Competition Issue 59

Competition is in the air. I had the pleasure of spending a week and a half in lovely Lismore, vacation destination of baseball aficionados, where I watched the annual Australian Youth Baseball Competition held on the few water-sogged baseball diamonds not washed away by January’s floods. At the halfway mark, when I had reached a saturation level with baseball that could not be revitalised by beer, I flew to Melbourne to attend the annual IDA awards. Now I am back in the office and the spirit, exhaustion, stress and overall exhilaration that accompanies competition continues on around me. Half a dozen of our best and brightest are toiling away on a competition for a major project in Singapore.

Opening the newspaper there is evidence of more competition: milk wars, petrol wars and airline fare wars. The highs and lows, the endless juggling to be on top, to win the game, get market share, be awarded the commission is everywhere. In some cases this brings out our best thinking and team spirit, unfortunately in others it brings to the surface ugly tactics and behaviours that lead to no good. Winning an award for a design, or getting the gold medal in a baseball tournament is a low stakes game, the winners don’t get money and other than a few moments of fame, which I will grant for some is the highlight of their lives, the benefits are often really only emotional and quite personal. This is not the case for many of the other competitions that are in the air.

If you have been to Coles or Woolies lately and picked up a litre of milk you will have noticed that the price has gone down, in fact the price of milk is about the only price that has gone that way of late! The two retailers are in a bitter war with one another that has been going on for years, but it wasn’t until the price of a litre of milk was slashed to $1 in January that the fighting got dirty. No doubt the reaction was due to the understandable latent fear, petrifying to many Australians that milk wars could extend to beer wars. Sadly they have, severely impacting a main staple of the Australian diet! Don’t make light of this, it is both serious and complex. So serious that a federal senate committee has been sent in to investigate price wars and so complex that the committee has requested an extension to their reporting deadline.

The milk guzzlers amongst us are happy, they’re dancing in the streets knocking back moo juice like there is no tomorrow. Coles and Woolies are happy too, because when you buy a litre of milk it would be foolish to not buy the accoutrements that go with it: Oreo cookies, coffee and Wheat Bix. When reaching the register you will more likely have spent more money than intended because large retailers like Woolworths and Coles are making it more and more attractive to purchase items in their stores that you may have previously bought from smaller retailers like the local butcher, fishmonger or fruit and veg vendor. What’s the problem? Isn’t this good old healthy competition? Do we need a senate committee to investigate and aren’t there more pressing items for senate committees to busy themselves with?

Watchdog magazine Choice thinks not, they have nothing against cheap milk, which they maintain is good for the consumer. Their concern is the high level of concentration in the supermarket sector and the fact that there is no regulation. This has led them to call for the appointment of a supermarket ombudsman. The unfortunate reality of this story is the consumer isn’t losing, Choice magazine isn’t suffering either, neither are the large retailers. You might conclude the real losers are the Ma and Pa stores and the dairy farmers who face pressure to keep cost low, but they still are not the real loser in the milk war. The real loser is the cow, in particular the 700,000 ‘bobby calves’ slaughtered every year as waste from the dairy industry.

Before I started writing this I didn’t even know what a bobby calf was and honestly that was a good state of blissful ignorance. Not giving a stuff where and how the milk got into my latte was a better place for me. Knowing about the poor little suckers and their pitiful four day lives has driven home the point made frequently on The Biggest Loser – in a competition there are winners and losers. In this case the baby cow is the biggest loser. My motivation is not to profess animal rights, or to guilt you into a short black; I simply wish to highlight the fact that in competitions, it is not always easy to tell who the real winners and the real losers are.

Being in the design industry we are no strangers to competition, the past years have been particularly tough with the GFC and general slowdown in many regions of the world. In fact the past year has been so tough that designers feel like they are living in a late night commercial where they are forced to entice the consumer with thrown in extras to sweeten the deal. “You don’t just get design services, if you purchase by midnight we will throw in strategy and travel free of charge, yes ladies and gentlemen that’s a 30% savings for purchasing by midnight tonight. Wait don’t touch that dial – for today only, we will also add a post occupancy evaluation. That is a $10,000 savings for you”.

Attempting to look at the positive side of this situation, it is important to note that competition between design firms keeps us honest and serves as a catalyst for out of the box thinking, it also forces us to develop clearly articulated value statements and continuously evolve as professionals. However, as we found with the milk wars, design wars may have unexpected consequences that are far from optimal. One obvious down side is the wear and tear on people that producing the same amount of work for less money takes. It is counter intuitive that educated people would agree to take on work they could not earn money on, but they do, although sometimes not knowingly. It is all part and parcel of the passion architects and designers have for their work and their general lack of concern with finance (Given we talk about our ability to deliver commercial solution, to client’s budgets, does this sounds like we don’t care about cost?).

