Being acquired: why big brands are buying design studios
Sean O’Connor, partner at Smart Design, looks at why more and more companies are integrating design into their businesses through buying consultancies or investing in in-house teams, and weighs up the positives and negatives of being acquired.
Global companies’ demand for design is growing. Figures from John Maeda’s latest Design in Tech Report 2017 reveal that over 70 design firms have been acquired since 2004 with around 50% of acquisitions taking place in 2015 and 2016. With current examples including Cap Gemini and Idean, Capital One and Adaptive Path, McKinsey and Lunar, Accenture and Karmarama and Salesforce and Sequence, the trend shows no signs of slowing down. So, what is behind this buying frenzy?
Brands, IT and management consultancies, and advertising agencies buy design studios
The companies buying design agencies typically fall into three categories: Brands (often banks such as Capital One); management and IT consultancies such as Cap Gemini and McKinsey; and advertising and marketing groups such as WPP, which last year acquired Centrale Holding Du Bois Ording B.V. (dBOD), a design studio based in the Netherlands.
Across all three categories the desire to better understand design is driving the acquisition of design consultancies. As well as boosting a company’s creativity, it can introduce advanced digital skills and an understanding of how to transform corporate work places by breaking down divisional silos with the help of new tools and practices.
Facebook and Google have increased design teams by 65%
Even technology companies, which have digital skills in-house, are keen to hire design talent: Facebook, Google and Amazon collectively grew art and design headcount by 65% over the last year, according to the Design in Tech Report 2017.
Corporate companies that want to become design-led have two choices: build or buy. On building, brands such as Johnson & Johnson have created their internal design resource and have people holding roles such as chief design officer.
The alternative is to buy in the expertise, which is the strategy that Accenture, Deloitte and IBM – which are leading the acquisition trend – are pursuing. Other companies are doing both, for example financial brand Capital One has bought Adaptive Path in the US, while also hiring a design team in the UK.
Design can bring in more revenue and clients
But why are big companies acquiring design consultancies, or developing in-house design teams? It’s partly to do with complementing their current service offering with something that will make it more valuable for clients or open new revenue streams. The holy grail is being able to combine design, technology and business, which is essential for today’s digital-focused world.
There is also a need for companies to create authentic user experiences that are human-centred and relevant. Establishing an internal design department enables brands to keep pace with fast-changing consumer needs and bring new products to market more quickly and cheaply than more conventional research and development (R&D) processes might allow.
Pro: less pressure to pitch
There are pros and cons to being acquired. One positive is the removal of constant pressure for design studios to pitch and win new business, and also the potential to grow teams with ease.
The flip side is that if design companies lose their unique culture, they could potentially haemorrhage key talent, risking what makes them unique.
Con: less choice over projects
Designers may also find the projects they are working on more restricted, especially if the parent company focuses on particular sectors. This is great for those who want to specialise but not so good for those who enjoy working across a variety of clients and sharing ideas with those from different specialisms. That is where relationships with external design consultancies become really important.
Companies need to respect the “culture of design”
To integrate design studios successfully, acquirers need to be mindful of retaining that elusive “culture of design” common to well-known organisations. Accenture, for example, is credited for leaving Fjord’s carefully-nurtured culture alone. Other integration strategies include giving design a seat at the executive table, and giving them autonomy. For instance, big organisations should not push technology partners onto their new design teams; designers should be free to recommend the best fit for a specific design problem.
Big companies also need to ensure design is embedded into the company’s entire culture. Bringing in a design team is not a quick-fix solution; design needs to influence everything from product and service creation to launch and delivery to the customer.
Designers need to consider whether the company cares about design
Meanwhile, a key consideration for independent design studios considering selling is whether design is something that the company needs, understands and values.
The corporate world is increasingly aware of the commercial value of design. The 2017 Design in Tech report refers to the Designification of Venture Capital, highlighting a growing trend in funds founded or co-founded by designers such as Garry Tan. The report lists 11 early stage and nine late stage funds that are design-orientated such as the Designer Fund.
This shows the growing importance of design as a strategic business tool; its methods can help start-ups and big corporates investigate commercial opportunities, as well as craft experiences. Ultimately, the challenges and opportunities of acquiring need to be weighed up by both sides, and a decision made on whether it is right for the individual business.
Sean O’Connor is a partner at Smart Design. The design consultancy was founded in 1980 and has studios in New York and London, alongside global clients.