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Comparing UXD Business Models

By Jim Nieters and Garett Dworman
July 10, 2007
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When leaders of UX organizations get together, we always seem to talk about how our UX groups are structured and why. Just as designers solve user interface design problems, their leaders solve organizational design problems. It’s what we do. At CHI 2005, Kartik Mithal, Director of User Experience at Sun Microsystems, and Jim Nieters, Senior Leader of User Experience at Cisco, spent hours sharing insights about how to best structure their groups for future success. Kartik and Jim agreed that the opportunity to learn from one another was one of the more valuable reasons for leaders of UX groups to attend CHI.

This manifest need for UX leaders to learn—and share—best practices was the rationale for the authors, Jim Nieters and Garett Dworman, to write and present a CHI 2007 Experience Report on the organizational structure that Jim Nieters created for his UX group at Cisco [1]. It also motivated us to follow up that presentation with a CHI 2007 Management Special Interest Group (SIG), “Comparing UXD Business Models,” in which participants compared different models of UX organizational design [2]. Our intent was to share experiences and systematically explore them in the hope that this information will aid companies in structuring their internal UX functions. To this end, we generated SWOT (Strengths, Weaknesses, Opportunities, and Threats) analyses of four UX business models.

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More than 100 members of the CHI management community attended this SIG. During the discussion, it rapidly became clear that UX leaders had a lot to talk about, and one and a half hours was far too short a period to permit definitive answers to emerge. So, this SIG will be the beginning of a longer-term exploration. In this article, we are sharing what we learned by performing SWOT analyses on several UX business models during the SIG.

UX Business Models

To begin the SIG, we explained our goals and briefly described the following four simple organizational models:

  • Centralized funding model—A central UX organization receives a large budget from a single organization, which views it as a cost center.
  • Client-funded model—Individual business units fund a single central UX organization that manages the UX team and provides UX resources to product teams.
  • Distributed model—Instead of a central UX organization, smaller groups of UX practitioners report directly into product divisions and focus only on the user experience of that division’s products.
  • Internal consultancy model—Highly focused teams of cross-functional experts provide in-depth UX support on carefully selected products. This is the model Cisco’s UX group follows, and we discussed it in detail in our CHI 2007 Experience Report [2].

We presented these four organizational models as examples of business models that we could analyze during the SIG. We then opened the discussion for ten minutes to allow a free exchange about which models people had experienced or would like to know more about. Following this discussion, SIG participants chose the following three business models on which to perform SWOT analyses:

  • Fully centralized model—In this model, both funding and the UX reporting structure are centralized.
  • Hybrid model with a central UX group—In this model, funding is centralized and the central UX group is responsible for company-wide UX efforts. UX groups embedded within business units handle UX projects for those business units (BUs).
  • Hybrid model with more distributed UX resources—In this model, there is again a central UX group, but this group focuses on process, education, infrastructure, standards, and a just few key design projects. UX groups are integral to the BUs that fund them, and do most project-based UX work. Participants assumed members of such UX organizations would be geographically dispersed.

Why did attendees choose to evaluate these particular models? When we polled SIG participants, we determined that these three organizational models were the models that their current companies had adopted. It is important to note that the two hybrid models, while similar, have salient differences. Are hybrid models more common than the fully centralized model, and if so, how much more common? We will explore this question over the next year and also stratify the data we collect according to company size, market segment, and other relevant contextual factors. It was interesting to note that almost none of the participants were interested in analyzing a fully distributed model, although many admitted to having experienced such a model.

