Digital Disruption Disrupted

The term “disrupted by digital” has come to define the era at the crossover of this and the last century in which publishing, music, advertising, journalism, television, and a host of other information & entertainment business models were destroyed and rebuilt in new shapes thanks to digital technology.

Web design firms rode the crest of this wave proudly bearing the jolly roger of digital as they upended traditional graphic design, advertising, and public relations firms in the first decade of this century.

Web Design Firms Are Failing

Now, in a tidal wave that’s moving so fast many don’t even know it’s upon them, these first-wave digital firms are themselves being disrupted.

Hundreds, or even thousands of web design firms risk obsolescence in the next year or so if they don’t rethink their offerings and re-engineer their business models.

Most of these firms know they’re in trouble—the signs have been there for a couple of years—but few are facing up to the reality of why or what to do about it.

Didn’t See It Coming

didntseeitcomingOn Monday, Marc Stoiber’s new book Didn’t See It Coming showed up in the mail.

Its cover (possibly the best book cover design of all time) has been staring at me all week.

Stoiber works to “future-proof” brands and his self-effacing stories of his own time working as creative director at multinational agencies on large CPG brands skillfully highlights how success, for brands and the firms that market them, leads to complacency and to the invitation to be blindsided by change.

I’ve written before that I once heard ReCourses’ David C. Baker tell an audience of design firm owners that they should reinvent their business every eighteen months.

After reeling at what I initially considered bad, even irresponsible advice, I realized he was right.

I’ve since further written about how my own periods of stagnation have coincided with stretches of three or four years where I did not reinvent my business.

Success Kills

In the economic downturns of 2002 and 2009, I was fond of exclaiming from as many stages as I could get to, “I love a recession. It’s like a disease running through an animal herd. It kills the sick and the weak, making the herd stronger.”

Now, in a tidal wave that’s moving so fast many don’t even know it’s upon them, these first-wave digital firms are themselves being disrupted.

Say that to a room full of people and the sick and the weak are immediately outed by their expressions.

In 2009 I saw an interesting trend: The graphic design firms that were failing were the famous generalists.

They were the ones that had years—decades, even—of regional success based on their reputation of doing great design, but who never evolved or specialized to meet the needs of a fragmenting market.

(The ones large enough to be owned by networks or holding companies were largely safe, often because they were merged into other entities.)

Back then it was primarily the slowness of these firms to get serious about digital, in addition to the weakened economy, that did them in. They clung to a ludicrous belief that an offering could be as relevant in 2009 as it was in 1989.

Regardless, it was the complacency that came from their earlier success and the hubris that came from the recognition garnered from that success that kept them embracing old ideas, often confusing them as values, when they should have been innovating.

Just six years later some of those very digital firms that disrupted and displaced the generalist design firms are the ones being blindsided. Once again, it seems to be the firms that found some degree of fame and notoriety that quit evolving. Nothing breeds failure like success and just a little bit of contentment.

The Innovators and the Oblivious

I’ll tell you below the three ways digital firms are thriving in these new conditions but first let me share an email conversation I had with the owner of a digital firm who has made the brave decisions and evolved with the market.

He pointed me to a recent article written by a founding partner of one of the famous digital generalists…one that is stumbling quite publicly right now. In his email he references that article:

“The disparity between [what the founding partner is saying in the article] and our reality is amazing. He’s saying that he and his other web dev buddies thought 2014 was the worst year of the past ten and budgets, leads, and sales cycles are all going the wrong way.

“We’ve averaged 16% year over year growth over the past ten years, and both our average budget and lead count fully doubled from 2013 to 2014.

“[The partner/author] clearly states the foundation of his misunderstanding in the penultimate paragraph of the article:

‘Businesses don’t have to continually re-invent themselves, but, perhaps change the semantics of what they offer.’

“That is exactly wrong. Constant and disciplined reinvention is all there is.”

Peter Drucker, the Yoda of management consulting, famously said that a business has only two functions—marketing and innovation. The irony of digital firms not truly innovating is almost too much to comprehend.

While we’re quoting Drucker, he also said, “Wherever you see a successful business, someone once made a courageous decision.”

A young person with nothing to lose specializing in digital 10 or 15 years ago isn’t all that courageous. It’s certainly smart, opportunistic, bold as any new venture has to be, prescient even if it they started earlier than that.

There’s no expression of courage however when there is no fear. Courage is kicking over a firm that’s been successful for 10 or 15 years and rebuilding it. Courage is constant evolution and innovation even when you really would rather just enjoy your success for awhile.

Peter Caputa IV, VP of sales at Hubspot, wrote on the decline of the web firm in this August, 2012 post The Web Design Business is Dead.

He nailed it…30 months ago.

That’s a lifetime in digital. The comments from web designers are particularly interesting. Some see it. Some are in denial.

Newfangled COO Chris Butler explained their pivot in September 2013 post titled, We Don’t Build Websites Anymore. (They do—perhaps a more appropriate title would have been, We Don’t Bank on Websites Anymore.)

Teehan + Lax, one of the best of them all, shut their doors two weeks ago—at the end of their most successful year ever.

That’s courage.

(The partners went to work for Facebook. You might say that’s courage!) Did they see the writing on the wall and want to get out while the getting was good?

It wasn’t that simple or ominous explained T+L founder, Jon Lax, but the loss of two key “product” people (who went on to found the very cool startup Wattage) at a time when the landscape was clearly changing did prompt the period of introspection into which Facebook dropped a “once in a lifetime” opportunity.

