"Following the Green" Presentation on Design Business with David Conrad

Interested in starting your own design business, but don't know how to do the "business" part? This comprehensive presentation covers how design studios make money, the ways design studios organize themselves to support making money, considerations for managing your studio's finances, and a method for creating your own studio operating model. Many of the tools and perspectives in this presentation were identified in collaboration with Design Commission, a successful design business headquartered in Seattle, Washington.

I delivered this presentation with David Conrad, Studio Manager and Co-Owner of Design Commission, as part of AIGA Seattle's "Design Business for Breakfast" series. Much of the information here was then included in my book Success by Design: The Essential Business Reference for Designers.

You can view the presentation on SlideShare and download the associated Excel spreadsheets here. Enjoy and may your business be successful!

The Dynamic Role of Design in Entrepreneurship, Part 6: Make Change Fun

This is the final post culled from notes I wrote in preparation for a talk at Kansas City Design Week (KCDW). See the slide deck here.

At the start of this talk, I'd defined entrepreneurship as undertaking risk to create customer value by making needed things, receiving feedback on them, and improving business performance iteratively. And I'd said I wanted to answer this question: How might we bring design into businesses to improve their chances of success?

Here's my answer to that question. Increasing the chance of success for design-led businesses requires entrepreneurs to define their impact potential, seek out “duh” problems, make desirable solutions at greater and greater fidelity, and work in cycles of learning. If there's anything you remember from this talk and put into practice, I hope it's this.

Every week, every month, every year, your business is growing and changing. Uncertainty and change can feel daunting, especially with so much risk in the process of running a business. But change can also be great fun, an exciting process of discovery for everyone involved—your customers and your teams, everyone that’s along for the ride. And it won’t stop until the ride is over. 

So take regular breaks as you sweat your way towards your entrepreneurial vision. Swap stories and support those that are part of your team. Don't get too worried (yet) about breaking away from the peloton. And take in the stellar view you might miss, both in the peaks and valleys, if you don't stop to take a look.

The Dynamic Role of Design in Entrepreneurship, Part 5: Improving Business Performance

This is the fifth of six posts culled from notes I wrote in preparation for a talk at Kansas City Design Week (KCDW). Read the first, second, third, and fourth posts, and see the slide deck here.

Improving Business Performance Iteratively

With enough customer feedback on our hypotheses, we are able to hone in on "duh problems" that, if solved, create major value for customers while also creating new business opportunities for our clients. This requires steady, consistent effort, and going through smart iteration on both the product and business.

Iteration doesn’t just mean to create improvement for improvement's sake, adding countless features and complexity in the process based on every piece of customer feedback that you receive. I see iteration as informed learning. If you aren’t learning in an ongoing cadence, and shifting your effort based on that learning, then you are taking on additional risk as a entrepreneur. Entrepreneurs need to be able to move not in long, slow, measured phases, but in a fashion that’s dynamic in nature. What you learn informs what you make, why and how customers value it, and how much risk you are still carrying through the product design and development process.

Let me use an analogy to try and explain this.

 

Think and Create in Measured Cycles

Do you like to bike? So do I. All the rage right now in San Francisco (and everywhere else, really) is the “fixie” bicycle, which only has one gear. This means that no matter whether you’re on flat ground or grinding your way up one of those terrifyingly large hills, you have the same level of efficiency in how you spin the wheel a complete revolution. This can be great when you’re in the flats, but on those insane hills, you’re getting crushed—and passed by all those people on their 20-speed bikes that can spin at a higher cadence with less extreme effort.

I like to compare the process of holistic iteration to learning how to ride a bicycle that has only three gears. The gears are associated with the fidelity of what you need to create, and the volume of complexity necessary to make that product tangible for your customers. The lowest gear is what you use to make a rapid advance on an early idea. You can move quickly to flesh out what you think the product will need to be. You shift into second gear, and there is increased challenge and effort to take the idea and translate it into the moving parts and pieces necessary to get it into customer hands. The highest gear has to do with small changes to your product or service. This is incredibly fast iteration, so you may be going up a very long hill, but you’re able to spin quickly to make incremental progress up the hill, polishing the smallest functional details to get them into use.

Often designers aren’t part of the pedaling in the lowest gear. They get stuck in the higher gears, spinning hard to make the tiniest details of the product or service—but they don’t get to take what they’ve learned and use it to inform the idea generation and big-picture design cycles. Designers work best when they have a chance to spin using all the different “gears” of the iteration process, moving from the big-picture flats to the peaks that provide the perspective to zoom down and plan out big sweeping improvements.

If businesses have designers only pedal in one or two of the gears, it can have a dramatic effect when confronted with these big hills. Design-led businesses have designers shift between all of them. Not only that. Design led-businesses understand that shifting gears may require not only rethinking their product or service, but also redesigning how the business functions as a whole. This is why I originally called this talk "Envisioning the Balance." You need to keep pedaling the gears at the right cadences, pushing toward a vision, to keep from falling down.

 

Keep a Record of the (Messy) Process

Often, the product is the only record of change for a business. Keep a record of the big changes, the things that really matter, the information that supported those big decisions. If I’m working on a product, I’m trying to receive feedback on a business’s product or service on a weekly basis, reflecting on what the feedback means, and adjusting course in the right ways for the correct “gears” that product teams are in. 

You will forget the reasons why you decided to turn left instead of right. You don’t want to repeat the same mistakes over again. Customer feedback is priceless, but only if you know what you’re learning as a result of said feedback, and can apply it at the right times.

The final post in this series will be about living with change.

The Dynamic Role of Design in Entrepreneurship, Part 4: Making Things and Receiving Feedback

This is the fourth of six posts culled from notes I wrote in preparation for a talk at Kansas City Design Week (KCDW). Read the first, second, and third posts, and see the slide deck here.

You Should Always Be Making

You’ve identified the level of risk you can take, and established the value of the problem you’re seeking to solve for your target audience. At this point, I still meet people who look at the entrepreneurship process as having an idea, formulating a plan around that idea, getting funding, then making the thing. This behavior happens not only in product and service design, but in nonprofit and global development work.*

Rapid prototyping and learning from those prototypes through intelligent iteration is the new norm. When people say the word "iteration," it's a marriage of both crafting versions of a product and reacting to what you learn from customers using that product. You should always be making rough versions of your solutions. These are ways to embody and test your assumptions and hypotheses around what customers might value. You can’t receive feedback about what customers value unless you make things and get them into their hands. 

This is the native impulse of many product designers. We have to make the things to understand them, argue about them, gauge their value. This is even for business ideas that may seem a bit intangible and contingent on technology for their execution. If you want to simulate how people would interact with a voice-command concierge like Siri, you could start with a scripted dialogue with people on the street rather than immediately building a front-end solution. If you want to create a website that provides the best chocolate bars available, use a paper order form and circulate it with your friends, seeing what content and prompting encourages them to part with their hard-earned cash. Test the value of the service or product in small chunks, touchpoint by touchpoint, and see based on their feedback what the shape of the system is going to resemble.

 

Know What the Things You Make Represent 

I recently had a project where our client was interested in creating a new business extension that could improve how we manage our money through smartphones. They had a lot of awesome capabilities to make this happen, but no explicit focus on what behaviors to target with people. So we spent time with the right people, meaning households where they were struggling to adopt strong financial behaviors, such as paying off their credit card balances on a monthly basis, saving money regularly, and all the other “good habits.”

