The relevance of the future itself to the architecture, design, and engineering professions transcends its relevance to other categories, since design is about the future. We believe that much that will happen in the years ahead is already knowable.
We can approximate the key trends that have driven past changes and will very likely drive the future. Much in our field depends on demographic trends and these provide the foundation point to study all other categories. We are an industry of cycles, and our survey research seeks to understand all economic as well as the micro and macro trends that will have signal impact on your future.
The Design Futures Council is committed to supporting you as you create your future. As you read the analysis in this issue of DesignIntelligence keep in mind that our focus is on “best of class” performance. We do not study the experience of average firms, nor do we use industry benchmarks of average performance; instead we focus on the top 20 percent of firms comprising “best of class” achievement. All percentages and reporting includes information from firms who are significantly outperforming average firms with numbers. Our trends watching includes population and aging as well as very specific industry trends—we follow more than 100.
Just ahead in the short term we see certain aspects of 2005 that will mirror last year, but don’t be deceived. Some of the most significant changes are invisible day to day. The design professions are undergoing revolutionary changes. On a project-to-project basis, changes in professional practice may seem evolutionary, but taken together over a three to five year period the significant transformation becomes apparent. And even though the economic conditions will be more favorable in 2005, according to our forecasts, some architects and designers sadly will experience significant decline this year. The reasons for this decline will range from the vast limiting beliefs about the architecture and design professions’ future, to victimization attitudes as practice paradigms shift, to poor project execution that results in the condition of chronic soft business conditions, even when the economy itself is strong otherwise. In this time of fast design, the great majority of firms will be underperforming in today’s hot climate for success. Remember, the economy will not be as big an enemy for your future success as is the tunnel vision and the numerous limiting beliefs about today’s opportunities.
We believe this to be a time of unprecedented opportunity
The context for next-level success is changing. Today’s newest wristwatches contain more computing power than existed in the entire world before 1961. My BlackBerry PDA possesses more computational capability than the best supercomputers of the mid-1970s. Our office car here in Atlanta is a VW Passat Wagon that has more computational ability than Apollo 11.
This new context is digital, fast, accurate—but also fragile and fluid.
Your new computer hardware and software is four times more productive than those of just five years ago. That is one of the reasons we have dramatic new benchmarks each year. But many professionals and firms are not keeping pace. We are only beginning to understand the power of parametric technology and artificial intelligence in design. Ahead, we see more technology changes in the next five years than in the past 95.
As we contemplate the significance of all this on the life of best of class professional practices we come to realize the importance of better understanding what the most successful firms are doing differently and what changes outside our industry may have the most significance to us here inside the AEC arena.
The Brookings Institution conducted a study recently that reveals an important perspective on the demand for long-term professional services for the built environment. About half the homes, office buildings, stores, and factories needed by 2030 don’t exist today, according to the study. The U.S. population is expected to increase 33 percent to 376 million people by then, which is about 90 million more citizens. Imagine the responsibility and opportunity calling out for leadership. Keep in mind too, the dramatic upheavals on the way to 2030. The next three years will likely offer up robust economic growth and then we will move into a stall period as the generational pig in the python enters retirement age. The demographic changes beginning in 2008 will create a new stress on our public and government institutions and a very different set of rules for architects and designers. You might say these are game-changing events. But for now let’s shift our focus back to today’s context, to what’s likely to unfold in 2005 and the next three years.
Today’s geopolitical context is in motion and gaining speed. In November we watched the U.S. elections bring us another Bush term. And still, the anti-Americanism around the world is growing, notwithstanding the compassionate response to the Asian tsunami. The deflation of the dollar is providing a short-term economic buttress to many firms exporting services, but is in fact eroding the fundamental economic strength of the U.S. The pace of change inside most firms is not calibrated to the changes in our new A/E/C industry. Best practice paradigms in the architecture and design professions need to be constantly updated, relearned and applied to changing markets. If not, your firm could stand to lose its competitive position, no matter how good your past performance. If you want to be relevant in the future your first commitment in 2005 should be to zero complacency.
