Next-Gen Business Models in Creative Professional Services

A few weeks ago I posted a request to learn from other creative professionals about their views on the future of the creative professional services industry ????

I’ve spoken to over a dozen leaders within the space - active and former agency executives, freelancers, upstarters, professionals within large and small organizations.

I learned A LOT - so this is also an opportunity to thank everyone who spoke to me ??

I promised to share some of my key learnings, and there are many. Therefore I’m aiming to share main insights through dedicated articles such as this.

I’m always looking to learn and improve - so if you have feedback please share in the comments or DM me. If there’s more on this topic that you or someone in your network is worth speaking with, let’s connect!

Business & delivery models - if it’s broken, let’s fix it

Many feel that the current models are broken and unsustainable.?

Consultants and agencies can’t continue to work at hourly rates, project-based, studio-focused models that limit scale, constrain creativity, diminish the quality of work, and create business uncertainty.?

While procurement departments seem comfortable with the existing models, clients seem to agree that the current models don’t encourage the level, pace, and communications standard of work that they expect. Essentially expecting better quality, faster delivery, and deeper understanding of business needs and expectations.

This has led to an assumption that creative professional service businesses are inherently low-margin, with one of 3 eventual outcomes:?

1. You don’t survive ??

2. You stay small and niche ??

?3. You sell and merge into a large holding group/big4 company to subsidize and sponsor you ????

This may be a “fact of life” type situation, and I’ve heard views on how this reflects market demand and willingness to pay, however there are also a few interesting models to learn from.?

• “Skin-in-the-game” models that aim to correlate services with business outcomes
• “Tech-inspired” models that aim to productize consulting services, inspired by tech and software companies
• “Flexible scaling” models that leverage community and remote working tools to deliver work at scale while reducing the dependency on fixed assets

"Skin-in-the-game"

????Fixed + success-based/impact pricing models?

While not entirely new or innovative, it’s interesting to see how many are exploring engagement models that include fixed fees along with payment correlated with the business impact or major milestones achieved from the service. This is a direct translation of “pay for value”, that prices offerings as defined, measurable outcomes (as opposed to list of deliverables). It’s always been a challenge to directly correlate impact with creative deliverables, but as data & analytics have become more sophisticated, service providers handle more of the hands-on delivery side of the work, and clients become more sensitive to ROI, there seems to be a growing opportunity in these types of engagements.?

?? Equity // Right-to-invest?

With the rise of startups all around us, there is a growing appetite to collaborate with early stage ventures, and experienced creative professionals have much to offer to these companies. However there’s typically been a price gap, where startups couldn’t afford the services they needed, and the service providers couldn’t profit from the work at the prices these companies had. While this gap has not been completely bridged, we see more models being introduced that include equity as a payment method (typically combined with a minimal fee for service, and aligned with vesting and defined milestones), as well as introducing “right-to-invest” clauses that allow professional service providers to participate in future investment rounds. This opens up new growth opportunities for agencies, introducing potential new revenue streams (as well as risk factors),? with an interesting angle, which is hands-on due diligence of their potential investments. This model also has variations within the startup accelerator and VC service space, where startups enjoy these services as part of their investment agreements. This framework is relevant for early-stage startups and service providers with an appetite for risk, and it should be said that this model also generates a lot of uncertainty, can be a distraction from the core, and isn’t necessarily healthy for a business that doesn’t have the pockets or the resilience to endure.

“Tech-inspired”?

?? Subscription models

This used to be called a monthly retainer ?? But, the difference seems to be that more individual, 1-man-show businesses, are inspired by SaaS frameworks, and use predefined subscription tiers as their offering. Clients can choose what they need online, signup for the service tier that suits them, cancel at any time, and the work is done mostly asynchronously and through digital channels without too much face2face or meetings. This likely isn’t for everyone, and might be more of a niche model for specific talent, and specific company needs, but it seems to come up more often than it used to.

??? Product monetization // Licensing

As the lines between design and development blur, and more service providers find themselves engaged in product management, there seem to be more opportunities to commercialize technology that is developed internally, and building on organizational knowledge and expertise to create products and services not only for paid client engagements, but as software solutions that could be licensed beyond the single project or client engagement. GenAI and low/no code solutions allow for greater experimentation in this space and it seems like there is a lot of potential to diversify revenue through this approach if done well. It's worth mentioning at the same time that many who talk about this also share that the experiments being run today are not significant, can sometimes lack resources to be fully functional or successful, and can be defocusing.

“Flexible scaling”

????????????Core + Remote + Collective?

The pandemic accelerated the adoption of remote working methods which unlocked new models for creative professionals. Shared physical spaces are no longer a must, and collaboration continues to thrive through virtual spaces and asynchronous communication. In addition, downsizing of full time team members has led to the adoption of more freelance and part-time working models, which in turn has generated marketplaces, open innovation and collective member setups, allowing for small agencies and teams to deliver work at scale without the constant challenge of having to pay fixed salaries and benefits regardless of workload. Companies are now being built around these models, allowing for more flexible engagements, leaner cost structures and theoretically more access to talent. It will be interesting to see if and how these models scale, and how the culture and organizational benefits of the traditional agency life, are preserved or applied to this way of working.

?? ?? AI-driven Agencies/Agents

While still in early days, it's clear that many are experimenting with models centered around AI. From AI bot designers and consultants that offer services that replace or augment human labor, to internal tools that streamline operations, enhance organizational intelligence and allow for faster, more efficient work delivery that holds the potential for increased margins. It seems clear that AI will play a major role in creative professional service models, though it's yet to be seen how scalable and differentiated this will be over time. One thing seems certain - the use of AI and Gen AI is changing perceptions and expectations around speed of work, the need to outsource creative thinking & doing, and how to leverage unique and proprietary knowledge and insights. Those who find ways to build on these assets, can create an advantage that will be hard to replicate once these tools are ubiquitous.

Surely there are more models to explore and this is hardly a comprehensive list. There are also several constraints and nuances to address - depending on the company size, the current financial situation, the type of work that pays the bills today, legacy issues, etc.,

But the main takeaway seems to be that the traditional models in the space are closely nearing the Einstein definition of insanity ”doing the same thing over and over again, and expecting different results”. So if you’re not exploring new models in one way or another, you might want to reconsider ??

If you made it this far, and found this interesting - please share, comment, connect to keep the conversation going ?? ??

‘Till the next one ??