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Mass extiniction

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An in depth look at the state of digital agencies demonstrates that most will go out of business within the next several years. The few that remain will either have dramatically changed or struggle to stay alive. I discuss the future of our industry and the forces that will shape the next decade. If you work at, own or operate, work with or are thinking of starting a digital agency you should check out this presentation.

Published in: Design

Mass extiniction

  1. 1. Mass Extinction The end of an era for interaction design firms
  2. 2. Brian Pullen TWG Design Director, @wisebeard
  3. 3. Interaction design firms & companies with these services Who I’m talking about
  4. 4. A diverse industry
  5. 5. The mass extinction Our industry is already weak and tough times are ahead
  6. 6. Your ValuesClients/ProjectsProfitability Legacy What does success look like?
  7. 7. Profitability
  8. 8. Our industry by the numbers Source: IBS World Industry Report 2014 Revenue 21 Profit 3.5% $ b Businesses 124 Share 3% k
  9. 9. Market share maturity Source: IBS World Industry Report 2014 Revenue 48$ b Businesses 124 Businesses k 64k Revenue 21$ b Advertising Interaction
  10. 10. 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.
  11. 11. Let’s compare profit Source: S&P 500, StatsCan 3.5% Interaction 8.9% US Average 12% Advertising 20% Consulting 26% Software
  12. 12. 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.
  13. 13. Legacy
  14. 14. Creating a legacy Founded in 1864 JWT has changed leadership many times over these last 150 years and is still a respected market leader. J. Walter Thompson
  15. 15. Teehan+Lax closed their doors one month ago rather than transfer ownership.
  16. 16. Clients & Projects
  17. 17. What makes a good client & project? High value Challenge Impact Partnership
  18. 18. 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
  19. 19. Values
  20. 20. What about your values?
  21. 21. Why is this happening? We do not know how to communicate or capture value.
  22. 22. Our young industry is highly misunderstood Many firms have difficulty communicating their uniqueness.
  23. 23. Creative commodity Fragmentation Price competition Poor stability Low value projects Low entry barrier
  24. 24. Even when we create value we have no means to capture it.
  25. 25. The corporate takeover Our newest competitors is the in-house teams at our clients
  26. 26. No communication problem Design-driven companies outperformed the S&P by 228% over the last 10 years.
  27. 27. Software is eating the world
  28. 28. 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
  29. 29. We now compete for projects, budgets and most problematic of all, talent.
  30. 30. Companies that have a retention problem usually have a winning problem -Marc Andreessen “
  31. 31. Clients will increasingly hire us for low value projects
  32. 32. Clients will still need us! We just need a new model and more time, right? no not really…
  33. 33. Like any extinction your choice is to evolve, struggle on for a time or die off.
  34. 34. Possible evolutions •Get acquired •Divergent specialty •Research focus •Become a platform •Non technical clients •Venture investing •Product development •Hybridize services •Channel control •Scale down
  35. 35. Most will choose to struggle rather than change.
  36. 36. Yes there will be success stories. I’m talking about a trend Disclaimer
  37. 37. So what is the TWG plan to thrive in this chaos?
  38. 38. Let’s talk about the future together! @wisebeard

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