Global Success Comes in All Sizes

Annual Multinational Design Fee Survey Shows Paradoxical Results

United States architecture firms are exporting a record $2.02 billion in design services.

Our annual Global Survey shows paradoxical results. For instance, the total export of U.S. architectural and design services of the top 30 firms shows a healthy upward trend, yet some individual firms are growing more rapidly despite global economic stress. This year’s projected year-end, non-U.S. billings by U.S.-based firms will stand at approximately $2.02 billion. This is not too different from last year’s $1.82 billion. We can’t report a huge growth story or statistical deviation this year because the macro analysis shows an essentially healthy growth performance. The growth is still slightly up and strategically encouraging.

The overall growth over the past four years has been 51.9 percent, all this during the recession. The annualized growth rate since 1998 has been 14 percent. Moreover, in the top 50 list we see that many firms who are ranked in the 31-50 levels show gains over last year and steadily rising fees over the past last three years.

While the top 30 in our global rankings of U.S.-based firms are expected to invoice just over $2 billion in 2012, the next 20 are projected to invoice approximately another $104 million in non-U.S. fees. Additionally, some of the smaller firms are trending up in their export of services as a percent of their total gross fee invoicing. A few examples illustrate the diversity of experiences that the smaller firms are having. We discover that TVS (No. 33) is currently exporting 27.5 percent of their services. FX Fowle (No. 31) are projected to export 34.3 percent of their services. GBBN (tied, No. 41) is projected to export 16.7 percent. And Pei Cobb Freed & Partners (tied, No. 46) are projected to export 19.1 percent.

The Greenway Group and DesignIntelligence have been conducting the U.S.-based Global Top 30 Firms Survey since 1998. Thus, we can track the ups and downs of individual firms, and we can see who the new players are and where they are getting their new commissions. We also track trends and innovation (in process and product) in the global architecture and design services delivered each year. We talk with more than 700 firm principals each year and more than 250 clients to understand their stories of innovation from their unique vantage points. The landscape for global services by U.S. firms is continuously changing with a strategic dynamism that reveals new opportunities for growth and relevance. In this issue we will share the latest insight.

U.S-based firms are providing services in just about every country on the planet. Here are the top nine geographic zones according to firms who participated in this year’s survey:

1. Middle East     65%
2. Europe    52.5%
3. Asia    42.5%
4. Canada/Mexico    45%
5. China    45%
6. India    30%
7. Latin America    27.5%
8. Africa    22.5%
9. Australia/New Zealand    12.5%

Some of the U.S.-based firms are projected to invoice more in foreign fees than U.S. fees. Here are the exemplars in this category:

1. Adrian Smith + Gordon Gill    94.3%
2. Jerde Partnership    93.7%
3. WATG    91.1%
4. Steelman Partners    84.2%
5. Langdon Wilson     73.5%
6. Goettsch Partners    69.7%
7. Cambridge Seven    67.9%
8. KPF    65.8%
9. Smallwood Reynolds Stewart, Stewart & Associates    62.5%
10. SOM    57%
11. RTKL    52.9%
12. Machado and Silvetti    48.5%
13. Bermello Ajamil    45.5%
14. Swanke Hayden Connell Architects    42.6%
15. HOK    42%

When we survey firms it is sometimes asked of us whether it is possible that the smaller niche players are gaining on their larger cousins — that is to say, taking away market share. We were asked by one of the largest circulation business newspapers if we saw any sense of complacency in the mature firms on our list. Are the larger scale firms failing to acknowledge new savvy ways to stay competitive in their markets? Our response: well, yes and no. In this issue of DesignIntelligence we’ll take a closer look at this and let you decide for yourself.

For sure, we don’t see that a rising tide — or a falling tide — affects all ships the same. Even if the economy kicks in at new levels, we can project that some firms will shrink in market share. Clients are discerning. Moreover, we can measure how the premium branded professional practices in the global economy fare better. The less prestigious brands and those with lower-priced/lower-value service offerings are not faring as well. Our 2012 study confirms that in this uncertain economy the strong performers are getting stronger and the weaker ones are not.

Firms Fly High Despite the Gloom

Look at the resiliency and flexibility of Gensler. The firm was hit hard by the catastrophic meltdown of 2008. They did not avoid the direct line of fire. Yet they have seen domestic and global bounce at levels only dreamed of by some of their peers.

