Contract - October 2016 - 24

Productizing Practice: Growing Revenue
Without Growing Staff
by Evelyn M. Lee, AIA

Evelyn M. Lee, AIA, writes
a regular column for Contract
on business practices in design
and professional development.
Lee is a senior strategist at
MKThink, the ideas company
for the built environment
based in San Francisco,
and holds graduate degrees
in architecture, public
administration, and business
administration. Lee is
currently a member of the
AIA national strategic council,
and she previously served
a two-year term on the AIA
national board of directors.
In 2014, she received the AIA
Young Architects Award. Her
website is evelynlee.com.

Evelyn Lee will be a featured
speaker at the 2016 Contract
Design Forum, November 9-11,
in Del Mar, California. The Forum
is open to qualified candidates-
those who are engaged in the
commercial design profession-
to attend and participate.
Visit contractdesignforum.com
to learn more.

The potential revenue growth in architecture
and design practices, as professional service firms,
is limited by the number of staff and the associated
gross margins. Even with technological advances,
most firms cannot achieve gross margins above 40
percent. Therefore, in order to increase profitability,
a firm ultimately has to continue to grow its staff.
But productizing-the act of modifying a concept
or tool internal to an organization to make it suitable
as a commercial product-is one way that firms
can get around this conundrum to create alternate
revenue streams. Below are three different ways
to integrate productization into practice.
Developing and selling a product
The first strategy is straightforward: designing
products-such as furnishings, lighting, floorcoverings,
fabrics, or wallcoverings-for the interiors industry.
Or, perhaps a designer is more fortunate to develop
products with broader mass-market appeal.
Famously, the late Michael Graves and his firm
designed a multitude of products for Target,
and celebrity designer Nate Berkus has an ongoing
relationship with that retailer. A number of other
firms have done well by designing and selling
products. But initial success does not necessarily
mean a contract with a large retailer: As with most
endeavors, it is wise to start small and eventually
push for larger distribution.
For example, a few years ago, Los Angeles-
based design-build firm Marmol Radziner launched
its own line of jewelry marketed as a "natural extension
of the architecture firm." The collection is now
available in more than 100 stores worldwide and online.
Also in Los Angeles, Rios Clementi Hale Studios has
its office one floor above the store it owns, called
notNeutral, which sells furnishings and decor that the
firm designed. Many of the patterns found in notNeutral
echo those from textiles, metal panels, and other
surfaces in the firm's award-winning architecture.
Delivering product as a service
If tchotchkes are too small game, consider
the success of prefabricated buildings. Architect

Michelle Kaufmann of California was one of the first
to create a product out of an entire service offering
with the success of her Glidehouse prefabricated
homes. Capitalizing on the public's increasing
interest in prefab, Kaufmann sold the assets
of her company, mkDesigns, to Blu Homes in 2009.
Alternatively, LivingHomes brings the designs
of Ray Kappe and Kieran Timberlake to the public
through its prefabricated offerings.
Going beyond the residential market,
design strategy firm MKThink successfully spun
off a building technology company, Project Frog,
which delivers prefabricated building kits.
Now a separate company entirely, Project Frog
has received $50 million in venture capital funding.
While it began as an endeavor to develop a better
solution for modular classrooms for K-12 schools-
it now includes products for data centers and
healthcare environments.
Creating a product out of a service
Rather than finding ways to increase profit
margins, consider opportunities to package the
services that the firm already offers in new ways.
Do you have a great approach to stakeholder
engagement that is replicable? Better yet, is there
a way to create a digital toolkit or interactive
tool that allows potential clients to both input
information about their project and receive some
preliminary feedback on potential approaches?
SYPartners, a managerial consulting firm
based in San Francisco, has developed a number
of print and digital products that help clients
get "unstuck," find their "superpowers," and become
better leaders through storytelling. The firm has
even created a passive income stream by sharing
a product it uses in-house: Teamworks, a softwareas-a-service (SAS), was developed internally
and is sold to companies as a tool to keep teams
engaged and aligned. This SAS costs $59 per month
or $599 annually, and clients include Perkins+Will
and Target.
The solutions that architecture and design
firms provide are ripe for productization, whether
as three-dimensional objects or innovative
approaches to problem solving. Technology
continues to make these endeavors easier through
3-D printing, the growing use of data in design,
and the many ways the built environment is being
tracked through the Internet of Things. Product
opportunities are not necessarily a means to give
one firm an advantage over competitors. Rather,
for the firm's own financial growth, the potential
exists to provide the necessary capital to take
on new endeavors or to continue to sustain
the practice when clients are not seeking design
and construction services. Productization comes
in many forms and sizes. Which one is right
for your firm? c
contractdesign.com

OCTOBER 2016

PHOTOGRAPHY: CARL BOWER

COLUMNIST

http://www.evelynlee.com http://www.contractdesignforum.com http://www.contractdesign.com

Contract - October 2016

Table of Contents for the Digital Edition of Contract - October 2016