The architectural profession is dominated by service-based businesses. The conventional way in which architects run their studios requires them to reinvent their services with every new client. Specific requests and project briefs are mostly approached with a high level of customization that is time-consuming and inefficient.

In recent times, a new business model has entered the field of architecture, enabling businesses to become more competitive. The concept of productized services proved to be a superior alternative to the established business model, offering a faster turnover rate, more freedom for principals and employees and more room for scaling.

The idea of productized services draws from the field of product development. While services offer greater flexibility and adaptability, products are considered to be standardized and inflexible. In order to reconcile these two contrasting approaches, business owners can appropriate the efficiency and scalability of products with various levels of customization.

The idea behind productizing design services in not to make services more inflexible, but to systematize them in a way that benefits both clients and service providers by creating repeatable, standardized, and automated practices. This can significantly reduce risks for clients and establish trust through consistent delivery of reliable services. By standardizing prices and billing procedures, clients are more likely to perceive architectural design services as value instead of cost. The often intangible qualities of good design are made more transparent and measurable.

Firms looking to offer productized services have different profiles. Some are just starting out, while others are existing businesses with a healthy client base. Productizing existing business models can also be achieved by adding products to your offering which will complement existing services.

It all starts with the customer/client experience and feedback. Explore what new value a productized service would provide to your clients. Define which parts of your business are the easiest and important to standardize. You can use different online tools to automate parts of your processes. A simple pricing system can go a long way in helping you get new clients. Complement this with a consistent look and feel that make specific service elements recognizable.

MIMA Lab introduced productizing very early on. Marta Brandão and Mário Sousa started their business from scratch, offering prefab housing concepts with plan sets that can be ordered online. The structures are delivered together with a folder of drawings that may be necessary for licensing procedures, as well as fact sheets, and guarantees for fixed prices, components and finishes, construction, electrical installations, sewage and water installations, house permits, five-year warranties, and transportation and assembly within Portugal.

They decided to create a business around the idea of affordable, productized architectural designs. As they said in an interview for Archipreneur, software engineer Miguel Matos helped them to create a software that translates all the design information for the factory and simplifies the construction process. The software also allows clients to locate their property on Google Earth and generate an automatic 3D model of their future houses and its position on the site.

Finnish firm Workspace, on the other hand, is a great example of how productizing can be enhanced by focusing on a specific niche. The firm is a leading Nordic consulting and design agency specializing in workplace design and management. Their approach focuses on creating integrative design that combines resource, space management and information communication technology in order to appeal to businesses in need for environmental solutions for new, emerging organizational structures and business models. They create designs that supports various scenarios of use.

In an interview for aec-business.com, Jyrki Yläoutinen, Executive Workplace Consultant at Workspace, said that a large part of their productizing strategy was to focus on finding businesses and not individual clients. They were inspired by the gaming industry in which developers get user feedback very early and fast.

Their services include workplace management and consultation, support for change management and communication in workplace changes, interior design, and architectural design. With their services clients are saving up to 30% in real estate costs and productivity and speed is increased by 5-50%. The resulting business model led to clients fully understanding what they get for their money and the firm now requiring less time for sales and negotiations.

Eric W. Reinholdt took a more gradual approach to productizing his business by introducing products that complimented his existing services. He started his firm, residential design studio 30X40 Design Workshop after gaining extensive experience working for other architects and seeing the consequences of the recession first hand.

His business struggled until he introduced pre-designed plan sets that cut energy consumption. He established a fee structure for schematic and construction packages. Reinholdt added this new product line to his established service-based model, adding customers that didn’t fit the established model as driving force for his passive income model. His website also allows visitors to buy his influential books on architecture and entrepreneurship.

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The key to productizing architectural services is to replace the time-consuming model of billing by the hour with a more efficient model with set prices similar to those of products. Potential customers are easier to target, hiring people is more straightforward and project turnover rate increases. It is important to remember that productizing services is not a one-off endeavor, but a process developed by looking at what clients need.

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Some of the most innovative and profitable companies in the world base their business models on commercializing untapped resources. Facebook has relied on its users to generate content and data for years, and organizations are starting to realize the value of gathering, processing, storing and taking action on big data.