We are not economists; we track trends and monitor the construction industry category by category. We listen to your own firm analysis and facilitate group sessions. We survey the industry. Our conclusions are based largely on inference readings and interviewing. Based on what we read and hear we believe that our economy is poised for GDP growth of around 3.6 percent. Construction spending will surpass $1 trillion dollars and there will be plenty of opportunities for the 230,000+ North American architects and designers (who will bill more than $28 billion in fees) who are planning buildings and environments to be built by the over 6.8 million construction industry workers in the United States.
The Random Future—Wild Cards Cannot Be Discounted
Right off, let’s state that there will be suicide car bombings, natural disasters, outbreaks of civil war, illogical stock market behavior, contagious health situations and other inevitable surprises. Keep this in perspective and let it remind you to stay agile. Statistically, the world may be getting safer, but you wouldn’t know it from the headlines.
In the face of danger it seems to me that we have a professional responsibility to do all we can to design a better world. Your solutions in both process and product can and will improve the quality of life and give new hope to developing corporations, organizations, and countries around the world. Their future in many ways depends on your vision, talent and success. Your fitness and how you apply your talents is what will change the world.
The exceptional work of the Aga Khan Trust for Culture (and their well run awards program) and the exemplary volunteer organization Architecture for Humanity, reminds us that design solutions that are highly sensitive and properly additive to local cultural norms can be achieved at reasonable cost. Some architects now are making a strong case that design offers hope to challenge even the “cancer that is terrorism.” Initiatives by design organizations have architects and designers strategizing new creative pathways to build relationships and understanding through design—an offering of “hope by design” to a challenged world.
One of our Senior Fellows, Richard Farson, has convinced us that wise design creates experiences and situations that lead to understanding—for instance, deeper understanding between vastly different cultures. Thus, we believe the new environments that architects and designers create will have positive effects never before realized. We should not think this to be impossible.
The Economy is but One Part of the Picture of Progress
On the face of it, the economic recovery of the past few years has been marginally strong with significant growth in the building categories of health care, education, and public projects plus the categories in expanded services which for some firms have grown by as much as 28 percent a year.
Last year’s economy performed about where we thought it would but most of our subscribers and clients outperformed the general economy. Don’t let an economic forecast fool you into thinking that your firm’s performance will run a parallel course. You can do better. Just below the surface of today’s economy is a weakening condition we are concerned about—being brought on by our huge U.S. debt, the Chinese economic boom, and perceptions that America’s architects, engineers, and designers are not as innovative (nor relevant) on the world stage. If you are not considered innovative today in terms of service delivery processes, you are no longer considered world class. That is one reason why the economy is not as big a factor as management mistakes and lack of leadership.
Still the economy is an important part of the puzzle. Here at DesignIntelligence, we do see the economy offering up mostly positive news for architects and designers in 2005. We see gains of 2.8 to 4.1 percent across the board even though some in our industry are calling for more. Certainly we’d like to see that happen, but based on the most recent series of interviews with leading firms, there is a conservative outlook for future work in the U.S. We welcome an upturn—but even if the economy falters that will be no excuse for you and your firm not to have a satisfying, productive and significant year.
Our think tank sessions, leadership summits and regional roundtables have discussed the reasons why some firms are losing their edge while others thrive. Sadly, some firms are entering (and creating) a newly defined subprofessional zone where they will get little respect, their trusted adviser role will erode, and they will have one low fee experience after another. That is the headache zone of practice you want to avoid. Keep the perspective that all across America and worldwide, there are architects and designers experiencing more success than they dreamed just a few years ago. That is why we’ll spend most of our time on the new ascendancy, not on remediation. But still, we’ll write from inside the real world, right were the bills are being paid and the projects delivered. But make no mistake, our point of view is that it is a great time to be a creative professional, and by far the best time to be an architect, engineer, and/or interior designer.
Interest rates will continue to rise with three or more Fed rate hikes predicted in 2005. This will have the effect of slowing down residential building somewhat from the last two years. This will not, however, slow down custom high-end architect designed residences. Overall we see residential building growing by 2.2 percent. The interest rate increases will be modest and should not pose a problem for most firms.
Your performance has proved consistently over the past decade that architects and designers who study trends and new technical applications often anticipate new opportunities better than their peers. And even though there will be wild cards, these need not create a state of fear in your own outlook or leadership confidence.
