Leaders Roundtable: Success in Asia-Pacific

March 15, 2003 · by DesignIntelligence

Asia and the South Pacific are home to some of the biggest architectural projects in the world at the moment. What follows is a Q & A with leaders who know the territory.

Asia and the South Pacific are home to some of the biggest architectural projects in the world at the moment. But some firms have been there for decades, and were willing to share some of the pitfalls and pluses of working in a culture vastly different from American practice. What follows is a Q & A with leaders who know the territory.

Participants included Harold Adams, chairman of RTKL Associates Inc.; Steve Huh, president and chief executive officer of The Leonard Parker Associates (a part of the Durrant Group); and Howard J. Wolff, Senior Vice President and Chao "Robert" Zhen, Director of Business Development for Greater China of Wimberly, Allison, Tong & Goo.

How are you currently involved in the Asia Pacific region?

ADAMS: Our first experience in Asia came some 15 years ago in Japan. With the help of a robust economy, our work there expanded and we opened a Tokyo office in 1990. Over the last decade, we've developed excellent relationships throughout the region—in Korea, throughout Southeast Asia, Taiwan and Australia and, more recently, in China, where our design for the Shanghai Science and Technology Museum has opened the door for a number of new projects. Because of the significant amount of work we're doing there at the moment, and the extraordinary opportunity the country holds, we are in the midst of opening an even larger office in Shanghai.

HUH: The Leonard Parker Associates has been heavily involved in the Asia Pacific region, particularly in Korea, for the last 15 years. Many of these are housing projects, specifically high rises and condominiums. Recently, we began working more heavily in China. For instance the three million square foot mixed-use project in Dalian. We won the Beijing Olympic Artist Park design competition as well.

We also have experience in Australia and New Zealand.

We have also worked in Taiwan and the Philippines, but activities in those two countries has not been strong recently due to slow economic times.

The majority of our international projects are convention centers, hospitality, and retail. However, we also do museum projects, and special facilities such as senior housing and youth centers.

Parker/Durrant's policy is that international projects should encompass no more than 30 percent of our business. However, since the domestic market is down, international work currently accounts for more.

WOLFF: 26 percent of Wimberly Allison Tong & Goo's (WATG's) revenues are from the Asia/Pacific region.(29 percent if you include Hawaii). Six of our seven offices are doing work and/or pursuing work in the region. We've been working there since the 1950s.

How are the design professions different in Asia? Specifically in China?

ADAMS: The professionals are as different as each country, therefore it is not possible to provide one answer—in general some countries are very advanced, others are developing. China is developing at a very rapid speed with a growing capability and a very competitive workforce. There is a very strong movement in China today to be contemporary, to push the edge of design. What remains is the impact this will have on the historic depth of their culture and the physical expansion of their cities. So, while design abilities are quite strong, urban design is still emerging.

HUH: I'm not sure there is much difference. Of course, there are cultural differences and the definitions of the professions differ somewhat, but we find that designers themselves are interested in the same thing: excellence. Asian designers are rapidly developing skills and catching up with the rest of the world. My guess is that within 10-15 years, things will be very different in terms of overseas design talent, and Asian designers will be competitive with American and European designers.

ZEHN: They are better known for their production and technical strengths than their design abilities. Our clients value the marriage of American ingenuity and creativity with the local knowledge of how to get things built.

Exactly how do fees compare?

WOLFF: In our experience, fees for Western design services are comparable to other parts of the world, but local firms are generally cheaper.

ADAMS: Fees are generally much lower so you must negotiate very hard for an adequate fee and as long as you maintain respect for the client's position you will prevail. You are paid based upon full completion of a phase of work and the time-consuming job can be getting all of the many review groups to put their chop (approval) on the drawings. Being paid is another phase of negotiations and can take several months after the completion of a project. But while more negotiation time is required, developing the tender documents and construction are very rapid. [Adams referred to the $200,000,000 Shanghai Science and Technology Museum, completed in 2001.] It was a hard fought battle to get an adequate fee, but we finally prevailed.

HUH: The fees in Asia are extremely low for the standards they have set. However, the basic issue is the same, foreign or domestic: we must get compensated for the work we perform. We tell the client "This is our fee for doing this work." Ultimately, the fees we receive are based on our scope of work and how well we negotiate the contract with the client.

China is touting its green ambitions through the 2008 Olympics—is that a real concern? What standards are there? How do they compare with U.S. regulations on environmental impact?

HUH: Environmental issues are a concern in all Asian countries (Korea, Japan, and China), primarily because fast growing economies eventually create pollution issues. Dense population eventually equates into concern about pollution and energy use. Energy savings is a concern because of financial reasons. We find that Asian governments are asking design firms to keep "green" issues in mind on their projects. However, there are no government mandates that I am aware of requiring "green" design, though it is frequently a design criteria for overseas work.

ADAMS: There is a growing interest in green design and sustainability, and the ambitions the government have announced for the Olympics are admirable. At this stage, however, it is difficult to reconcile those goals with the reality of the country's urban expansion and economic growth. China may be a little ahead of the US in their sustainability movement, and not quite as strong as Europe, but I wonder if smart growth initiatives and planning controls could be more vigorous.

WOLFF: There is heightened interest and sensitivity to the environment. However, the focus is more on reducing waste and pollution than on creating sustainable development. In China, most clients will sacrifice the environment if they have to choose between a green building and a green bottom line.

Is there anything similar to ADA, OSHA, national standards and requirements? Or does it vary by region?