In the AEC industry, some companies are discovering the hidden potential of excess energy that is generated by buildings, while others are looking to utilize large roof surfaces of mega-malls and supermarkets for harvesting solar energy. Airbnb has turned underused living units into assets, and allows people to generate additional income by renting out their homes to travelers.

The traditional notions of ‘private’ and ‘public’ space are eroding under the influence of a sharing economy and technological advancement. Space is being recognized as a profitable commodity in itself.

The commercial real estate industry is undergoing similar changes. Co-working spaces are sprouting in big cities, with building owners finding ways to make profit from underused desks and offices, targeting an increasing number of people who telecommute or work away from their main offices. In fact, The Bureau of Labor Statistics estimates that by 2020, about 65 million Americans will be freelancers, independent contractors and solopreneurs, and will constitute about 40% of the total workforce.

According to a 2014 All State-National Journal Heartland Monitor Poll, millennials prefer to work in places where they can find a community of like-minded people. Several other polls have confirmed that millennials want a “fun and social” workplace, flexible work hours and place value on lifestyle and traveling. They are less interested in buying property, but are willing to spend money on experiences and events. Increased mobility and the rise of the sharing economy are not only changing the way younger generations live, work and travel but also transforming our physical environment.

Finding an office space and setting up the necessary infrastructure for it to operate can be a daunting task for startups. Landlords are usually interested in long-term leases – less than ideal for young companies and freelancers. Recognizing the need for convenience, flexibility, and less liability, companies like WeWork have developed successful business models around the idea of space as a service.

Founded in 2010, WeWork has become the forerunner of the space as a service trend and is one of the fastest growing consumers of office space in New York City. Recognizing the disappearance of 9-to-5 jobs, its founders decided to create a service that would function like a “physical social network”.

Essentially, WeWork transformed a real estate business into a technology platform. The idea of sharing space isn’t new, but WeWork has translated space sharing into a concept closely connected to the lifestyle and work habits of younger generations.

WeWork leases space wholesale from landlords and then sublets it, at a margin, in small blocks of floorspace. The company currently manages over 3 million square feet of space. They offer pay-as-you-go access, or “unlimited commons” membership that allows people to use WeWork locations anywhere in the world. They provide tenants with the Internet, printing services, and beverages, as well as places to relax and take a break from working. The company takes care of everything in terms of actual office management, from utility bills to replenishing the ink in the printer.

The company has recently begun to test its first residency offer. Its first co-living development, located in New York City, currently accommodates 80 WeWork members in 45 apartment units, with plans to house over 600 people across 20 floors. All tenants have access to community events by way of a mobile app, through which they can share cleaning services, laundry and utilities. Provisionally named WeLive, their residential offering is expected to account for 21% of the company’s revenue by 2018.

Micro-rental, on which WeLive’s concept is based, is the hottest trend in residential real estate. The concept is simple: a company rents a large multi-room unit, creates communal spaces and sublets individual bedrooms out to people on a short-term basis. Co-living companies don’t own the property themselves but instead act as property managers.

Abandoning long-term leases for month-to-month arrangements with micro-rentals appeals to millennials who are much more comfortable with temporary accommodation solutions than are older generations. Short-term contracts are best suited for young graduates and professionals who frequently change location or can’t afford to buy their own homes. As an increasing number of 25 to 34-year-olds are living with roommates and staying single for longer than previous generations, mobility becomes the deciding factor in choosing suitable housing arrangements.

A large number of startups are trying out the idea of creating co-living spaces. Up-and-coming businesses like Pure House, Krash, Open Door, and the co.space are tapping into the real estate sector with similar offerings.

Co-living startup Common has recently raised $7.5 million in Series A funding and has announced the opening of a 51-bedroom residence in Williamsburg, NYC. This is the company’s third building in the NYC borough of Brooklyn and the first ground-up development.

The conditions for rending out spaces here are pretty much the same as they are for other co-living startups. What Common does differently to avoid the fate of Campus, a startup forced to close its premises after failing to create “a financially viable business”, is that Common partners directly with real estate companies that buy the buildings. This allows them to save on rent and have greater control over the spaces.

Co-working and co-living spaces are the most dominant types of the space as a service concept. It has proven to be a transformative force, drastically changing the residential and commercial real estate industry. The proliferation of the sharing economy is illuminating the hidden potentials of physical spaces, and changing the way architecture is used and inhabited. This phenomenon could irreversibly change the way in which we design buildings and think about urban development.

