Nick Parminter, Founding Partner @ Class35
After hundreds of millions of dollars of transactions globally, the convergence of consultancy and design agencies is now well understood. If you wrote a list of the leading independent design and innovation agencies in 2016, that same list would now be under new ownership. Either by a big consultancy or a systems integrator.
As a founding team at Class35, we have been on both sides of these transactions and in some cases have had the job of running (or more accurately repairing) the integration efforts that follow. It wouldn’t be controversial to say that the experiment hasn’t worked — even if the consulting industry has found a way to weave a narrative that it has.
Design thinking & organisational design
The thesis makes sense. In a business age defined by rapidly shifting consumer behaviour, the rise of cheap and accessible digital technology and a resulting new breed of pure-play digital competition, even the most stoic analogue thinkers have had their heads turned.
The theory stacks up too. It is possible to assemble a new type of methodology — one that takes the need for experimentation and insight-led approach of designers, frames it within the business model sensibilities of strategy consultants, and then pulls through the operating model and technology skills required to turn ideas into businesses.
Or put another way — taking the problem-solving skills of a designer but not the naivety to what works in the real world, and taking the structure of a consultant but not the innate urge to kill all inefficiency, no matter how effective.
The practice is less perfect, and arguably remains unmastered. For a couple of reasons. There are the obvious cultural barriers to chucking design-types and TM Lewin-donning Red-Brick types into the same room and hoping they play nicely, but there are also a number of more fundamental methodological kinks to iron out to make this work.
All this means that the playbook is now sadly predictable — get acquired, lose the most independently-minded folks almost immediately, get lured by the retention benefits to stay on, slowly lose the ability to win work independently, design a load of dashboards for big group clients, lose more folks who hate designing dashboards, give up the ghost and go fully integrated, hire a more senior team that can ‘play nicer’ with global account leads, lose the last remaining originals, rebadge some corporate folks, slowly become a division within a division, have a “brand review”, lose your name. Design agencies are proving to be amongst the most soluble solutions when put into big consulting groups — all under the cover of the increased (/reallocated) revenue and headcount, which are celebrated in league tables.
It is easy to put this down to cultural differences. From personal experience of having switched sides, chucking an agency culture into a consultancy (and vice versa) can be a lot like chucking a freshwater fish into the sea. The business model is similar, but almost everything else isn’t. As a consultant, you are taught to be resourceful, competitive and to ‘play the game’. In an agency you are taught to be original, collegiate and to ‘do the right thing’. One loves precedent and repeatability, one loves insight and originality — very hard to hold both mental models simultaneously. Even more frustratingly (at least for designers), one is taught to learn their craft over time and to develop their ‘sense’, the other is taught to learn anything instantly — so you can imagine a 12 year design veteren’s feelings towards half-day Design Thinking courses, and the resulting ‘certificates of completion’, like it’s some sort of evening class in the village hall.
For now though, I don’t think we as an industry should be focusing on the cultural side of things — even if it is the most palpable issue in many cases. It isn’t helpful to dwell on, and more importantly doesn’t really matter to the organisations that are hiring combined teams with the hope of achieving a ‘full-stack’ customer-led transformation.
We should all be focusing on an entirely new approach that takes the best of both worlds and creates some rules around who does what, when. The natural term for this would be ‘Business Design’, despite some of the negative associations arising from misuse of the phrase on both sides of the faultline.
Business Consulting + Design Thinking
You’ll do well to find a proper and commonly agreed upon definition of Business Design.
The design establishment, which continues its march upstream, will use any combination of the following words — empathy, abductive reasoning, business strategy, design thinking — possibly within a venn diagram. The execution of which tends to look like a business design team within the broader design agency, a few neat little canvases and a fair amount of cynicism from ‘actual designers’. I’ve not seen any design agency that is able to properly grasp the complexities of markets and internal organisational structures as a consultant would — so, whilst they may understand that customers are as irrational as they are important, they probably won’t see that the people within organisations are too.
The consulting establishment, which continues its march downstream, will use business design as a sort of evolved operating model design — one that combines organisation design, technology and business strategy to define the ‘capabilities needed to win in the connected age/fourth industrial revolution/new digital world’ (delete as appropriate). Although an effective and reassuring way to quantify an organisation’s response to external triggers, such approaches will rarely develop an ability to understand or even anticipate changes in their customers’ behaviour.
Both definitions are understandable — design needs to step up if it wants to exist at the scale of a business (rather than a product) and consulting needs to move on if it wants to tot out the same frameworks in a much less boxy and more competitive environment.
