What is in a Business of Architecture? What makes a FIRM ticking? It is again the model of production – A Stage, A Script and The Crews.
A Stage – Is defined as a Hardware. Its address speaks a thousand words. A Firm in CBD is different from a Firm in the Suburb. The Location, Imagery and its Organization gives meaning to a BRAND. Your office represents what and who you are!
The Crews – Is defined by its ORGANIZATION. Organization is who’s who within the confine of an Office (Stage). There is a “BOSS”, called it by whatever name – CEO, MD, Managing Partner, Principal, he is the “Fountain Head”. He alone makes the ultimatum. If you have 2, the organization is going to doom. Subsequently, it is ROLE PLAYING. The head is supported by his team, all in it is called the ADMINISTRATION. Different components or ROLES are classified as PRODUCTION, MARKETING, IT and so on so forth, each potentially becomes a full-fledged company in itself. Crossing this line, it is an amalgamation of Holding Company with its Subsidiaries. This ORGANIZATION defines its POLITIC.
THE SCRIPT – Each Crew liked an ACTOR has different SCRIPT such as LEADERSHIP, STAFFING, DIRECTING and CONTROLING.
Leadership is best done by example. There are basically 2 types of leadership – the BOSS and the LEADER. You choose…
Staffing is what you want your staff to be 5 years down the road. There is a different between a Career and a Job. Every employee should have a Career path, not just a Job scope!
Directing is another word for Communication. Right communication is essential. If the instruction is clear, the execution erred – it is the executives’ mistake. If the instruction is unclear, the execution erred – it is the superior’s mistake. Communication is to put a decision into action and worse of all is no decision and not wrong decision. It is judgement call. Everyone should have it. For standardization is good practice to lay them down as SOP (Standard Operating Procedure) and DL (Discretionary Limits).
Controlling is the flow of authority. If it originates from the top, it is called top down control and there are various sort of controls. What is your preference?
When you gel all these together, you get yourself a FIRM.
BDG CONTRACT 101 - CL27.8
You are an Architect for Project ABC. The Contractor CDE has delayed. The Contract Period has another 6 months to go. The Contractor is blaming its NSC of non-performance and herewith request you as the Architect for consent to terminate the NSC under PAM2006. What will be your response?
1. One of the method employed by Contractor for mandatory EOT is to determine the NSC almost to the tail end of the Project.
2. The PAM98 form does not require consent for NSC determination. However, in the PAM2006 form Cl27.8 require the Architect’s written consent as a precedent condition for NSC determination.
3. Here is the catch, if the Architect consented, the Contractor is automatically granted for additional EOT as time is required to re-nominate. If the Architect decline, the Contractor may accused the Architect for unreasonably withholding consent.
4. To avoid being unreasonable, the burden of proof rests upon the Contractor to present. Such proof has to be beyond reasonable doubt. The benefit of the doubt must rest within the NSC. Cl27.8 implied the Architect to be in due diligent to the NSC.
5. In the event that the proofs are insufficient, the Architect has the right to withhold consent until further notice. There is no specific time for the Architect to give consent.
Many years ago, the Board had in placed the Noblest Scale of Fee called the Scale of Minimum Fee Rule (SMFR) and one Towering Figure of that Time, almost sharing the same stature of “Lord of the Rings - Gandalf”, our grandfather Architect nick-named “The King of the Loo” has risen to awake newbies architect that “Thou Shall Not Undercut Your Professional Fee” or “You shall Face the Full Force of the Board!”. Such “commandments” shiver through the spines of every newbies architects to the extent that one committed suicides because of such!
In reality, with the exception of Government Jobs, no private practice actually go by it or rather openly admitted to have not complying to SMFR, a staggering FACT shown by the polls conducted by both the Board and the Institute. Yet, the noble of noblest Board happily admitted that fact and the irony is these practices agree that such Rule shall be continued for perpetuity as it safeguard the interest of the practitioners. Now you know why Newbies are forced to take jobs at ridiculously low price as nobody has faith in this archaic rule.
For the benefits of Newbies so that they are not caught red-handed of committing such heinous “crime”, this is how the BIG BOYS did it. Assuming Construction Cost = RM100,000,000.00, “market Fee” (1.2%) = RM 1,200,000.00. What is in their appointment letter reflects, Construction Cost = RM30,000,000.00 and the Scale of Fee Rule (4%) = RM 1,200,000.00. Even with the compliance of the SMFR, one is able to manipulate the figures and that is how BIG FIRMS are doing to protect the interest of their shareholders. You are technically in compliance to the Rule.
SMFR is again going to be the same stale subject in the Professional Qualifying Examination but as a matter of surviving the Red Ocean to the Newbies, pledging your alliance to such will only make you death by hunger unless one is born with a silver spoon.