Democratization of Web Design & Development

The major force driving the current wave of change is the vast ecosystems of open platforms that have put powerful, inexpensive web development tools into the hands of millions.

A functionality that might have cost a client $50k-$100k to build three years ago is now a $19/month plugin.

Add to that the massive pool of inexpensive developers that can now be easily sourced and rated online through sites like oDesk and you’ve got price pressure on both the technology and the labour.

And this is just a beginning. We can’t be more than ten years away from building complex websites quickly by simply speaking to our computers. (Ray Kurzweil, if you’re reading this can you tell us exactly when this will happen?)

Sound far fetched?

Check out The Grid, the first platform to build websites through artificial intelligence. It’s cool. Whatever happens after that will be even cooler.

What happens after that, you probably can’t even conceive of but the idea that the world will continue to support numerous firms that build websites for tens of thousands of dollars a pop is preposterous.

That website problem has largely been solved. Now the web talent pool are focusing their efforts on more singular, specific problems. It’s not nearly all doom and gloom—the success stories are numerous and fantastic. Let’s look at how they’re doing it.

The Future Current State of Web Design

The digital firms that have innovated their way to success are taking three main paths.

1. They’ve Expanded Their Disciplines and Contracted Their Markets

Many of the thriving web firms today are the ones who realized web design is the increasingly commoditized part of an increasingly complex ecosystem.

While websites were being democratized ancillary applications were growing in numbers and complexity, creating all kinds of integration challenges.

Web sites lead to marketing automation which leads to consulting and integration, which could lead to staffing and training the new breed of marketing technologist required in such a system.

All this leads to CRM which breaches the wall in the client organization between marketing and sales. This leads to sales training or even complete outsourcing of the lead generation (sales, marketing or both) function.

These are just a few examples of the opportunities branching off of web design. Of course it would be folly to follow all of these leads but the point is there are just so many places to go when the centre you’re standing in is getting bombed out.

Choose one of these paths and ignore the barriers that separate design from marketing and even marketing from selling.

Do this within a specialized market such as a vertical and learn to solve the real problems specific to that market. Don’t worry so much about the tools that you use or where it takes you, just stay focused on solving the problem.

2. They’re Just UX. For Real.

I want my children to be user experience (UX) designers so they can add real value to the world but they want to be doctors and lawyers. I think UX design might be the most important job on the planet right now and for the next decade. Uber, Clarity and so many other revolutionary businesses have been a revolution in user experience alone.

A UX designer solves the client’s problem by solving the user’s first. She also serves as a translator between engineering, product marketing and marketing and works at an excruciating level of complexity and detail to make things simple.

I’ve never been clear if UX design is a thing on it’s own or if it’s the highest expression of digital design, but I know a UX designer by looking at her work and I know most firms that claim they “also” do UX design don’t. I think fundamentally you come at the problem from the user’s side or the client’s.

The demand for good, real UX talent is massive right now.

Uber says they’re looking for 100 UX designers. GE says they want 1,000. Facebook, Google, Capital One, Accenture and other large companies have all bought design firms recently and all those firms are UX (or UX heavy) or product design.

Web design may be dying but the demands for talent in related fields are massive.

3. They Now Build Products. Their Own.

UX firms help build applications, products and services for their client. But what about building them for yourself? This is another big trend in digital firms and where the real money is being made.

In one of my seminars a few years ago a business development person from a design firm told me the principals of the firm were worth hundreds of millions of dollars. I stared at him while I processed this. I finally said, “Industrial design?”

“Yes,” he said.

“You retain the IP or get a trailing fee on sales,” I concluded.

“Sometimes,” he said. “But just as often, we conceive of and develop the product first then sell or licence it to a client. We don’t wait for clients to tell us what they want. We exploit the opportunity in the market first.”

Interactive designers of all stripes take note: If you’re serious about apps you’ll think beyond the fee-for-service model and build apps and products for yourself.

If you’re really good at it you’ll end up as a software company and you’ll look back at the time when you sold hours and wonder what you were thinking.

An Age of Opportunity, Not Despair

It seems ludicrous to me that good firms filled with talented people could be failing in an environment where there is so much opportunity so close by even if it isn’t exactly where it was a few years ago.

But fail they are.

They’re still pining for the glory days like The One That Eddied Out that I wrote about in The Win Without Pitching Manifesto.

“What he cannot, or will not, see is that his misfortune is rooted in his early success. He was not forced to make the difficult decisions early, so when faced with them late he remained certain that the decisions and the effort could be avoided, and success could be had the old way once again.”

We Ain’t Seen Nothin’ Yet

Stoiber’s book couldn’t be more perfectly titled, his cover more succinctly evocative of the imminent fate of the generalist digital design firm.

Unlike 2009, the disease running through the herd today is not economic but merely the ever-increasing pace of change—the absolute majesty of the exponential growth curve.

If you think this happened quick, stick around for what happens next. Just make sure the pace of your own innovation matches the majesty of that curve.

I’ll leave you with the final thought that failing firms is not a bad thing at the macro level. That’s creative destruction at work.

All that talent does’t disappear, it gets absorbed into entities whose owners have made courageous decisions (or who are young, opportunistic and have nothing to lose.)

It’s hard to watch at the micro level, though.

The disease may ultimately be good for the herd but it’s painful when the sick and the weak are people you know and like; people who only yesterday were strong, brave and at the top of their game.

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