At the end of these interviews, as we heard from them and observed different "duh," problems, we tested different hypotheses around what would best help them manage their money. We put provisional, sketched versions of dozens of solutions in front of them. We let them prioritize those different solutions, to see which would be more or less beneficial to them. Then we asked them, “Why is this solution are more valuable than the others you've seen?" You want people to say, “Oh, I wish that I had this, but it would be more like [a new solution they've drawn out] to explain what they need, because of [a situation or problem they hadn’t thought of until this stimulus was in their hands.]”

 

The Best Solutions You’ll Have to Tear Out of People’s Hands

In participatory design situations like the above, I gather feedback from people regarding potential solutions. Is it this exact solution, or are there other ways we can help them with similar issue?  I then ask them whether out of everything they’ve seen in the stimulus, what one thing would they want to have fully working and in their hands when they walk out the door.  

This is what’s known as forced prioritization. Sometimes the people we’re meeting with gravitate towards one or two ideas, and talk halfheartedly about how it might be useful for them. But you know you’re cooking with hot sauce when they say, “I wish I had this solution right now. I would start using it immediately.” Then they tell you how, in specific situations. This is a great starting point in which to gauge value, just as much as the fit or quality of a product solution as you’ve designed it. 

But as a designer, I'm also trying to understand how to create the most compelling, well-crafted solution. I try to get a range of solutions into people’s hands, whether we are talking about ideas sketched out on paper, screen-linked prototypes on a phone, or functional prototypes of a product solution. You want people to desire what you make. Not just like it, not just want to use it. You want to tear the best solutions out of their hands, because they want it now. 

This is how we know when the prototypes we’d made for our clients were resonating with each person she showed it to. They could see how they could use it in their lives, and wanted to start using it right away.

The next post in this series will be about improving your business through iteration.

 

*In a recent workshop I went to with Zaid Hassan from Reos Partners, he referred to this as Design, Implement, Evaluate (DIE).

The Dynamic Role of Design in Entrepreneurship, Part 3: Creating Customer Value

This is the third of six posts culled from notes I wrote in preparation for a talk at Kansas City Design Week (KCDW). Read the first post and second post, and see the slide deck here.

Don’t Think You Have the Solution 

So, you’ve defined the type of impact you think you want to have. You have a theory about what particular group or community would benefit from your business idea or solution. 

Now you’re going to immediately make your solution and unleash it into this world, right?

This is a rookie mistake for any new business. We assume if it’s our problem, it’s important to everyone else. We believe that other people value a solution as much as we do, or struggle with the same issues we do in the same particular ways.

I hate to break it to you, but value is relative. Once you have a starting theory of who you believe would benefit from a solution, you need to validate you’re solving for a pain or issue that even exists. Never assume that other people are going to value the same things, or respond in similar ways to the same issues.*

There is no substitute for seeing how other people live their lives, with your own eyes. Spend time with the actual people who you believe will use your theoretical solution. Be methodical about seeing the systems they live within, and the aspects of those systems that hold them back. Do this without immediately showing your hypothetical solution to them. (And do your homework if you don't know much about the people you're going to talk to. Secondary research is your friend here. Immerse yourself in it. Start to get educated as rapidly as possible.)

 

Being on the Lookout for “Duh” Problems 

What I’ve learned by conducting hundreds of ethnographic interviews with people from all around the United States is this: My initial hypotheses regarding what people need is never, ever perfectly aligned with what they actually need. 

Yes, I know you believe you’ve got the big solution all figured out. But what you discover when you start testing your hypotheses is that you’re missing out on BIG needs that don’t get solved easily. 

And that is often where the real opportunities for your business begin. I call them “Duh” problems. As in, “Duh! This problem is right here in front of us, and nobody is doing anything about it.” Some “duh” problems that I can rattle off just off the top of my head: Dealing with all of the passwords for your online accounts. Helping people save money for an emergency. Improving the speed that doctors can help you if you have an emergency. Even figuring out where you want to go for lunch with your officemates can be a weird little problem that keeps cropping up over and over again, and there are many businesses trying to tackle it.

 

“Duh” Problems Are Systemic in Nature 

What you learn from looking at successful entrepreneurs is that they can’t make point solutions to try and crack a “duh” problem. “Duh” problems can't be dealt with by fixing just one little thing, and then ta-da they’re magically solved.

If you're going to tackle a "Duh" problem, you're going to need to suss out root causes for that problem. These root causes are challenging to identify. It takes some time to get to the bottom of things, and really understand foundational issues you need to start working from. Many of them change rapidly, based on cultural and behavioral trends.

Solutions to “Duh” problems are systemic in nature. They are challenging to make, because many entrepreneurs don't know how to visualize and make the appropriate elements of that system and test them. 

You have to train yourself to identify how these problems manifest themselves.  Designers see these as touchpoints in how people go about their lives, interacting with services and systems. (You could argue that in our modern day and age, anything that moves beyond a point "product" is just a proxy for a systematic branded service.) You need to know where these touchpoints are and keep track of them, as they are part of the ecosystem your business is going to work within (and potentially disrupt).

You may need to add, change, or remove touchpoints to deal with that “duh” problem and create the desired impact on the part of your target customers. One type of tool that designers use to do this is called a journey map, which helps you to clarify how people move through different touchpoints. The X axis on these journeys is always time, and on the Y axis are the different phases that customers move through to achieve a goal, based on the different touchpoints available to them from products or services. 

If you can map out how much things are broken, then you can begin to imagine ways that journey could change, to make it so much better for your audience.

 

The "Duh" about Trying to Solve "Duh" Problems 

Why would you go to the trouble of identifying and solving for "duh" problems? Because good solutions to “Duh” problems are more valuable.

“Duh” problems are surprisingly obvious, once you start paying attention to where people struggle most. But there are always reasons why people say you shouldn’t try to solve them. These reasons are often logical, highly reasoned, and tied to either legacy business models or quirks of human behavior that require untangling. (It might even be because someone else patented the crap out of potential solutions and is holding on to them. This is not uncommon.) 

If you map out how much a customer journey is broken, there are always reasons why the pain points exist, and some of them you can’t change.

But if you’re aiming for impact, these are exactly the problems that need to be solved. Each “duh” problem is an investment in helping people. 

Investing in tough problems can have greater risk, but it’s also where the big rewards are for customers in terms of value and in how much you can potentially earn with a business.

The next post in this series will be about making things and receiving feedback.

 

*Unless you’re creating social products—and approaches to creating these types of products merit their own deep dive—you should start by identifying the needs of the customers you believe would benefit from your ideas. Even when creating a social product, you should be referencing secondary research to see what behavioral trends or needs you can learn from.

The Dynamic Role of Design in Entrepreneurship, Part 2: Undertaking Risk

This is the second of six posts culled from notes I wrote in preparation for a talk at Kansas City Design Week (KCDW). Read the first post here and see the slide deck here.

Entrepreneurs Take on Risk

Risk is often measured in an investment of explicit resources: time, people, resources, money, space, and so forth. You can quantify these things. They are tangible. You can capture them in a spreadsheet, calculate in your head exactly how much "runway" these resources might afford you.* 

When talking about risk, entrepreneurs are often talking about exposure to potentialloss or downside if you take a particular course of action. These are decisions whose implications could make your business suffer in the short term, or reduce the amount of runway you had planned for in the long term. 

