The BDI annual design industry survey, now in its 7th year, reports disappointing results for the commercial design sector 2006/7.
• 2006/7 turnover and fees are down 8% over 2005/6.
• Employee numbers are also down by nearly 5%;
• export income is down 10%
• and market share regional leader, London is down 10%
Sector buy in to design has shifted with the service industry now emerging as the lead purchaser of design services.
The Business to Business sector which has occupied 2nd place for several years has dropped back to 6th place.
Design procurement in the manufacturing sector has made a major comeback, up 17% to 34% - doubling in the past 12 months.
• Whilst the headline results are disappointing, they are indicative of a number of changes taking place in the design sector.
• They also present conundrums for government bodies and national design organisations seeking to build a national framework for the design sector.
Changes and influences
The drop for the second consecutive year in employee numbers (9000 jobs over two years) would indicate that many designers, in an attempt to restore a live work balance, are leaving full-time employment to become freelance operatives.
Working from home and collaborating on projects with other like-minded individuals supported by easy access to technology and social networks has increased the attractiveness of the freelance market. Freelancers can earn upwards of £300 per day and exist on serving two or three loyal clients per annum.
• Design firms employing fewer than 5, increased their representation of the sector up from 51% 2005/6 to 57% in 2006/7.
Design firms struggle to turn a profit and therefore lack funds to invest in employee incentives, training and marketing; they appear to wish to remain small, underpinning a cottage industry approach.
Context
The efforts of the Creative & Cultural Industries Skills Council through their concordant partnership with the Design Council to develop a Blueprint Work Force Development plan for the industry may struggle to engage an increasingly fragmented design industry.
Whilst the larger firms and aspiring middle band may welcome more structure through a professional framework of accreditation, training and CPD initiatives; the smaller groups may be less inclined to participate.
It has been debated at length as to whether creative firms operating at a vocational level – passionate about their work and less interested in commercialism and structure – are as valid in context of business practice as those who welcome structure and court commercial growth.
Social networking, ideas, file sharing and collaboration, through ease of access to technology led by models such as FaceBook and YouTube are giving rise to an increasing freelance market and social enterprise.
Additionally, many established, as well as new and upcoming creative firms and individuals are investing in their own talents and becoming their own clients.
• There is a growing interest in the value of intellectual property and how to trade it as a source of new income.
Major corporate firms who rely upon innovative ideas to grow their profits are turning to Open Innovation as a means to generate ideas from the originator market. Those corporates are welcoming external IP and negotiating equitable buy-in through licensing or buy-out of IP rights. It will not suit all brand owners or all design firms but it is a serious and effective option for those to whom it is cost efficient and applicable.
• Additionally these changes to the design industry business model will begin to make an impact on the traditional fee for services design sector.
The traditional fee-for-service design sector income model urgently requires review.
It can take reference from other creative industry sectors such as publishing, photography, illustration, publishing, game development – all of whom operate a business model based on fee; plus licensing and or royalty income whilst retaining copyright ownership.
A discussion needs to take place around copyright ownership and when it is and is not appropriate to retain copyright. New ground rules that are balanced and fair to both parties are required.
• Over the last two decades the traditional design industry business model has seen its profits eroded by ever more give-a-way to its client base; whilst overhead continue to rise.
Technology has increased the speed by which work is undertaken reducing turnaround project time. An income model that operates on day rates rather than value is thereby negatively affected.
At the other end, gone are the print and supplier mark-ups and handling fees (mid 80’s to mid 90’s); gone are the extended usage fees (1980’s); gone are the retainers (mid 80’s to 90’s); gone are the artwork and production fees eroded by adoption of new technologies.
• Design firms are left predominantly with creative fee income which has not kept pace with inflation. Consequently day rates are at the same level as they were over a decade ago.
If the design industry is to enjoy future growth and afford to invest in employment benefits, CPD and marketing activities; it needs to take a long hard look at the existing design industry business model.
Fee rates have remained largely static for all bar the larger firms and niche specialists but overheads have increased.
Whilst BDI are largely supportive of initiatives to develop professional practice frameworks – we feel strongly that such initiatives should not impose practices that do not take account of the difficulties faced by the sector or initiatives that are introduced without first addressing the critical issue of the fee remuneration model as it currently stands.
National programmes that raise awareness of the role of design and the benefits it brings to business are welcomed. However such benefits must be equitable. Proffering the skills of a profession ought to assist it to grow through a share in the competitive advantage it creates for industry.
To assist the design sector to develop their own business skills requires an empathy and understanding of operating practices and passions coupled with a tangible framework developed for the sector that assist it to meet its clients’ objectives at the same time as both parties making a profit.
Income models such as fees plus royalties on sales or by territory and application licensing fees create deeper focus, commitment and loyalty.
