Many architecture and engineering firms are in denial when it comes to commoditization. As we dropped into the abyss back in 2007 and workload disappeared like spilled water on hot asphalt, we transitioned into a strange world where low cost took the lead on many A/E project selections.
But This is a Professional Service
I recall a discussion with a civil engineer friend back in 2008. To give it context, understand that I was in charge of marketing and business development for a civil engineering firm at the time. He said he had given his business development director the order to "sell value." After all, he stated with conviction, this is a professional service and that’s how selections had always been done. I told him things had changed and that it felt like A/E firms were gravitating toward more of a "low bid" environment. Owners were looking for low prices because their capital budgets had shriveled up; the market was crowded with qualified firms; and some were even willing to take jobs at a loss.
Professional Services and Luxury Cars
Commodities come in packages of many different sizes and values. We often think of construction materials, tires, pork bellies, or oil as commodities. But consider Mercedes. It’s a high-priced luxury vehicle in America, but a commodity in Europe. Immediate access to the manufacturing source is the main reason.
Suggesting that a Mercedes is a commodity anywhere sounds just as ridiculous as saying the same about A/E services, doesn’t it? Did it ever occur to you that professional services ca be a commodity? It’s a tough reality to face, but we have to keep in mind that a commodity is created when supply outweighs demand. Commoditization doesn’t discriminate when it comes to the value of a product or service.
The engineers and architects I know are some of the smartest folks I know. The feats you accomplish are not only meaningful, but mindboggling in some cases. How can you commoditize a complex service performed by folks with advanced technical degrees and certifications? But I recall large projects in Philadelphia where more than 100 architects and civil engineers crowded into a pre-proposal meeting between the hungry years of 2008 and 2013.
Imagine the feeling of power for the facility manager and his or her cohorts as they look out over a crowd of eager-looking architects and engineers that goes 10 rows deep. Who do you think holds the bargaining power? I attended a pre-proposal meeting where a facility manager invoked his inner Richard Pryor at the expense of the architects in the crowd. Professional designers should never be treated with such disrespect, but that’s what happens when commoditization sets in.
Branding: The Great Differentiator
Put yourself into the mind of a selection committee member. Several firms stack up evenly on relevance of qualifications, resumes, reputation, and quality of proposal. How do you differentiate? The only real differentiators are cost, relationships, and branding.
Cost is cost. Relationships are relationships. But how can you differentiate with branding?
In what space can you corner the market or at least be among the top five players? Many architects do this well. They build the practice around a specific type of project, i.e. higher education or adaptive reuse. The selection committee within that sector then associates the firm with their project.
The next step is to make sure your brand is consistently reflected in your statement of qualifications and proposals. Oil rises to the top of water. When a selection committee is faced with a stack of proposals or statements of qualifications, as human beings, they will favor those with the most attractive presentation: design, clear and concise writing, and sturdy stock. Why do larger firms seem to get the edge during the selection process? Often times, it’s because they understand the importance of marketing and allocate more resources to the submission, and to branding in general.
The impact of commoditization on the A/E sector will change in accordance with market conditions. For now, it seems that the amount of firms still outweighs the available work. As the balance between available work and qualified firms shifts, there will come a time when the industry will gain the advantage over owners and the commoditization trend will reverse. But for now, denial of this trend is not an option. Use this time to sharpen your marketing efforts and operational efficiency.
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