Achieving indispensable value in this dynamic landscape of opportunity is exactly what the marketplace will be seeking; you and your firm can fill this gap. In the last two years professional fees have grown by more than $2 billion (that we can count) and now there is a new bigger playing field and a positive redefinition of professional practice. We believe this is an exciting time for both professional satisfaction and for building stronger, yet newly-defined professional firms.
Best Practice Definitions Will Change as Global Opportunities Expand
More than 38 percent of our readers now have an international practice. Imagine for a moment your current percentage of work for your non-U.S. clients. Increasingly, firms of all sizes have foreign clients who are expanding in the U.S., or who want to import the specialized expertise of seasoned firms. For many firms this percentage of work will grow again this year. China is now the hottest zone, of course, for new professional practice growth. There we see more design experimentation than anywhere else.
Firms who have recently expanded their success in China include Foster and Partners, SOM, RTKL, Epstein, NBBJ, Durrant, Gensler, Rem Koolhaas, Herzog & De Meuron, KPF, Pelli and others—including a growing list of specialized smaller firms such as acoustical expert, Kirkegaard.
This will be the year where we see China and others parts of Asia export more talent than ever before, thus creating a new zone of competition for European and American firms. We hear so much about the Japanese architects practicing globally. But keep in mind such Chinese architect standout talents as Zhang Lei, Liu Jiakun, Ai Weiwei and Yung Ho Chang who are being recognized increasingly outside their home borders. This trend is just beginning. The technology and talent transfer of A/E services from North America and Europe to Asia is now creating a robust new competitive choice for clients including corporations and arts patrons. Prepare for more of this reality, a competitive boomerang of sorts.
Determining The Trends That Are Reshaping Design And Construction
Over the years our list of trends reshaping the design and construction industry have been diverse and for the most part, happily accurate. We have been in the zone on our prognostications (except for some sector forecasts that we have blown) and our prediction that Building Information Modeling (BIM) would be implemented at grand scales. (We have been wrong about that for about four years running.)
Change will Change—12 New Frontiers Plus Two Bonuses
Of the 100 trends we are following, we see the following dozen most significantly changing our industry during the next three years. We’ve added two bonuses that almost made the top 12 list. Dozens more await innovative leaders who can find ways to reposition the design professions for new relevancy.
How you actually perform professional service work and the efficiency of that work is becoming a huge differentiator. Lean and value-based processes will define professionals of the future. Process innovation improves delivered quality characteristics. New processes driven by advances in both technology and management will become significant distinguishing characteristics of the most successful (read, most relevant and indispensable) organizations. In this issue you will read the article by Scott Simpson about Stubbins Associates’ new HyperTrackTM process. There are dozens of process solutions that are being invented each year. Paradoxically, it’s the increasing level of complexity that drives innovation and breakthrough success. Thus, it can be said that complexity is an ally of the architect, engineer, and designer.
Productivity is improving both inside and outside the design professions and bringing more competition inside—changing the fundamental tenets of the design and construction economy. Throw out your old benchmark studies. Revenues per employee are improving significantly and often where you least expect it. It’s no longer uncommon for professional service firms to exceed $200,000 revenues per full time equivalent. This has migrated forward from an unheard of status to a best-of-class standard. With increasing productivity comes an underlying, almost invisible, yet profound economic growth. A commitment to continuous improvement in productivity and constantly raising the bar will separate the average firms from the best of class.
Intelligent and fully integrated smart buildings will become more of the norm; they require increasingly sophisticated and specialized professional service delivery. Intelligent buildings require the best specialists and the smartest designers. The gap between client’s needs and service delivery has widened in many cases we have studied. A huge opportunity exists for firms willing to commit to filling these gaps. After the hype, take a look at the overt benefits that Leo A Daly and Arup’s engineering are bringing to security and building intelligence. Real world and real-deal, smart buildings services will be delivered by more and more best of class firms.