The problem with this though is that both are written from their respective starting points. And ultimately both are incentivised to ‘win the argument’.
Stepping back
Whether thinking about business design in an innovation or transformation context, there are some universal laws and common truths that business design has to grasp if it is to be successful.
First, customers are irrational. If you sit in a few hours of observational research, you’d see that customers are as motivated as much by habit and culture as they are by utility. They can be anxious, loss-fearing, herd-following and mistrusting — because they are people. This means that you can’t build the perfect product and assume they’ll buy it, nor can you set up perfect self-help portals and assume they’ll never call you.
Markets aren’t much better. Most strategic and economic frameworks are built on physics — cause and effect. The one-off magical meeting of demand and supply, with perfectly symmetrical information, is an absolute myth. Markets, contrary to popular belief, can create multiple answers to the same problem. But even then, you can create as much value as you like, but you’ve also got to capture it (i.e. make people pay more than it costs you to make the thing). There is no benchmarking or ‘white space’ analysis that can honour the alchemistic reality of launching services into markets, the only real answer is a bottom-up distribution strategy, based on deep understanding of your audience and their alternatives (which still might not be right).
Then there are businesses. It would be a mass generalisation to say they are inefficient, problematic and legacy-burdened. Some aren’t. But what is clear and common is that all businesses, whether 1 or 100,000 employees, share a very similar anatomy — they are a system of systems (more on that in my next blog, which I have been writing for about 3 years). And you can design and optimise systems, once you understand how they work. Not being relevant to customers anymore isn’t some form black magic, it is actually a systemic imbalance.
So you can see why, when presented with the same facts, consultants (or economists for that matter) and designers will react very differently:
- A consultant will have the frameworks to break down any complexity and inefficiency into a simpler feast but are sadly prone to quantitative bias — not helped by most clients’ urge to prioritise that which is measurable over that which isn’t (by benchmarking)
- A designer will break down the problem entirely differently, by looking at the human behaviour driving things, then prescribing the products, services, touchpoints and messages to fix pain and access gain, but will consider business models and organisational requirements as an afterthought (‘make this thing that I’ve designed make sense, because it’s what customers want’)
An example
To paint a real-life picture — I recently worked with a bank, who had a design agency and strategy consultancy answer the same question (in different phases), and couldn’t reconcile the two.
The designers had conducted 80 hours of customer research, and defined a product based on the needs they identified through skilful facilitation. Having designed the product, they then defined a revenue model, chucked a few pricing tables into a prototype and then tested it with customers — who had agreed that it made sense, and they’d probably pay for it. They then validated that technically it was easy enough to build. As a result, they were convinced that this business would make money, even if they weren’t quite clear on how much, nor at what cost, or how this ultimately translated into a P&L.
Conversely, the strategists looked at a benchmark of comparative and competitive products, how much revenue they tend to make per customer, and the level of capital investment generally required to get to that point. They did a scan of the macro factors that may arise for a product like this, and concluded that, in the face of a highly competitive landscape and uncertain regulatory backdrop, there was too much risk in the business model. They also modelled a typical P&L for a business like this, and showed that, if they were going to go for it, the upfront investment would take about 5 years to sweat off — based on the previous attempts of others. No sense of what the product would do, how it would work, what it would look like or what it would be called but a very thorough analysis of where to dig (or not dig).
The bank was confused. A very sound customer-centric and an alternative but equally sound economic argument were pitted against each other with no consistency. Some stakeholders were of the view that solving customer needs comes first, some were of the view that they didn’t fancy another few million pounds of investment withering on the innovation vine. As it was, a well-known virus settled the score. (In favour of the strategists).
The Third Option: Business Design
A business designer would tell you that the above scenario is a false choice — you shouldn’t need to choose between a profit model and a product — they can’t exist without each other.