An entrepreneur always has a notion of their runway in their mind, whether they care to or not. It can boil down to how much money is in the bank, how much fuel is necessary to keep the business moving.** 

Entrepreneurs can’t spend all of their time focused on the downside. You are trying to reach the upside. When incubating and growing a business, the upside can be some grand vision about what outcome your business will have on other people’s lives. Product usage, customer benefit, satisfaction. 

To get there, you wager those resources at your disposal, to see if they will materialize. This is a series of bets. Some bets may be table stakes, with a high probability of a small payout. Others are substantially larger risks, by many orders of magnitude. 

As an entrepreneur, you are responsible for your business’s long-term probability of success or failure. Every decision you make changes that probability, and you can’t easily peek ahead or simulate exactly what the final outcome is going to be.***

With so much risk, and so many bets that need to be made, it's tempting to focus on technological capabilities—which can be controlled and quantified in some manner—as where entrepreneurs can exert maximum control when formulating their bets. However, in order to reach the upside, you have to focus on the benefits that customers want to derive from a technology. They are not always the same!

Let me illustrate with a scene from a fictional story that may ring true, based on your experience.

 

Lightbulbs Won't Go Off

Imagine you work at a technology company as a CEO. The head of the R&D department rushes through the door of your office, which has a view overlooking all of Kansas City.  

"Bob, you won't believe it." She waves a light bulb at you. "One of our researchers was able to invent a new type of lighting that can last for twenty-five years per bulb."

Your jaw drops, and the calculator begins whirring in your head. "Betty, that's fantastic. We're going to have such a big impact on the market with this new technology. How soon can we get this into production? How long does it take to produce these things at volume?"

Betty lets out a long, slow breath. "There's something I need to tell you, though."

"What's that?" Your head is floating in the clouds. You can already imagine this completely disrupting the lighting market. Your competitors are going to rue the day they tried to squeeze you out. 

"The cost of materials and production for these lightbulbs is going to be twenty-five times the cost of any other lightbulb out there."

You pause. "Oh, I wouldn't worry about that too much right now. When we get it out there and our competitors find out what we've done, we'll know."

Have you ever been in a situation like this, where the technology capability drives all of the business considerations? I have. And as a designer, it's my obligation to say the following: "For who are you creating this product?" 

Design makes you think about the WHO. To quote Bill Aulet,

"Building stuff does not make you a startup… For the entrepreneur, stop obsessing about your MVP. Your first question, before HOW and WHAT, has to be 'FOR WHOM?'"

As a designer, I want to understand the impact you want to have on other people. Impact is often confused with having a vision. I.e. “I want everyone in the world to have been cured of cancer by 2050,” or “I want us to have terraformed Mars by 2075.”

Can you please be specific as to who will begin this movement? Who will benefit from it first?

 

Impact Is Bullshit, If You Don’t Define It

"I want to change the world!” is what I’ve heard from many founders, but when they clarify how they've changed the world, we describe things that cause shifts in market condition: New software products. Storefront businesses. Physical products. Websites that sell t-shirts and posters. A service that brings you candy. Things things things. All too often, the answer is the thing, how the thing is going to shift a market from a capital or resources perspective. The “what,” the “solution”—this is the first problem to be solved. 

I'm not against wanting to have an impact, or having an epic vision of changing the world. Having vision is crucial to a leader's success. It’s healthy to have aspirations. However, I don’t confuse a vision, which is often about the more abstract effects we’ll have on society on large, with the tangible influence a business can have in the here and now on a particular group of people.  

This doesn’t require an MBA or fancy spreadsheets, at first. You need to visualize what you believe your influence on a particular group of people, starting from your perspective. Then you're going to discover if your point of view is true, based on what they truly need.

 

Show Us What You Mean

One of my favorite tools to help visualize potential impact is the "Ripple Effect" activity that's in frog's Collective Action Toolkit (CAT). I've done activities like these with everyone from lifelong entrepreneurs to high school students, and they always help align everyone around an approachable definition of what impact their efforts could potentially accomplish.

The "Ripple Effect" activity forces you to visualize, with the group of people that you're creating a business with, the net change that you want to see on particular groups of people. The activity forces people to go from the fuzzy, abstract aspirations you've got about world-changing ideas, to creating a theory around who you believe your first focused audience might be for a set of technology capabilities. You can keep doing this activity as you learn more and more about the people you believe your business will serve, and what they need from you. This can be tested.

 

You Are Nothing Without Your Ecosystem 

Creating a startup or a business can feel like you’re in a hermetic box. It’s just you, intently focused on making something and getting into the right people’s hands, and those people responding back in kind. But you can’t hide in a box, make a thing, and unleash it on the world without knowing who’s part of your ecosystem. You’re part of a community that’s going to support and enrich your business over time. 

If you know the impact you want to have on a particular group of people, you need to align it to your customers, partners, competitors, friends, family, professional networks, “coopetition,” the government, and so forth. An activity I do with startups, often following "Ripple Effect," is the "Rings of Connection" activity from the CAT. This activity forces people to visualize the people and the entities—other businesses, partners, competition, supporting organizations, governments—that will support your efforts and help you achieve your intended impact.

You don't just do this activity once. Your view of the ecosystem is constantly changing, based on how your business acts in the world. Once you’ve determined who’s part of your ecosystem, take a little time every few weeks to update this picture, based on what you’ve discovered. Are there entities who should (or could) be added? Taken away? Get it out of your head and in a place where you can keep track.

 

Know What You Don’t Want to Happen

When starting a business, many entrepreneurs focus on the net positive effect they want to have on the people in the world. I encourage entrepreneurs to also do the opposite: write out what you don’t want to have happen as a result of your business activities. If those types of effects happen, whether through accident or explicit intention on the part of yourself or other partners, immediately step outside the situation and consider what other options are possible to fix the situation. Consider this your preparation for worst-case scenarios that come along, as well as a way to qualify the kinds of sustainability effects you want your business to avoid.

 

The next post in this series will be about creating customer value.

* For those not versant in the startup lingo, “runway” is how much time you have left until the plug gets pulled on how these resources are going to be utilized, from laying off employees to having to shutter or sell the business. The concept of a “runway” is a literal embodiment of how much time there is to make a business sustainable. There's a reason why startups get beat up when they hire tons of people to make something that turns out to be trivial in the eyes of customers: it is risking using up much of the runway.

** Once a business is profitable and free of major debts, new runways can be laid for new products or ventures as part of their portfolio.

***That is, until there’s a version of The Sims for startupland, and then we’d be playing at businesses rather than sweating making them.

The Dynamic Role of Design in Entrepreneurship, Part 1

The following 6 posts are culled from notes I wrote in preparation for a talk at Kansas City Design Week (KCDW). The talk was delivered on Wednesday, March 5, 2014 at Think Big Partners in Kansas City, Kansas.

How many people here would consider themselves entrepreneurs? Designers? Both?

When the folks at KCDW reached out to me about giving this talk, I gave them the title "Envisioning the Balance: The Dynamic Role of Design in Entrepeneurship." However, five months have passed since I came up with that title, and as often happens with thinking about a subject as large as entrepreneurship, I've come to realize the title wasn't correct. So I’ve decided to change the name of this talk as "What You Already Know and Wish I Wouldn’t Remind You About."

