Nico Macdonald
Sep 1, 2015 · 15 min read

First published in AIGA Gain online magazine (USA), 2001. Re-published for a #TypeTuesday event I’m speaking at entitled ‘Web 1.0: the baby and the bathwater’, which is hosted by Eye magazine on the evening of Tuesday 1 September at the St Bride Foundation in Fleet Street

A salutary finale to the first act of the Internet design industry

In Smithfield, the Victorian meat market at the edge of Clerkenwell, the Deli Bar used to pull in a thousand pounds a week catering to the Razorfish office located above the freezers and concessions wholesaling carcasses to the meat trade. The company was so pushed for space that the Bar became and extension of their office, and its proprietor, Mike Foskett, once proposed that Razorfish acquire it and take him on to run the business. “They still come here,” he notes “but now they pay for their own lunches, and I often hear them on the phone arranging job interviews”.

This scene, played out from New York to San Francisco via Boston, Chicago and Austin, and from Sydney to Stockholm via Hamburg, has been a salutary finale to the first act of the Internet design industry. From the 1995 Living Surfaces conference, through the growth of Silicon Alley and South of Market, the first IPOs, rapid expansion and acquisitions at home and abroad — all in the context of the dotcom boom, rapid growth in Internet use, and ‘classic’ businesses desperate for a piece of the action — the last six years have been the most exciting, and the biggest test, for the business of design.

Did we really need to give designers and engineers monthly toy budgets, and were all those last minute cross-country flights really necessary — Nathan Shedroff

“In the past everything was moving forward and it was a bit of a blur” comments Darryl Feldman, until recently Creative Director at Organic and now at Sapient in London. “These days you are lucky not to be sued!” Reflecting on the blur, Nathan Shedroff asks “Did we really need to give designers and engineers monthly toy budgets, and were all those last minute cross-country flights really necessary?” (Shedroff left Vivid, the San Francisco-based company he founded, the year after it was acquired by ModemMedia.)

The problems in the design and Web integration sector can be traced back to the downturn in the Nasdaq in April 2000, though many other factors are involved.

Too many [Web agencies] staked their fortunes on dotcoms and ended up swallowing unpaid bills and worthless equity — The Economist

Other companies were directly affected by the drying up of venture capital and private funding, and some agencies, having put their money where their belief was, had agreed with dotcom clients to defer fees or had taken some fees in the form of equity. While tying income to clients’ remuneration is not unusual in the IT sector, the rapid collapse of the dotcoms, and the agencies’ greater exposure to these companies, made the impact more significant. As The Economist newspaper commented: “Too many staked their fortunes on dotcoms and ended up swallowing unpaid bills and worthless equity.”

At this point in the development of the new economy, most dotcoms and corporate Web sites were already into their second or third iteration, which reduced the level of design consultancy and Web integration work needed, Matt Reed, writing in the London-based NetImperative, notes that “a lot of the work carried out last year has had to be re-done, because it was so rushed the first time round”. Sales cycles have lengthened, which has stretched the cashflow of many debt-laden agencies. And many of the dotcoms that survived have brought or grown design and engineering services in house and had little need for external suppliers. Andrew Zolli, until recently Chief Marketing Officer at SiegelGale, observes that “a company like Amazon knows more about design than any Web design agency — they would never hire one”.

Of design services offered by agencies the straight-laced Economist also contends, somewhat disingenuously, that “the flashy web designs that were the hallmark of nose-ring New York firms such as Razorfish are now seen as slow and confusing; Yahoo!’s credo of fast, functional and boring has won the day.”

Demand and supply were not aligned any more; the company was larger than demand could justify — Thomas Mueller, Razorfish

The outcome of these dynamics was summed up succinctly by Thomas Mueller, VP Design/Creative Director North America for Razorfish. “Demand and supply were not aligned any more; the company was larger than demand could justify.”

Rapid hiring and firing practices were one characteristic of companies that in many cases were not well managed. Christine Overby, an analyst at Forrester Research, believes that many “didn’t have business practices in place to support the financial forecasting needed for well-run public companies” but adds that “you can’t fault them, as the market was rating them very highly”. Companies were also expanding very fast and the integration of new employees was hard to manage, especially when they were brought in as part of an acquisition. Paul Kahn of Dynamic Diagrams/ingenta observes that “having seen what it takes to merge creative groups in different cities and different countries on a small scale, I can’t imagine how it works on the scale that Razorfish, MarchFirst, and Organic have been doing it”. Many agencies also expanded nationally and internationally, without basing the expansion on client revenues; regional offices had to be subsidised, or used for outsourcing work from the centre, which proved to be an intolerable burden when client work became unreliable. It also required greater financial oversight than they were used to or able to give.

