The business model used by most design professionals today is outdated and out of sync, said Kyle Davy, the president of Kyle V. Davy Consulting, which means firms need to embrace change.
"Significant opportunities are available to firms who face up to those brutal facts," he said during his keynote speech at the recent Association of Consulting Engineering Companies Canada (ACEC) leadership summit. Davy’s lectures widely, has published numerous articles on project management, is an author and also a principal faculty member of ACEC-US’s Senior Executive Institute (SEI).
His presentation, entitled, State of the Practice: Exploring Models of Professional Practice, outlined how the current economic business model whereby firms are "professional time sellers," providing services paid for by the hour isn’t progressive.
He said there is also a commoditization of professional services, which is impacting business.
"The brutal fact is commoditization is a real phenomenon," he stated.
What once was perceived as a valuable or unique service becomes a commodity among consumers, Davy said, it’s matured.
"When it’s first invented, the customer needs will be way above what it provides in performance," he explained. "But as technologies, or products or services get better and better and better, they will eventually cross over that point where customers are satisfied with what the performance of the technology is, they’re not really looking for more performance. They’re looking for lower cost."
Davy suggested three ways to transform a firm and move forward into a new way of doing business.
The first concept was to become a "living company," which builds off an idea created by Arie de Geus, the man who introduced the concept of the learning organization.
"These living companies focus on clarity, purpose, values and vision. They absolutely focus on learning. Use that learning to adapt to that changing environment," Davy said. "They’re tolerant. They allow people to experiment."
These companies do this while being fiscally conservative, he said, where "profit and growth were the result of doing the other things. That stance actually is a terrific fit with built environment professions. It is everything you are fundamentally about."
The second suggestion Davy outlined was to transform a firm’s value proposition. One way, which Davy noted is already happening to some degree, is to expand the firm’s value chain by moving from just design towards design-build, design-build-finance-operate, etc.
"It shifts the relationship the firm has with the client and with the community," Davy said.
Other ways to show value is through leadership, technical innovation and creativity, being collaborative and transformative and by providing a learning experience for the client.
Davy’s last concept he called a "game changing strategy." It’s the idea of becoming a professional entrepreneur.
"That’s a place where you look at both the economic side of things but also the public good," Davy explained. "In the middle, I will assert, is a terrific place for professional entrepreneurs, and professional engineers and architects to begin to consider a future home for their models of practice. Do well by doing good. Combine purpose with profit."
This can be accomplished through "curiosity and innovation, not about selling hours," he said, and by investing in research and development.
Increasing a firm’s a diversity is also a step towards professional entrepreneurship.
"There’s the racial ethics side of this, but in particular, you’re diversity in terms of who’s in the firms," Davy explained. "In most engineering firms, who’s in the firm? Engineers."
He cited Stanford University as an example as it developed "The d. school" where students and faculty in all sorts of different disciplines gather to problem solve together.
"A place to teach design to non-designers," Davy said.
"You get this place where all sorts of non-design people can come in. You get this creative burst that comes with that synergy."
This can include students and faculty in engineering, medicine, business, law, the humanities, sciences, and education, states the school’s website.
This thought also coincides with his message of making connections and collaborating with others.
"Don’t try and do this on your own. Partner up with research institutions, the labs at the universities, other coalitions that you can put together," he added.
And lastly, when doing this, don’t make one big bet.
"This is small bet territory. It’s not a firm killer. Those small bets can lead to bigger and bigger bets and build your confidence as being this professional entrepreneur," he stated, adding while it may not be easy, it is time for change.
"Going there will demand the best of you. It will demand that you overcome in many ways the fear that is so widespread amongst design professionals of taking these types of chances," he said.
"It will require a choice."