For many architects, “business” is a necessary evil—the compromise and the obligatory price paid to function in a competitive environment. Architects with interest in business are seen as “office managers,” lacking in creativity.
Many businesses do not understand architecture, design, or the artistic process. Architecture is a creative profession. Business is all about the bottom line. There has traditionally been a gap between these two endeavors. The languages have been foreign to one another, the processes often misunderstood, and the priorities of quality design and budgetary constraints have often been in conflict.
For many architects, “business” is a necessary evil—the compromise and the obligatory price paid to function in a competitive environment. Architects with interest in business are seen as “office managers,” lacking in creativity. For many non-designers, architecture is perceived to be a functional service that may offer superfluous aesthetic choices.
In 2000, the American Institute of Architects (AIA) conducted a survey to understand public perceptions about architecture. It was found that nearly half of business clients felt that the design of a facility or its fit into its environment was not a priority. In addition, 90 percent of respondents felt that there was a greater value in architectural functionality than design.1
Leveraging the value of design is often considered by using the most efficient materials, calculating utilization rates and determining long-term operational costs. While these are important metrics, the overarching image plays an important part in design decision-making and can be integral in business strategy—beyond facilities management or real estate investment.
Brand development incorporates many business considerations including financial and management strategies; the physical manifestation and design of the product or service, and the communication strategy, both internal and external.
While a component of any brand may be an intangible emotional connection, the development of the “hard” aspects of corporate brand identity involves many facets of design. These include graphic design (logotype and signature design, color, printed collateral such as letterhead and business cards), product design (packaging and uniforms), interactive design (Web sites), environmental graphic design (signage and themed environments), architecture (interior and exterior environments), and more. Since design and image influence sales, from a purely financial perspective, design enhances return on investment.
A company’s brand can be its largest asset, but brand development and management are often undervalued. Typically, these functions are considered “the softer side” of some intangible worth. Occasionally brands are financially valued, as with the annual Business Week review, and therefore related to the goodwill of the company. However, as a line item on an income statement, the brand loses context in meaningful decision processes.
Historical brand research has included corporate image and product image surveys to test perceptions. However, these techniques do not provide the precision to determine whether changes in perception tangibly add to the bottom line. Some companies are beginning to change this view, offering metric analysis to inform the decision-making process. The analysis leverages the potential of the brand to contribute to financial growth. Such study begins with an understanding of brand equity—those values and attributes that guide a consumer decision, and thus affect profitability of a product or service.
While statistical analysis and econometric techniques have been used to evaluate the trade-offs between alternatives, features and prices for products, they have not been a tool to inform the design process of architecture, environmental graphic design and the built environment. However, the “fixed assets” of built environments, especially those of retail and consumer service sectors, are integrally linked to brand identity and equity.
Brands and Buildings: The Ultimate Value Proposition
In many settings, architectural design can contribute significantly to a corporate brand strategy, offering both “buzz” and the long-term potential to increase revenue. For example, tourists travel to Prada stores throughout the world to see striking design push the envelope and create a relationship with the fashion it represents. In June 2003, The New York Times said “Prada has connected the dots that most people didn’t know existed, and in the process the fashion house has arguably become one of the world’s great patrons of architecture.”2
In his book, Emotional Branding, Marc Gobé suggests that brand-driven architects can influence society by bringing a renewed sense of beauty to the places we visit. He and many others cite the success of the Bilbao Guggenheim Museum in changing the economy of the town of Bilbao, as well as that of the entire region. In 1997, when the building was completed, 1.36 million people visited in the first year. The Bilbao deputy mayor calculated in 2001 that the museum had already generated hundreds of millions in economic activity for the city.3 This is relevant, because the success has been more than just a powerful brand name. According to Gobé, it involved understanding the consumers and their emotional objectives.
