Can change be a friend to your future? We think so. In this issue of Design­Intelligence we’ll lay out the reasons for optimism.

Nothing shapes our lives so much as the quality of questions we ask and this has become the essence of the research systems we use here at Design­Intelligence. This year our expert panel consists of 50 thought leaders. They are an optimistic bunch. Nearly 85% are positive about the outlook for 2013. However, they are not saying that the path forward will be easy. We’ll explore this deeper in this issue and we’ll take a look at the drivers of change and the responses contemplated by the most successful leaders in our industry.

For the 18th consecutive year, The Design Futures Council along with Greenway Group’s research and strategic staff takes stock of today’s situation in the design and construction sectors. We ask questions, interview thought leaders, and we imagine the year ahead. We ask: How can our clients have a stronger future? What will it take to adapt to the changes now unfolding? What are leaders and their organizations to do in order to make change a friend?  

We have found one trait that’s pretty consistent in our design and construction industry: The best organizations are always on edge. They are curious about what’s next. Anticipation is the often used watchword in day to day communications. Their concern for the future is palpable.

Long time readers of DesignIntelligence know we conduct six to eight surveys throughout the year in order to gather the most current thinking on subjects ranging from executive compensation to technology to global practice. In each, we sense a restlessness to achieve at new levels. To re-set the bar higher. The leaders of over four-hundred firms, institutions and organizations participate in the research. Our work is increasingly global with leaders joining in from around the world. Along with the research we conduct seminars, think tanks, summits, and workshops. The dynamism of these conferences combined with research produces a rich blend of what is sometimes referred to as “solution creation”.

In one of our workshops a few months ago, I asked the participants to list the biggest headache level issues that had disrupted their organizations within the past year. The diversity of responses may surprise you. Here is a sampling of topics in no particular order.

  1. Technology, BIM, and cloud computational tools that bring sciences and systems that dominate and imitate art and design judgment
  2. Recruiting and retaining creative and talented staff who can communicate and lead collaborative high performance teams
  3. Design-Build-Operate accountability with new aspirations and delivery puzzles
  4. Integrated and cross-disciplinary innovation taking each profession (architecture, engineering, interior design, landscape architects, sub-consultants, contractors) outside their “bubble” and with it further blurring traditional roles and responsibilities
  5. Extreme efficient and fast design and prefabrication of building components
  6. Global competitors and frustrating international procurement regulations
  7. Leadership and ownership transitions with concern for next generation business success
  8. Achieving net-zero promises and taking sustainable design principles beyond LEED standards
  9. Increasingly uncertain economic conditions in both public and private sectors
  10. Business shifts and productivity challenges requiring a re-design of practice profit models

With these examples and others in hand in the workshop environment, I turn next to a discussion and exercise on foresight planning. Most of the time Greenway uses a three year time horizon for our foresight and strategic planning programs. Sometimes organizations prefer a five year cycle. This will work too. However, it is important that the plan be updated rigorously every year. Our belief is that foresight and strategic planning will most often provide new confidence levels and competitive resilience for firms in transition. The best plans always bring refreshed vision, values, systems, goals and action priorities for success. Firms and organizations that have their strategic priorities well understood within their culture have an ability to develop creative and purposeful responses to a wide range of industry situations. Strategy incubates resilience.

It is commonly understood that the conditions for success today are changing. In fact, we know that with accelerated change some firms and organizations will most likely not survive some of these changes. You may know some of them. The signs are often easier to see outside their organization and the officers/principals are sometimes the last ones to comprehend the decline and what’s going on. These are the firms and organizations who are acting like yesterday’s solution providers.

To illustrate this point in our foresight workshop, I ask seminar attendees to name the strongest, most invincible firms and organizations that they can think of in our industry today. I then write their name on flip charts. Several dozen usually come to the surface quickly. I then divide the group into smaller table top conversations and ask each group to select one of the firms and to work the following task: “Construct a scenario for the organization where it is driven to the edge of failure in three years.” The shortest way to state the question: “what might it take to derail this firm even though they may be a current role model organization?” The purpose of the exercise isn’t to stress the dark side of change but instead to point out how vulnerable to change firms really are, no matter how strong they appear to be. In short order, disruptive trends and shifts can threaten and even kill the best organizations.

