A recent article in Architectural Record penned by Phil Bernstein suggests that the architectural profession could benefit from a new business model. Bernstein, who is an Associate Dean and Senior Lecturer at the Yale School of Architecture, challenges the current methods of value creation and proposes a new business model for architects that shifts the value proposition of practice from selling time to creating results for clients.
According to AIA, architects are responsible for designing approximately $600 billion worth of buildings each year for which they are paid about $29 billion in fees, or 4.8% of construction value. Bernstein notes that these fees are largely paid as a commodity, and that real value is rarely reflected when compensation is a commodity; it hurts the overall economics of the profession. Fees are typically negotiated down, and architects are too often selling time versus measurable results.
If architectural compensation models were based on delivering outcomes of the building process, including the performance of the finished building, he believes these result-based fees, or outcome-based design practices, would redefine and benefit the architectural services business model. With digital tools and technology today, architects can truly impact building performance objectives such as energy usage, carbon emissions and maintenance-cost optimization.
Imagine a world with an outcome-based delivery system in which architects are helping clients realize goals to create offices that boost the effectiveness of workers, schools that educate students better, hospitals that promote faster healing. Bernstein is encouraged by the architectural students he sees today who are eschewing the more traditional architectural firms and are looking for more entrepreneurial, multi-faceted practices that include builders, researchers, and developers as well as architects. He is hoping this next generation of architects will be more responsive to innovative business models and demand new ways of practice.