What’s Unfair about Competition?

Lunch at the Hyatt Regency Dehli, New Dehli, India

A few weeks ago I was in New Delhi, India, where architectural services cost about a fourth as much as they do in North America. This low-cost option has been perceived as the driving reason for the outsourcing phenomenon of the past decade. Some view this as unfair competition.

North American firms have contracted for parts of their technology services to be accomplished overseas. This has created an around-the-clock service model. China and India have become the global leaders and the preferred choice for outsourcing services. Today, some North American and European professional practices have their own captive “insourcing” operations in India and Asia to support their other offices where labor and overhead are often much more expensive.

There are parallels in other professional practice areas. In the management consulting and technology field, U.S.-based management consultancy Accenture says that its firm in India will grow by more than 5,000 staff this year and will surpass 55,000 in India alone. And it predicts continuing growth that will not only serve the growing needs of India but significant parts of the developing world and developed world as well.

There is much more to this story than low cost/high quality talent, however. And this difference is not just about low cost. It is the high level of diligence and work ethic among professionals in India. Little waste in process, focused attention, lean overhead, very latest technology, and speed. Executives travel to client offices via coach class, even for a 15-hour flight. When they book their hotels, it is two to four people per room. They are eager to please, and their enthusiasm for the future of the design professions is contagious. This lean overhead, high work ethic culture has redefined outsourcing of architectural services. We believe it will continue to do so.

While the building information modeling skill levels in India have become legendary in just a few short years, the innovative nature of Indian professional practices is not just a story of technologically advanced practitioners in architecture and engineering.

Indian professionals have catalyzed fundamental change during the world’s recession. They have found new ways of meeting client needs, including meeting those that clients didn’t even know they had. They are eager imagineers of the future of professional practice.

Global innovators see opportunities that others are missing. They find service niches that are changing the face of the architectural and engineering business. Furthermore, they are matching their capabilities and quickly adapting to the world’s changing markets.

Prepared for the New Normal

According to official statistics, the deepest recession of the past 40 years is now behind us. The GDP is growing, the Dow has cracked 10,000, and interest rates remain at historic lows, keeping inflation in check.  Wall Street is even paying big bonuses again.

Yet to most people, the tangible effects of the recovery remain elusive.  Unemployment has increased over the past six months, the dollar has lost significant value on the currency markets, and many sectors of the economy (especially commercial real estate) remain fragile.  Is this what a recovery is supposed to feel like?

Unfortunately, yes. The economy may have bottomed out and experienced something of a bounce, but it’s certain that the boom years of 2005-2007 will not be returning any time soon. While it’s true that panic has subsided into caution, the credit markets remain deeply chilled, if not frozen. While some clients are doing planning new work in anticipation of a more robust recovery, very few new projects are getting the green light, and this state of affairs is likely to pertain for the foreseeable future.  Under these circumstances, a slow-growth, cost-sensitive economy is beginning to look like the new normal.

What’s a design firm to do?

Like it or not, get ready for increased competition. Significant layoffs in the profession have spawned a new generation of small, nimble design firms with low overhead. These new firms, often headed by well-regarded professionals with significant experience, can be formidable competition.In the past, perhaps a dozen or so contenders would be chasing any given project; these days, that number can easily double or even triple. Clients are increasingly price-sensitive, so expect significant downward pressure on fees. You will have to price your proposals accordingly, and when successful, execute the work with relentless efficiency. There will be little if any wiggle room.

This will almost certainly require a leap in technology, and specifically BIM, which can be used for all phases of the work from design through construction administration. Sophisticated users of BIM have found ways to create significant efficiencies in the documentation process and have even been able to eliminate the need for shop drawings during construction. Now that the GSA (as well as several states, including Texas and Wisconsin) have mandated BIM deliverables for all projects, the tipping point has clearly been passed. If you have not already done so, it’s time to get on board. Make use of your downtime to acquire the software and institute a firm-wide training program, as BIM capability is fast becoming a gating issue during the selection process.

This is also the time to invest in personal client contact. Brochures, mailings, and press releases about design awards have their place, but nothing beats a face-to-face discussion between real people. Remember that your clients are in the same leaky boat as you are: They are worried about volume, cash flow, and expenses, so anything you can do to ease their burden will be appreciated. Sometimes this is as simple as clipping an article about how to save on energy or maintenance cost and sending it along. Let your clients know that you are thinking about them and that you are a source of good ideas — both now and for the future. When they are ready to build again, they’ll remember this courtesy.

It’s also a good time to review and refine your value proposition. What is your firm really good at? How can you demonstrate that with hard data?  Which clients can benefit most from your particular skill set? Those are the ones you should be talking to. Put away your shotgun (though it’s tempting to go after any project that comes up, regardless of fit), get out your rifle, and take very careful aim. Your marketing dollars are precious, and you can’t afford to waste them. Think high impact:  What are the things that clients need to know that you can provide? What sets you apart from the competition? How are you going to communicate this clearly and convincingly to each and every prospect? Get in the habit of doing this, because it’s the best way to position your firm for long-term success, regardless of the state of the economy.

Above all, remain optimistic. Nobody likes a complainer. Don’t focus on problems — anybody can do that.  Instead, insist on finding solutions. Design is inherently about value creation, so make that part of your brand.  nd stay patient. The recession may be technically over, but its effects will linger for a while . Eventually, pent up demand will create more opportunity than you can handle. The U.S. economy, despite its recent bumps and bruises, is still more than twice the size of Japan’s (No. 2) and four times the size of China’s.

Like a good sailor, you need to position your sailboat to take advantage of that next puff of wind.

