A recent BusinessWeek podcast featured an interview with Fahrenheit 212 founder and CEO Geoff Vuleta. Fahrenheit 212 is an innovation consultancy that engages their clients in a unique way by subjecting two thirds of their fees to agreed upon commercial milestones. If they don’t meet those milestones, they lose those fees. As a result the consultancy has a tangible interest in whether or not an initiative succeeds.

KA+A’s VentureSpring program produces similar results. When commercial interests are aligned a truer partnership, with all the honesty and transparency that necessarily goes along with it, is created.

The BusinessWeek interview with Vuleta provided some cool insight into how they work, but I don’t think it did justice to this unique way of engaging clients. The interviewer claimed that “Fahrenheit 212 gets fully paid only if the client ends up satisfied with the shops work.” In reality, the consultancy doesn’t base the success of its work on something as subjective as client satisfaction. As I indicated above, they define concrete commercial milestones that serve as objective success indicators. At the end of the day, both client and consultant can look at the facts and know if the results were favorable or disappointing.

Skin in The Game

The most obvious benefit to a client organization is that their consulting partner has every motivation to produce measurably positive results. In a time-and-material arrangement one could argue that the consultancy might be driven to drag an engagement out as long as they can – indefinitely if possible. And with pure project-based engagements the consultancy could be said to have the rapid completion of a project (at the expense of quality/success) as their primary motivation. With a performance-based approach, however, both parties share a common primary objective.

Building Credibility
Along with being able to command higher fees, the consultancy stands to reap some important benefits from this arrangement as well.

Plugging into an organization to help meet discrete, well defined goals, creates the opportunity to see things through to the (hopefully) glorious end.

Apart from a performance-based model, it’s not uncommon for design/innovation consultancies to complete their work, hand it off to an internal team at the organization and never hear about it again (until the client comes back a couple years down the road to address the same challenges again). When engaged in a deeper partnership based on reaching shared goals, the consultancy is able to achieve true ownership of their work. This, of course, benefits the client as well, because the consultancy is motivated to avoid leaving/creating unanswered questions and gray areas.

In addition to fostering a downright healthier relationship, the performance-based model also affords the consultancy an important chunk of credibility. As any design consultancy can attest to, there are occasions where clients wants something that’s less than optimal — i.e. something other than what the consultancy is pitching. There are two paths that can be taken here: Acquiescence, which results in a subpar solution. Or push-back, which, although probably the right move, can make the consultancy look defensive and disagreeable. In a performance-based model, there is already an implied acceptance of the consultancies expertise, or else the relationship wouldn’t have been entered into. As such, the client can be sure that their best interest is being served by push-back and disagreement. (Of course, sometimes clients are right when rejecting a proposed solution)

Design’s Continuing Evolution

Performance based relationships between design/innovation firms and their clients are representative of the professions continuing upward movement. As we attempt to earn/keep our seat at the table with other business leaders, adjusting revenue models (i.e. moving away from time and materials estimating and billing) can be a powerful strategic maneuver. Not only does it create opportunities for designers to increase compensation levels, it creates opportunities to develop deep and meaningful partnerships that can open all kinds of new doors.