Success is not a state but a process

Trade unions, guilds and tenure systems (and some licensing laws) are examples of solutions to problems that have changed or diminished or gone away. New context alters our needs and preferences. Context is changing dramatically in a variety of ways. This change can be mapped. Older solutions and fixes have outlived their shelf life, their expiration date. The unintended consequence is that these solutions to past problems are slowing innovation and creating bottlenecks to such factors as quality enhancements, efficiencies, and performance. Since the world is spinning faster, change is occurring on multiple fronts simultaneously and at a rapid pace. The reality is that for architects, designers, and engineers the professions are not only just as tough as they always were; but tougher. However the reasons are different.

Most people are risk averse at heart. In global practice we must keep in mind that some of the new competitors are actually going to be invisible. Moreover, they intend to stay that way as long as they can. Ahead are some inevitable disruptive changes.

Navigating the drivers of change is unlikely to be comfortable. Our industry (and others) is facing wholesale reinvention. While it may not feel good in the moment, it actually can be a good thing. What is changing? Leaders will be adapting to numerous changes and they will leverage technology better. They will live digitally. The next generation leadership is bringing new energy and vision to our industry. They will excel at collaboration and flexibility — and they will not be as afraid as their predecessors to cause creative destruction that will reinvent processes and solutions. In short, faster evolution.

Great minds don’t always think alike. The future of the design and construction sectors is most promising for different reasons. To realize that future we must act wisely on many fronts, sometimes in conflict with the conventional wisdom in place at this moment. Different pathways must be taken to realize new dimensions of success.

What Kind of Industry will we have in 2013?

In our environmental scanning this year we find that 91.7% of our expert panelists believe that design technology will profoundly impact the design professions of the future. No surprise there! It’s the only way to stay competitive. Technology will have transformational impacts on the design professions and will be essential for efficient, productive differentiation. Additionally LEAN processes will demand collaboration and efficiency that only technology can advance.

Will the future of architecture and design belong to the large and mega large firms? No, say 71.4% of our panel of experts. You don’t have to be huge to do big and important things. Smaller firms and virtual teams have incredible capacity too. Firms offering integrated services will have a competitive advantage. Entrepreneurial designers may find the large and mega large firms good training grounds but not always matching their personal objectives. Are small firms and medium size firms at a disadvantage? No, say 63.9%. There will be increasing demand for using local businesses and many of these will be small and medium scale organizations. They will serve their neighbors and communities well and have an important place in commerce.

What will the target rate of net revenue per full-time equivalent be in 2013? Taken together the panel says $170,687 of net revenues per FTE.  But some firms are stuck at $125,000 at the low end in their budget forecast while others are well over $250,000+. The target rate of utilization per full-time equivalent for 2013 will be 68.9%. The lowest in our survey is 58% while the highest is 75%. Firms will be profitable at a level of 9.7% although most will set their goals between 12 to 18 percent.  

Just as we were going to press a Texas firm President told me a story about how they were working directly — more intimately — more digitally with product manufacturers and sub-contractors on design assist and he wondered if this could lead to a restructuring. He said, “One way to interpret this is that in essence the potential is to take away the need for the traditional general contractor”. It’s an example of de-layering strategy that brings simplicity. Of course, we also see contractors today acquiring design firms of all sizes.

In another instance of blurring and disruptive change, this time in New York City, ShoP Architects has extolled the benefits of its new and growing construction division. And in a dramatic strategic move, AECOM purchased Tishman Construction. There is a message from each of these examples: New creative structures will put the former parent organization out of business — Creative destruction. The working philosophy: “It’s better to be the perpetrator rather than the victim of change”.  

So, the future will depend on leaders (young and old) who bring an energetic vigor to our industry. These leaders will understand the potential of our time. They will be more optimistic about the future and they will show this with less cynicism. They will be entrepreneurial with lots of flexibility. They will know that rear view conformism won’t work anymore.

Strategic and foresight planning can be powerful in firms and organizations of all sizes. It brings a challenge to the status quo. The best strategic plans challenge each professional in the organization. Plans can be ambitious and radical. The process, not the product is what is ultimately most important. It is a form of anticipatory, strategic thinking. It results in organizational readiness for change.  

Perhaps you have heard the statement, “if you wait for all the lights to turn green, you’ll never get started.” For 2013 it seems that there is sentiment everywhere for reinvention. Change-ready organizations are proliferating. Are you one of them? If so, then change will most likely be your friend.

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.