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Revolution and Achievement: New Practice and Business Models Emerge in

Study of Architecture, Design, and Real Estate

The fundamental context and characteristics of achievement in architecture, design, and

real estate are changing. With new innovations in professional practice and related

businesses being offered up in the A/E/C industry, the Design Futures Council has

completed a new study that researches strategies and operational changes that high

achieving organizations are currently testing and experiencing.

During the summer and early fall of 2003, Greenway Consulting’s Counsel House

Research and DesignIntelligence, the journal of the Design Futures Council, conducted a

qualitative analysis of 45 leading design, construction, and real estate organizations to

explore the changing directions in professional and business models. Greenway’s

Counsel House independently conducted the interviews.

There is revolution on the horizon, according to the firms and organizations interviewed.

These changes are motivated by widening horizons and ever changing contexts brought

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about by innovation, better management, and new technology, which are merging into

new models and systems of achievement.

There are seven areas of research findings.

1. Process innovation, driven by advances in technology and better management, is a

new, significant distinguishing characteristic of leading architecture and

engineering organizations and their clients in Europe, Asia, and the United States.

2. The architecture, engineering, and construction markets are increasingly

competitive, which is changing the fundamental tenets of the design and

construction economy. Competitive pressures are increasing productivity and

changing financial benchmarks of firms in the study.

3. Intelligent and integrated buildings are becoming the norm; they require

increasingly sophisticated professional service delivery.

4. Globalization is forcing increased efficiency in the construction industry and is

cited as lowering professional service fees.

5. 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.

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 6. Building information modeling (BIM) is perceived as an important tool of change

and competitive advantage for organizations transforming the A/E/C industry.

7. Building lifecycle management solutions will improve process and open new

service expansion doors for entrepreneurial firms and could further disperse and

diversify their current offerings.

Study participants characterized the construction industry as being fragmented with a

multitude of design firms, contractors, owners, and suppliers. This fragmentation,

inefficiency, and the resulting frustrations are driving behavioral changes, which often

lead to innovation in the marketplace.

According to the owners, one of the core values that they look for in this fragmented

environment is the collaborative reputation of service providers. According to a major

lodging company, one of the owners who participated in the study, “the culture in the

A/E/C industry has for a long time been fragmented and inefficient. This industry has

lacked trust and has been short on strategic collaborative thinking. We believe that this

culture must become a remnant of the past. We see smart firms creating new value

propositions that connect together and make sense of the pieces of the puzzle.”

A research respondent from the Stubbins Associates, an architecture firm located in

Cambridge, Massachusetts, said of the current dilemma, “In a typical design process, the

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architect designs the building with the help of engineering consultants, and then the

construction documents are then passed on to contractors for bidding, including

subcontractors. The steel erector is interested in steel, not drywall. The plumber is

interested in pipes, not wires or ducts. Because each party is looking out primarily for his

or her own interests, conflict and contention are built in. Forward- looking firms are

taking a different approach—they’re transforming the process through true partnering.

This calls for new decision-making process—one that is simultaneous rather than

sequential. As for the architects, they need to realize that they’re in the leadership

business.”

The research participants discussed how they could enhance each client’s business given

the challenges of the current paradigms and new opportunities.

One of the key findings was: process innovation has become a significant distinguishing

characteristic of leading architecture and engineering organizations and their clients in

Europe, Asia, and the United States. There is a commitment to greater efficiency in

service delivery brought about by better management and technical solutions, such as

faster microprocessors, cell phones with greater reach and reliability, Blackberry

technology that gives e-mail increasing mobility, online project management and

collaboration services, and a new wave of design authoring tools focused on enhancing

process. Creative ways to reduce expenses and to improve value is being actively pursued

by leaders in the industry. Productivity gains are being made in architecture, engineering,

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construction, product manufacturing, and facility management. Participants believe that

process innovation will continue to revolutionize traditional services.

Many of the study participants believe that the construction industry is becoming more

competitive and complex than in the past. The intensifying business competition is

resulting in a kind of surge in managerial innovation. Technology is combining together

with management concepts to transform processes and systems toward leaner and faster

delivery. This productivity increase is measured in professional firms and construction

businesses in terms of metrics of value or financial benchmark improvements. “The

competition has gotten stiffer and more daunting than ever before,” said one of the global

architecture firms participating in the study, Kohn Pedersen Fox Associates in New York

City. One result of this increasingly competitive environment is what they perceive to be

an advanced “commoditization of services.” Some clients see a great majority of services

offered by firms to be similar—not unique or differentiated—and, thus, not distinctively

valued. Some A/E/C firms said they have strategically moved into the “commodity

niche” and are providing basic services competently and profitably. In the words of one

study participant, “commodity services are producing new fields of opportunity right

under the nose of traditional professionals.” Other firms are focusing on the richness of

highly automated yet differentiated services uncommon in certain building markets.