Let’s look at what is in a BRAND. There are 4 quadrants to where your products are graded: -
The first quadrant is where your product is too generic and has no exposure WHATSOEVER to the market thus being irrelevant. In simple word, what is your Architecture? If you are doing the sort of Architecture as just another production oriented firm, you are in the stage of HOPELESS. This is where most startups are.
The second quadrant will see your product move vertical upward. You need your product to be relevant! So, technically you sell your stuff to Design and Built contractors and Developers who can immediately tap into your resources either on pro-bono, below market price or delay gratification basis. At this stage you move from being technically competent to technically intimate with relationship builds after time. You will be known among the circles of people who employed you and to a certain degree take advantages of you. Such your product or Architecture is still very generic in nature. This is what is probably known as COMMERCIAL ARCHITECT. You are just ONE of MANY!
The third quadrant is a horizontal approach. You tend to be Artistic and Passionate about what you are designing. You may have a grand scheme that nobody wants. Who cares? It fills your ego but it may not fill your hunger. You are born rich and you have no family to feed. It is OKAY! This is the sort of Stararchitect in the making. The Primadonna that NOT anyone can be. Your product is so distinctively individual that it is waiting for the right Audience to appear and to accept. The fact is you remain IRRELAVANT.
The fourth quadrant is a GRAND BRAND. It is highly relevant meaning acceptance by the Public and absolutely distinctive. This is where most of the successful practices are. What has it in common?
Your product must be CREDIBLE. Being credible means there must be a degree of trusts put upon your product either in production, services or design. Credibility can only be built upon years but you can destroy within second. That is why BRAND promises, INDIVDUAL don’t.
Your product must be UNIQUE but not necessary functional. There must be some kind of architectural concoction that only you can produce and everybody can remember it. That is your kind of Architecture.
Your product must be RELEVANT. In other words it must be CONTEXTUAL, FINANCIALLY and TECHNOLOGICALLY VIABLE and SOCIALLY ACCEPTABLE to a certain degree of POLITICALLY CORRECT. There must be the audience or consumer that constantly consume your product and perpetually financing you.
Your product must be MOTIVATING. It must create a following, a campaign or a movement so that the masses are your believers. This is where you make your product like a cult, religion or the “Opium”. You subconsciously imprint your Brand into people’s thought. You manipulating their desires and selections without giving people choice for selection.
In summary, reaching the Grand Brand is not too far off. It is a diagonal movement along the 4 quadrants. You make a balance between “one of many” and “waiting to happen”. Ultimately translating into creating your very own BLUE OCEAN.
There are 6 aspects to Business Development also known as MARKETING MATRIX.
You must understand your PRODUCT and what you offer. This goes back to the approach of your firm’s orientation such as DESIGN driven, SERVICE driven or PRODUCTION driven. Most start-up will start with PRODUCTION driven. This what known as the “bread and butter” of architecture where recycle of workable plans, fast churning of production drawings and fast authority approval for a mediocre fee are the order of the day. When you are in the market for some time and able to survive the “red-ocean”, you want to carve a name for yourself you start to leech to newbies developer, you start to shift gear to SERVICE driven. Some goes as low as to “SLEEP” with potential clients to get JOB. Some went into POLITICS and be the cronies. Ultimately the performance is measure as to how good your relationships with the Clients. The quality of your product does not count. When you are comfortable enough with the jobs available, you have the opportunity to choose and select and such potentially make you a Starachitect. On this pedestal only then you are DESIGN driven in a “Blue-Ocean” you had created.
You must understand who you are OFFERING to. What will be your market segment? Start-up will approach individual owners because you have no precedent to showcase. Interior works are best to start with for its short gestation period and potentially gloss over magazines. Later they will be promoted to engage with Developers with all kinds underlying tactics. Some will operate as “in-house” others will be engaged as outsourcing that the firm will need to finance itself during the gestation period – also called delayed gratification. Some will be partnering with foreign firms in creating their blue ocean and the lists go on.
You must understand if your offering is UNIQUE. There goes your branding liked ECO-ARCHITECTURE, BIO-CLIMATIC, ICONIC and so forth. This is to create your own market segment – we called “Blue-Ocean” strategy. To garner such you must appear to be EXCLUSIVE. For example, there is a Firm whose individuals happened to be once the President of the Institute of Architecture. He lobbied and headed the newly minted Green Certifying Body under the auspice of the institute. He set his rule and game plan. For out of the Blue, he champions for Green Building and marketed his firm as Guaranteed Green Building Certified Architect in town. Whoever developers wannabe Green must go to him for he only knows how to go about it and no one else.
You must know your PRICE. It is true that the bottom line of any commercial decision is the price. Do you know how much your service worth? It is naïve to think that there is no price war within architectural practices although it is mandatory for all to follow the minimum fee rule. The BIG BOYS are throwing their fee just to keep their organization afloat and the SMALL FRIES are surviving on shoe-string budget waiting to go bust. Price war is the stupidest thing to do and yet is the most practical thing happening in this industry. Both the Board and the Institute cannot do anything about it because it is believed that they are the party to it as well. Learn to be smart with pricing.