In school, or if not there in the early phases of our professional careers, we learned the importance of balancing the relationship between scope, fee and time; nevertheless designers are more prepared today to make adjustments to one part of that trio without adjusting the other. Why? For the same reason Woolworths lowered the price of their milk, because that is what the competition does and if you’re going to be in the game you play to win.

There are many sayings that extol the virtues of winning the battle but losing the war. One of my favourites comes from the ‘Art of War” by Sun-Tsu. Written in the 6th century it goes as follows. “In the practical art of war, the best thing of all is to take the enemy’s country whole and intact; to shatter and destroy is not so good.” It causes us to consider whether what designers have been doing in the past years has been doing just that, shattering and destroying the industry we work in and love.

To gain greater insight I have asked a number of professionals practicing in different parts of the world to share their experiences with price wars. While my survey is by no means conclusive, it does offer insight into what our profession is experiencing and whether you consider it good news or not, we are not alone. In fact, in some places designer price wars are far worse than they are in our neck of the woods.

It is no surprise that in countries where haggling to buy street trinkets and knock off watches is common, designers are forced to haggle for their fees. We must therefore consider ourselves very lucky. In India architects accept fees as low as one percent of construction cost, a practice we wouldn’t consider even in our most desperate hours. It should be noted that these are the same places where kick backs and bribes are fair go, providing the architect the opportunity to make up the difference by having contractors, sub–contractors and suppliers pick up the slack.

You may find it unacceptable as a designer to think others in our profession would be engaging in these kinds of activities. Before you do, consider the sentiment of the architect who gave me this information who asks how this is any different from some interior designers in the West marking up furniture they specify. Also don’t forget, designers in the developed nations do not think twice about accepting invitations to overseas boondoggles sponsored by suppliers, which some might construe as a covert bribe.

There is a belief that larger firms are able to charge higher rates than smaller design consultancies. A parallel was drawn between the design and fashion industry “retail is generally suffering in the UK, but premium clothing brands seem to continue to prosper. Clients seemingly will pay for the signature firms. That said, those who are engaging the larger firms are large robust blue chip clients.” The price range for simple space planning services in the UK varies from £16 – £45 per hour. We have experienced similar gaps in our markets. From this we could conclude that when the price gaps are that substantial, it is even more critical to articulate value and your point of difference to warrant the extra cost.

You may say you get what you pay for. One would assume that the same quality level could not be achieved when fees are cut so dramatically, interestingly this was not the case for the few I spoke with. Many admitted to biting the bullet and taking up the slack for the good of the relationship, or to get work in the door. For some this was a factor of who the client was, whether they had a national contract with the client and only if they believed that market share and volume would make up for early losses. Still they discounted their work, even it was not a practice they would extend to all clients, only those who could offer a large volume of work.

Most practitioners would deliver a high quality outcome to their client even if they did the work at a lowered cost. This is not the case everywhere, particularly in countries where kick-backs are common. “There is shoddy architecture everywhere. Doors do not close and windows do not open, paint runs, but lights do not, concrete crumbles and pipes drip, walls grow trees, planters do not. Hardware is worn even before it is installed. This is exacerbated by the fact that all this sits cheek and jowl with its opposite: doors that close and windows that open and so on, all evidence that doing the right thing is possible and an option.”

All it takes is one competitor to lower their fee to set a client’s expectation that they can get services for less, especially if it comes from the same competitive pool, not from three guys in their garage. This often leads to challenging conversations with clients that result in the designer backing down to get the work. Despite not being a country known for haggling, contracts in the US are now being conducted with the fervour of a Bali beach vendor, one respondent wrote: “All recent replies to inquiries go 2-3 rounds with specific requests about add services, exclusions and other items that did not previously receive such scrutiny”. It is not dissimilar in Australia, today I reviewed the sixth version of a contract being negotiated with one of our clients.

One area where we appear to stand apart is in the area of competitions for interior design services, unfortunately this practice has become a standard entry ticket for work in the Singapore market. When exploring this topic with practitioners in other countries I couldn’t help but feel very jealous of our neighbours in New Zealand where the not so bright idea of interior design competitions are less common. “I can’t think of any situations where we have been in a competition for interior design services.” Hearing that from our pals in NZ hurts me, almost as much as it hurt when my best friend in puberty would rant on about eating whatever she wanted and never put on weight.

