Welcome to the third installment of our new RebusFarm Business in Arch Viz series. Over the next year we will be featuring two articles every month. Each new article will discuss the business side of working in and running businesses in the visualization industry. We will feature articles from some of the top studios in the world and have in-depth answers to questions that every studio and artist in the industry should know.
The goal of this series is to provide a long-term resource for not only new artists and business owners entering the industry, but also long-time industry veterans. The topics will range from contracts and IT infrastructure to hiring and business strategy.
Studios participating in this series include: 2G Studio, ArX Solutions, Beauty and the Bit, Cityscape, DBOX, Designstor, Digit Group, Inc., Factory Fifteen, Kilograph, Luxigon, MIR, Neoscape, Public Square, Steelblue, The Neighbourhood, Transparent House, Urbansimulations and many more. Collectively these companies generate hundreds of millions of dollars a year in revenue, and have decades of experience running some of the most successful businesses in the industry.
We hope you enjoy the series!
We would like to also like to sincerely thank RebusFarm for supporting this series. Through their support they are helping better our industry and contribute significantly to future generations of visualization businesses in our field. If you are looking for one of the best rendering farm companies in the world, we highly recommend checking them out here
by Randall Stevens (CEO at AVAIL)
Image Credit: HOK | Canon Headquarters | Pure
Every business owner dreams of growth. In the end, you'd like to have all the customers; 100%, a monopoly. We all know that's impossible but it's not impossible to capture an outsized share of the market by serving your customers in new and unique ways. To do that you need to innovate. You must erect barriers, stifle the competition. I can't tell you what that looks like for your respective business but I can pass along a framework for thinking through it.
What is Innovation?
Let's first describe what we mean by "Innovation". The official definition is "a new method, idea, product, etc". Most people think about innovations in terms of product features or offerings, but in business, innovation often occurs when you reinvent parts of the process by which you deliver your product or service. This is referred to as a shift in "Business Model".
In the early days of ArchVision (25 years ago) we were in the visualization services business like many of you. I remember painstakingly bidding projects based on the design information supplied to us. We'd take a set of drawings back to the office and pour over them trying to estimate how long it would take to build the model. This was in the days when nobody was supplying a 3d model. We had to build it from a set of 2D drawings. After a couple of years of that pain I saw that every project took about the same amount of time if you broke it down into different "scenes" or major areas of the project. With that knowledge under our belt we shifted our sales strategy to a simple $5K per room/area of a project and removed the time and complexity of providing customers with an estimate for their project. We innovated the selling process and could give customers an on-the-spot estimate of their project by counting the number of "areas" of the project they wanted to visualize. Sounds simple but that's an example of innovating part of the business that didn't involve technology advances.
Skip forward 15 years later and ArchVision innovated its business model once again. By that time, we were in the software business selling RPC content libraries and plugins. In the 2007-08 time-frame we made the decision to move to a subscription model for RPC. Our product line had grown to approximately 100 RPC content libraries and over a dozen third party plug-ins. Rather than continuing to force customers to wade through what had become a complex product offering, and a pricey one at that (over $20K in retail value), we put everything into one subscription agreement and began charging $249/year/user for the same offering! We were innovating the business model to better suit the changes in the market and better serve our customers. That change came with a sizable investment in backend infrastructure for managing the subscriptions and an even larger investment in educating the market about the change. But it was worth it and today seems like standard fare. So how do you go about finding an innovative offering?
Creating a Unique Offering
I've become an avid follower of entrepreneur-turned-venture capitalist Peter Thiel. From his book "Zero to One: Notes on Startups, or How to Build the Future", Thiel notes "Tolstoy opens Anna Karenina by observing: ‘All happy families are alike; each unhappy family is unhappy in its own way.’ Business is the opposite. All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition."
Definitely a good read for those that are interested in the topic. Thiel does a great job of explaining the types of businesses you should steer away from for what should be obvious reasons. You know, the businesses with endless competitors that become a race to the bottom with no competitive advantage and zero profits. One method Thiel uses to test whether you're in a good business position or not is whether you can describe your market opportunity as narrow today but able to expand tomorrow. By contrast, a bad market is one where you must narrow your description to convince someone you're unique. He uses the example of restaurants as the prototypical limited market opportunity. If you describe your restaurant as "we're the only restaurant, that also provides takeout, on the south end of ____ serving traditional Indian cuisine", you might be in a limit growth opportunity business. By contrast someone like Google claims to have unlimited competitors if you compare their revenue to total worldwide marketing revenue, but when it comes to online search and advertising they're dominant. They make up competitors to keep the government off their back. Given they are currently only earning a fraction of all worldwide marketing dollars they have a lot of upside opportunity.
