Competitive advantage in the service industries

The other day I met with the General Manager of a big global design consultancy. We talked about the problem his company is facing, that of its process and methodologies being replicated by organizations outside of the design industry, like advertising agencies and brands. He called it the “McKinsey challenge,” where former McKinsey consultants went and became CMOs and started implementing the thinking tools and processes internally, reducing the need for the external help.

What this design consultancy is facing goes beyond, though. It is now competing with advertising agencies, where planners who read enough about design thinking are creating “lean” and “iterative” processes based exclusively on focus groups and selling them to clients. Brands are creating their internal design thinking teams. Surely, one can agree the fairness aspect of this newfound competition, as the methods and tools and processes are not exactly design thinking, but who cares? Design consultancies are the ones losing the money.

Who is to blame? Process can be replicated, people leave.

For companies who have nothing else going on for them but process and people, the competition is endless. Advertising agencies know this well.

How can design consultancies and agencies defend themselves against the competition? Creating a strong brand is one way in a sense of being recognized for a particular kind of work. CP+B used to have it. It could get away with much more than other agencies could at the time. People were lining up to go to Boulder.

Better than branding, though, is constantly updating your process, effectively making all previous iterations obsolete. Something like software updates, v5, v6, etc. People can leave but can only take the old software version with them. No one wants to be the person with the old software. No one also wants to miss out to be first one to test the new software, either. So people stay.

The problem is that this takes a lot of thinking and time. Being really responsive and iterative and adaptable is a long-term competitive advantage. But the current process doesn’t allow for this new, competitively superior process to come to life. In design consultancies and agencies alike, everyone is too busy delivering to be thinking, and everyone works within the timeframes and pay structures that encourage repetition of best practices. As long as efficiency is the goal, replication will be its side effect.