You must know how to PROMOTE. Promoting a BRAND is a better choice of word. The practice as a BRAND where Brand Promises, individual don’t. You must be a MEDIA’s darling. You must create events and generate awareness. You must be seen championing a cause. You must engage in Social Media. You must cultivate Brand Awareness within your own organization. You must LIVE as the Brand. You must communicate with the Brand via your writings, speeches, social works and so forth. It must be a 360 days awareness campaign to make your Brand jingles in everybody’s head. If nobody ever knew you existed in the first place, you are a total FAILURE.
In summary, you must have a good PRODUCT. Then you BRAND the product. Next, you PROMOTE the Brand. With the Brand you open up your MARKET SEGMENT. The Market Segment will indicate your PRICE – This is PROGRAMMING.
There are 4 aspects to BUSINESS LIFE-CYCLE – at least in theory la…..
Getting the Business – Business Development. We need a FLESHY PORTFOLIOS. Works that can sell itself without much deliberating. We need to create more SEXY-Buildings. The wow factors that will excite the potential client. If it is not the building we need SEXY-People. Good looking people and charming orators that can sell ice to the Eskimo. We need SEXY-Coverage from the Medias, although the Board is very cautious about it! We need to be creative to work around it. We need to “buy” our way through the intriguing networks of brokers, managers and lobbyists. That is reality – the $ speaks loudest. Over-promise is NEVER a Sin. Under deliver – YES! We also need SEXY-Address. Imagine one lobbying for jobs amounting to Billions with an office somewhere in the slum?
Doing the Business – revenue. Revenue is your BLOOD line, without it everything will “close shop”. Revenue comes in the form of your collections, invoices, bills and so forth. You have to find ways to increase revenue and none other by Getting the Business! Newbies mistake is to provide FREEBIES in the form of Free Proposals that brokers will salvage to sell them to their potential clients in your expanse, not theirs. That is a FAIL Business Model. Recruit debt collectors if necessary because in this line of business, payment is always on credit terms. Overall it is unhealthy. The paradigm has to change. Perhaps bridging loan is a short term solution. Remember, REVENUE = PRODUCTION COST + PROFIT. Either way both production cost and profit have to increase!
Managing the Business – Effective Delegation. One reason business fail is because the Principal abdicated its role to someone else. Abdication is not Effective Delegation. Effective Delegation comes with the reward, abdication – no. Effective Delegation comes with a precise objectives and discretionary limits, abdication – no. Effective Delegation comes with proper reporting, abdication – no, and the list can go on. If one fails to delegate, the organization will not grow. The real assets of the firm is Human Capital, not the owner. The owner is credited for its foresight and vision. In other words, if you find someone asking the screw driver to do a hammer’s job, you know it is going to be trouble!
Financing the Business. This is the very one aspect that makes Architectural Practice a FAIL business model. Firstly, Architectural Practice is heavily dependable on human capital and production technology plus all the fixed expenditure and that incurred REAL Cost. Second, services payment are on credit terms and may not be prompt. Such Financial Charges will add up into our REAL Cost and if you are not careful you will end up with LOAN SHARKS. Thirdly, recouping Bad Debts are a risky business due to high Legal Cost and Prolonged Legal Battle. Holding ransom with the Letter of Release will not offer much help. It fails on the first principle and it really doesn't make money sense to run a firm. Yet, people does it! Why?
These 4 aspects will continue to haunt you. Once in a while you will rudely wake up from your sleep with chilling sweats that you need to make up for the 100K pot holes to keep your firm up and running before the bank foreclose your personal property. If you care to look at the profitable firms, you will understand that they had broken away from this paradigm. The question now is… what is this new paradigm?
Knowing a little of how an Architectural Firm doing business is a good thing. As the saying goes, Business Development (BD) is not a sole individual responsibility but the entire organization’s objective. Without it, there will be no Clientele. Without the client, there will be no business and the consequences are too horrifying to even think about. Everyone within the organization will go hungry, so are their families.
Saying such, what is the Architectural Business Model? What do we do to make a living? That is the fundamental. Sure, we say we makes DREAM. We CREATE. We know the BEST because we are the Architect. Dunno what I am saying? Watch the “Fountainhead”, you will know what I am talking about. In reality, it NEVER HAPPENS the way you intended it to happen.
Let’s look at the Business options available: -
Among the 3 business orientations where are we? Which direction we want to go? How to go about it?
I am sharing these information with a caveat that these information is for educational purpose only and shall not be taken as an advice be it legal or otherwise. You should seek proper advice to your case with the relevant professionals. The author cannot guarantee the accuracy of the information so provided here.