Everyone gathered here has critical knowledge and perspective about this subject. Many of you could come up here and deliver their own version of this talk. So it's my hope that over the next hour, my point of view on this subject will serve as a useful starting point for the Q&A session that will follow.

A little bit about myself: I've worked for the past five years at frog, a global product strategy and design firm. We help define and design many different kinds of products and services, and advise everyone from Fortune 10 companies to startups on how to better serve their customers and grow intelligently. We’ve also recently launched a venture design practice, where we invest in seed and early stage businesses. When I'm not at frog, I am a writer and teacher, trying to make design skills more available and accessible worldwide.

Over this past decade, I’ve helped design all sorts of products and services, as well as establish strategies for both business success and cultural transformation through design. I’d love to tell you some stories about the businesses that I’ve helped, and the products that I’ve worked on… but when you’re helping businesses to define the next next thing, much of what happens is confidential. There's nothing confidential, however, about what design means to entrepreneurs. It's one of the keys to not only satisfying and delighting customers, but creating high-performance businesses.

We’ve seen serious results from design-oriented companies that are in the Fortune 500. I read last week in an article by the Design Management Institute and Motiv that:

“Over the last 10 years, design-led companies have maintained significant stock market advantage, outperforming the S&P by an extraordinary 228%.”

So there's a proof point regarding how this approach can reward markets and shareholders. And it's having an impact on the hiring and integration of designers into businesses both big and small. As Laurie Segall said recently in CNN Money:

“In the Silicon Valley hierarchy, coders have always ruled the roost, but right now there's a different skill set on the industry's most-wanted list: designers.”

New business ventures want the benefits of having designers as one of their founders, at the start of the startup. In Silicon Valley, it’s a recruiting dogfight for talented designers to join both early-stage startups, more mature tech businesses (i.e. Google, Facebook), and legacy businesses that are transforming not just their products and services, but their culture (GE, IBM). There may still be a heavily lopsided ratio of development to design, but designers are defining the details of the products we use every day. They get their hands on the important stuff.

So the key question I want to tackle tonight is: How might we bring design into businesses to improve their chances of business success? This isn’t just about how to create a great startup, or how to make an aging business pay attention to design. It's oriented around principles I've been using in my work to help businesses bring design to the core to how they operate, empowering them to create their best possible products and well-shaped businesses. This is my own answer to the question based on my own successes and failures, and should not be confused for the opinions of others.

 

Design in Entrepreneurship: Let's Define the Damn Thing

So, what do I mean when I talk about “entrepreneurship”? This is my personal definition:

Entrepreneurship is undertaking risk to create customer value by making needed things, receiving feedback on them, and improving business performance.

One of the first questions I always ask the businesses that I work with is, “Which of these activities are you not doing? Or do you wish you could do better?” I ask the above question this because you can’t be equally great at all of these activities. Most businesses don’t do all of them well, or focus on them in equal measure.

Designers often get trapped in working on products, focusing on function and decoration rather than looking across the whole business. Design is identified by many business owners as fitting into the activity of making needed things & receiving feedback, and we are hired into companies to provide basic craft skills to do so. There is no better example I can think of regarding this attitude than the "ugly baby" phenomenon.

If you work in a business, it's your job to make some form of product or service. Let's say that the product is a baby. It's your responsibility to make the baby, feed the baby, clothe the baby, We hope people will like our baby, buy our baby, and maybe even let the baby grow up into a fully functioning adult while somehow skipping those awkward, ungainly teenage years.

Now, have you ever been asked to help a business make their "ugly baby" look and function better? Businesses often put makeup on their ugly babies when they take them out to the playground, because they’re a little embarrassed about how the baby looks or behaves. Designers get the call for help, because they are great at baby saving. In the end, we babysit.

There's always a place for babysitting, and there are some days that I love to be focused exclusively on just that. But tonight, I'm going to talk about how designers can have a role in every one of these activities entrepreneurs need to pay attention to throughout the lifecycle of their busienss. From undertaking risk to gauging customer value to helping improve business performance, our aims are the same. And designers have unique skills they can use in concert with the entrepreneur (if they aren't the same person) to improve the likelihood of customer happiness and business success. Businesses that bring design into their core of how they function understand that design can touch and help improve many aspects of what a business can accomplish.

In the following five posts, I'll share with you the way that I've been working to bring design into entrepreneurship. The next post in this series will be focused on the subject of undertaking risk.

Upcoming Talks and Workshops: CCA, Kansas City Design Week, SxSW, and HOW

Here's a list of some upcoming talks I'll be doing around the U.S, on the heels of being on podcasts with Ash Thorp (The Collective) and Jason Fruy (My Creative Copilot). Hope to see you at one of them!

Friday, February 21st, 2014
"Design Is Hacking How We Learn"
California College of the Arts
San Francisco Campus
1111 Eighth Street
San Francisco, CA 94107-2247
7 PM in Timken Hall, reception at 6:30 PM
Free and open to the public

This is a new iteration of a talk that I started giving this past year. The abstract: The next big disruption in lifelong learning will be by design. We are innately trained and poised to have a global impact on how other people can survive and thrive, whether they are designers or not. In this talk, I'll point out opportunities for designers to participate in this disruption, sharing tools such as frog's Collective Action Toolkit, which has made the skills designers use more accessible and available for people worldwide. This is part of the Interaction Design faculty lecture series.

Wednesday, March 5, 2014
"Envisioning the Balance: The Dynamic Role of Design in Entrepreneurship"
Kansas City Design Week
Think Big Partners 6th floor event space
1800 Baltimore Ave
Kansas City, MO 64108
5:30-8 PM
$10 admission in advance, $15 on site, limited to 75 attendees

In this talk, I'll explore the expanding role of design in entrepreneurship, looking at emerging principles we can use to drive sustainable innovation, growth and beneficial cultural change within our startups, companies, nonprofits—or even within a group where no business may yet exist. Through this entertaining talk and Q&A, I'll uncover how different tools used by designers allows entrepreneurs to create valuable new products, services and business models with their customers and communities. And, most importantly, I’ll examine the proper place and role of design in the lifecycle of your ventures, finding the right balance between design and other critical activities that lead to successful businesses in the long term. (You mean just design isn't enough? Yep.)

Monday, March 10, 2014
Workshop: "Expansion Through Ecosystems" with Diego Depetris, Patrick Kalaher, and Steve Selzer
South by Southwest Interactive Conference
AT&T Conference Center
Classroom 102
1900 University Ave
9:30 AM-1:30 PM
Advance registration and workshop signup required, attendance limited to 40

Ecosystems are critical when exploring new market opportunities, or seeking to expand or diversify an existing market. Value in an ecosystem is created not only by driving adoption for your products and services, but by driving demand and “coopetition” from the entire ecosystem. When parties in an ecosystem collaborate to expand the entire pie rather than just their slice, growth occurs faster and everyone benefits as a result. Ecosystem strategy helps you determine the options available to your business to make this growth happen. In the future, the ecosystems that you participate in become your business. Few companies will successfully operate in isolation. If you don’t actively identify and plan for opportunities to shape that ecosystem, often in collaboration with others, you may fall behind. This collaborative 4-hour workshop will simulate the ever-changing nature of ecosystems as you work with others to stay viable in the marketplace.

