Sunday, August 25, 2013

Unlocking the hidden value of design services - Part 1

This might be shocking to hear but I believe the recession has been good to the design industry.

Don't take me wrong, I know from the inside how much design firms have suffered during the last few years. Many businesses have folded under the weight of overhead costs they could not eliminate or the debt they could not repay. For others, the lack of profitability seems to have permanently discouraged partners from investing in their firms and it has led many practicing designers to lose faith in the profession they have worked so hard to belong to.

When I started this blog over a year ago, I set out to explore how sanity in the design profession required such a fine balance between leveraging the magical experience of creating something new while remembering that what we create must have value to others. Understanding the post-recession re-tooling of creative professions was my goal and it all started with my first post “What’s in the toolbox?

So why do I say that the recession has been good to design businesses?

Because now that designers are finally seeing an increasing number of interesting RFPs flowing-in as well as a steady rise in billings, the holders of equity in firms are realizing the full potential of their newly-acquired “recession-survival” skills: they have learned to appreciate the value of the information contained in financial statements, they have developed selling skills they never thought they had, and they are reaping the benefits of a focused strategic thinking.

The professional landscape has changed and designers are now guided by a new map.

I am surprised by how frequently these days designers mention their attendance to real estate and investment conferences, their active presence in social media platforms, their new-found curiosity for Gen Y'ers and Millennials, their interest in deploying financial resources in technology and their deeper understanding of metrics that help them run better performing businesses.

All these interests bring improvements to the economics of the design services industry, but I have also noticed that what I consider to be the best measure of success is often absent from the conversation, crowded out by all these new and exciting activities. I am talking about that one element that has been the foundation of so many designers’ careers: a satisfied client.

I think there is a real risk that the search for operational efficiency might become the Holy Grail of designers focused on surviving the next economic dip. If firms make the keystone of their mission to become well-oiled and lean machines, they might just crowd-out the Client. While I insist that the recession has made many design practices better managed businesses, designers should not forget that the success of their services results from contributing positively to the goals of their clients.

So what do we get from satisfied clients that return with more work?

  • They increase the profitability of the business by reducing the cost of sales
  • They become an active part of the firm's marketing strategy – providing referrals and tilting the needle of trust in the right direction for other potential clients
  • They increase the intrinsic value of the business by solidifying the client portfolio and helping raise the backlog baseline
  • And last but not least – they provide the most significant and elusive reward a designer can get: a compliment for a project well delivered.

Here's the challenge: design firms need to be professionally managed to succeed but if they seek efficiency solely by approaching design as a goal in itself, they will only survive until the paradigm is disrupted again. But the firms that approach design services as a dynamic and evolving process by which they leverage their client’s ability to succeed, those are the ones that will perpetuate the business.

As designers seek to define their value proposition in the current economic environment, they must strike the right balance between the cost of the resources they apply to each endeavor and the opportunity cost of those resources. It is only by striking the right balance that we can maximize the productivity of each creative professional in the organization and unlock the hidden value of our services.

Design professionals are particularly vulnerable to over-servicing and under-valuing their involvement in projects, and that risk increases exponentially when clients do not provide the adequate level of project management. By delivering effectively on the services that clients have bought we can achieve a baseline profitability, but by actively expanding the scope of work and up-selling services that are perceived as adding value to the project, then firms can truly leverage their resources to maximize the performance.

In my next post, I will explore examples of actions that leverage this new management approach and unlock the value of design services.

No comments:

Post a Comment