Most clients were treated like necessary evil buffoons whom service companies deigned to work with if they could form-up enough cash — Nathan Shedroff

More seriously, some companies were viewed as being arrogant and greedy. According to Nathan Shedroff “the ‘experience’ most clients had with most companies was disastrous. Most clients were treated like necessary evil buffoons whom service companies deigned to work with if they could form-up enough cash and sat quietly in the corner while the developers did as they pleased”. Now, according to Heath Kane projects are “more bespoke; clients choose what they pay for rather than what we want to do”.

Christine Overby points out that “clients also became skeptical of companies that said they can create a digital business”, a point re-enforced by Clement Mok, Chief Creative Officer at Sapient, who charges that “companies that wanted to ‘recontextualise your business’ have made design too shallow”.

Much of the drive for growth was a result of companies being public, a point picked up by Matt Reed in NetImperative. “Those that resisted the temptation to go public must be relieved that they escaped the pressure to go headlong for growth and global expansion at a breakneck pace, as well as the baleful scrutiny and short-term approach of the investment markets”. The Economist observes that the restructuring in which these companies are now engaging is similar to that conducted by the older professional services companies ten years ago, but notes that “they were able to do so on their own terms, as private partnerships; the Web consultancies must pull off the same trick in the glare of the public markets”.

There is less hype [today] and more discussion of return on investment — Darryl Feldman

The consequences aren’t all bad, either. “There is less hype and more discussion of return on investment”, according to Darryl Feldman, and this means we have “more satisfying work to do, as we know that it will last”. The focus on value makes it easier to work with clients. “Cool is out now. Profitability is in,” attests Jared Spool, Founding Principal of Massachusetts-based User Interface Engineering. Meriel Lenfestey, founder of the London-based user experience consultancy Flow Interactive, believes it is becoming clearer to clients that “creating a product which provides a good user experience is one of the cheapest aspects of the design process”.

Whatever benefits the events of the last year have had, it is clear that companies have had to change if they are to continue to succeed. “Up until six months ago integrators were not incented to get better”, notes Christine Overby, but this is no longer the case.

Positioning oneself as a general-purpose Internet consultancy may not have that much relevance going forward — Gong Szeto

While the redundancies that have been pushed through are the greatest indictment of the industry’s previous strategies, other changes have been more creative. Much of it has centred around a belief summed up by Overby that agencies need to “narrow service lines and build deeper expertise”. She argues that only a traditional IT or professional services company (“a Deloitte & Touche”) can genuinely offer end-to-end integration. Gong Szeto, Chief Creative Officer at RareMedium in New York, acknowledges that “positioning oneself as a general-purpose Internet consultancy may not have that much relevance going forward”, though Clement Mok reports that Sapient’s clients “continue to want soup-to-nuts, [albeit] with more emphasis on back-end systems integration and performance”. (“It is back to a core competency from the past”, he notes.)

Szeto goes on to note that his group is “also focusing more on the strategic value of design in business”

Alongside the reorganisation and restructuring, the areas that design practice addresses are changing. Gong Szeto describes how “in the User Experience Group we are taking charge of areas that were once the domain of technology, such as Content Management Systems, where the design is manifested in the end-user experience but also in the design of tools and administrative workflow processes.” He goes on to note that his group is “also focusing more on the strategic value of design in business”.

Client retention has become a key area. “We are focusing on something which we took for granted in a demand market: client relationships” confesses Ian Worley, noting that Viant is “identifying individuals who understand specific markets, have relationships with previous clients and can spend time developing the relationships with new clients”. Organic is aiming for “100% referential clients”, according to Darryl Feldman, while Clement Mok states that Sapient’s “measure for success is repeat business and happy clients”.

It used to be that vendors were really interviewing clients for ‘worthiness’ — a totally arrogant POV — Sam Tripodi

While agencies have initiated many changes in their approach much change has been driven by the greater power, confidence and experience of their clients. “It used to be that vendors were really interviewing clients for ‘worthiness’ — a totally arrogant POV” observes Sam Tripodi, “but the scales have evened out now, or perhaps tipped in favour of the client”. (Bucking the trend Phil Jones claims that EHS Realtime “now turns down far more clients than we would have in the past. If we do not feel the budget allows us to do the job satisfactorily we advise the client and step out of the ring”.) Richard Sedley believes the downside of the changed dynamic is a “greater nervousness when dealing with clients”.