Tuesday, May 13, 2014
Workshop: "Off the Page, Into the Wild: Designing for the Internet of Things"
HOW Design Live
Hynes Convention Center
900 Boylston Street
Boston, MA 02115
10:15 AM to 12:30 PM
Additional fee required for this workshop

Attend this session for a set of quick and dirty storytelling and prototyping methods for cross-screen and cross-device interactive design. Drawing from influences as varied as reality TV, automatic writing, artificial intelligence, and improv, I'll show you how to work individually and with multidisciplinary teams to: target unique user needs and tasks with a story-first approach; rapidly ideate around those needs and tasks using unique methods that range from text and photo prompts to prototyping with your phone's camera; capture, evaluate, and iterate on provisional artifacts and scenarios; understand when to shift from low-fidelity prototypes to full-on technology simulations and prototypes. This workshop draws from David's experience in teaching storytelling in user-experience design at California College of the Arts and in his ongoing work in exploratory research and design with cross-disciplinary teams at frog. You’ll go home with a cheat sheet of storytelling methods and examples you can bring directly into your studio practice.

Thursday, May 15, 2014
"Creating Creative Superteams"
HOW Design Live
Hynes Convention Center
900 Boylston Street
Boston, MA 02115
4:30–5:30 PM
Presented as part of the HOW In-House Management Conference

You know when a team just clicks. Designers complete each other's sentences. Group brainstorms yield breakthrough ideas. Team members want critique frequently, and relish the feedback. Everyone feels invested in where your projects are headed. However, if you lead or work on a creative team, you may have experienced the opposite, from team members struggling to remain engaged in brainstorming sessions, or fighting for their interests in what's meant to be fruitful critique. In this session, you’ll find out how you can encourage and empower creative teams, helping to improve their communication and collaboration skills along the way. The tools you’ll learn from this session will help you: Lead brainstorming sessions that teams love to participate in; identify which team structures lead to maximum creativity and project ownership; expand your critique vocabulary, with five unique strategies to help your team open up when sharing work in progress; understand what conversational cues can lead to constructive dialogue, rather than creating competition; empower your team members to build off each other's skills and perspectives.

Protection from an About Face

You've probably heard about the recent dispute between Jonathan Hoefler and Tobias Frere-Jones. We could sum up the news thusly: Don't join a business without a signed agreement.

A partnership is worth the paper it's inked on. No matter how long you've known someone, the depth of your friendship, or the assurances that have been made through countless emails, an oral contract is brutal to try and enforce in court, even for a partnership that has been public-facing and branded as such for over a decade.

Plus, this crucial sentence stood out for me in Frere-Jones's claim against his former partner: "…between their agreement in 1999 and March 2004, the partners developed, expanded, and grew HTF without any corporate formality. This ratified Hoefler's and Frere-Jones's 50-50 partnership agreement."

You've been trying to cement this partnership agreement since 1999? Ugh. We're talking more than a decade without crisp legal assurance of a partnership.

Someone is a true friend if they insist on ratifying ANY critical agreement or employment contract with you in writing. Such an agreement protects both parties and their shared interests, under the law.

Read the formal claim for the lawsuit. Then don't do what they did.

No matter who wins this case, it will impact the perceived value of their (once shared) business. See this Gizmodo piece for a more in-depth analysis of the legal situation.

"Negotiation: Logic and Emotion" by Ted Leonhardt

 

This is a guest post by Ted Leonhardt, who helped me out with the "Negotiation" chapter of Success by Design: The Essential Business Reference for Designers. Ted has a new book that just came out called Nail It: Stories for Designers on Negotiating with Confidence, which takes the topic much further and extends from client interactions to salary negotiations, promotions, and job interviews. Nail It was released first this month as an e-book through Amazon/iBooks and will soon be in print, so check it out!

 

Logic is great for analyzing what went wrong after the event. But it’s not so great for creative and emotional moment-to-moment decision-making. When you’re in the heat of it all, logic is hard to hang onto. Understanding how to move from being dominated by your emotions back to your logical side is critical to success in stressful situations.

 

An example

You’re negotiating the biggest budget of your career – up to now anyway – and your client Fred says, “we just got a bid that’s half of yours.” Wham! You didn’t even know that there was a competitor involved. Everything just changed!

You’re surprised. All of a sudden you feel your heart beat in your ears. You’re caught unawares. Maybe you’re a little embarrassed, caught in front of your team who – you told you had it in the bag. You’re certainly reassessing your relationship with Fred, who just blindsided you. As this is swirling around in your head, you’re feeling a little queasy too.

You know from experience not to respond in the moment, but it’s hard not to let your disappointment, outrage and, perhaps fear of loosing, reduce you to your inner child. Always a bad idea.

Earlier in your career the half price claim would have completely focused you on price and how to lower it. The client’s claim reframed the meeting from a high level discussion, to down and dirty market bargaining. In effect, you’ve just gone from attempting to achieve lofty mutual goals to haggling over a used car. That’s a natural kneejerk emotional reaction to being hit by surprise. It changes everything in a heartbeat.

Instinctively you want to hit back: “What? You said we had the project, that we just needed to work out the details. What’s going on?” 

Or, again instinctively, the role-over reaction: “Well, I guess we could take a look at our pricing calculations.”

Both reactions are completely understandable in the heat of the moment. They are like fight or flight. Both are focused on the price objection and lead to the same place: less money, less respect, or worse, the loss of the project to the half-priced competitor. Both reactions are driven by your feelings in the moment.

I always thought that with experience I’d no longer feel the tug of emotions overwhelming my rational self. That these feelings would no longer plague me when I grew up. Sadly that hasn’t happened. But I have learned that when the emotions are running hot and heavy it’s a signal by myself to myself that: first, what is going on is important; second, I’d better pay attention; third, I need to step back and get a little space on the subject. I may need to just take a deep breath or I may need more time. In either case it’s the reminder to not react that’s important.

 

What to do

Because emotions are so powerful you must prepare in advance to deal with them.

In my experience the most important preparation is the simple recognition that these feelings are normal and can happen at any time. I call this the “take your head out of the sand” step. I used to simply pretend that these feeling didn’t exist. I’d go bravely into negotiations actively suppressing even the eventuality that I might react emotionally. The result of this maneuver was surprise and poor reactions every time my feelings did get aroused. Not good. But, by recognizing that my emotions could rage prepares me to logically examine and rationally deal with them when they do.

Second, have a list of questions prepared that are both general and specific that you can refer to in the heat of the moment. A quick glance at your list can give you the needed tip to get past the narrow issue at hand, shift the context and get back in control of yourself and the situation.

Third, remember your accomplishments and credentials. Don’t forget that you were invited to the negotiations because of your skills and achievements. The client needs you to help them–you are an expert–you have high standards and always deliver as promised.

 

What to say

Since the half price challenge caught us by surprise maybe something has changed since we started the conversation. We could ask, “Fred, has something changed since we last spoke?”

All we know is that Fred has cited a half price competitor after indicating that we were already selected. We could say, “Fred, we’ve put our budget together to achieve what we understood to be your goals. What would you recommend?”

Often our opposite doesn’t have the authority to move forward and does not want to reveal their hidden constraints. “Have I misunderstood something about your goals, Fred?”

