February 22, 2013
The Building Industry Undervalues Its Intellectual Assets—To Its Detriment
A biotechnology expert offers his perspective on the design industry
In the building industry, architecture and engineering firms are full of talented people who solve complex problems as a matter of routine. So why are their IP portfolios virtually empty? I spent most of my working life in the chemical, pharmaceutical, and biotechnology sectors. I specialized in intellectual property after spells in research and then commercial roles. For ten years I was the director of the Intellectual Property Institute.
In 2010 I joined Billings Jackson Design as business director. I have had less than three years experience in my new industry sector so, clearly, I claim no great knowledge or insight, but maybe it’s useful to get a picture of an industry from the perspective of an outsider so, here goes… Firms of architects and engineers operating in the building industry use and generate considerable intellectual resources. They are usually staffed with highly qualified, motivated professionals with a mixture of creative and technical expertise, which is not matched in many industry sectors, if any. It is surprising, to me at least, that these intellectual resources are rarely identified, valued, managed and effectively exploited within such firms.
Problem solving (generating good ideas) is the life-blood of the industry, but these good ideas are seldom captured, managed, and exploited internally in a structured and effective manner. They are almost never exploited externally, traded with third parties as the subject of formal intellectual property rights. This is not generally the case in companies that are heavily reliant on scientific or technical expertise, where the role of intellectual property protection (through patents and trademarks) in justifying and enabling R&D investment is well understood. Nor is it the case in other areas of the creative industries (publishing, the arts, music, fashion etc.) where copyright and trademark protection are, and are seen to be, essential to commercial success. Why, then, should firms that have both creative and technical prowess be so seemingly laissez-faire about their intellectual assets?
The building sector is also unusual in that upstream industry (building product manufacturers) enjoy generally higher profit margins than downstream players (architects and engineers). It is not unusual for manufacturers to achieve margins in excess of 50% for their products, depending primarily on the unit price and sales volumes (normally, the higher the price and lower the volume the bigger the margin). In most industries, downstream players enjoy the highest margins since they are closest to the ultimate buyer (branding is a key factor here) and they also facilitate access to the market for their suppliers.
In industries such as automotive, pharmaceuticals, and FMCG sectors, there are a relatively small number of very big downstream players who have such market power that they can effectively dictate how they will be supplied and at what price (suppliers are prepared to reduce margins to near zero if the market penetration is sufficient and volumes are high enough). The building industry is not structured in a similar way; there is no equivalent of Toyota, Pfizer, Tesco or P&G.
Nevertheless, firms of architects and engineers, especially those with strong reputations in specific building sectors, do have some market influence with product suppliers, which for the most part, they fail to exploit. They deal directly with clients, they have reputations and, hence, the potential for brand identity; they specify products for projects, they have the best understanding of what the market requires of a product in terms of price, performance, aesthetic etc.; they could use this market potential and product insight to leverage value from upstream industry (where there is much value to be captured). But, as a rule, they don’t. I have heard many bemoan a lack of innovation in the building industry. A risk-averse culture and some very unhelpful procurement methods are certainly factors here, but until the industry really starts to value and exploit its considerable intellectual assets more effectively, I fear little will change.
Dr. Paul Leonard, FRSA, is business director for Billings Jackson Design, a firm that is the lead sponsor of the RSA-US Student Design Award, and co-sponsor of the Transit Options for the Future City Brief.