Message to Designers: Be Ready to Pivot
In conversation with Johanna Hoffmann, CEO of Oomph Group Inc., about getting your firm through the crisis by being nimble and finding creative ways to generate revenue.
You have been advising practitioners in creative industries about the importance of having an agile, resilient practice – one that can withstand sudden changes, be they industry-specific or in the broader economy. And if there is anything that fits that definition it is COVID-19. That said, although the pandemic has greatly affected many built sectors where designers look for work (particularly hospitality, retail and commercial), there had been seismic shifts occurring in building industries in ways that impacted A+D firms long before the pandemic hit. Can you explain a bit about what those shifts are and how they influence designers?
Construction is the biggest industry in the world, and the worst performing. Productivity and earnings are lower than in all other industry groups, risk is high, and cost and time overruns are standard. How buildings are financed, designed, and built has remained virtually unchanged, while other industries have been disrupted and transformed by the internet and digital technologies. But now technology has evolved sufficiently to make new ways of building possible, and we’re on the cusp of seeing a major transformation of the architecture, engineering and construction industries.
New technologies, products and processes like 3D printing, modular components, mass timber and light-gauge steel make it possible to build faster and cheaper than ever before. Environmental issues are also driving change, as is the case with cement, which is one of the global economy’s most carbon-polluting industries, responsible for about eight per cent of global carbon emissions.
Beyond cost and environmental impact, the significance of these new materials is that they are driving change in the building process itself, which is evolving into more of an industrial type of process, with modular construction components manufactured off-site, in highly automated factories, then delivered just-in-time for on-site assembly, using automated processes – very much the way cars are made. This will have a profound impact for designers because it will change the sequence of work and the volume of bespoke design and construction details, because a lot of this will already be included in prefabricated products and modular components that now just require assembly.
These technology shifts go hand-in-hand with another huge shift, which is the appearance of a whole new breed of player in the industry. Until now, investment in the sector had been limited to ownership of real estate assets, but the design and construction industry itself had not attracted the same levels of investment as high tech, manufacturing, and consumer goods. That is now changing. The opportunity is so vast that it is attracting venture capital firms and hedge funds chasing deals in a virtually untapped sector. Their only objective is return on investment, and so they will revolutionize the industry’s long-standing business models, focusing on cost control, processes and vertical integration to maximize profits.
For designers, these new players will have a similar impact to what the adoption of P3 had: altering the project hierarchy such that architects went from being the prime consultant to being subordinate to general contractors. Now, the search for maximum profits will drive the adoption of industrial approaches, and new technology, which again will shift where and how designers participate in the process.
What can’t be ignored are three other familiar trends that will now escalate. The first is adaptability. Already before COVID, project typologies were breaking down and blending. Large, mixed-use projects with offices, hotels, condos, theatres, and retail are now common. Many healthcare and civic environments now have sophisticated hospitality, retail and lifestyle features. But COVID will now take flexibility to a whole new level, as everyone grapples with distancing requirements and variable occupancy due to remote work and learning. For example, I imagine we’ll see a big demand for open spaces that can be continuously reconfigured with flexible partitions, and systems furniture that can easily be separated and reassembled.
Then we have consolidation and globalization which has led to ever-larger architecture and design firms. What may surprise many is how Canadian firms are global leaders in this: WSP with 50,000 employees; SNC-Lavalin with 52,000, and Stantec with 22,000, and they rank globally at number seven, 10 and 11. These homegrown giants are investing heavily in research, new technologies and equipment, driving major changes here at home that will trickle down to even the smallest of firms. Lastly, we have more ancillary sector players moving in and taking work that was traditionally performed by design firms, such as global real estate brokers, who now provide workplace interior design and project management services on renovation projects to global hospitality brands, among others.
While the rise of conglomerates and multi-nationals have created ripple effects that certainly disrupt small and mid-size firms, the sectors that they are gobbling up (institutional, healthcare, government, etc.) still need designers to design spaces. So, if you are a recent design school graduate would your employment prospects be threatened at all? Or is there still room for designers, it just means who the bosses are now has changed?
Designers’ creativity, understanding of space and spatial relationships, their analytical and reasoning skills, ability to communicate complex ideas, attention to detail and sophisticated technical knowledge are exactly the skills that are needed most today. Architects and interior designers will continue to play a leading role, but the firms they work in, the materials they specify, the tools they use, and how they work will change.
