Where Does the Design Agency Go from Here?

Troubled Times for Ad Agencies

Over the past 20 years, agencies — in particular, ad and media shops — have faced a rapidly changing landscape. Scott Galloway, professor of marketing at New York University’s Stern School of Business, coined the term the Four Horsemen to refer to Amazon, Apple, Facebook and Google: the four companies who, in many ways, have taken over the reins of traditional media and the advertising industry. To put their growth into perspective, the Four Horsemen together grew by 20 percent in 2016 while the US economy as a whole grew by just 2 percent. It’s no wonder that ad execs are worried.

How can design agencies adapt and, more important, retain relevance as leaders in their field? Is the design agency model the best way to deliver great work that solves real problems?

Are Design Agencies Next?

A quick glance reveals clear parallels between the issues facing design and ad agencies. On one end of the spectrum, the rising power of
procurement departments and tendering processes put in place to drive down costs has resulted in a decline in loyalty and excessive amounts of free pitching. Design work goes increasingly to in-house design departments whose costs are less visible to procurement. Shrinking design budgets have led to fierce competition between agencies and ad hoc teams of freelancers. Design agencies whose focus has been executional work are struggling to survive.

What Can Design Agencies Do?

The big question is, how can design agencies adapt and, more important, retain relevance as leaders in their field? Is the design agency model the best way to deliver great work that solves real problems? Based on the experience garnered from our positions at Edenspiekermann, we certainly believe so, but it takes a very different type of agency to do that. What does this “modern” agency look like, and how can it avoid the same fate as the ad and media shops?

The modern agency needs to operate like a research and development lab rather than like the old ad shops. It needs to be lean and efficient: flat in hierarchy and fueled by smart generalists who can manage themselves, their work and others.

5. Consider making the resulting insights drivers of your future business success.
Keenan Beasley of New York–based agency BLKBOX has an interesting and smart solution: “We work with direct key performance indicator compensation,” he says. “If we don’t hit the benchmark, we get x dollars as a fee. If we hit this feasible benchmark, we get x and y dollars. If we hit this other, much higher benchmark, we get z. That way everyone is incentivized for higher return on investment. Of course, clients have to be willing to play the game.”

The New Design Agency Model

With the increased presence of design competencies in technology and consultancy firms, the shape of the industry has already shifted past the point of no return. Although uncertainty abounds for the design agency, the current landscape is also filled with opportunity for those who adapt. Agencies must fundamentally rethink their organizational structures in order to stay relevant. Forget the sexy branding agency you fawned over your whole career; the tech and consultancy players are your real competitors, and they are damn good. The modern agency needs to be more than a design or creative shop. In order to stay relevant — and provide true value to its clients — it needs to be much more: a research and development lab, a technology partner, a consultant, a sparring peer for in-house teams, and everything in between. Above all, it needs to be a trusted partner who offers fresh insights and counsel to organizations and businesses, which are also finding their feet in a digital-first world.

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Edenspiekermann

Edenspiekermann

Hello. We are Edenspiekermann, an independent, global design agency. We solve business problems with design.