These are interesting times for U.S. professional practices — at once stimulating and vexing. Results of the DesignIntelligence Multinational Design Firm Fee Survey tell a story of guarded optimism and prudent growth.
I have just returned from three weeks of travel. It is time to share a strong opinion I have about U.S.-based airlines. Repeatedly, they fail to deliver the experience that their foreign counterparts have become reasonably good at. When you travel globally, you rapidly learn that U.S. airlines underperform on the standards set by others around the globe. British Airways, Singapore Airlines, Virgin Atlantic, Korean Air, and occasionally others have a higher service ethic that consistently outshines any competitor based in the United States. They are way ahead of the U.S. carriers. It saddens me. A recent trip to Shanghai was a case in point. Knowing that I needed to move to Asia fast, write a 20-page report en route, and transition through a 12-hour time change, I considered my options. What company should I trust for this? I chose Korean over the U.S. options. My wealth of travel experience has been a learning experience — but I have learned.
So what about U.S.-based architecture and design firms? Do we see any parallels between airlines and professional practices? Thankfully, no. Not yet anyway. Just the opposite is true, as it turns out. While U.S. airlines do not work nearly as well as their European and Asian counterparts, U.S. architecture and design firms are setting new global standards. This is an underappreciated feature of creative professionals whose home base is the United States. It should be the cover story of leading business magazines. BusinessWeek, Forbes, Fortune, Financial Times, Wall Street Journal — all look at innovation, processes, business models, buildings, and innovative client experience, and all should be reporting on the leadership that design has taken in many of these areas. American design talent is changing the world.
Let us take a closer look at the reality of U.S.-based global practice.
See the Potential
Contrary to discussion chatter at industry dinners about international service expansion, going global does not benefit all. Yes, it is a trend — even a paradigm shift of sorts — but it should not be entered into nonchalantly without considerable soul searching and convincing scenario planning.
Be warned: Design professionals can exhibit signs of myopia when it comes to exporting their design services. A different business model is required for global work than for domestic projects. Strategy is different, relationship protocols vary widely between countries, and getting paid requires both art and science. Moreover, expenses for marketing and travel are often under-scrutinized, and these costs can build up quickly, causing heartburn between partners. Occasionally, overseas growth plans can even become anti-strategic. This can result not only in confusion but in grief as well.
In other words, based on our case studies, there is a often high naïveté and even wasteful marketing without a reasonable return on investment.
There are many reasons to refrain from entering into a global agenda. These include the following threats of international practice:
• The global spillover of U.S. economic effects
• Difficulty in staffing and ensuring that a firm will have a strong performance record
• Lack of capital to fund design services and projects appropriately
• Complicated taxing authorities
• Complexity and risk of opening offices overseas
• Increasing competition from everywhere, bringing increased downward fee pressure
• Meeting client expectations in dramatically different cultures
• Collecting fees in a timely manner and possible repatriation of fees
• Political turmoil
• Global conditions for success can and do change rapidly
On the other hand, going global with your firm’s unique services can make a lot of sense. That is why there so many of America’s leading firms are expanding internationally. For instance, HOK has grown dynamically for the past 10 years. Cannon Design is projecting its international fee growth to exceed 20 percent in 2009. Moreover, consider the decades of global leadership that SOM has exhibited — arguably one of the most influential design practices of all time. The firm is innovative in finding new work (and value propositions) in many of our planet’s cultures.
Multinational Design Firm Fee Survey
Want to change the world? International practice is by most accounts far more difficult and risky than working near home, but the rewards are also enticing, as evidenced by the data collected in DesignIntelligence’s current Multinational Design Firm Fee Survey. Many of the firms participating in this research report higher fee yields abroad than on domestic projects. Younger professionals are attracted to practices that offer global project experiences, not to mention travel. And some architects have a passion in their minds and hearts: to improve the world, to make a difference. Going global can fulfill that mission.
