean thinking outside THE box, but rather to think outside OUR own box. What owner of a design firm can’t admit that they aren’t frustrated with life. I have a close older mentor/architect friend who has taught at Yale, Harvard as well as a few others. Frustrated over the status quo, I once asked him if a Masters in Architecture would be a worth-while direction in order to expand my horizons. After all, both Arch. and ID share many parallels and it seemed as if structures were rising all around me.
To my suprise, his reponse was that to be an Architect was nothing more than a status symbol. After 30 years in the field, he claimed he could have made more being a plumber. Truth be told when I happened to visit his own high-end yet low-profile woodworking company specializing in custom fabrication for his own work as well as other high-society archictects. Even that business, according to him, barely survives. Last month he asked me how I had been marketing myself. Thinking this was a rhetorical question, I answered with “not so well lately” and described how I had lost all my CAD quote to an overseasbid. He response was: 'Sounds like we both need a pimp!!".
A wise man once said: “your best investment is in yourself”.
We all thought that we did and now, here we are trying to find the future for ourselves. In case you were wondering, My hourly rate is maybe slightly higher than a plumber.
Yeah it is harder and harder to get traditional ID gigs. The world is changing fast. We IDers have to change with it and use our creativity to go beyond what is out there now.
We have to come up with our own stuff cause traditional consulting doesn’t cut it and isn’t a steady gig. After 14 eyars in teh industry I am still kind of huslting and struggling with stability while the client makes steady income…I hustle and wonder when the next paycheck or client is coming…
It is unnerving at times…
Either get a steady paying job at a large corporation or make your own stuff if you have the ability to.
Yes designers need to learn how to market their goods and not just do design by the hour as that is limited and non-recurring. Royalties are one way but doing your own goods lets you be in control and not always wonder if you are getting screwed or not…the only thing is it becomes a full time job to market that product so that may take away from purely doing design work.
Yup. Upfront faith payment + royalty is rule #1. Most people are affraid of rejection but this is the only way. I’ve been around the horn a few times with this. You’re always better asking for an upfront sum and taking the rejection/humility from your potential licensee. You might not score a deal with that particular group but you aren’t wasting your time either. I’ve been dragged out on an 8 month lark because my "agent’ didn’t understand the concept of monetary versus mental connectedness. If you give a design for free, it doesn’t cost them anything to cancel it. I feel like I coud write the book on this but I won’t let myself get carried away.
If the AVERAGE salary within a consulting firm is $60,000. That works out to roughly $30 an hour. Salary ranges from $35K to $95K.
Multiply by 3 for overhead and profit. Billable rate is $90.
Multiply by 3.5 and the rate is $105.
This sounds about right to me. Some firms billing at $90 to be below the figure of $100/hr.
I’d say a consulting firm would have difficulty breaking even below $90 an hour.
I’d say the majority of firms would bill at $90-$120/hr.
Top firms can bill more.
If the project is big the billable rate might go to the lower end of the scale because it keeps staff busy with guaranteed work for long periods of time. If it’s a smaller project it goes to the higher end as the work only lasts for a short period of time and it takes non-billable time to do the pitch/proposal which eats into the profit margin.
I think most good consultancies charge above US$40K and up for most ID projects. I think many projects are in the $60K - $150K range fo rthings like cellphones and cameras and laptop computers (Probably more than US$150K) etc.
Yes, overseas design is cheaper…And overseas engineering is cheaper.
In fact, a Taiwanese manufacturer recently hired Frog and IDEO to provide industrial design services, because they wanted an American “look”, but discovered it was cheaper and faster to fly a Taiwanese team of 3rd party engineers to the US, and put them up in hotels to do the development.