Rethinking Practice Through Business Model Innovation

Architecture and interior design firms need to evolve to survive. This has been my personal ethos since before I entered business school in 2008, and I continue to look for new methods, case studies, and opportunities to have conversations about business model innovation in practice. But what I have found recently is a bit disheartening. Over the last five years, I believe interest in firm evolution has decreased in a more thriving marketplace than when our industry was suffering.

Today’s principals are primarily concerned with hiring top talent to keep up with demand, a proposition that is even harder with a missing generation of practitioners due to the recent recessions. Never mind the inevitable cycles of the construction industry that our practices are so dependent upon, and that we will inevitably be subject to once again in coming years. Why are we not taking some overhead time to consider a new approach to our practice now so that we can continue to thrive in the long run?

Not sure where to start the conversation? Consider the willingness to explore these three areas of innovation: adding service lines, varying revenue sources, and changing operations.

Adding service lines

This method is probably the easiest to undertake, and the one that most leaders tend to talk about when considering business model innovation. When MKThink added strategy work to its portfolio, it did so because, all too often, it was building the correct solution to the wrong question. Design firms tend to enter the decision-making process with the client far later than they actually should in order to achieve the best outcomes. In strategy consulting, designers provide clients with both pre- and post-design services. As a consequence, the strategy team is consistently in a position to have conversations with the C-suite of organizations rather than the facilities or real estate teams. The addition of a strategy group has carried MKThink profitably through several downturns. For your firm, are there other service lines that can have a similar impact?

Varying revenue sources

The designer-as-developer model is another means to add sources of revenue. However, this method is harder to pursue outside the residential marketplace. Other potential additional revenue sources often involve higher risk, but with greater risk comes greater reward. Perhaps your firm may consider taking payment in the form of equity? One of the most notable stories related to this is the payment that graffitti artist David Choe received when Facebook went public. Choe’s tiny percentage of the company—taken in lieu of payment for murals he created for Facebook’s offices—made him a multimillionaire overnight to the tune of roughly $200 million. What other sources of revenue or receipt of payment can your firm seek out?

Changing operations

Undoubtedly the most difficult method to innovate around, changing firm operations has the potential to go a long way in increasing overall productivity. New operational models can also have the added benefit of altering the firm’s culture to steward leadership and promote employee retention. San Francisco–based Rapt Studio and, to a lesser degree, MKThink are evolving their operational models by taking a cue from the tech industry, planning project teams with an agile framework. A self-organizing framework lowers internal barriers regarding decision-making processes, enabling project teams to continuously respond to changing client demands and to strengthen client collaboration.

In a similar effort, Environmental Building Strategies, a sustainable consultant group in San Francisco, is in the process of restructuring to become a “holacracy” to improve internal processes and client outcomes. In a holacracy, such as in the online retailer Zappos, role descriptions are continually updated and employees take on multiple roles, sometimes on different teams. Traditional hierarchy is replaced with interconnected but autonomous teams, and decision-making authority is more distributed and less top-down.

There is no time like the present—while the economy is robust and your firm’s business is strong—to consider changes that can enhance your firm’s sustainability over the long haul. Why wait until innovation is a necessity or even the only alternative to shutting down altogether. What changes can you begin, or should you consider, making today?