I stumbled across an old Dan Pink post, referring to a yet older article of his in wired, talking about well curves.
This is a recurring pattern in many industries, where it replaces the more familiar bell curve. A simple example will be the fact that while big companies are getting bigger, we now have new small companies which are smaller than companies ever were.
It his post, Pink links two news items showing how the middle tier of the legal services industry deteriorates. On the low end – people will just get basic services online, which started with simple contracts, but quickly progressed into more complex services like divorce agreements. All for record-breaking low prices. On the other end of the well you get the big offices charging record-breaking high prices for high-end, bespoke services.
If you’re a law firm that used to make a lot of money out of divorce contracts but can’t justify a price premium any more – you’ll be falling into the well…
Make no mistake – this is happening in design and across the creative industry .
It is often believed that design and the creative industries as a whole will be the last to suffer from the wrath of globalisation and off-shoring, Pink himself has largely maintained this position in his excellent right-brain manifesto “A Whole New Mind.”
But the existence of a well curve within our own industry indicates that we are far from safe. Looking around I see that we are increasingly competing with both low end products (often rapidly becoming comparable) from emerging markets. Additionally, for high-end design, boutique agencies with more compelling price structures are competing with us on premium services (enjoying that other well-curve which makes being a small company increasingly acceptable and effective). I won’t even mention pro-am culture. This forces us to move higher and higher up the other side of the well, as the middle will not hold long-term and no leading company wants to become a part of the commoditised side of the well.
The solution? One option is to change the price structure to support this commoditisation of design – ad agencies have been doing it for years on some labour intensive deliverables. But who wants to work in that company, right?
So the other solution is to hire only outstanding talent and create an environment that lets them create fantastic stuff. Then, a company can price accordingly. Any big agency is clearly on the latter end of the spectrum, which implies – that its potential client pool will continue to shrink. It’s a scary trend – unless we price out more and more prospects, we’ll be facing more and more competition.
The next decade will be about finding new ways to justify this price premium facing an increasing amount of competition and new models for agencies, the major players won’t give up so quickly and will constantly push them and the entire industry, forward. Now isn’t that exciting?
P.S. the above would still hold if I was still working for a boutique agency, their prices are usually closer to the big ones than the other end.