16.10.2019

Your Experience Design Provider Builds Its Own Products And Invests In Startups? Good!

About half of the 51 XD providers we surveyed recently — agencies and consultancies such as Astro Studios and Work & Co that provide experience design (XD) services — are also:

  • Developing their own products.
  • Founding startups and maintaining equity stakes in them.
  • Investing in startups with either money or their talent in the form of “creative capital.”

Why? Partly to tap other revenue sources in a shifting marketplace, and partly to help retain design talent that could go directly to a startup or internal innovation studio. So should you be worried that those investments distract providers from doing their best work for their clients? No — they give providers valuable know-how that improves it.

Astro Studios’ founder Brett Lovelady says this “creative capital” is the right perspective and talent applied early on in a project or business to steer it to success. Lovelady argues that creative capital should be on par with venture capital, and the concept has benefited from the growth of venture capital firms that see design as critical. Creative capital can be applied to internal projects, as well — ustwo Games famously played a major role in the popular mobile game Monument Valley and reports that sales have exceeded $25M to date.* Two investment firms, Combine VC and FCTRY, have been founded around the creative capital concept.

It’s not just startups: Astro Studios has had success working with midsized companies with royalties as one part of the compensation package. And T3 and Work & Co both report increased interest from clients seeking to include performance incentives or use other compensation models such as equity.

What It Means

Companies hiring XD providers that also build their own products and invest in startups will get better results.

Recommendation

Find out what the providers that you work with, or are considering, have been learning.

Ask your provider for war stories about things such as:

  • New design methods and tactics.
  • A/B tests gone wrong.
  • Customer insights gained through guerrilla UX testing.
  • Successful exits that suggest their judgment is credible.
  • Examples of performance incentives that align their interests with their clients.

Seek out relationships with providers that allow them to “invest” in your business for a return, with royalties and performance incentives, for example. This is especially true for midsized firms looking for help with innovation efforts. This approach stretches budgets to cover more work, as costs map to actual business improvements rather than work that’s far removed from an actual launch date.

More Resources

For more insights from our research about XD providers, see:

These posts and the research reports they link to are based on Forrester’s:

  • Experience design provider survey of 51 agencies and consultancies.
  • Findings from our frequent interviews of XD providers and their client companies.

If your company needs guidance about XD providers and your selection process — or if you’re an XD provider and would like to know more about our research into this landscape — Forrester is available to help through customized advisory services.

* Source: ustwo games, “A Year of Monument Valley 2,” Medium, June 25, 2018 (https://medium.com/@ustwogames/a-year-of-monument-valley-2-36754517a386)

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