Understanding the whole story
In last week's article I described the emerging network economy and looked at two of the fundamental changes of business logic that underpin the transition: the shift from computing to computermediated environments, and from a value chain to a value constellation model. This week I will examine other equally important changes in business logic that are not yet fully apparent.
One of the most significant changes in the coming decades will be the transition from reductionism to holism, driven by the requirement to provide solutions not services. Breaking down services into their constituent parts and disciplines is of interest only to the providers, not to the client.
The products of this change are likely to appear in many forms. For example, instead of just having your practice quality-assured, you might also have to provide a more structured total quality management (TQM) service, which deals holistically with a client's expectations and experiences. This would be very much in architects' interests as one way of resisting the commoditisation of service and would demonstrate value added more easily.
Conversely, rubber-stamping practices with quality accreditation is a move in the opposite direction because it creates a level playing field where all accredited practices are regarded as the same by clients. The only differential between practices in this scenario is cost, and the convergence towards cost as the sole means of choice is almost a definition of commoditisation.
Another move towards holism is the single building concept, in which all of the building elements are interrelated in a computer model. Although the technology for this is fast becoming a reality, it would be unwise to see it as an accessible low-cost option like other computer software is at the moment. Indeed, one of the pivotal issues of a network economy is the increasing imbalance between fixed and variable costs.
In knowledge-intensive industries the fixed costs of developing products and services will increase greatly. However, the variable costs of delivering knowledge products will become relatively low as a result of improved methods of communication. The result is a transition from a linear to a non-linear system: another important change of business logic. In a linear system, increasing the resources going into an organisation will probably result in a proportional increase in output. In a network economy, the responses to knowledge products are subject to positive and negative feedback effects in the market, meaning much greater success or failure in a more chaotic, unpredictable way.
The central issues in this scenario are how much expenditure you think is reasonable on fixed costs, and how you intend to distribute your knowledge product and at what price. In a network economy, there will be a constant downward pressure on price with increasing demands on delivery. Shared resources in computer-mediated environments, one solution to this dilemma, might work well for architects.
In a network economy, several-to-one marketing will be the dominant mode of marketing. Either several complementary companies will offer their collective (different) services to the client, or several firms with similar or identical services will make individual offerings to clients via a shared medium. In the former case, project assembly becomes the problem of the service provider rather than of the client. And in the latter, the similar services have accepted the fact that there is a lot to be gained by joint marketing. Of particular importance will be cyber-synthesis - difficult if not impossible to replicate in the real world.
Everyone in a business has a network: a network of contacts both within and outside the company. In a network economy there will be much greater structure to the networks of individuals and companies, which will result in a dramatically different set of relationships. In the past, global macroeconomic changes have determined the evolution of economies.
But in the new system, microeconomic shifts are the drivers of change, determined by the changing set of relationships between companies. So the nature and quality of relationships become the keys to success in the new order.
The new economic order requires a different way of thinking. Most of our education and training has been directed towards finding a single solution to problems. But in the non-linear world of value constellations and computer-mediated environments, we will have to learn new ways of identifying and dealing with several, plausible scenarios in a more complex system. Architects, more than most professionals, are well equipped to learn these new skills.
Architects will also have to learn the ground rules of new processes. For example, in a network economy you must have high levels of connectivity in order to ensure that everyone in the network has access to relevant information.
In the real world that takes time. Meetings have to be arranged and information sent out. In a computer-mediated network economy, high levels of time compression are possible.
Possible approaches include passing information into a central server that then sends it out automatically to other parties, or setting up a secure, encrypted site in cyberspace in which design work is undertaken and alterations are made (everyone involved has access to this live site, reducing the need for face-to-face meetings). Time-compression processes require high levels of connectivity and engagement with computer-mediated environments by all levels of the practice.
There has been no distinct point at which the network economy suddenly happened, nor is there uniformity of transition into the network economy, either geographically or by sector. But what is certain is that architects entering the profession will spend all their working lives in this environment. Older members of the profession will have to adapt and learn the new rules of the game.
Brian Richardson is the managing partner of Synthesis Marketing (tel 0191 222 1159) and is the author of Marketing for Architects and Engineers: a New Approach, Spon, November 1996