Think of these neutral, non-challenging questions as the first steps in unraveling what is really going on. Think of them as a part of your investigation. Make sure Fred understands that you see dealing with his half price challenge as new information. New information that properly investigated, will lead to a mutually satisfying result.

You can always ask my favorite question, “Fred, help me understand how you’d like to move forward.”

 

And, finally

Using your natural emotional responses to inform a rational response will serve you well at the bargaining table. It sure works for me.

 

Article illustration by Ted Leonhardt. This article was first published on Branding Magazine. 

Envisioning the Balance: Gauging the Growth of Design-Led Startups

The time and place are set. You meet, shake hands, order your pour-over coffees or craft beers. You chat about how things are going in your lives. Then the moment comes. The startup founder pulls out the appropriate smartphone, tablet, or laptop, and asks if they can receive some feedback on their product.

I have many of these conversations every year, most often with startups that employ designers as one of their core founders or first hires. The founders I meet with often have design training and are well aware of the benefits of taking a human-centered design approach to their product from day one. Their team understands that a visually beautiful user interface and an "intuitive" user experience emerge from deep understanding of user needs, paired with a willingness to experiment in order to define and refine the product's functionality and content.

However, when designers are seeking to bootstrap a startup product, there are issues that crop up along the way that have to do with the design of their business. Designer founders may not be familiar with how to formulate key performance indicators for their product. How to bring new methods into their business to improve workflow. How to handle the myriad issues that crop up as a product scales from a rough prototype to a system that millions of people are hammering on every second. 

A startup needs to balance the different factors that lead to business stability in service of quality product design and smart growth. This means that whenever possible, they should be getting ahead of issues before they impact the quality of their product experience for customers. Startups that take the time to pair decisive action and experimentation with just enough reflection in the following areas can formulate action steps that'll help them reach their business goals with more clarity.

In order to help design-led startups, I've generated a questionnaire that I use to help early founders understand the different types of growth their organization may experience. The questionnaire focuses on six areas of concern that have cropped up over and over again in my mentoring conversations:

1. Team Cohesion and Culture
2. Expressed Value of Product Solution
3. Financial Stability & Business Model Experimentation
4. Technology Platform
5. Product User Experience & Brand Expression
6. Measuring Product Success

I'm sharing this questionnaire here for you to adapt, build upon, and share alike with others under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License. You can either duplicate it from this Google Drive spreadsheet, which I've posted in a view-only format, or refer to the text included below in this post.

Before I go through the questionnaire's contents, I would like to clarify the way you can use it as a diagnostic tool. 

The statements in each area below are representative of the working state of early-stage startups that I've encountered, organized from high maturity to low maturity. For each item, read through the statements and consider how you'd describe your startup in relationship to that item. Some founders are aware of all the items in these areas and are actively working on all of them. Some are aware of most of the items here, but haven't reached a stage in their startup's growth to formulate a point of view. And, in some cases, a few of these items here may be "unknown unknowns" that haven't been dealt with yet. That's why, in the spreadsheet format of this questionnaire, there are areas for you to fill in associated with each section. For each item, you want to answer the following:

How Is Our Startup Doing Here? Where does your startup land on each of the items provided here? The point is not to exactly match one of the statements or another startup. The point is for you to take a moment and articulate how your startup is doing in that area and what level of maturity your organization may have in that area.

Why? Are there any issues or root causes that you can identify, which are either making you successful in that area or holding your startup back?

What Actions Should We Take?: What would you do next to improve how you handle this area? This can often be done even for areas where your startup appears to be doing fine.

Important disclaimer: What I'm sharing is not exhaustive and has been a continual work in progress for my personal advising of design-led startups. This is not meant to be a quiz that you finish, and at the end, say, "I scored 26, so my startup is doing great!" The point is to help you be more strategic about how you plan the growth of all the different facets of your startup and its products. If you do edit or expand upon this questionnaire and share it with others, please write me at david at changeorderblog dot com so I can link to your work and we can all benefit from your input into future versions. Thanks!

The 10 Building Blocks of Design Studio Culture

This is an excerpt from from my new book, Success by Design: The Essential Business Reference for Designers, out now from HOW Books.

Culture is everything people in a design business do that supports the process of making work happen. Culture can create joy for designers, while improvements in process can facilitate profit. A common misperception is that culture emerges organically based on the decisions of a business owner or CEO. But a design studio’s culture is not created solely by those at the top. For a design-led business, culture is generated from ongoing contributions and discoveries from both studio owners and employees.

In researching my recent book on how design businesses can be more successful, I began to see important building blocks that were present in the most successful studios. These building blocks are divided into two groups: hard building blocks and soft building blocks. Hard building blocks are realized through a budget, meaning that you can allocate money and time for them as part of business overhead. The soft building blocks can be created through the decisions employees make over the course of their daily work, life and play (with less material investment by the owners).

A healthy studio culture draws equally from both types of building blocks. They provide emotional and material stability to employees in the face of ongoing work challenges, and often clients, family and the general public perceive them as ingredients of the company’s brand. These building blocks are equally present within design firms and in-house design teams—though for the latter, the composition of some building blocks may be heavily influenced by the company's overall behavior and needs.

Let’s take a deep dive into these building blocks, with important questions to ask yourself (and your team) in order to create a strong studio culture. 

"How To Manage Client Feedback" on FastCoDesign

Clients deliver feedback on everything we create for them: proposals, deliverables, project schedules, email communication styles, what we’ve worn to a meeting with their CEO, and so forth. Soliciting and receiving feedback from clients is a crucial part of any ongoing collaboration between a client and a designer. To quote Robert Allen, “There is no failure. Only feedback.”

The inability to manage client feedback causes your design work to suffer. Here are some ways to work with feedback that will help keep your design projects running smoothly, while reducing the tension that poorly considered feedback can cause in a client relationship.

Read this excerpt from Success by Design at FastCoDesign.

What Aspiring Designers Need to Know About Strategy

This is an exclusive excerpt from my new book, Success by Design: The Essential Business Reference for Designers, which was recently released by HOW.

As I read through his resume, the designer stared at me expectantly. He had a wealth of great design projects under his belt. He had been seeking out personal projects to build out his portfolio. He had internships with sterling businesses and design studios. But there was one thing that leapt out at me from the list of core skills he’d listed at the top of his resume: strategy.

Not brand strategy, content strategy, interactive strategy, media strategy, or the MBA-land of business strategy. Just plain ‘ol strategy.

This has been happening more and more frequently, for a few reasons. In the process of providing strong service to our clients, we increase the likelihood of becoming a strategic partner. We finally have a seat at the table when the client is talking strategy—and we can offer a range of strategic services that verge outside what may be considered a designer’s core area of expertise. This is a good thing. With the ongoing expansion of design’s role in business, today’s designers are helping to solve problems that transcend mere decoration and instead impact the core functions of a client’s business.

But in our haste to be strategic partners, I’ve discovered that many designers don’t fully grasp how strategic services fit into their client offerings. And when I ask designers out of sheer curiosity how they’re functioning as strategists—what experiences they directly bring to bear on being strategists rather than having a strategic orientation—they can’t easily answer the question.