What We Learned

The following factors quickly became evident during the discussion:

  • UX leaders feel as strongly about this topic as we anticipated they would.
  • The structure of a UX organization indeed plays an important role in determining the impact it can make in a company.
  • The strongest conclusion of the SIG was that an hour and a half was not enough time for the discussion, and participants encouraged us to organize a follow-up workshop. An informal poll showed that at least 30 SIG attendees would be interested in attending the workshop.
  • Participants wanted to talk about much more than the two dimensions of organizational structure that we presented—funding and centralized versus distributed teams. Some of the organizational dimensions they wanted to explore further included geographic distribution, reporting structure, size of UX teams, organization size, and organizational emphasis on product, engineering, or marketing. Participants also wanted to combine attributes of different models that reflect their experiences in industry today.
  • Almost everyone agreed that a fully distributed model does not work well—although it is not an uncommon model.
  • Participants wanted to learn from their peers in industry about what has worked for them in what contexts and what has not. They wanted to hear case studies and war stories.

SWOT Analyses for Three Organizational Models

An important factor that is beyond the scope of our SWOT analyses and this article is the reality that larger organizational factors and politics often play a role in defining organizational models. Sometimes, as UX leaders, we can influence these. At other times, we cannot. Subsequent articles on the topic of organizational models will touch on these more political factors.

Here are brief SWOT (Strengths, Weaknesses, Opportunities, and Threats) analyses for the three organizational models participants discussed during the CHI 2007 Management SIG “Comparing UXD Business Models.”

Centralized Model

In this organizational model, both funding and the UX reporting structure are fully centralized.

Strengths:

  • Permits different skill sets to coexist within a single, larger organization. For example, interaction designers, visual designers, user researchers, and usability professionals can all work in a single cross-functional organization.
  • Provides a career progression for UX professionals, who report to a UX leader; follow best industry, research, and design practices; participate in peer reviews; and receive accurate performance evaluations.
  • Ensures UX resources are not assigned to non-UX projects.
  • Lets UX team members work on multiple projects and technologies over time.
  • Lets UX professionals share their expertise, so less knowledge is lost if people leave.
  • Gives UX professionals an independent voice, because UX resources report to neither product management nor engineering.
  • Facilitates the development of standards and training and encourages knowledge-sharing exercises.
  • Ensures visibility within the organization, because a central UX group tends to be larger and has executives who can create a clear and unified vision for UX.

Weaknesses:

  • Business units (BUs) do not view UX resources as a part of the BU, sometimes making it more difficult for UX efforts to achieve traction or resulting in protracted engagements or delayed results.
  • A UX team that is not aligned with BU objectives can appear out of touch and lose credibility, especially if the team resides in a different location.
  • The UX team might lose the flexibility that is necessary to meet the unique business needs of specific product teams.
  • Conflicting objectives make prioritizing difficult. Should a central UX team optimize for the needs of their group or for business objectives? Do BUs understand and agree with the central UX group’s project selection or prioritization criteria?
  • The culture of the UX team might be insulated from that of the larger organization.
  • UX professionals and others on product teams might lack shared incentives.

Opportunities:

  • The UX team can receive steady organizational support for growth and expansion. The impact of benefits to the organization could be huge for the team.
  • The UX team could have higher visibility.
  • Design can become part of the corporate mandate.
  • UX professionals can easily share learnings across projects.
  • When the leader of the UX team has a title such as VP of UX, the entire team could gain in credibility and the power of its voice within the organization.

Threats:

  • A cost center could become a target for budget cuts.
  • Complacency could seep into the UX team, because of a lack of alignment with the business goals of specific divisions.
  • Business units could choose to ignore UX rather than making the effort it takes to insert UX concerns into every product development effort.
  • UX resources might “go native” in business units rather than aligning with the goals of the central UX group, diminishing the overall alignment of UX efforts within the organization.
  • Business units might hire their own UX teams to ensure alignment with their goals and nimbleness, creating competition for a central UX team.
  • If the members of a central UX team do not see their impact on products—because they are either not aligned with or included in strategic decisions—they are more likely to leave.
  • Stifling innovation by overemphasizing consistency can reduce the overall impact of the UX team.

Hybrid Model With a Central UX Group

In this hybrid model with a central UX group, UX resources are co-located and aligned with product teams.

