Small-to medium-sized architectural firms will be outpriced by one-stop design and construction firms and digitally literate start-ups unless they change to suit the industry’s changing landscape, says a recent report from the Creative Industries Innovation Centre (CIIC).
The CIIC’s ‘Architecture Forensic Report’, which summarises the insights drawn from interactions with more than 1,500 creative enterprises between 2009 and 2014, highlights economic trends, forecasts and responsive guides for the architecture industry. The results show that economic margins for architects are being squeezed from a variety of areas.
According to the report, the main competitor for small-to medium-sized architectural firms in the future will come from a new breed of start-ups with low overheads, and from above by large multi-service one-stop-shops, such as engineering and construction firms, both of which compete aggressively on cost.
This will be accentuated by the increasing commoditisation of architectural services such as project management, which are now increasingly taken on by builders and engineers.
Other tasks once performed manually by architects, such as administrative, documentation and contract tasks, are also being replaced, in this instance by new technologies and offshore contract workers–a trend that is also likely to proliferate in future.
These pressure points, says the CIIC, can begin to be addressed by a proper business model which starts with a changing role of a firm’s leadership:
“Principals are all too often involved in ‘doing the business’ rather than running it, manifesting as margin erosion, poor cash-flow, and a weak sales and marketing strategy, all of which leaves firms overly susceptible to changes in the economic environment,” says the report.“Architecture principals need to free themselves from the day-to-day running of the business and allocate time and resources to longer-term thinking, trend forecasting and action.”
But it’s not all bad news for architects. The CIIC report offers a seven-step guide that they say will help architects exploit market opportunities and achieve sustainable growth all by better demonstrating the value of their services.
These include (courtesy of CIIC):
Step 1: Understand the future
The future will not look anything like it does today, yet many firms are behaving as though it will. Look at where the market is headed to better understand how your firm will fit into this brave new world. You will have to take some punts: if you replicate what’s already out there, you will be forced to compete on price.
Step 2: Create a sales & marketing plan
A differentiated and compelling sales proposition can reduce fee-based competition, free up time for paid work, and reduce exposure to the prevailing economic environment. Firms with a robust sales strategy are more likely to outride the waves of recession and recovery that characterise this sector.
Step 3: Find a niche & look for synergies
Because small- and mid-sized firms employ fewer staff than multi-service organisations they are also less exposed to progressive ideas, emerging skillsets and collaborative projects, the CIIC says that insufficient staff development is therefore another persistent issue for smaller businesses.
Step 4: Create a network & upskill
Replicate the interdisciplinary nature of large firms by creating a network of specialist consultants and subcontractors, perhaps even partnering with firms overseas to leverage the skills of emerging economies. Increase the abilities of existing staff through mentoring, technical and leadership training. Firms with an overreliance on senior staff could find themselves gradually out skilled.
Step 5: Look overseas
Demand for architectural services is rising in fast-growing areas of China, Singapore, Vietnam, the Philippines and India. International work requires an understanding of language and local customs, strong local connections and a local presence or affiliate office. Research regions and opportunities carefully before you leap.
Step 6: Demonstrate return on investment
Demonstrate your understanding of the client’s objectives by measuring return on investment through a design’s fulfillment. Quality assurance is vital in the heavily regulated construction industry. The site-based nature of the industry is subject to variations in local planning conditions, which necessitates constant skills development and legislative knowledge.
Step 7: Improve financial management
Master job costing and credit controls, understand your cost structures, and track projects from quotation to delivery. Bill clients fully and in a timely manner or in accordance with the contract.
The full CIIC report can be downloaded here.