One way to understand the disruption that is taking place, and what the future holds for design firms is to look at how historically other creative industries have gone through a nearly identical sequence of events: first, you have the appearance of digital tools and a slow, gradual adoption of new technologies and the emergence of new types of companies; these developments are fueled by venture capital; then comes a global shock, followed by a recovery, which fuels ever larger increases in venture capital investment: finally, the new technologies gain critical mass and rapid mainstream adoption.
This is exactly what we’re seeing now in the design and construction world: traditional architecture firms still lead in most sectors and do all the prestige projects, but digital tools and processes have entered the design world, with BIM as a game-changing example; venture capital is now fueling the production of new materials and construction processes, and new types of vertically integrated companies, like Katerra; then we have the shock and COVID brings the world to a screeching halt; new companies like Katerra can’t sustain the shock and go under, but this is a hiccup as their innovative cost-effective solutions are apparent and point the way forward; economic recovery from COVID will bring even more venture capital into the sector and our industry is on its way to being changed forever.
In the evolving future, traditional architecture and firms will still get the top prestige projects like unique museums, hotels, restaurants, amusement parks, office and condo towers, as well and bespoke private residential. But most multi-unit residential, affordable housing, commercial, industrial, public and civic projects will increasingly go to firms familiar with the new technology that can offer a much faster, convenient and cheaper service and product.
What does this mean for designers? Millennials and Gen-Z graduates are digital natives. They are lightning fast at adopting new technology, and much more flexible, adaptable, and entrepreneurial than previous generations. Don’t forget, Google and Facebook, and many other tech giants were conceived in university dorms by kids barely out of their teens. So, I think digital babies will do just fine. I also believe that many of today’s design graduates will strike out on their own much sooner than ever before, develop whole new types of firms, new ways of working, and new designs that we can’t even begin to imagine today.
COVID-19 is acting like a crockpot, intensifying the pressure smaller design firms have already been feeling and expanding the cracks that are already there. Certainly when we come out of the pandemic there will be casualties, and to survive firms are being told they must be nimble and “pivot.” What does that mean to you, and what is your advice to firms that want to come out of this still alive?
In a more competitive and rapidly changing environment, the business side of the practice is more important than ever. Most design firms have good financial and human resource systems in place, but still lack a competitive brand position and a focused, proactive approach to business development. Brand position is expressed though key messages that are client focused, that explain who you are selling to, what you are selling, the value you provide, what you are best at, and why potential clients should believe it.
When you look at most design firm websites, you see generic descriptions of their approach to design, identical lists of services and sectors, along with team biographies and project images. Lacking a defined brand position, homepages feature information that is then duplicated on the Team and Project pages, with platitudes such as “licensed to practice in Ontario,” “we deliver on time and on budget,” or “owned by shareholding employees” all of which is irrelevant to clients You can take the copy from almost any website, apply it to another firm and it still fits. I think one reason for this is that designers are trained to focus on their creative talent, aesthetic and technical expertise, with much less emphasis placed on the problem-solving aspects of their work and on project and client management processes. This is reflected on websites where you don’t often see descriptions of a project’s challenges with explanations of how the firm successfully addressed these. And you rarely see descriptions of the firm’s approach and processes to client, project, and administrative management.
The only areas where design firms are right to highlight aesthetics and creativity are hospitality, retail, entertainment, and certain civic projects like museums, where clients need imaginative designs because they are integral to the marketing of the facility. However, for most clients, practical design solutions and flawless project management and administration are as important as the design itself, because these are the elements that shape their project experience and satisfaction, much more than design awards.
Equally important is research. When positioning your firm, you make assumptions about client needs. Many are based on your sector experience and previous work, but client needs are always changing, so to come up with messages that truly resonate, you need to test your assumptions. This is particularly important if you are looking to extend your practice into new geographic areas, extend your service offering, penetrate a sector in which you have limited experience, or are returning to a sector you haven’t worked in for a while.
It’s about understanding the big picture: the client’s industry, trends, competitive factors, and other parts of their operations, like human resources, finance, technical and security. The people who lead these areas are often part of the decision-making team and demonstrating that you understand their needs and how the spaces you design can make them more effective is often what gets them to support the choice of your firm. For private clients, it’s understanding their fears and concerns, which often centre around budget and process management.