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What other underused spatial resources are you aware of? How would you utilize them in a sustainable and scalable way?

The post Space as a Service: Business Models that Change How We Live and Work appeared first on Archipreneur.

Do you have an idea for a software that could make life easier for architects? Perhaps you already own an architecture-related software startup and are looking to scale up? There are several ways of selling software these days, but an increasingly successful model which is slowly pushing out the software as a product solution is Saas (Software as a Service).

Software as a Service (SaaS) is not a new concept. It’s been around for a while, but has only recently gained popularity due to its advantages over the more traditional ways of delivering software. Most architects are familiar with the issues of expensive licenses, compatibility, paying for endless upgrades, and having to stay informed on the most recent bug fixes. Anyone who has as some point created a file that couldn’t be opened on a client’s or colleague’s computer knows the frustration behind dealing with software as products.

Besides, this type of user engagement also requires certain skills in other aspects of software beside those relating to its actual use as a design tool. This constant back-and-forth between software developers and customers and required engagement by users has proven to be inefficient for both sides. Companies are increasingly switching to the SaaS business model as a way of making their products more accessible and drawing steady revenue streams instead of relying on the one-off license purchases.

Software as a Service delivers applications over the Internet and is based on charging regular fee for their use. The model also includes a variety of options like maintenance, hosting and customization. This business model is very scalable and responsive to customer feedback. Unlike the software as a product model, SaaS firms that are just starting out recover their investment much slower, but often manage to work better over the long haul as they later generate steadier revenue streams. The economics of SaaS can be diverse, but the common denominator among all SaaS-based businesses is a high level of automation and the ability to introduce changes based on user experience quicker and across entire platforms.

SaaS software and applications use the provider’s servers and, in order to access the software, users only need access to the Internet. Since internet access in the developed society is pretty much a given, this isn’t an issue. Some companies also provide the option of working while offline, and allow the content to be automatically updated once you go back online. SaaS companies also roll out upgrades across the entire system, lessening the amount of work required from the user. There is no need for installing software on your machine and having to purchase several licenses for your employees. Maintaining the hardware falls under the jurisdiction of the provider which also provides secure data backups. It is all about convenience and reliability.

SaaS is also beneficial for startups, as is allows the introduction of incremental changes and eliminates the need for spending huge amounts of time perfecting the software before it’s finally shipped. A similar type of scenario played out in the case of ArchiOffice, time and expense tracking, project management, billing, accounting and reporting software for architects.

ArchiOffice Online a multi-user, cloud-based application currently part of the offering by California-based BQE Software, with over 325,000 active users, but its beginning were quite humble. It was first developed as a much cruder version by architect Steven Burns. Burns ran his own practice in Chicago and was feeling overwhelmed by the amount of administrative work he had to complete each day. By the time he would finish with invoicing, project management and time tracking, hardly any time was left for him to design. He decided to build a tool which would streamline these tedious tasks and free him up to participate in the creative aspects of the work.

Other local firms heard about the software and wanted to try it out. Noticing the success of the solution, Burns hired a team of professional coders to optimize the solution and soon sold his interest in the architectural firm to his partner in order to focus strictly on ArchiOffice. After meeting with BQE CEO, Shafat Qazi, he decided to join their enterprise and make ArchiOffice part of their product line. Initially conceived as a license-based software, BQE gradually converted it to a fully SaaS and cloud-based business model in 2014 with subscription-based pricing.

A revenue model in SaaS doesn’t rely only on subscriptions. Upselling is also a great technique for getting your existing customers to buy new features and complementary products to those they’re already using. You can also offer additional improved services and strengthen your revenue streams by making your products compatible with other software applications. Young startups can speed up their growth with affiliate sales, thus lowering the costs of marketing and expand while keeping their existing customers on board. Using specialized services like SaaSAds can also generate additional recurring income.

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The startup culture is known to be driven by technological innovation. However, nowadays, innovation in the arena of small businesses is more connected to new business models. The reasons behind startup failures are usually not related to inefficient technologies, but are rooted in the lack of defined ideas for acquiring customers and generating revenue. As with other business models with great potential, the success of a SaaS-based business is determined by several factors, including financing strategies, sales techniques, partnering and defining a value proposition.

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