If We Believe in Our Future, It’s Time for Action

In his recent blog post, Scott Simpson states that, “Over the next five years, the A/E/C industry will undergo a profound transformation.” Simpson asserts that the leading drivers of this change will be BIM, IPD, and LEED. I believe quite strongly that Scott is right but would argue the transformation is upon us rather than something that may or may not occur in the future. In his post, Simpson summarizes just a few of the reasons why building information modeling (as a tool) and integrated project delivery (as a process) are changing the way leading firms and sophisticated clients across the world are doing business. According to ongoing research done by the Greenway Group for the Design Futures Council, these are among the most important trends driving the ongoing revolution of architecture and design.

However, if we are to believe in our own future, as the title of his post suggests, it is time for serious action on the issue. Rather than focusing on tools for execution, I believe the profession and, perhaps most important, our academic institutions should begin to greatly enrich the focus on collaboration and leadership in the creation of designers and architects. As the A/E/C industry goes through a powerful redefinition of relationships in the coming years, the architectural profession has the opportunity to assert leadership and design thinking, which will both have increased relevance to our clients and the design and construction process.

Simpson says, “With IPD, all the brainpower in the room can be focused like a powerful lens on the problem at hand.” However, as the state of affairs in the halls of the United States Congress reflects, lots of brainpower focused in one place does not always lead to powerful solutions. What the IPD process needs to be successful and truly transformative is leaders who can enhance discussions and successfully encourage all team members to work toward common goals. Most architects have never received any formal leadership education — an unfortunate outcome of the priorities of architectural education in most institutions. However, architectural education and practice does create great skill in understanding complex relationships. With focus and coaching, architects can serve as the facilitators of these integrated teams to create truly remarkable outcomes.

I believe that the firms and institutions that focus on developing and enhancing leadership characteristics in their staff and students, promote collaboration, and provide stimulating environments that foster design thinking are best situated to lead the profession — both now and in the future. To this end, academia, firms, and the profession as a whole must renew our focus on the importance of leadership and collaborative skills and devote meaningful time and resources to their development. It is these skills, along with an increasing awareness of the power of design thinking, that will lead our industry forward in the future, but we cannot wait for them to happen organically. It is time for action!

Let’s Believe in Our Own Future

Scott Simpson

While no prediction is ever 100 percent correct (including this one!), we do know this: Sooner or later, the current recession will subside. When it does, things will be different. The conditions that existed between 2003 and 2007, which created unprecedented prosperity worldwide, will not be returning. It follows that the successes of the future will not look like the success of the past.

Over the next five years, the A/E/C industry will undergo a profound transformation, powered by the three primary game-changers of building information modeling (BIM), integrated project delivery (IPD) and Leadership in Energy and Environmental Design (LEED). BIM is a technology, IPD is a process, and LEED is an attitude. Individually, each is very powerful.

Together, they combine to exert huge leverage for change. All three are at the tipping point; there is no turning back.

BIM provides a way to connect the silos of expertise that have traditionally divided the design and construction process. The increased transparency of who does what makes the interdependency among all the key team members painfully obvious. The traditional model of design/bid/build promotes a culture of self-defense, with each player on the team incentivized to consider individual interests first and team success second. With BIM, this is no longer possible; it creates a whole new sociology of design. Ironically, BIM promotes both creativity and predictability in equal measure. It’s a powerful design tool yet equally adept at demystifying design documents, bridging the gap between design intent and project execution from conception to creation.

IPD takes this a step further, substituting a single, inclusive contract that aligns the interests of the owner, architect, and construction manager. What a concept! The benefits are as obvious as wheels on luggage. IPD invites a whole new approach to decision making. Since IPD represents a truly integrated team, all the key players are at the table from day one. The traditional sequential approach no longer applies. With IPD, all the brainpower in the room can be focused like a powerful lens on the problem at hand (much as parallel processing does for computing), which leads to better, faster, and more creative solutions every time.

LEED symbolizes a profound social and political shift from an economy based on consumption to one based on the wise stewardship of shared resources. In the past, the winners were the ones who made the most or consumed the most. With sustainable design, values have shifted 180 degrees, inspiring us to ask how we can do more with less. Over the useful life of a building, even small improvements in energy use, water consumption, and air quality create huge benefits. Sustainable design is like BIM and IPD in that it forces us to recognize our interdependency — no one can win unless everybody wins. It creates an unbreakable bond of mutual interest.

As we consider what’s next, it’s important to keep in mind that design is both a noun and a verb — a thing as well as process. It’s also about creating value. As currently configured, the A/E/C industry is acknowledged to be hugely inefficient. About 37 percent of all construction materials end up as waste, some 30 percent of all projects do not meet budget and schedule, and more than 90 percent of clients believe that design documents are insufficient for their intended purpose.

A conservative estimate is that of the $1 trillion spent on construction each year, $300 billion is wasted. But here’s the good news: We can view that waste as a resource. By using new technologies, processes, and attitudes (BIM, IPD, and LEED), the waste can be re-deployed, funding innovation. The result will be better, healthier buildings, constructed faster, for less. Everybody benefits — owners, architects, constructors, and the public.

This is a natural and inevitable outcome of the post-recession economy, which will demand a new accountability for value creation. The downturn imposed a certain discipline. It made us much more cognizant of what we do, how we do it, and what we spend. Viewed correctly, this discipline, which seemed harsh at first, is actually refreshing. It opens the doors to new ideas, and as designers, ideas are our stock in trade. Going forward, we should behave as if we believe in our own future. The rest will follow.