The trend now is to provide a turnkey, one-stop shopping service. Immersing yourself in your target market’s entire business can point you towards ancillary services that you can add, or that you can offer by teaming up with other companies. For instance, if you design retail or hospitality environments, being able to help clients with inventory, cash management, or security systems can be very valuable, especially for clients launching their first boutique or restaurant. Finally, don’t forget about competitive research, which is knowing your competitors and how you compare. In competitive bid situations and strategic pursuits, this helps you highlight your advantages and prepare messaging or content that counterbalances theirs.
Another key component is marketing and business development (BD). Traditionally, professionals have operated under the assumption that if you are good, work will find you. This is a remnant from days when licensed professionals were strictly forbidden to promote their services, and design culture has evolved with a retained stigma around selling. But increased competition, and now COVID, have disturbed the traditional flow of referrals and walk-in business. Knowing how to sell and having an ongoing BD program, supported by marketing activities is now a must.
Marketing tactics like public speaking and PR generate awareness and leads, which BD and sales convert into clients. Both elements must be seamlessly intertwined to reinforce each other, using the same brand and value messages that flow directly from your market research and brand positioning. This is where I see a gap in many firms: marketing or sales activities often not directly linked to a partner’s BD efforts, targeting prospects and stakeholders with content that highlights value, benefits and solutions with relevant thought leadership that supports relationship and trust building.
Old timers still remember the real estate market crash of 1989 and the ensuing industry slump, during which hundreds of design firms went under. Since then, we’ve had three other recessions: the 2000 DotCom bust; the 2008 global economic crash; and now COVID. By looking at firms that failed, those that survived but limped along taking years to regain their pre-shock levels, and those that thrived and used downturns to pivot, retool and leap ahead, we can draw many lessons.
First, have a nimble and flexible mindset: For decades how firms functioned, were managed and went to market didn’t change, but now the only constant is change. Therefore, you must always be reassessing your competitive position, services and delivery methods and your firm’s culture and people management, which are now front and centre thanks to COVID and rapidly evolving socially consciousness movements. Next, don’t put all your eggs in one basket: boutiques that are focused on one sector only are extremely vulnerable. Having seen how many boutiques have found themselves almost out of business during downturns, I have come to believe that one-sector boutiques that only provide a traditional design service should no longer exist. You need what I call a stool with three legs, so that if one leg breaks off and another one is wobbling, the stool is still standing. However, if you really want to practice in only one sector, then you must extend your service offering beyond traditional scope to provide a ‘one-stop-shopping’ service. Lastly, strategic alliances are more important than ever. Team up with other design firms whose expertise amplifies yours or who are technologically advanced in new evolving areas, so you can deliver a comprehensive service and benefit from each other’s ability to procure work.
To get through a crisis like COVID, you need to find creative ways of generating revenue by taking on work that may not be what the firm typically does, but is a stop-gap solution that provides cash flow until things turn around. For example, more and more firms are adding new services such as graphic, branding and multimedia design to their offerings. Many hospitality firms have also taken on private residential work, a segment which has flourished during the pandemic. As well, given the growth in mixed-use projects and the blending of typologies, hospitality and retail elements are now important features in education, healthcare and long-term living facilities. These are all areas into which interior design firms can expand, particularly given their inflows of funding beyond COVID.
In the short-term, to drive revenue look for areas that have to adapt their facilities and space for COVID. What are schools, community organizations, clinics in your area and adjacent communities or towns doing to prepare for re-opening? Your space planning, project management and procurement skills are urgently needed now. Can you offer a “return to work/business” service with standard elements such as floorplan, flexible partitions, return-to-work plan for a fixed price to promote to businesses in your community? The work may be basic and more maintenance or emergency driven, but it’s revenue to help while the world and the economy recover.
A creative marketing and business development leader, Johanna is known for her ability to integrate inventive marketing tactics with business development strategies to drive results for AEC firms and organizations. Before Oomph Group, she held executive marketing and business development positions with global leaders B+H Architects, Forrec Inc. and Stantec.
To hear the complete conversation, listen to the Bevel podcast on our website or any of the popular streaming platforms.