If you’re going to run a design-led business, it’s inevitable that you will need to talk strategy with your clients. So let’s explore the types of strategies you might create as a design businessperson, as well as how they may support the efforts of your clients. It’s my hope that this information will open up some new paths for you to explore in your career as a designer.

Read the whole piece on frog's Design Mind.

Design Business by the Numbers: One-Percent Prepayment Discounts

This is a post in an occasional series I'll be running on ChangeOrder about the benchmarks that design businesses use to help maintain their long-term success. These benchmarks are drawn from the research that I conducted when writing Success by Design: The Essential Business Reference for Designers.

In my previous post, I wrote about how it's important to encourage new clients to pay you in advance of providing design services. Many designers and studio owners struggle to put this advice into practice, as their clients often have their own accounting and bookkeeping policies that conflict with paying for services in advance of their completion.

So, how do you bend these policies in your favor? A number of studio owners shared with me the following line of text that they had included in the estimates and invoices they'd provided to their clients: "Client shall receive an % discount if payment is received in advance of date."

That's right. Many companies have policies that require advance payment of an invoice if there's a discount. It doesn't have to be a huge discount, too—sometimes as little as one to two percent off a large-ticket project can be enough to encourage advance payment. (Though I've seen it at anywhere from 2.5% to 5% in previous agencies I've worked at.)

Highlighting this clause during contract negotiations will help you, as long as you preserve your profit margin for the project if the discount is exercised.

Other posts in this series include:

• Extending Zero Credit
• 80/20 Rule of New Business Development
• 3% Proposal Percentages
• 50% Bid/Win Ratios

Design Business by the Numbers: Extending Zero Credit

This is a post in an occasional series I'll be running on ChangeOrder about the benchmarks that design businesses use to help maintain their long-term success. These benchmarks are drawn from the research that I conducted when writing Success by Design: The Essential Business Reference for Designers.

When starting up a design studio, it can be tempting to do whatever it takes to win project work with new clients. A common mistake, however, is to extend credit to new or existing clients rather than require payment up-front for project work.

It's never a good idea to extend credit to a brand new client, and minimal credit should be extended only for long-term clients that have a strong track-record of deposits, on-time payments, communicate about honestly money, and have asked you for the privilege.

In our laissez faire, credit-saturated culture, it can seem as easy to use credit cards as it is to provide credit to others. However, as a business owner, taking on debt in order to fulfill a service isn't wise. Take a deposit on the work that you'll be completing, with a signed contract in place that outlines a payment schedule tied to your project milestones. No work should start until the first payment is received and deposited.

Running a credit check on a client isn't enough. You may discover that a client has ample income at their disposal to pay you, but that isn't the only issue. You want assurance that, as the project progresses, there will be a fair balance between what compensation you receive and the you've created that is shared with the client.

Imagine in your head an old-fashioned scale. This is the kind where you place objects on one side of the scale, then various weights on the other to assess how heavy the objects on the other side are.

Let's say the client has one side of the scale, and you have the other. On your side, you pile up your expertise, which they've hired you for. It's invisible and weightless—you haven't created anything tangible yet. On the other side, the client places their money. Oh, wait—they haven't paid you yet. So right now, the scale has nothing on it. It's in balance, right?

Wrong. Your side is burdened with your studio's operational overhead, the hours that you'll be spending working on the client's work, and the projected value of each deliverable that will be provided in return for due compensation. If you aren't paid up front, the scale is always tipped in the favor of the client. With each hour that you plan to bill and each deliverable that you provide without compensation, things are further and further out of balance. You're beholden to the payment terms you'd set up in the contract: all the time you've spent working on the client project, plus all the time it takes for them to pay you back.

The larger the client or project, the harder it is to make this happen. They may have a blanket policy for how they handle vendors, or for how payment up front should be handled. They may be under the gun and want to start the project as quickly as possible, no matter what due processes must be followed. And in some cases, they may believe that since they have the money, they have the leverage. Believe it or not, some companies have unspoken policies to drag out payment for vendors as long as possible, as they can earn interest on that large amount of money in the short term before it's disbursed.

The right way to handle the situation is to make what's on the scale even. When you start the project, the client has place a deposit on their side of the scale, and on your side, you're placing a hold on the time and materials necessary to get the work done equivalent to that deposit. If you aren't paid up front for that first chunk of work, you're the one bearing the full onus and risk.

Instead of offering Net 30 payments on invoices for work that you've fulfilled, set up a clear schedule for payment. Depending on the length of the project, split it up 50/50 (half at start, half when you're halfway done) or 33/33/33 (a third at start, a third at the first third, and a third before the final stretch of the project). If the payment doesn't arrive on time, per the terms of your contract, you stop work and there is a fee to restart the project (this is in your contract).

No matter what, ensure that your final invoice is paid before you deliver the final work for your project. This isn’t NET 15 or NET 30. It’s NET 0. Mark the final invoice "Net 0" and circulate it with them well in advance of final delivery, so you don't end up in a situation where you either withhold providing your final deliverables to the client or end up showing a "good faith" measure.

Letting invoices ride out can be "business as usual" if that studio has a strong cash-flow buffer and clients that regularly pay on time or early on those estimates. You may feel like you have little to no leverage in negotiations, especially when it comes to the size of your project fee or when you expect to get paid for the work. But it's your business, and your rules regarding how you run it and how you manage your company's cash-flow. Choose them wisely.

Other posts in this series include:

• 80/20 Rule of New Business Development
• 3% Proposal Percentages
• 50% Bid/Win Ratios

Design Business by the Numbers: The 80/20 Rule of New Business Development

This is a post in an occasional series I'll be running on ChangeOrder about the benchmarks that design businesses use to help maintain their long-term success. These benchmarks are drawn from the research that I did when writing Success by Design: The Essential Business Reference for Designers.

Do you track how many of your clients come back and work with you again? I hope so. Ideally, 80% of all new business should be repeat business. It should come from your existing clients that you're working with right now, or clients that are returning to you after a successful project in the past. This is the 80/20 rule of new business development. You should aim for an 80% retention rate for existing clients, and diversify your client base with 20% new clients and projects.

I'm not suggesting, however, that 80% of your retained client work is coming from a single source. Many design studios will end up being extremely successful with a single client, and without paying attention that client will command fifty to eighty percent of the studio's portfolio of business. (At this point, the studio needs to diversify and find new clients to help reduce their dependency on that single relationship.)

The 80/20 rule is a hard benchmark for a service business to meet, for a number of reasons:

The studio isn't tracking client retention—or retention isn't even a focus. Some design studios are so focused on getting the work or fulfilling the work that client retention is an afterthought. Just beginning to keep a metric of how many clients are retained year-over-year can send a strong message to both studio employees and studio leadership about how important it is to provide great design work AND a great client experience.

The studio isn't seeking out long-term fit when landing new business. A common reason studios don't hit the 80% retention target has to do with how they initiate relationships with any new client. Design studios in general need to put more diligence into vetting client fit when pursuing and winning project work. When submitting a proposal for any potential studio project, you should be looking closely at what long-term potential there is in working with that client.

The studio isn't providing solid client services alongside the work. If you're doing killer creative work, but every deliverable review with your client feels like another round of The Hunger Games, you're not going to build relationships that last outside of your projects and lead to future work. (This should be obvious, but I'm continually surprised to meet designers that harbor an us versus them mentality regarding how you collaborate on a client project.)