The Gensler brand has unified their story around the world and continues to do so. Gensler is an example of a firm who has built up its ethos and its brand both outward, to clients and businesses, and inward to its growing (and loyal) staff. The firm is currently practicing in Asia (40 percent), Europe (35 percent), India (5 percent), Latin America (10 percent), and Canada (5 percent). Other powerful design brands, including SOM, Cannon Design and HOK, continue to perform at high hits rates and marketing success worldwide.

Projected Top Non-U.S. Invoicing by U.S.-Based Firms for 2012 (in millions)

1. AECOM    $302.7
2. Jacobs (Architecture)*    $272.3
3. Gensler    $179.0
4. HOK    $173.0
5. SOM    $142.6
6. RTKL    $109.0
7. HDR (Architecture)    $85.0
8. Perkins+Will    $80.0
9. KPF    $75.0
10. WATG    $57.8

Others include Cannon Design at $55 million, NBBJ at $37.3 million and SRSS at $13.5 million.
* KlingStubbins is included in Jacobs’ number.

Compare the composition of the top 15 this year to 2008:

Top Non-U.S. Invoicing by U.S.-Based Firms for 2008 (in millions)

1. HOK*    $320.0
2. SOM    $170.0
3. Gensler    $115.0
4. KPF    $78.0
5. HDR (Architecture)    $70.0
6. WATG    $66.0
7. Callison    $45.0
8. NBBJ    $42.0
9. Arquitectonica    $36.3
10. SRSS    $36.3

Others included Cannon Design at $35 million, HKS at $31 million and Ellerbe Becket (now AECOM) at $18 million.

* HOK Sport (now Populous) was included in this 2008 number for HOK

Now, look at the composition in 1998:

Top Non-U.S. Invoicing by U.S.-Based Firms for 1998 (in millions)

1. HOK    $58.8
2. RTKL    $31.0
3. WATG    $26.0
4. Gensler    $20.0
5. NBBJ    $20.0
6. Benham    $20.0
7. Ellerbe Becket    $17.6
8. Lockwood Green    $16.5
9. Murphy-Jahn    $14.0
10. KPF    $12.0

Others included Cannon Design at $3.9 million, Rafael Viñoly at $7 million and Perkins+Will at $6 million. SOM did not participate in the research in 1998.

Smaller Firms Face Long Road to Recognition

Late in August we hosted a think tank and workshop in London with an extra day of reflective conversation at King’s College, Cambridge. The focus of this think tank was profit power economics for design firms and construction industry partners. What we heard was that there are path-breaking economic and practical implications for architecture and design firms who are further differentiating their global services.

The conversation explored how some firms have profit-yielding proprietary assets going unrealized by some other professional practices. Furthermore, workshop participants agree that there is a rapidly mutating global economy. Some are ready. Others not. A full report on this think tank will be available later in 2012 for members of the Design Futures Council.

A problem with so many professional practices is that they rely on the same ideas year after year. Then they slide in performance. It’s ironic that they complain about being perceived as a commodity and yet they repeat old habit patterns month after month and project after project.

Global growth will demand differentiation, brand excitement and world class service levels.

Improvements in information technology, product manufacturing, shipping and transportation, pre-fabrication, off-site assembly of complex components and the ability to work in a 24/7 environment essential mean that traditional political borders are no longer a factor in design and construction.

From cars to clothing, this phenomenon has already changed the way we get our goods — so why not buildings as well? Essentially, this means that all firms have the potential to practice globally — and that global firms can practice locally.
Our findings this year show that there is a surprisingly strong global economy today for firms prepared to compete. Yet there are historic levels of uncertainty about what’s next around the corner and on the horizon. And because of this it is believed that for organizations with a strong point of view — empirical talent and exemplary services — this can nevertheless be a highly rewarding time to be in professional services.

Global clients are looking for something new, something better and something satisfying. Efficiency is good, but uniformity of professional services will not carry the day. Differentiation will.

James P. Cramer is founding editor of DesignIntelligence and co-chair of the Design Futures Council. He is chairman of the Greenway Group, a foresight management consultancy that helps organizations navigate change to add value.