If your value proposition is "we create beautiful renderings" you could potentially service a large audience but you'll have a limitless number of competitors. In order to differentiate you then have to say something like "we create architectural renderings for retail developers in the southwestern part of the US". And with that you've severely narrowed your audience and thus market opportunity. You'd rather say, "we are the only global provider of rendering services that can deliver with a turnaround of 24 hours" or "we provide a unique rendering style, using proprietary rendering techniques over a decade in development, that best captures the essence of our customer's commercial developments" or "we provide subscription rendering and VR services for AEC firms seeking to reduce overhead while maintaining "in-house", on-demand services". You don't have to develop technology to differentiate yourself. You can differentiate in how you deliver your products or services. Think Amazon. They are dominating the retail market by innovating delivery. They've now built an infrastructure that makes it nearly impossible for anyone to compete. They'll likely maintain that dominant position for a while until someone innovates on a different vector.
Getting to Ah-ha
There's no magic to the innovation process. The secret is to talk to your customers. It's in those conversations that you're likely to discover overlooked opportunities. Don't expect to find them in a single conversation. The "ah-ha" moment most likely happens after hundreds of conversations. It's in the questions you ask and subsequent conversations with your customers that reveal opportunities. It's your job as an entrepreneur to piece those conversations together, look for the patterns, and discover an opportunity to solve your customer's problems in new and unique ways.
Once you think you see an opportunity to innovate and create an offering to solve your customer's problems you need to test the theory. Until you've proven the theory by having customers agree to hand over their hard-earned money in exchange... it's just a theory. You're in search of what is referred to as Product/Market Fit (PMF). Until you reach PMF you are engaged in experimenting with your idea to see how customers react. Each of these customer-interaction "experiments" provides you with a clearer view of how well you're solving the problem, just how acute the problem really is, and how many customer's have the same problem (ie. size of the market). It's not an easy process, but the process does work.
Never stop innovating
I've found the cycle of innovation in my career has run in relatively steady 7 year cycles. My theory is that's about the amount of time needed to identify a problem, test multiple hypotheses, develop a solution, reach Product/Market Fit and deliver your offering at scale. If that sounds like a long time, it can be. It's also why not everyone is cut out for this line of work. There are no guarantees but I've found it's one of the most rewarding ways you can spend your professional time. Once you get comfortable with the customer learning / validation process you'll engage in it constantly. And by the time year 7 comes you'll have already begun thinking about and talking to customers about what's next.
Randall Stevens is an AEC industry veteran with over 25 years of software development, sales and management experience. Randall founded ArchVision in 1991, a software company specializing in 3D graphics and content management technology for the design industry. Randall offers a unique combination of expertise in software and graphics technology, coupled with a background and degree in architecture. Randall is the inventor of the software technology Rich Photorealistic Content (RPC) currently being used by AEC customers in more than 100 countries and chosen by Autodesk as the native tree & planting solution for Revit. Through ArchVision, Randall has built relationships with the industry's leading design and visualization software companies. Most recently Randall led product development for the AVAIL platform, a fresh approach to the AEC market's content management challenges. Randall is the Founder/CEO of AVAIL (getavail.com).
Randall received his B.A. from the University of Kentucky College of Architecture and served as an adjunct faculty member at the College of Design at the University of Kentucky from 1991-2007. He currently teaches entrepreneurship at the University of Kentucky College of Business. Randall chairs the Advisory Board for the University of Kentucky Innovation Network for Entrepreneurial Thinking (iNET) and is on the Board of Directors for the Kentucky Governor's School for Entrepreneurs.
Randall initiated the inaugural Building Content Summit (BCS) in 2015 and currently serves as the BCS Chairman. Randall owns and operates Base163 and Base110, co-working office spaces housing small tech and creative companies in Lexington, Kentucky. He is a frequent lecturer on technology and entrepreneurship.
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