The studio isn't staying in touch and directly asking for future work.This may seem like a duh. If a project goes well for a client, you shouldn't be afraid to ask if there are any other potential opportunities to work with them in the future. You should also plan to regularly contact them just to stay in touch. It's possible that if they go to another company, they may be able to bring you business from that company. Keep in touch, and there's a higher likelihood you could start a conversation around a future project.

The studio's work isn't strong enough to stand up to competitors. Usually, we lose clients because of poor client service or project management. But if you start slacking in the quality of work that you deliver across a few projects, you can risk losing the relationship. Take a hard look at what you're delivering, and maintain the quality.

Keep in mind that not every project needs to be about the long term. Truly great projects come along all the time where we do great work, we have a satisfied client, we put the work in our portfolio, and we move on. But be aware that your studio becomes more efficient when securing new projects from return clients. Plus, working with the same clients can help contribute to the profitability of future projects, if they are managed effectively.

Other posts in this series include:

• 3% Proposal Percentages
• 50% Bid/Win Ratios

Design Business by the Numbers: 3% Proposal Percentages

This is a post in an occasional series I'll be running on ChangeOrder about the benchmarks that design businesses use to help maintain their long-term success. These benchmarks are drawn from the research that I conducted when writing Success by Design: The Essential Business Reference for Designers.

You need to write that proposal to get the project. And you need to do a good enough job of writing the proposal to make sure your client understands why you're the right partner for it.

But that proposal isn't going out the door until it's been finessed within an inch of its life. Right?

As designers, we may be perfectionists at heart. But when crafting a proposal, we can't be carried away and lose ourself in the effort like we're polishing a beautiful design.

A useful benchmark to make sure you're not spending too many hours on your proposal is to hold yourself to a three-percent proposal percentage. This benchmark was shared with me by David Conrad at Design Commission. His studio uses this benchmark to make sure that they never spend more than two to three percent of proposed project budget to secure the project. This includes any necessary negotiation and revisions with the client through the new business process. The time spent on new business is then factored into the hourly rate and overall utilization of the studio, rather than being tied to successful project fulfillment.

Putting the hours used for writing a proposal against the future project budget is a big accounting no-no. This is a common mistake a lot of design studios make.

Why is this a bad idea? Because you are blurring the lines between the expenses your firm bills against the project budget and the expenses that your firm incurs on all the activities acquired independent of staffing those projects. You should be optimizing your new business process to acquire work independent of how efficient you are in fulfilling the projects once they're in your studio. This is the equivalent of trying to keep a monthly budget for your household, only to discover that someone else in the household has been using your credit cards and racking up debts that suddenly you're liable for. This isn't fair to anyone involved.

So get out of this "credit-card spending" mentality. You don't have an incentive to spend weeks on a proposal. You should be spending the minimum necessary effort to generate the best proposal for a potential project that you have a high likelihood of winning.

If you're going to try and keep to this percentage, here are some common issues that stand in the way of successful implementation:

You haven't set up templates to work from on your proposals. If you're generating new or custom proposal elements that can't be leveraged or updated for future proposals, you're burning time that won't make your new business acquisition process more efficient. Even if you're selling bespoke services, you can generate templates for how you sell them.

You aren't pitching a good fit in terms of subject matter or expertise. If you're conducting reams of research to figure out what to say in every proposal, you may not be perfectly suited to win the work. Be selective about where you make these investments at the proposal stage, rather than have those activities become part of the paid work.

There is too much time to write the proposal. It's important that you ask for the appropriate amount of time to craft a quality proposal. However, I've seen proposals drag out in draft after draft because there isn't adequate motivation or pressure to complete it and send it out. This is where bad habits can form. Try to hold yourself to a "shadow budget" and realistic schedule for writing, vetting, and submitting your proposal.

Other posts in this series include bid/win ratios for new business pitching.

"12 Essential Negotiating Strategies for Consultants" on FastCoDesign

When first striking out on their own as businesspeople, many consultants and designers don’t know how to bargain or strike a deal. In this exclusive excerpt from Success by Design: The Essential Business Reference for Designers on FastCoDesign, read about the strategies consultants use to successfully come to meaningful agreement with their clients.

Check out the article here.

Design Business by the Numbers: Bid/Win Ratio

Numbers surround us every day. They’re woven into the fabric of our lives, part of the advice and cliched folk wisdom that we dispense to each other: Two's company, three’s a crowd. A bird in the hand is worth two in the bush. And so forth. Every one of these cliches, however, started out as a rule of them, intended to help us learn from our previous positive experiences and failures. They’re patterns we can follow that can help contribute to our future successes.

I'll be posting over the coming months numbers I heard from the design businesspeople I interviewed while writing Success by Design: The Essential Business Reference for Designers. These people had specific rules of thumb they followed as in order to ensure the health of their design business. They were either handed down to them from co-workers or mentors, or derived from hard-fought experience. I’ve added to these numbers the ones that I’ve recorded from my experience working at a range of small and large design studios.

It’s my hope that these numbers will help you establish useful guidelines that'll help you better manage your projects and operate your design studio.

Let's start things off with your business's bid/win ratio.

Anyone who runs a design business knows that if you aren't winning projects, you won't stay in business. So when you seek out new business opportunities, how do you determine which to pursue and which to turn away?

When researching Success by Design, a number that kept coming up in my interviews with studio owners was fifty. Or, to be clear, a 50% bid/win ratio for your studio's new business efforts. This is the number you should try to hit or exceed, and it correlates with how many potential projects you need to convert from proposals to paid projects every month. Otherwise, you'll be billing to much time to studio overhead (writing proposals) instead of working on paid client projects.

There are specific criteria you should use in order to try and hit that 50% number. These include gauging the following:

Dollar value of the proposal. This should be averaged over the number of staff members and hours required to fulfill the estimated scope. This assumes, of course, that you have the capacity in your studio to fulfill the work.

Level of competition. If your client won't tell you what other design businesses are in the running for the work, at least ask them how many other businesses might be in competition for the work. If you're filling out an RFP or RFI and throwing it over the wall—the odds of winning the work can be stacked against you.

Fit for the studio. Is this work that will contribute to staff happiness and morale just as much as your portfolio and pocketbook? You should determine this before you agree to write a proposal as part of your pre-qualification process. (You've got one of those, right?)

Relationship with the client. If you haven't sat down with this client and truly understood the problem they're trying to solve, you may not even be in the running at all. You also may miss nuances and politics that may be stacking the deck against you.

There are other factors to consider, but the above are mandatory considerations before you go down the path of agreeing to craft a proposal. Think about like going to a casino and choosing how to gamble your money. Say someone handed you $10,000 scot free and said, "Go bet this all on the roulette table, and if that number comes up, you get to keep the money I gave you." Would you rather put your money on a single number? Or on all odd numbers? This benchmark is intended to help you control risk and look beyond individual project possibilities to the overall impact your business development choices are having on your cash-flow. This isn't to say that you shouldn't take risks on projects that may be a great boon to your studio, per the above criteria. It's to say that your risks should be measured.

Be aware as well that when using this ratio is that you may not be winning the most valuable projects, balancing the above factors against sheer dollars and cents. If you aren't winning approximately 50% or more of the potential revenues available across the proposals in your pipeline, you may need to reassess your new business strategy.