One of the trickiest challenges I have is defining what kind of services firm Adaptive Path is. For the sake of this post, let’s say AP is a firm that designs for interactive media — websites, software, mobile phones, devices, and kiosks.
Design for interactive media is a hot space right now, because of all the money flooding in online advertising. For example, Schematic was acquired last September by WPP, a massive holding company of communications services firms. Unsubstantiated word is that Schematic went for 6 times earnings, which is astounding, considering services firms typically get at best 3x. (12 years ago, I worked with Schematic CEO Trevor Kaufman when he lead up the website at Voyager. What a long strange trip!)
The thing is, AP is not an interactive design firm like Schematic, Organic, Razorfish, Digitas, etc. For one thing, we’re much smaller (though we feel big to ourselves, at 32 employees, we’re about a fifth to a tenth of the size of these others firms). But, and this is the crux of this post, we pretty much don’t touch marketing, and never advertising.
(In 2005, we decided to never do “just marketing” work again. This is because, although lucrative, as attested to by the growth of these other agencies, we realized that the people we brought on pretty much loathed marketing communications. We don’t want to work on the stuff that talks about the thing — we want to work on the thing itself.)
See, all these other companies are essentially interactive agencies, with a heavy emphasis on advertising and media planning. And currently, because of the movement of advertising dollars online, these companies are doing remarkably well.
Adaptive Path is more like an interaction design analog of an IDEO or Frog — where they began with industrial design, we began with interaction design, and we’ve all evolved into product strategy and design firms. In 2007, we found ourselves going up against IDEO and Frog far more than interactive agencies.
Now, back to the title of this post. I suspect that “the market” finds it a lot easier to find value in interactive marketing agencies more than in interactive product consultancies. And what I’m trying to figure out is why this is the case. Products (and I’m using that term generically, to include services and all manner of offerings) are what provides value. They are what get people to spend money, to engage in a service. They *create* value. But it’s marketing design, particularly advertising, which is what has been lucrative — think of the big ad firms going back 40, 50, 60 years. There are no big product design firms more than 30 years old, and there still isn’t anywhere near the kind of money in product design as in marketing.
(As I write this, I realize that the rise of the product design firm over the last 30 years, and the two companies I most associate with that rise (IDEO and Frog) are pretty much the result of the increasing complexity of product design thanks to computerization.)
I don’t have a close to this thought. I’ve just been mulling over why product design firms, which create value, don’t seem to be perceived as valuable as marketing design firms.
you would be shocked to learn that many companies spend way more on the marketing of their products than the development of their products. the making of the widget is one thing, the selling of the many many widgets is another. i, however, agree with your comparison of AP to IDEO, Frog moreso than with agencies. but isn’t AP/FROG/IDEO getting in on the innovation-strategy thing that is also another differentiator?
I’ve been wondering something related about AP for a while now – given your attitude and the company passion towards product design, why hasn’t there been more Measure Maps? It seemed a few years ago that AP was on the same natural progression that 37signals experienced, from a services-based focus to creating tools that helped them with their services to selling the tools directly. MM seemed like a definite success, not just because it was acquired but because it was a focused tool that served its audience well (I use it to this day). So why not shuck clients completely and make stuff for yourselves?
We actually did a fair amount of soul searching around that. Measure Map was a great experience, but it didn’t come without risks — if it hadn’t succeeded, it would have been a terrible blow to the company. By the time MM was acquired, we were at around 18 or so employees. We couldn’t simply become a product firm — we had too much overhead, so we would have needed to take investment. (37Signals was much smaller when they made the switch.)
We considered remaining a hybrid services/product firm, but we realized that that split serves neither side well. So, we decided to focus our energies on the services side of the business. It gives us the greatest freedom to do all the things we want to do (including events and R&D), and best allows us to fulfill our mission — the deliver great experiences that improves people’s lives.
All that said, I could see a future, when we’re big enough, that we might again pursue product development, because if a product were to fail, it wouldn’t be much of a burden on the rest of the org. But not for a while, at least.
I’m not shocked. I know it’s the way of the world. But I wonder for how long — marketing was dominant in the age of mass, and particularly broadcast, media. But as companies realize that “marketing spend” doesn’t have the same impact in the age of hyper-word-of-mouth, and as we have more circumstances like more and more products being returned even through the product isn’t broken (it’s just too hard to figure out), I suspect value will continue to shift towards product design investments.
I also wonder if we’ll ever live in a time where people are willing to spend more up front to save down the line. The “Get Me The Geeks” segment on 60 Minutes shows that a lot of value is currently located after-purchase, in service and support. Could product companies capture some of that value by having better, easier-to-use products that cost a little more to buy, but don’t cost as much to configure and maintain? Will consumers ever figure that out, or will the majority continue to focus solely on initial price?
Thanks for your post. This is something I have had to think through a lot over the past few years. LBi, the company I work at, has a lot of heritage as a company full of people who design the thing but a great deal of our work is going into the marketing side. I am very impressed with Adaptive Path’s position on this, as it is a view I share.
I have always had a great deal of frustration with the amount of money invested in marketing in comparison to product development, as well as the stark differences in raw talent needed for each. I remember hearing one of my clients state how as a rule of thumb, you should spend something like five times as much on marketing your product as you do developing it. That statement disgusted me as someone passionate about making great products rather than pushing average ones.
I think there are also some interesting things to consider with respect to digital and physical designers…I trained as an Industrial Designer but couldn’t possibly work in that profession since going digital. Generally speaking, digital pays way better, there is more chance for progression, and bizarrely you have more power with your clients. Some of my physical design peers who I went to college with or know from outside were generally more talented by me but now earn less. That sucks and I have always felt guilty for being so successful yet not half as skilled.
I don’t believe that product design investments will increase greatly in the short term, though I would love that. The companies have great designers who will always do great work for little financial compensation, because these guys are passionate. The challenge for getting people to buy the product is still getting it out there and known. Yes, the product will still have to stand for itself once bought, and ‘loved’ products like most of apple’s will help future sales, but I believe that apple are a rare case (nb, they still spend a shedload on advertising and pr).
Anyway, some food for thought indeed.
“Iâ€™ve just been mulling over why product design firms, which create value, donâ€™t seem to be perceived as valuable as marketing design firms.”
I think this is because good marketing can convince people that they NEED something, no matter how idiotic or useless that thing is (think pet rocks or, um, movies with Sylvester Stallone in them)… Which in turn means money rolling in…
Fabulously designed products can be, well, fabulous, but don’t guarantee people will buy them. Actually, I’d say it’s more normal for a poorly designed product with great marketing to succeed than a well designed product with little marketing.
FROG url is frogdesign.com not frog.com
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