It’s no comfort that 2008 DesignIntelligence trends predictions hit the mark, and it’s no news that big challenges remain ahead. Our 2009 trends predictions indicate that now is the time to summon your strength, exploit opportunities, and embrace flexibility.
You are enveloped in a blizzard of data, hype, conflicting news, and head-scratching statements that swirl around your professional practice. We understand this. In this issue of DesignIntelligence, we’ll cut through the clutter and focus on insight and strategies culled from our own North American and global research and from select trusted sources; moreover, we’ll draw on the wide-ranging experience of the Design Futures Council’s think tank, some of which was gained in two previous recessions. We’ll look at what makes for resilient leadership, for agility to stay alive and ahead, and for success in shrinking and transforming markets.
The Leadership Challenge
As we begin our report, consider this: $7 billion in professional practice fees will evaporate. We are in the midst of this phenomenon right now. Professional practices and others will further tighten their budgets, and thousands of architects, engineers, and designers will be affected. But much more is happening — there is an industry restructuring taking place, too. This tectonic change is triggered by a creative impulse — as well as a necessary imperative — to reinvent during times of concern for survival. While some people and organizations in our professions will be stung with the moodiness of paralysis, others will be energized with new creativity that will evolve into value. This is today’s leadership challenge.
Layoffs are looming large: By our calculation and interviews, $26 million dollars in annual payroll had already been cut in the design professions by the close of 2008. And the new year looks to portend layer after layer of further cutbacks.
Most likely your own firm has or will be activating contingency plans on some level. We’re into a recession that will be around for at least two years and in some sectors, four or five. Will the result be a weaker industry or a stronger one? And what of your own organization? In this economic- and paradigm-changing context, you are not wholly a victim; in fact, as you will see from the data and analysis that follows, you hold the cards to achieve success, to win more and lose less. But playing this game will be hard. Let’s take a closer look.
Misery in Prophecy
DesignIntelligence has never shied away from forecasting. One year ago, we reported: “In 2008 some professionals and their firms will find themselves on a burning platform of unsustainable practices and behaviors … new threats will be revealed. Ready or not … during times of economic uncertainty and rapid change, most — not just some — firms will be caught off guard.”
We wish we had been wrong.
Last year we said that billions of dollars of fees would be lost in retail design and corporate office design on top of the residential slide. We predicted that profits of average firms would decline by 5.2 percent (from 13.1 percent to 7.9 percent). We further predicted that accounts receivable periods would lose ground by 11 days as clients paid much slower. We stated that bank lines of credit would dry up, would not be expanded, and would be more strictly enforced with more diligence, requiring more cash flow discipline by professional practice CEOs, managing directors, CFOs, and other design leaders.
However, a year ago we also predicted that U.S.-based global design export fee growth would further expand by 18 percent (it will likely be closer to 20 percent when all the reports are in) and said that the percentage of design firms engaging in sustainable design would grow to 62 percent in 2008 and 79 percent in 2009.
So there was a smattering of good news, but we reported in our most sober tone that there were also “chilling long-term simulations” for the construction economy.
Our bottom-line prediction last year: “The construction outlook for the United States is decidedly down.”
Chin Up
Now let’s look ahead. Your energies should be focused on resiliency, on anticipating the future, and on your own next value propositions. You need not feel or act wimpy. It is true that we do not see an economic rebound in the short-term, but we most certainly do in the mid-term and beyond. Some sectors will be lifted by the new economic stimulus package, but others will linger into a three- to five-year recovery. We wish we could be more optimistic; however, we do have plenty of reason to be strategically optimistic 24 to 36 months out.
In the short-term, stay strong with your cash management, work extra diligently at building on your reputation, and compete more strategically for a piece of the smaller economic pie in the sectors you serve. Most important, always remember: This economic period will pass and there will be a future.
Don’t get caught in the vortex of cynicism and doom. That would be easy, yes, but coax your energy to where it can make a difference. The recession will present many excuses for a can-do attitude to backslide, but resist the temptation with all your might. While you can’t afford to be in denial about the recession, you don’t want to fully participate in it, either. You can get on top of today’s opportunities. You can focus on the new and satisfying horizons, and you can get ahead of the curve. Yes, you can.
Forecasting the future
Here at DesignIntelligence, we have unique forecasting approaches that enable leaders of our industry to more confidently predict turning points in service sectors and position themselves to take advantage of these understandings. In down economies you can exploit opportunities in new ways. The list of trends and analysis that follows will provide not only information but hopefully inspiration as well.
Some trends, such as sustainable design, are surprising only by virtue of the current economic scene. While green issues were once considered something of a luxury, sustainability has become a value-adding aspect to nearly every type of product and service. “The U.S. clients get it!” says one global design firm CEO. “There will continue to be a huge shift to sustainable design,” he predicts, and many other design leaders agree. We see sustainable design as continuing to grow in importance even as its speed may level off. What enhancements can your organization make to its sustainability practices and products? Perhaps you can provide services outside your traditional offerings that clients will value as they continue to embrace green thinking as a necessary aspect of their projects.
Non-traditional services and innovation are also trends we cite as worth attending to in 2009 and beyond. This falls right in line with the need to be distinctive in a bland economic landscape. “Innovation is required to increase our ROI to our clients and grow our value,” notes the executive vice president of another global firm. “We want to continually ‘swim upstream’ with our services,” he says.
The Horizon
This recession is not a primary indicator of the future of professional practice. Look at it this way: It is the biggest current challenge and it too is part of the evolution of our industry. You will learn new things each day as this crisis unfolds. You can come out of this period smarter, and your organization can be stronger for the experience.
The president of a large North American architecture firm echoes the necessity of a mind shift and offers an invigorating challenge: “To the extent we see ourselves as capital spenders, we will suffer in the coming years. To the extent we see ourselves as leaders through transformational ideas, we can emerge more vital and more relevant as a profession.”
As you review our trends analysis on the following pages, you may be challenged to open yourself to a broader definition of professional practice. Certainly, if your organization is not only to survive but even to have a chance at growth during this discouraging period, you will need to surround yourself with like-minded entrepreneurial professionals. You will have to discover or invent a new viable future calibrated to tomorrow’s opportunities. This will offer top-to-bottom transformational opportunities. Open yourself to these transforming ideas: Here is where professional and personal satisfaction can be enhanced in the months and years ahead.
Above all, do not panic. Leadership is defined during times when challenges are greatest. Furthermore, in your firm you can be leading the way to a more hopeful future. You can lead inside your organization, and you can lead outside your firm. You can develop a plan to bring your energy and strength to clients. Now let’s look at the road ahead for success in our industry.