The firms I spoke to in the US do partake in paid competitions, but only for architectural services and do so rarely. In the UK they have seen an increase in clients engaging in interiors competitions described as a “beauty parade of designers where they ask to see some initial design ideas and indication of fees prior to appointment. In these instances we virtually end up designing the scheme, as you can’t afford to pitch an average presentation.” This statement hits the nail on the head; there is no point in playing if you don’t play to win and playing to win often means losing your shirt. In most countries there are guidelines that have been drafted around architectural competitions, never the less they still don’t protect architects from pulling the short straw and if I am not mistaken these guides don’t apply to interior design.

Design competitions are not a contemporary concept and are most definitely not always bad; many famous buildings are the result of architectural competitions including the Acropolis and a handful of middle age cathedrals. Our Sydney Opera House was the product of an architectural competition. A competition can change the face of architecture, as was demonstrated in the outcome of The Chicago Tribune Tower Competition in 1922. The judges selected a design by New York architect Howells and Hood featuring a neo gothic building complete with flying buttresses and gargoyles. This decision to shun modern entries by Walter Gropius and Adolph Loos is said to have set back modern architecture by 20 years. That design went on to influence buildings around the world; take a look next time you’re in Melbourne.

Generally competitions produce exceptional outcomes; however, sometimes local conditions, politicians or site owners insist on putting in their two cents worth, which impacts on the winner’s vision. Just ask Daniel Libeskind about his World Trade design or Phillip Thallis about his winning entry for Barangaroo. (any issues with Lend Lease in saying this?)

Returning to The Art of War, consider the initial question posed, are we doing something to our industry that will ‘shatter and destroy’ it? Some think not, considering the current practice of price slashing and throwing in extras as par for the course in a competitive industry, believing it is up to each of us to deliver value that is worth paying for. Others lament we have become a commodity, a box of paper clips, with our services being procured by the same people in the organisation, using the same method.

Most small design companies cannot afford to buy work for very long. When larger firms slash prices, it creates an untenable situation for the smaller practitioner who will either fold, or be sold. Even larger firms cannot sustain this practice, companies in the US that bought work are now suffering, and particularly those that negotiated five year contracts at discounted rates in a desperate attempt to keep afloat.

Price slashing will change our industry; the challenge is in knowing how it will change it and strategically thinking about how we will respond. We can be ‘bobby designers’, like the cows – too young and stupid to know they are destined for the chopping block. On the other hand, it is pointless to go down fighting a lost cause by taking a ‘we are mad as hell and are not going to take it anymore’ approach. What are we going to do? Demand the DIA create a commission and appoint a design ombudsman? That would be tantamount to recording companies arresting every teenager in the world for illegal music downloads.

After researching milk and petrol, beer and architecture it seems obvious the right approach is to forget price wars and get smart. Perhaps follow the lead of REX (formerly known as the New York office of Rem Koolhaas’s firm OMA ). They use design to make money for their clients; their design for the cultural centre in Kortrijk, Belgium is a great example. The brief called for a “library of the future” but REX believed the client’s recommended use of the site was wrong. They proposed an alteration that allowed the building to integrate into an existing public square, this freed up another portion of the site for private development and that delivered a $42 million dollar offset that covered the cost of the new building. Who wouldn’t want to pay for a designer who shows them the money?

By the way, Rem Koolhaas won that job in a closed competition.

Sources:

Peers and colleagues whose names and firms shall remain nameless in Australia, New Zealand, the UK, India and America.

Farrelly, Elizabeth; Another Bastard for the Colonies, Sydney Morning Herald, December 23, 2009

Ferguson Adele and Rosenberg, Jen; “Grocery Giants to get Grilling Over Grog Wars” The Sydney Morning Herald, March 24, 2011

Hewitt, Rachel “Supermarket Gian Coles Triumphs over Woolworths” Herald Sun, April 2011

Hockley, Catherine; “Coles on the Attack Again in Milk War” The Advertiser, April 21, 2011

Kuang, Cliff, “Architecture That Boosts the Bottomlilne” Fast Company Blog

Mitchell, Sue; “1.5m More a Week Flock to Coles Stores” The Australian Financial Review, April 21 – 26, 2011

Staff Writers; “Milk Price Report Delayed until Oct” APP, April 21, 2011

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