Globalization is redefining the who, what, when, how, why, and how much in construction. It is cited as a trend that will put pressure on lowering professional service fees. This is a threat and an opportunity to the future of the design professions. Outsourcing will continue and with the devaluation of the U.S. dollar we may see other countries begin to outsource to firms here in the U.S. Think about it. The global economy now touches all firms and is a part of the context for professional practice. This trend, like the others here, can have short-term problems caused by regional trade blocs but the trend will surely benefit talented designers.
Speed to market is forcing new fields of collaboration, including advanced design-build models and more sophisticated forms of Internet project management and teaming models. Digital project management is cheap and can do more than ever. The case study we did last fall about Hammel Green and Abrahamson Architects, Engineers and Planners explains why this is such a significant competitive differentiator—a strategic advantage at each of that firms six locations. They understand that the rate of change is steadily accelerating and will speed up construction solutions and create new life cycles. HGA calls this “Fast Architecture.”
Building information modeling (BIM) is a tool of change, and we say again, will be a significant competitive advantage. After creating great expectations and then missing deadlines we believe that soon BIM will enter a breakthrough phase. The time is now ripe. For the short term we see new functional outsourcing and a variety of partnering arrangements. Get ready for BIM or be left behind. The underlying assumptions about its relevance and efficiency are valid. But watch the work of Jonathan Cohen, Gehry and Partners, and SOM. They are not bragging about it, but day-by-day progress is being made. Make a New Year’s resolution to attend Autodesk University in 2005.
The best professional firms are becoming less concerned about control and more flexible on how to achieve top quality. Rapid change is leading to more flexible organizations that can create collaborative value in non-linear terms. Service firms are thinking in flatter, more agile models of management and using temporary organizational structures. Design firms don’t have a history of being well managed. This can be viewed as but a charming artifact of the past profession. Well-managed firms, such as Beck Group, will become even more influential in 2005; many have already established their repute.
Not all design has to be sexy. Building lifecycle management solutions will open new service expansion doors for entrepreneurial firms in the AEC industry. This isn’t for everyone, but it is a great business model. For those with a passion for programming, commissioning, consulting, and real estate facility management there are huge opportunities waiting. Combine lifecycle understanding to the game plan for design firms and the market pie grows by a significant factor. And keep in mind, digital innovation will provide new communication solutions. Wireless computers will be used on most construction sites to improve connectivity of the entire design and building team. Building lifecycle management solutions are being tested at Perkins + Will, HOK and other prized small and medium size firms throughout the country. 3D-I has carved out an expert zone as a firm understanding maintenance analysis. Sexy? No, but a relevant service protecting and preserving.
Architects of the future are not just designing buildings, but also experiences. This is bringing a new architecture of change where design adjusts to an age of flux. Richard Foy of CommArts argues that we need to design spaces that employ refreshable information, messaging, content, images, transparency, luminosity, activity and digital technology as key components in shaping and choreographing social experience. The focus is people—setting stages for their lives and roles using design. We’re convinced that commercial and institutional environments will increasingly become part of the “experience economy” where shopping centers, hospitals, schools, and offices will become spaces that make people feel good and elevate the human spirit. Expect architecture and design firms to become experts in the role experience plays in creating stronger, more personal relationships with employees, clients, and consumers. Pine and Gilmore at Strategic Horizons are more relevant and timely than ever before. Expect the experience economy to bloom in 2005. Expect continued double-digit growth in environmental graphic design.
It won’t be in the official RFPs but the attitude of strategic optimism will be sought out by clients. Genuine, professional, confident and optimistic problem solving will be a prime attribute in the years ahead. In challenging times clients are challenged too—they want informed, expert professionals who are optimists. This is the characteristic that clients say was one of the reasons Frank Gehry was selected above all others for the new cultural building at the new World Trade Center in New York. It is a characteristic worth emulating by all of us.
Green and sustainable design and development will shift gears into mainstream demand. LEED standards will grow significantly but professionals will think beyond them. Imagine how architects might create living buildings that produce more energy than they consume. Follow the architectural leaders including Bill McDonough, HOK, BNIM and planning leaders such as Phil Enquist at SOM and Cecil Steward at Joslyn Institute as they imagine the new “what ifs.” This trend integrates nicely with all dimensions of design excellence. That is why long-term architects and designers will own the keys to the green and sustainable solutions of the future.