The top categories for services abroad should come as no surprise. Our survey reveals that most of the professional service fees collected outside the United States are generated in the following categories of professional practice:
• Health care
• Mixed use
• Master/urban planning
Secondary but still significant categories include aviation/airports, education, entertainment, government facilities, interior design generally, landscape architecture, residential, and science and technology.
Most of the firms we interviewed invoice in U.S. dollars. This can protect against declines in the value of foreign currencies. However, during the past several years, it has been the U.S. dollar that has been devalued almost 30 percent. It is one of the reasons that a handful of firms write their contracts in the home currency of each of their office locations. It is a strategic decision and one that firms watch very carefully.
Europe’s architects dominate the list when it comes to competing with America’s leading firms. And Asia is expected to be the new challenger. They have a new perspective on exports, and they are energized to win. The Olympic spirit has infected their design ambitions. They have the perspective of a challenger, and they are a growing threat to take market share in North America as well.
U.S. practices are quick to recognize their admiration for firms based outside U.S. — professional talents in the global marketplace. The most admired of all non-U.S.-based firms are still mostly European. Here are the current leaders:
• Foster and Partners
• Renzo Piano Building Workshop
• Herzog & de Meuron
• Ateliers Jean Nouvel
• Legorreta and Legorreta
• Office for Metropolitan Architecture with Rem Koolhaus
• Rogers Stirk Harbour & Partners
• Santiago Calitrava
• Rafael Moneo
• Fielden Clegg Bradley Studios
Apart from those U.S. firms that are exporting services, there are five that are the most frequently named role models as highly respected by our survey participants:
• Kieran Timberlake Associates
• Zimmer Gunsul Frasca Architects
• Kohn Pederson Fox Architects
• Steven Holl Architects
As you would expect, there are others toward the top of the most admired list, including firms of all sizes. These include NBBJ, Pelli Clarke Pelli Architects, Polshek Partnership Architects, Bohlin Cywinski Jackson, Gensler, HKS, Lake/Flato Architects, and Morphosis. There is no shortage of general admiration and self-respect for the depth of U.S. talent.
The credit crunch and financial recession worldwide have hit design organizations hard this summer and this threat is growing. Yet the market has been huge, and many recent projects are now becoming new buildings and communities. From our poll, the following are the most admired construction organizations:
• Mortenson Construction
• Turner Construction Co.
• Hensel Phelps Construction Co.
• McCarthy Building Companies Inc.
In addition, architects and designers often talk about the quality of engineering that goes hand-in-hand with architectural services. There are several clear favorites:
• Thornton Tomasetti Inc.
• Severud Associates Consulting Engineers
• Walter P Moore
This data confirms that there is respect for the team — and a lot of it to share — and it is deep.
We are in uncertain times. The economy is a wreck. The planet is growing in population at 77 million people a year. Strategic plans are problematic, and firms are well advised to have backup plans — in other words to hedge. Yet there is a future to shape, and most design leaders believe that global practice will continue to grow and will demand even better solutions, especially in the making of communities, in sustainable design, and in buildings that inspire the future.
More than 70 percent of our participating firms are bullish (positive) about the future of global practice. Only 30 percent are neutral, and there are next to no firms that are bearish about the future of international practice in the long term. Considering the opportunities for U.S. architects looking forward with a three-year strategic horizon, this is positive news indeed.
Rethinking the Future
Earlier, I said that European and Asian airlines were superior to U.S. carriers. This phenomenon has happened gradually, almost imperceptively. Then, wow, it became obvious that big differences were being offered in value, service, and even the design experiences during flight. For the U.S. carriers, something had gone wrong. Consider that the same could happen in professional services.
There are clear competitive advantages right now for U.S. architects in the global marketplace. This includes superior education, technology equity that is in place and moving to next generation, innovation in integrated service delivery, and superior design talent. Nevertheless, in the areas of cost, quality, and service, there are new competitors. They are being incubated to become the superior class of professionals, especially in Asia.
The forces of change are not against U.S. firms, but we live in game changing times. Professional practices must have a vision that excels and at redefined world-class levels. Our challenge is not just to improve. It is to rethink the service paradigm.