With the above example in mind, let’s look at how an alternative approach could’ve worked — one that factors both modes of investigation:
- The strategists had it right — it is pretty important to define a business model and addressable market that is worth chasing off the bat — so I’d start there
- Within that construct, you should also gather a deep understanding of your audience and what makes them tick — not to explore the territory, but to map the opportunity — this is core design-thinking discipline, but framed well
- Once you have an understanding of the market, potential business models and an understanding of needs, you can then start to design the product — designing a product before a business model is cart before horse (even if often called ‘experimentation’)
- Now that you’ve got a sense of what sort of product could address identified customer needs within a business model that will probably work, you are ready to start testing the proposition — ball back in designer’s court
- In parallel, you can get an idea of the complexity of delivering the product and resulting costs of doing so, both upfront and ongoing. This isn’t “are there APIs?”, this is “how do our costs scale?” — that P&L model comes in handy here
- Only once you are clear that there is a problem worth solving, and you’ve got an idea on how to solve it, is it worth thinking about the brand. And even then, this is from a distribution and pricing perspective (not an aesthetic one), e.g. you want to know if co-branding gives you a distribution advantage — not what this means for your colour palette — consultants and designers are both bad at this, you need a marketer here
- Now you’ve got the full picture — a clear and validated product and business model (what you do) and distribution model (how you sell it), based on a combination of customer need (designer) and commercial logic (strategist), you can start to design and build the first iteration of the product — this can be a ‘true MVP’, because you know your business model and scaling cost implications (this is another blog long in the making that will go live soon)
This sounds obvious to anyone that has ever started a business — because this is what you would do intuitively if it were your money being spent. But it seemingly isn’t for those advising big companies.
You’d be amazed how many people pick out a colour palette before a profit model. Or conversely how many define product opportunities without ever defining or researching the intended audience of that product.
You’d probably also be infuriated by the number of people who, in their arrogance, will see the deep research and design skills necessary to pull this off as ‘fluff’, or those that see the strategic, technical and functional skills needed to land new ideas as ‘guff’.
So let’s agree a definition of Business Design
First, what Business Design is not:
Business Design is not a role
Think of it as a formation, not a player. Yes, there are ‘business designers’, but it often takes diverse teams to ‘do’ business design. Teams of designers, researchers, strategists, architects, op model consultants, functional designers, software experts…. Etc. That’s not to say the small subset of people that currently have the title ‘Business Designer’ should run that team.
Business Design is not a rationale for design
Business design often gets put into a camp of quantifying the impact of design outputs. “Here is the idea, now tell me how much it’s worth and help me land it”. Done well, it is much a part of the design process as it is the business rationale.
Business Design is not a business case
A business case is to business design what a mockup is to interaction design — an illustrative asset. Business cases are an important part of packaging up business design outputs but are only indicative of the wider work.
Business design is not a viability test
We are all familiar with that venn diagram — the one with viability, feasibility and desirability. Designers do the desirability, techies the feasibility, business designers viability right? From where I sit, business design is the venn diagram, not the viability circle. I’m biased — but you could argue that feasibility and desirability are a subset of viability in that old framework. (e.g. you can have desirability without viability, but not viability without desirability).
Now, what it is:
Combining all we’ve said, Business Design helps organisations to effectively serve irrational customers in imperfect markets by designing new services and the business models that underpin them.
It does this by combining disciplines to unearth profoundly relevant insights about how customers choose and use services, as well the forces shaping those markets, to then organise the business response that creates and captures value in this changing context.
And doing this all with a unique form of ‘grounded optimism’ — a comfort with uncertainty and a lack of precedent, and a belief that you can do something that’s not been done before by spotting unmet needs (as a designer is used to), as well as an understanding of what would need to be true for that new thing to become a new business (as a consultant is used to).
In simpler terms, Business Design is about TENSION:
- Unearthing the tension that exists between customers and businesses and empathising with both sides of the equation.
- Creating tension by assembling diverse and multi-disciplinary teams from all sides of the table to balance creativity with commerciality.
- Embracing tension by obsessing about the reality and context within which you’re working, continuously interrogating progress and being humble and flexible enough to spot and accept failure early and change course.
Right tension, wrong tension
Back to where this piece started — the unhealthy convergence of consulting and design disciplines, This methodical approach to harnessing the natural tensions that exist within the emerging space between the consulting and design worlds is, by definition, ontologically impossible within consulting-acquired agencies. Both parties have too much to lose.
But when you boil off all of the ego-related tension and earn-out clauses, you are left with a very practical and high potential tension between two established schools of thought. This tension is the magic. I believe that the fusion required to overcome this tension will create a new category of services business — see other fusion industries like FinTech, HealthTech and EdTech for validation of the power colliding two ways of working to create a better alternative.
The consultancies intent on bulldozing this tension (because of their inability to separate the cultural and methodological) are chucking the baby out with bathwater. The consultancy-acquired design agencies that are intent on elevating this practical tension into a philosophical issue are missing the opportunity to see their work have more impact than ever.
The convergence of design agencies and consultancies is beginning to look like the wrong answer to the right problem. Hopefully a better understanding of Business Design as a discipline (and, who knows, as a category) can emerge from this very expensive experiment and the tension that it continues to highlight.
(But then, I would say that because we are trying to build a Business Design Agency).