But owners say they expect better and faster services for all building types. According to

Chick-Fil-A, a restaurant chain based in the United States, “a high level of professional

service is the only thing that will really keep architects and engineers head and shoulders

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above the competition. There are a lot of people out there beating the bushes for the

work and a high level of service is very attractive to owners – no matter the building

type.”

In response to such owner expectations, a growing number of design firms are also

finding a distinct strategic advantage in adopting new parametric change technology

paradigms, which increases their efficiency and allows them to spend more of their time

focusing on high-value design problems.

Clients are increasingly expecting intelligent or “smart” buildings, and this requires far

more sophisticated service delivery by design professionals and contractors. “As you

design and construct a building today it becomes a very complex assembly – there is not

one trivial exercise in the whole process,” according to a GSA spokesperson. The

construction organization BECK said that “projects are increasingly more complicated

and often require ‘smart components’ and owners are expecting highly collaborative and

technically savvy team members.” Survey participants pointed to green and sustainable

design, security, audio/video automation, universal design, convenience devices, and

advanced HVAC systems that will be delivered at unprecedented levels of performance.

New data-driven building information modeling and building lifecycle management

solutions facilitate the design firm’s ability to do building performance and sustainability

analyses in-house, with fewer staff.

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Globalization is forcing increased efficiency in the construction industry and is cited as

lowering professional service fees. The world economy is at a crossroads, and the

purchasing of professional services is being re-examined on a broad international scale.

There is an increasing exportation of U.S. services, but there are also new centers for

professional service outsourcing located in India and China. Many of the research

participants are now working globally or are working with project teams and team

members in different geographic areas. Research participants said they expect significant

outsourcing of production work to India and China. The San Francisco office of Flack +

Kurtz Inc., an international consulting engineering firm, said: “when we are working

overseas we normally take the project through design and then have the local engineers

complete construction documents with our supervision so that they can provide their

knowledge of all the local codes, standards and construction practices.” Survey

participants often mentioned technology as a tool that facilitates working across the

globe.

Arte Charpentier et Associes, an architectural firm in France, said that the Internet has

changed their practice behavior for the better: “What has changed dramatically for us is

that we are now able to use the Internet . . .distance is no longer a major barrier to service

delivery . . .we can do concept design here in France and send it to Shanghai to our office

or to the engineers.” Online project management and collaboration services have proved

to be extremely important when dealing with team members all over the world. In 2002

there were 800 major corporate headquarters that relocated worldwide, with a quarter of

them going to developing countries, according to the United Nations Conference on

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Trade and Development. A/E/C services are being stretched to new levels often with

expectations that fees will be competitively low. The abundance of production options in

China and India led some survey participants to believe that this trend will continue to

put pressure on fees. A $100,000 professional with comparable experience and education

practicing in the United States is now making $30,000 or under in India. Several of the

research participants are currently outsourcing production to achieve cost savings and to

keep projects going forward twenty-four hours a day.

Speed-to-market is forcing new fields of collaboration, including advanced design-build

and Internet project management. Respondents agreed that speed-to-market within the

building industry has increased dramatically in recent years. Technology and changing

cultural expectations are driving this trend. According to Skidmore, Owings & Merrill

LLP (SOM), “This increase in the speed of a project is proportional to the increase in

information flow. Everything today just moves faster.” More and more clients are

expecting faster results as benchmark expectations. “Projects used to take two or three

years to plan and design. Now this process is sometimes compressed into just a year

because of client needs,” said architects at SOM. “New technologies are making this

possible.”

Respondents have seen and are experiencing a trend toward various forms of design-build

within their industry. An architecture firm specializing in institutional and biotech labs

said, “we are seeing much more integration between the design side and the construction

side with more design-build and firms that basically do the whole turnkey type

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approach.” The rate of transition toward design-build may be as high as 4 to 5 percent a

year with an almost revolutionary transition happening. “The old process where the

architect designs something and throws it over the fence to the builder” is gradually

becoming less the norm. Survey participants agreed that there is a dramatic shift toward

integrated forms of service delivery and that innovativeness in this field provides a

strategic advantage in today’s marketplace.

The research participants articulated the advantages of design-build:

1. Faster turnaround

2. Stronger collaboration between designers and builders

3. Liability falls to one entity

4. Better communication

Eliminating the lengthy bid process can be a huge process improvement when speed

matters. Owners who say they are open to further innovation in collaboration models

notice a less contentious relationship between divisions on the building team. A

contractor in Germany, HBG Bouw en Vastgoed, said that they have come to value

design-build because of the early involvement they are able to have, “so an engineer

starts thinking about how the construction should be early on, already in the sketch phase

or somewhat later, but earlier than it used to be.” The Hong Kong Housing Authority

agreed: “there will be better communication among project teams such as architects and

contractors and this will often improve process and workflow.”

