In times of economic crisis both consumers and companies are cutting expenses everywhere they can. In the design world designers no longer have the creative freedom they used to, and are in stead often asked to cut down on details to make the products cheaper to manufacture. This ‘cheapening’ of the products often results in the creative process suffering and the designer, if not careful, risks becoming less invested in the designs he or she is creating.This is a problem for the company selling the product, as the product may not be as attractive for the buyer as it could have been, as well as it is a problem for the designer.
Design superstar Yves Behar’s company, Fuseproject, has adopted a business strategy that eliminates this threat. The economic model is simple – they reduce their standard fees, mark the reduction as an investment and seek ROI on that investment via royalties and equity as they enter into customized partnerships with the hiring brands. The other obvious upside for the designers is that if the product is a huge success, the designer is equally rewarded, which is something Behar had to learn the hard way.
in 2005, Fuseproject designed, named and branded the Slingbox TV streaming media, which was later on sold to Echostar for $380 million. Fuseproject did not use the partner strategy at that time and missed out on a lot of revenue from the Slingbox acquisition. Since then, behar changed his business strategy.
The partner strategy is a win-win situation for both designers and partners as the designers have the highest incentive for optimizing the product for a relatively low standard fee. This enables smaller companies and start-ups to partner with a large design firm that they would not otherwise have been able to afford, and where they on top of that share the risk of the product’s future. The partnership is thus long-term, and this sort of collaboration can prove invaluable to a start-up company, especially since Fuseproject also comes with a large network of engineering, production, manufacturing, public relations, media, press, retail, distribution and funding contacts all available to the project.
At INDEX: Design to Improve LifeⓇ we believe this is the business strategy of the future. Although it is not a new strategy, it is not well known or adopted by that many designers or brands yet. However, as more brands and designers focus on long-term partnerships, more entrepreneurs will potentially see their businesses succeed.
Having a strong design team behind your product is something we believe is very important at INDEX:, and we believe, in addition to having a great idea, the partnerships between Yves Behar’s company and the brands are the reasons for him winning the INDEX: Award two times (with One Laptop Per Child in 2007 and Verbien in 2011). In 2011, he was also nominated for the award with the design Clever Little Bag for sportswear giant Puma. The fact that much of Behar’s designs focus on sustainable design, only makes us even greater fans of his work.
At this point, Fuseproject has co-invested with 18 startups. Out of those, Behar says that there are three or four that haven’t worked out but remain alive. But more than five are throwing off significant cash. In fact, Behar reckons that nearly 60% of Fuseproject’s revenues come from their entrepreneurship model–and 80% of their profits. That sort of track record rivals almost any venture capital fund. The key is that Fuseproject chooses only two or three venture projects per year, and these are chosen not just because the client is eager for design services. The change in business model changes how Fuseproject look at clients. “We look for companies and situations where we can create a lot of value,” says Behar to fastco.com.
At INDEX: Design to Improve LifeⓇ we want all good ideas to have a shot at success, and we encourage all start-ups and designers to start thinking about partnerships like the ones Yves Behar are offering. Making people collaborate and share both the risk and the ROI is a great way to maximize your chances for success today. And please do so with the triple bottom line in mind.. 🙂
Recently Behar’s business model was praised on the Fastco website – one of the world’s bets renowned websites. Please click here to read the Editor’s Picks article on fastcodesign.com.