Clients scrutinise companies pitching to them to make sure they won’t go under before the project is complete, and this is easier with so many agencies being public. “Stability and financial security is key for client confidence” notes Richard Sedley. Hugo Manassei goes further in asserting that “clients don’t like hiring companies that make so many redundancies”, and they may well be sensitive to the ability of such companies to deliver, and the effect of redundancies on staff morale.

Aaron Marcus [of AM+A] claims that his company’s increased attention to planning and client liaison has led to a “consequent payoff in long-term client relationships”.

The direct marketing sector has always had to prove its success more quickly than design or advertising — Phil Jones

Clients are also more quantitatively driven, and agencies are responding to this. “The direct marketing sector has always had to prove its success more quickly than design or advertising agencies because identifying the results is part of the brief,” contends Phil Jones.

While the quality of client relationships is improving, getting work in the first place is tougher, and pitches are more frequent. While they still compete with one another the Web integrators face increasing competition on a number of fronts. There is increasing competition from the Big Five professional services companies (many of whom have created standalone Web agencies), established management consultancies such as McKinsey, BoozAllen and smaller outfits, traditional IT integrators such as EDS, IBM Global Services and Accenture, and the dominant branding agencies.

The Web agencies are also in competition with more specialised companies working with new platform such as wireless and iTV. They are also competing with companies focusing on usability and user experience, such as Flow Interactive in London, User Interface Engineering in Massachusetts, and Cooper Interaction Design and the Nielsen Norman Group on the West Coast.

Some experience designers will jump ship in search of more consumer oriented projects to work on — whether they be Internet oriented or not — Grace Colby

Agencies are also competing with in house teams, often recruited from staff they have laid off themselves. Grace Colby, an independent design researcher in Boston, predicts that “there will be a subset of an Internet services company’s experience design team who jump ship in search of more consumer oriented projects to work on — whether they be Internet oriented or not.” While this seems to be likely Karen Mahony [of Xymbio] wonders how effective in house teams can be. “Having worked in house in a really good team I found we weren’t listened to, and were brought in too late on projects.” These dynamics are further complicated by a trend towards outsourcing of entire areas of corporate activity , notes Ian Rowland-Hill of the London-based Design Business Association.

Strategy will also tend to be hived off. Ian Worley has observed an “increasing separation between Internet strategy houses and specialised implementation houses”, which he believes “will mean that the industry will begin to look much more like the structure of the architectural industry” (where his professional career began). He notes that if companies such as his “simply give clients exactly what they ask for they will tend to be seen as an implementation house”.

Whatever its specifics, the challenge of an increasing division of labour “will be to maintain the critical feedback loop between the thinking and doing which is required for innovation, particularly with respect to technology”, Worley concludes.

The division of labour isn’t just competitive. The advertising agency holding companies (WPP, Omnicom, Interpublic and their ilk) have long had partnerships with and held stakes in the Web agencies. This hasn’t been the case with the traditional professional service companies, and the recently announced investment by Francisco Partners and Accenture to turn four country-based agencies into AKQA Inc. was a signal development.

None of the potential for this technology (or the design for it) has reached anything like its limit — Richard Sedley

It has become clear that the belief in the ‘new economy’ (and it did embody a large element of faith) has been substantially undermined. Though the potential of the network is tremendous, the commercialisation of the Internet has largely been about solutions looking for problems. The lessons of this expensive period of R&D haven’t really been learned and the resulting pessimism doesn’t bode well for the short term future of the associated industries. As Heath Kane comments “rumours in the industry can create a recession that pulls everyone down with it”. “We are still in a doom-laden outlook that exceeds what is really going on. None of the potential for this technology (or the design for it) has reached anything like its limit,” argues Richard Sedley. Even the reduction in investment has to be seen in perspective. John Browning, one of the co-founders of First Tuesday, notes that “VC financing, although dropping over the course of 2000, is still several times higher than it was two to three years ago”, and Chris Pacione adds that “the market is very liquid at the moment, and that’s great news for a good company, with a solid business plan and the right team”.

The case for the effective and appropriate use of IT in society needs to be revisited and restated, going beyond the traditional business automation championed by established systems integrators. This case needs to be founded on a grander and more ambitious vision that recognises how human progress is intimately tied to technology, and also a more humanistic approach to its application. People working in experience design are as well placed as anyone to make this case.

Even in the gloom there is considerable investment in new developments from established companies. Interactive television (most advanced in the UK), mobile data (Europe, particularly Scandinavia, and Japan), and other handheld devices are where the excitement and much investment is currently focused.