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Most participants in the study said that they are collaborating on the Internet and that they

see collaboration services as becoming mainstream and no longer futuristic, visionary, or

even innovative. The Internet collaboration services are now “table stakes,” according to

HGA Architects and Engineers in Minneapolis, Minnesota. Arte Charpentier et Associes

of France agreed and added: “and in terms of the exchange of information, we will still

need to meet together face to face.” From the perspective of owners, online collaboration

services are providing great efficiencies in project management. “Collaboration services

right now are the biggest, most impactful change in the industry,” said one respondent.

Building information modeling (BIM) is perceived as an important tool of change of

those organizations transforming the A/E/C industry. Respondents generally agreed that

building information modeling--a design, delivery, and management approach first

introduced by Autodesk in 2002--will very likely play an increasing role in the future of

architecture, engineering, construction, and real estate. Respondents said that integrated,

fully coordinated building information models help design team members produce higher

quality work more quickly with fewer errors, while helping their clients better visualize

their future buildings. Kohn Pedersen Fox commented that, while building information

modeling is not yet fully robust to the levels expected, “it has the potential to change the

building industry.” According to ARUP the global engineering design organization,

“The end-users will see sooner and more clearly what they are getting . . . and can make

sure that they are getting what they really want.”

The concept of building information modeling has revolutionary benefits that include:

visualization of the end product in 3-D, more accurate early on pricing, interference

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detection prior to construction which reduces waste and errors, and easily accessible

information that can be used for managing the building during occupancy. The Hong

Kong Housing Authority pointed out that “with everyone looking at the same model,

changes can be reflected immediately and all are notified at once. This will save time and

reduce misunderstandings later in the process.” And the GSA in the United States said,

“The fire protection engineer, for example, instead of spending all of his/her time looking

for information, knows where it is and can really bring knowledge and expertise to the

team much more quickly and productively . . . the same with other team members. There

is a huge amount of productivity gains for moving in the direction of BIM.” A national

grocery chain said of using BIM, “it is going to enable professionals to really control

quality. Quality assurance will become the norm rather than quality control.”

Building lifecycle management will improve process and open new revenue doors for

service professionals, which could disperse and further diversify the focus of professional

firms. The discovery process of the research included a discussion of the application of

technology to building lifecycle management. This concept parallels the notion of

product lifecycle management that has driven innovation in the manufacturing sector for

many years. Building lifecycle management is a way of combining information generated

in a building information model and Internet-based collaboration services to solve

business problems across the entire lifecycle of a building – including design,

construction and facilities maintenance.

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The research participants found significant advantage to the idea of being able to share

and manage continuous information spanning from the inception of the project’s design

through construction to future additions, and ongoing building maintenance. A major

lodging company research respondent said that this could be especially helpful when

communicating the value added services of the design team. This respondent, as an

owner foresees that “smart drawings in 3-D will go from design all on toward interactive

construction with all the team members.” The trend toward building lifecycle

management is very beneficial says this lodging company, but “we are not there yet --

still, the database will show how all the pieces will fit together.”

Research participants said that they also valued the potential for easy access to

information for long-term management of the building. This represents “total (building

life cycle & cost) management and would be a very positive step,” said the owner’s

representative of the Hong Kong Housing Authority. While the survey participants found

much to like about the ideal of building lifecycle management, they also saw

complexities. “When we work on the refurbishing of a building in Paris and we go to the

archives, we find the plan which has been drawn in 1913, around 90 years ago. If paper

drawings are well conserved, we can reuse them and there is a lifecycle. But with

computer-generated information, my question is – what application will we be using 90

years from now?” expressed Arte Charpentier et Associes of France.

While participants expressed enthusiasm for potential changes and new opportunities

ahead, they also saw numerous obstacles to adoption of the seven directions of the

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research. They all require substantial changes in mindset and behavior. The survey

participants said that a major obstacle is the significant change to the entrenched thinking

and behavior patterns. Some people are “just afraid of these changes to their own habit

patterns.” Another said, “of course these revolutionary changes will happen. But it is

going to be slower in some organizations because of the natural tendency of people to

resist change. . . And there is tremendous leadership challenge to all of this.”

Some survey participants said that owners may need to be the primary drivers of change.

According to a GSA spokesperson, “if you look at the way the industry really works,

people only do what their contracts tell them to do . . . so if we write it into the contracts

that is what gets it done”. The multidisciplinary architecture, construction, real estate

organization BECK says that “champions will drive these changes forward – not just one

discipline or another – who will they be?”

Greenway Consulting -- Counsel House Research

DesignIntelligence

This study was sponsored in part by Autodesk, Inc.

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