While these anecdotal examples inform us that there are certainly relationships in this arena of thought, there is little or no quantifiable data to correlate the stories to the designs. Despite the commotion about its retail environments, Prada sales are rumored to have dropped from $59 million in 2001 to $32 million in 2002, and the group recently withdrew its third attempt at an initial public offering.4
While the stores may generate traffic and architectural discourse, there is no evidence to indicate the significant investments are contributing to the revenue stream. One retail trend watcher observed that on repeated visits over the course of a year, there appeared to me more sightseers than shoppers. A high-profile San Francisco Prada project has been postponed.
Even the success of Guggenheim Bilbao has not translated into the same performance in other satellite locations. Following low attendance at its inaugural exhibition, the Guggenhein Las Vagas was closed in early 2003, just 15 months after opening. The venue needed to attract between 3,000 to 4,000 visitors per day to justify expenses, but actual attendance was closer to 20 percent of the required patronage.
The delay of other Prada and Guggenheim projects and the failure of attempted locations (such as Guggenheim Las Vegas) may further contribute to the inaccurate perceptions of the value in architectural design. While the timeframe in question was difficult for many industries, economic volatility helps serve to accent the importance of end-user focused design.
When such prominent brands, hiring internationally recognized architects cannot show positive returns for their endeavors, the hope for architectural design as an integral part of a business consideration fades; it becomes an expense, not an asset.
Design that Builds Value
The built environment holds a powerful ability to convey strong visual and audio messages, as well as influence action and emotion. While there are many factors that influence buying decisions (i.e. convenience, location, and price) architecture also influences choices about the product or service.
A building, like a product or advertisement, contains unique components with potential to leverage and enhance brand equity. It is possible to define which architectural design concepts are the most effective investments. Just as product attributes can be tested for consumer preference, the design of the built environment can be tested and “valued” in terms familiar to business clients. Rather than basing a choice on strictly functional factors or what everyone “likes,” the decisions can be guided by what is most important to the end-user.
To begin the process, design is developed with the identification of the architectural components to be tested, for example: monumental signage, entrance canopy, street-level display and architectural form. If the client has a defined brand strategy, the desired brand attributes are used in the design process, as well. Once narrowed down to two or three design options, several research techniques are used. These include:
Development of a survey questionnaire
Market research with end-user focus groups
Statistical analysis and results modeling using direct and indirect relationships
Financial simulation using client-defined and publicly available market share data with a spreadsheet risk model
Once the results are tabulated, there are several ways that the data can be used. First, the results become a decision tool for designers and clients.
The team can understand which aspects of the design have the biggest effect on desired behavior, such as a purchase decision, and can choose a design scheme based on its potential to generate revenues. Results can also be used to refine the design process. For example, more emphasis may be placed on a redesign of a single component, such as the entrance canopy, should it prove to be most influential in the purchase decision.
Yet another way of using the information becomes important for the teams responsible for implementation. In an era of “value engineering,” the results can guide the decision process of where budget cuts can occur, mitigating the downside impact on revenues. In some instances, components may be altered or reduced with minimal consequence.
Some architects will see this premise as heresy; architecture cannot be boxed into a spreadsheet. Others will claim that their clients already understand the value of design. However, in a competitive economy, with an increasing scarcity of resources, this concept offers a tool which can benefit learning and understanding from both sides of the table, architecture, and business.
Businesses spend considerable time and effort to define their position in the marketplace. Achieving and maintaining this position requires planning and action at many levels. The real question arises when companies, forced to make choices, must decide where to focus their design efforts. With a blend of art, science, and business, advanced market research techniques provide architects and clients the tools to align investments with customer value, enhancing the creative and intuitive skills that traditionally guide projects.
—Ellen M. Taylor
Taylor, an architect, recently completed her MBA at Columbia University and London Business School. Her thesis included working with a team at Lippincott Mercer to investigate the applications of market research to
1 James P. Cramer, Design Plus Enterprise, p. 120.
2 Julie Iovine, “Forget the Clothes: Prada’s Latest Design Isn’t for Sale,” The New York Times. June 22, 2003
3 Charlotte Higgins, “Brand Wave,” The Guardian, May 8, 2003
4 According to Retail Traffic magazine, revenue dropped 3.1 percent, although the company’s fourth quarter sales in 2002 were up 10.9 percent from the same period in 2001.