Mass ExtinctionThe end of an era for interaction design firms

Brian PullenTWG Design Director, @wisebeard

Interaction design firms & companies with these services

Who I’m talking about

A diverse industry

The mass extinctionOur industry is already weak and tough times are ahead

Your ValuesClients/ProjectsProfitability Legacy

What does success look like?

Profitability

Our industry by the numbers

Source: IBS World Industry Report 2014

Revenue21

Profit3.5%

$

bBusinesses124

Share3%

k

Market share maturity

Source: IBS World Industry Report 2014

Revenue48$

b Businesses124

Businesses

k64k

Revenue21$

b

Advertising Interaction

The top 4 advertising firms make up more than 55% of the market.The top 4 interactive firms make up less than 10% of the market.

Let’s compare profit

Source: S&P 500, StatsCan

3.5%

Interaction

8.9%

US Average

12%

Advertising

20%

Consulting

26%

Software

Our clients pay more to clean their toilets than build their websites.There are nearly 50,000 cleaning service companies in the US that bring in

over $40 billion dollars annually. Their margins are on average double that of

the interaction design industry.

Legacy

Creating a legacyFounded in 1864 JWT has changed

leadership many times over these last 150

years and is still a respected market leader.

J. Walter Thompson

Teehan+Lax closed their doors one month ago rather than transfer ownership.

Clients & Projects

What makes a good client & project?

High value Challenge

Impact Partnership

Low innovation & low impact

Low innovation & high impact

High innovation & High impact

High innovation & low impact

Small client & low interest

Small client & high interest

Large client & low interest

Large client & high interest

Values

What about your values?

Why is this happening?We do not know how to communicate or capture value.

Our young industry is highly misunderstoodMany firms have difficulty communicating

their uniqueness.

Creative commodity

FragmentationPrice competition

Poor stability

Low value projects

Low entry barrier

Even when we create value we have no means to capture it.

The corporate takeoverOur newest competitors is the in-house teams at our clients

No communication problemDesign-driven companies outperformed the

S&P by 228% over the last 10 years.

Software is eating the world

Adaptive Path

Acquisitions are increasing

Hot StudioFjord Carbon Fuse Project

MethodFrogNurun Teehan+Lax Sofa

Companies looking to accelerate the growth of their internal teams

are acquiring top firms with increasing frequency and value

We now compete for projects, budgets and most problematic of all, talent.

Companies that have a retention problem usually have a winning problem-Marc Andreessen

“

Clients will increasingly hire us for low value projects

Clients will still need us! We just need a new model and

more time, right?no not really…

Like any extinction your choice is to evolve, struggle on for a time or die off.

Possible evolutions•Get acquired

•Divergent specialty

•Research focus

•Become a platform

•Non technical clients

•Venture investing

•Product development

•Hybridize services

•Channel control

•Scale down

Most will choose to struggle rather than change.

Yes there will be success stories. I’m talking about a trend

Disclaimer

So what is the TWG plan to thrive in this chaos?

Let’s talk about the future together!

@wisebeard