Individuals and design firms of all type and size are likely to have a vested interest in income models that enable growth and thereby in the professional practices needed to support them.
Shared risk models might also work more appropriately and equitably for start-up brands and SMEs who could be more attractive to established design firms if presented with a means to share in the success rather than subsidise it.
Not all circumstances lend themselves to the shared risk model; but where they do, better relationships could be established. Currently, low budget SME projects are not attractive to many design firms.
Regionalisation
Establishing regional activities on a networking and forum and exchange of ideas basis are a beneficial activity.
• Regional forums still require national representation.
A proliferation of regional networks has been set up in the last two years. Some are already struggling to maintain an existence; others are fairing well via personal enthusiasm of their drivers and subsidised by public sector funds.
However, in context of a national level of representation to provide a show of strength in the face of international competition, regional fragmentation is at odds with that UK plc objective.
Frank Peters, CEO of the CSD comments,
‘The reduction of fees, turnover and staff in the BDI survey makes for interesting if not disturbing reading.
The challenge for the design sector is to discover if these are reductions in the design market as a whole or whether the downturn has been to the benefit of another overseas market.
With economic growth just about holding its own in the West but still surging ahead in the East it is likely these figures indicate that UK design is beginning to suffer the same fate as the manufacturing sector before it. This is clearly illustrated by the percentage swing of design provision to the service sector away from manufacturing.’
Further, the regionalisation of creative industries activities demanding the setting up of regional structures has placed pressure on the national design representational bodies to whom funding has not been forthcoming and whose experience of the national picture is not being fully utilised.
It is time to take stock
Maxine Horn, CEO of BDI says,
‘The core business model operated by the majority of the design sector must be reviewed as a matter of urgency and new measures put in place to enable not just day to day survival but to enable future growth that is both essential and merited.
Too much public sector time and money has been spent prodding and poking the sector in context of its value to business with relatively little focus on the real cost of strategic design, knowledge, experience or the needs of the design sector itself.
Under-resourced design associations are doing all that they can to support an ever more fragmented sector. However they themselves are unsupported by the public sector purse – despite the public service role the national membership organisations undertake both in context of demanded consultation and their servicing of external audiences from career advice to IP issues.’
Frank Peters, CEO of the CSD comments
‘I suspect these figures illustrate a tendency for ‘business’ not to be investing in design rather than any underlying failing of the design sector itself. Clearly we need a body to champion the use of design and a government that backs investment in design.
As a profession we must not get bogged down in adding value to other sectors but should start to consider how we as a sector can create value for ourselves.’
-ENDS-
Survey details
Base number of design commercial design firms 4,500
Total number of full surveys completed 1565
Financial period June 05 to July 07
Survey is in its 7th consecutive year
About BDI
BDI is a not for profit collaborative innovation membership organisation. It is not publicly funded.
The BDI continues to invest in supporting the design sector to develop a more balanced and equitable business model. It has developed a specific framework to support those who are and or wish to be more entrepreneurial in their approach whether that is for traditional clients or in the pursuit of becoming their own client.
BDI has a national portal and 12 supporting portals holistically branded and tailored to each region. It is supported by a national board and over 40 regional directors each with more than 10 years experience in their design or innovation discipline and sector. Directors give their time voluntarily.
Those directors and other members with more than 10 years experience in their discipline and sector, participate in supporting individual originators and start-ups and SMEs in a national programme called Propositions into Profit.
It’s early days but already results of the new structure are beginning to bear fruit in many different forms.
The BDI national and regional portals attract over 700,000 unique visitors per annum and are on target to reach one million unique visitors by mid 2008.
BDI partners with shared vision
The CSD is supporting the BDI Propositions into Profit process; alongside Hidden Art – which assists East London based Designer–Makers; the Intellectual Property Office (IP0- former Patent Office); Intellectual Property Office (IPI) which represents the UK’s leading lawyers and University IP experts; Ideas 21 – a not for profit expert IP organisation who philanthropically assist all who ask; and Make Your Mark/Enterprise Insight – a government funded motivational campaign group who run the National Enterprise Week inspiring the 15 to 30 year old category.
BDI are also working with NESTA, the Manufacturing Advisory Service and PERA.
Continued collaboration
This group and others who choose to join them are all united in the common vision to assist the creative industries to earn a more equitable living from their talents. They do this by supporting originators with time and cost efficient professional frameworks, tools and hands-on advice.
BDI welcome any design and innovation; industry sector; academic and dealmaker representative firm or association to join forces for the purpose of collaborative innovation on an equitable basis.
Contact
Maxine J Horn, CEO
maxine@britishdesigninnovation.org
01273 621 378
 Download the attached PDF
Submitted: 15 Nov 2007
|