Strengths:

  • Makes UX more agile.
  • Lets UX professionals get better buy-in from BUs, who perceive them as members of the team.
  • Provides common funding for more extensive UX activities such as user research, which can get shortchanged on smaller, less well-funded teams.
  • Lets individual UX resources gain greater domain knowledge.
  • Ensures alignment with other members of the product team, because they feel UX professionals have “skin in the game.”
  • Enables the UX group to establish a cohesive vision despite tensions between the needs of the distributed UX groups.
  • Automatically aligns UX priorities with those of the BUs, because UX resources are already allocated to the BUs.
  • Lets UX enforce consistent processes across BUs.
  • Ensures coherence with the company’s overall vision, so long as there is a Director or VP of UX who has strategic weight.
  • Ensures a common look and feel across products.
  • Permits employee development.

Weaknesses:

  • There might be scope creep in the types of work for which the UX group is responsible.
  • UX professionals are accountable to the BUs, but not as tightly to the central UX group.
  • This structure might make communication between the central UX group and satellites more difficult.
  • This model makes keeping the UX brand consistent harder, because individual UX tribes tend to form.
  • Project teams might feel excluded, because they have no part in or input to the UX process.
  • UX needs local heroes to motivate individual product teams.
  • The purse strings for UX are not tied to revenue-generating products.
  • Performance reviews might be difficult, because UX resources report to both the central UX group and a product team.

Opportunities:

  • A simplified organizational hierarchy could lead to faster implementation of changes.
  • Centralized standards could control work priorities, but at the same time benefit from exposure to a wide range of products.
  • This model might lead to improved career-ladder visibility.
  • This model sometimes drives superior innovation.

Threats:

  • This model might result in an us-versus-them syndrome between the central UX team and the product-aligned UX resources.
  • Disproportionate funding patterns might result.
  • This model is susceptible to political manipulations.
  • UX resources might become jacks of all trades, but masters of none, rather than focusing on their areas of specialization.

Hybrid Model With UX Teams in Business Units, But Managed Centrally

In this hybrid model, UX teams are funded by and distributed into the BUs. The UX leaders that manage UX teams within a hybrid model might reside in either the central UX group or the BUs. Sometimes, such hybrid models use a matrix organizational model, in which UX teams report directly to a central UX leader and are also dotted-line reports to BU leaders:

Strengths:

  • Makes UX teams more agile, because of better integration with product teams.
  • Ensures better buy-in from the BUs, because UX resources are part of the product teams and their decision making.
  • Eliminates competition with other BUs for resources.
  • Makes it easier to make decisions when there are trade-offs between UX and the considerations of other disciplines on product teams.
  • Ensures UX resources remain dedicated to their projects and, therefore, can see them through to completion.
  • Ensures UX resources have specialized expertise.
  • Correlates the performance reviews of UX resources strongly with product success.
  • Makes for better collaboration.

Weaknesses:

  • There may be scope creep in the types of work for which the UX group is responsible.
  • Decisions regarding UX engagements might reside in the BUs—possibly to the detriment of the UX group.
  • This model might reduce incentives to follow the central UX group’s standards and methods.
  • UX resources might be allocated to non-UX roles when BU leaders need other skill sets or do not understand UX well.
  • It is more difficult to move UX people across BUs. UX resources become specialized and have to quit a job in one group to move to another—sometimes resulting in their leaving a company.
  • The satisfaction of UX resources with their disciplines might be lower if they feel isolated.
  • There is, potentially, less opportunity for career advancement, especially if BU leaders do not understand or support UX career progression.

Opportunities:

  • This model can provide agility and freedom to experiment.
  • Collaboration within and across product teams can lead to innovation.
  • This model can leverage the career-advancement opportunities of a central UX group.
  • UX might receive additional funding on a project-by-project basis.
  • Faster, more focused decision making at lower levels could drive faster times to market.
  • It’s possible to pick up additional, local funding sources or side deals.