Leadership in design and construction will become more competent, courageous, and visionary. Architect Richard Swett’s new book, Leadership by Design: Creating an Architecture of Trust, due to be published next month, is a powerful reminder that architects can and must lead our industry and our communities forward. It is an insightful, down-to-earth masterpiece that will inspire architects and designers to lead their communities to new levels of significance. Leadership is every architect’s business. We see more designers step up to take action in 2005.
Strategic partitioning and modular processes will become new standards to allow mixing and matching of different components comprising a whole building. Faster and leaner construction will achieve good design and high quality buildings. Architect Michelle Kaufman is offering factory-built green modular houses at around $120 per square foot, and they are exciting places to live. And Charles Lazor, a founder of Blu Dot has designed modules preassembled in a factory then delivered by truck to the site—just over $150 per square foot. Both offer up great architect designed residences that are flexible and absolutely stunning. New generation architects have staying power and we cheer their success. And there is also fresh proof at the commercial scale too—watch for new success from such innovators as Steelcase’s Workstage.
Architects will lose their reliance on buildings as their medium. The distinction between architects, engineers, designers, and contractors in the mind of owners will diminish and blur. This fading of boundaries will happen as professionals cross traditional borders. Architecture will meld the visual and three-dimensional but will also embrace video, theater, and experience. We are entering a period of industry interdependence of competency and collaboration producing total value paradigms. Imagine Pentagram, Guy Nordenson, and NBBJ collaborating without the usual prescribed roles.
Yes, change will change—alert architects know that linear change is still a factor, but non-linear transformation should always be factored into your future. These “potentials” are where both danger and opportunity present themselves for peril or advancement.
You Can Create a Calmer, More Satisfying, More Successful Year Ahead
Slow down to go fast. Sit back and focus on your priorities. Stay calm through the storms.
With the changing context for 2005 you can make it a successful and significant year. Here are a few suggestions. Add one of your own for each of these:
2005 Principles to Act On:
Know what you don’t know. We live in very complex times and it’s OK to be underinformed about certain aspects of life in this industry. You don’t have to be all things to all people. You don’t even have to be well rounded to be successful. Still, you must stay open to change/opportunities and look outside your own specialty for clues of what’s around the next corner. Keep reading. Network with people who are like-minded and motivated to succeed in the constant whitewater times we are in. Stay on top of your game and don’t let what you don’t know create cracks in your belief system about the future. Listen, test, diversify, adjust, stay resilient and keep learning. You’ll be fine.
Take responsibility for your future. Last year we took a poll that told us that about 45 percent of architects and designers believe that there is significant progress ahead and reason for optimism. Another nearly 45 percent were more pessimistic. Who would you rather employ? The onus of creating a great future in this industry falls squarely on our own shoulders.
Make more money. Design new systems and competencies in your firm that generate growth and an extra 3-5 percent of profitability. Once you imagine the mental picture of doing that one year from today imagine backwards what it will take to make it happen. Do that. Join those who have already taken the step.
Be more generous. We recommend giving a portion of your pretax, pre-incentive profits (say one to 1.5 percent) to your favorite, most respected architecture and design colleges and universities. Get involved with your own time too. These are the incubators for the future of the design professions. Schools do not have the resources that they need to be at the “best of class” levels that our future requires. Using a 1-1.5 percent formula would bring an extra $20+ million to higher education each year. And on top of this, volunteer to lecture, or get a faculty member on your firm’s board as an outside adviser. Live by example to bridge the collaborative spirit between professional practice and higher education. In addition, be generous with your time in your community. Pick a favorite not-for-profit and do pro bono work. It will bring a smile to your face and an extra kick in your step when you feel the nontangible rewards.
Look ahead. You have heard how important it is in hockey to anticipate where the puck will be next. In architecture, engineering, and design we should all look to a three-year horizon. The key watchword is to anticipate. Our strategic and personal plans should look forward 36 months at a time. We can contemplate longer planning horizons (It’s fun to do). We sometimes use five, 10, 20 and 30-year scenario exercises. But for your meaningful success put in place a plan that you believe in for three years and then systematically keep updating it.
Give thanks, often.
Sector Growth: Past, Present, Future
—James P. Cramer