Neither is the despondency uniform around the world. “In Europe there are still quite a few emerging markets”, says Ian Worley. “The smart companies will recognise this and begin to build presence in these markets.” “They are all building like crazy out there”, says Helen Charman, working on a Scient project in Portugal. “The marketplace is several years behind us, so they are still in a stage of euphoria.” Rawdon Messenger reports from Mexico that “currently less than two percent of the population is online, and this is conservatively forecast to grow by 100% over the next two years”. Growth overseas will also have spinoffs for agencies based elsewhere as their clients start to localise their products for those markets.

Even in the traditional area of facilitating business using the network a more solid basis has been laid. “eBusiness is no longer considered as a bolt-on”, says Shelley Evenson, Experience Architect at Scient in Chicago. “Technology has proven itself over and over again in terms of producing bottom line and top line value”.

The importance of user interface and customer experience is more clearly appreciated by some clients. Mobile voice and data company Hutchison Telecom’s business development group is pushing the importance of user interface, while Nokia’s Ilari Nurmi is on record commenting that for his industry “the real commercial competition has now moved to the higher levels of functionality such as the user interface”.

Web design is a craft activity… and this has made design closer to the client than it is in product design — Colin Burns, IDEO London

The value of design to business, and its input on the bottom line, appears to be better appreciated too. Colin Burns, director of IDEO in London observes that “Web design is a craft activity, where the designer crafts the last pixel, and this has made design closer to the client than it is in product design. Amory Hall sees design in an evolutionary context. “In an environment where technology is to a large extent fungible, in which features can be easily replicated and global prices compared with one click, the real power to differentiate lies ever more in the strength of the brand and in the way it is conveyed through visual design and applied to immersive, interactive media.” Gong Szeto believes that experience design could play a more central role at Rare Medium, commenting that “the User Experience Group certainly believes in it because we are the only real human-advocates amongst our sister disciplines, at least in an explicitly codifed way”. Shelley Evenson reports that “business, experience and technology as integrating forces within and among organizations are just as important (if not more so) than a year ago”, adding “I think we’ve just seen new (and possibly even more remarkable) opportunities for those integrating skills to be applied going forward.” According to Terry Swack “experience design is the thing that knits technology and strategy together”, which can only make it more central to business.

Design and Web agencies still have a lot to offer. Ian Worley at Viant contends that “we are in a great position to anticipate the future better than our clients because of our collective experience and interests in the Internet space”, adding that “the sense that the Internet is no longer of significant strategic value has come about because most clients still think in terms of Web sites”.

Richard Sedley believes that there needs to be “more of an emphasis of business strategy, which was something that many companies and individuals consciously neglected”. Designers will have to develop a deeper understanding of the areas in which their clients operate, and become even more convincing advocates for an effective and appropriate use of IT in society. They will need to have a tighter grasp on the real trends that are shaping the development of work, and public and private life, and find better ways to understand the real lives of the people who will use the things they design.

Very few companies designed the experience their customers had with them and even fewer bothered to audit these experiences — Nathan Shedroff

With clients they will need to reassess the nature of what they deliver, and how effectively it can promote a design their client’s organisation. This leads to considering the design of the organisation, an area in which design methods and a designerly approach can be very insightful. In addition to this Nathan Shedroff notes that “very few companies designed the experience their customers had with them and even fewer bothered to audit these experiences to see if the designs were faithfully implemented”.

While the effects of the industry shakeout have been most dramatically evidenced in layoffs, office closures and company collapses we should be careful not to directly equate Web agencies and design companies with the effective development of experience design, though they were the major drivers in its early years. The knowledge they have created has imbued their employees, collaborators and clients, and wised up commentators from investment bankers to broadsheet journalists, and whatever forms the industry takes in future this knowledge is not about to disappear. Design is taken more seriously and designers have are more ambitious about the impact they can have in business and society.

Back in Clerkenwell other business has made up for lost custom at the Deli Bar. Design companies may continue to cluster between there and Brick Lane at the edge of London’s East End, but design is definitely out of the ghetto.

Background

Source

First published in AIGA Gain, 2001

Gain was founded as the AIGA Journal of Design For the Network Economy and was published in print and online. It now addresses ‘the design of business and the business of design’ and is published online only.

Citation

‘After The Fall’ Nico Macdonald, AIGA Gain, Vol. 1, Number 2, 2001

Reproductions

No PDF available


Originally published at www.spy.co.uk.

Web design 1.0

The early years of Web interaction design in journalism

Nico Macdonald

Written by

Educator, facilitator and consultant on innovation and creativity. Tutor and Visiting Fellow @LSBU_ACI. BIG POTATOES manifesto co-author (@TheBigPotatoes)

Web design 1.0

The early years of Web interaction design in journalism

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