Threats:

  • UX might have less strategic alignment or impact.
  • The voice of the central UX group could be more easily ignored.
  • It might be harder to enforce standards or process.
  • If a BU has less appreciation for UX, UX might become marginalized, and its impact might decrease.
  • BU funding for the central UX group might decrease.
  • UX resources might get sucked into other, non-UX tasks.
  • An imbalance in funding patterns might exist across BUs, based on their UX teams’ performance.
  • BUs might do a poor job of setting UX work priorities.
  • This model might result in an us-versus-them syndrome between the central UX team and the product-aligned UX resources.

Conclusions and Our Future Plans

Once we begin looking at the strengths, weaknesses, opportunities, and threats of each of these organizational models, we can almost immediately start brainstorming ways of mitigating the challenges and put policies into place that help improve the strategic impact of UX.

In the coming months, we look forward to publishing the war stories of various UX leaders who are grappling with these organizational issues. As we share lessons learned, we begin to understand the context behind each of the factors we’ve mentioned in these SWOT analyses. UX managers can start building their own mental models for how they might structure an organization under what circumstances. We think organizational design is not only as important as product design, but is, in fact, often the factor that determines the success of UX within an organization.

As a first step, and as requested by participants in the SIG, we have submitted a proposal for a workshop at CHI 2008 that will produce in a pattern library of UX business models. This workshop will permit UX leaders to share their experiences with their own organizational structures, why those structures arose, and what has or hasn’t worked. We plan to define a taxonomy of dimensions by which we can describe an organization’s UX structure—in addition to funding and reporting models. We also want to formulate a taxonomy of dimensions by which we can describe a UX organization’s environment and goals. Finally, we plan to document and publish a set of patterns—in terms of these taxonomies—that codify most of the experiences participants present. Our ultimate purpose for this pattern library is to help future managers and executives make more proactive—rather than reactive—organizational decisions.

Our goal is to help UX managers and executives answer the following questions:

  • What other organizations have similar environments and goals, and what UX organizational structures have they adopted?
  • What has and has not worked for those organizations?
  • What stressors led to those organizational structures?
  • What stressors are likely to stimulate changing from such organizational structures to new ones?

To subscribe to the mailing list comprising the UX leaders who participated in this SIG, please provide your email address using the comments form below. 

References

1. Nieters, James, Subbarao Ivaturi, and Garett Dworman. “The Internal Consultancy Model for Strategic UXD Relevance.”PDF CHI 2007 Proceedings (2007).

2. Dworman, Garett, James Nieters, and Subbarao Ivaturi. “Comparing Internal UXD Business Models.” CHI 2007 Extended Abstracts (2007).

In Business of UX | UX Leadership | UX Strategy

Jim Nieters

Chief User Experience Strategist at Experience Outcomes

Los Altos, California, USA

Jim NietersA design leader for 17 years, Jim loves every minute of helping companies create competitive advantage by designing experiences that differentiate. He has worked with a range of companies—from startups to Fortune-500 companies—most recently as Senior VP of Customer Engagement at Monaker Group. He previously led User Experience at HP, Yahoo, and Cisco and has advised numerous startups. Jim chooses to work with brilliant clients, helping them unlock their unbounded potential by envisioning and designing end-to-end experiences that disrupt markets and engaging users emotionally. He often works with UX leaders to help them work through organizational challenges and ensure User Experience has the visibility it deserves and can design experiences that make the team proud. Jim also conducts design-value assessments for his clients, identifying gaps in their ability to differentiate on the experience, then helping them close those gaps and become extraordinary.  Read More

Garett Dworman

Senior Consultant at Tec-Ed Inc.

San Francisco, California, USA

Garett DwormanTec-Ed specializes in knowledge-management analysis and design. Garett has over ten years of experience in product and user interface design for firms ranging from established financial institutions to high-tech startups. Garett has published extensively on how people and organizations disseminate, access, and consume information. He holds a Ph.D. in Decision Sciences from The Wharton School of the University of Pennsylvania.  Read More

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