ADAMS: There is a growing interest in establishing these types of standards but China has yet to formalize them. As a matter of contract, we insist on designing to an "international standard" which establishes a fairly rigorous base line of quality and safety-accessibility, fire- and life-safety, egress. Because our clients tend to be interested in the same thing we are—quality design and construction—they are amenable to this. It seems reasonable they will embrace a national or, at least, regional standards once an infrastructure is in place to enforce those standards.

HUH: My understanding is that no such issues are covered by any laws, but their governments are fully aware of what we are doing and monitor it closely. It is always wise for any American architect designing overseas to insist that American codes are followed in these areas. By doing this, we are telling them that we believe they will eventually be required to meet similar codes, and adhering to them now will prevent expensive remodeling in the future. That does not mean that they will comply. Sometimes they ignore our suggestion, which may lead to considerable expense for the client down the road.

What is the best way to get work in Asia? And after it's in hand, what are the barriers to success?

WOLFF: There are two keys to being successful in getting work in Asia: reputation and relationships. The two most common barriers to success are poor communication and delivering less than what was promised or expected.

ADAMS: Relationships are the strongest currency, but that assumes you have the talent and track record to get to the table in the first place. While it is slowly changing, the most common way of getting major commissions is through a design competition. But, understand that winning a design competition is no guaranty of being selected to do the project. The Shanghai Science and Technology Museum (completed in 2001) was a long drawn-out competition that lasted over 18 months. There were many presentations, and many people at all levels in the firm involved. Depending on the phase of the work, anywhere from five to 30 staff were working on it. Once in hand, work in China requires a vast infrastructure of resources—professional and technological. Over the last few years we've managed to recruit a team of U.S.-educated Chinese nationals. They understand the language, the culture and the technology of the U.S. and China. We couldn't do it any other way.

HUH: The best way to get work in Asia, or anywhere for that matter, is to have a quality product to sell. You must have unique knowledge and talent, as well as functional and aesthetically pleasing building types. You also must have connections in the country where you are attempting to sell your services. Relationships are critical, as is a concentrated marketing effort. My experience is that it is very difficult to sell your product with an unfocused marketing effort. That's where a business can lose significant amounts of money.

After you have the business in Asia, the language barrier is the largest hurdle. Clear communication is vital to the success of a marketing effort and to a successful project. It is important to fully understand the culture of the country where you are working.

What about communications? How do you deal with the language barrier?

HUH: You must have someone who can assist you with communications in each country where you are working. Someone involved in the project must be able to speak the native language. More importantly, however, is attitude. You need to show a genuine interest in learning their culture and creating an environment that is conducive to open communication.

When discussing a project with an international client, it is wise to repeat the important items in their language and in English. This may seem redundant, but it is critical to ensure that no miscommunications occur. The most effective way is to allocate adequate time for face to face meetings with the client. This relieves any tension which might normally exist in an environment when two different cultures must work together in harmony.

ZEHN: Most of our clients speak English; but for work in China, we have both Chinese speaking marketing people and Chinese speaking designers. We also have people who speak several other Asian languages. While one can hire a translator, it's better to have someone who knows your firm and your business.

And afterward, how do you manage staying in touch with time and distance hurdles? Are there tech tools or a process that's helping you there?

ADAMS: We use all of the normal technologies—teleconferencing, Web meetings, email, phone and fax—but nothing beats the airline ticket. Things will become easier once we open in Shanghai, but, for the time being, we have key professionals in transit almost constantly.

WOLFF: Two of our offices—Honolulu and Singapore—overlap with Asia during business hours. Our three West Coast offices end their day when our clients begin theirs, but most of our client managers make themselves available on personal hours, as well. We use all the technological tools at our disposal to facilitate communication—fax, e-mail, electronic transfer of documents, etc.—but the most effective and most efficient is the telephone.

Why should a firm interested in Asia have an office located there? Does it really make a difference?

WOLFF: Clients want you to be accessible. Having an office within their time zone is desirable, we believe, but they generally don't want to pay for it. So, the costs associated with opening an office either need to be absorbed by a project or subsidized by the corporation. Making frequent trips to the region can be a viable way to serve the same purpose; you let the client know that you're no stranger to the area.

HUH: I don't recommend having a large office there. Most of the work we do internationally is done via a teaming effort with local architects and engineers in the country where the project is located. Oftentimes, these local architects and engineers come to us with projects, and our marketing effort is thus minimized. If these firms feel we are competing with them rather than teaming, they obviously will not refer clients to our firm. The wisest way of doing business overseas is to have connections in the country where you wish to work rather than a separate office.

ADAMS: Asian clients—all clients—demand a great deal of face time, which cannot be sustained by travel without burning out staff or giving the impression you're just playing in the market Commitment is an attractive quality for many clients. Also, having native-speakers on the ground allows you to plug into local politics and networks and get the jump on competition. The bigger question is whether a production office, at least how we Americans define such an office, is a viable alternative.

What are the pitfalls or caveats in setting up shop there

ADAMS: Taxes, Regulations, Taxes, Regulations, Taxes.

HUH: Each country has different tax laws which greatly affect how you do business there. If you have an office set up there, you get double taxed, once by the country you're doing business in, and again by the United States. However, if we do 100% of the work in the United States, based on our treaties with Asian countries and many other countries in the world, we only pay United States taxes.

ZEHN: [There are] three main types of pitfalls: the first includes all the pitfalls associated with opening a branch office anywhere else (even domestically); the second is that with a local office you start to compete with local firms and are subject to pressure to lower your fees; the third is the danger of diluting your brand by offering a different level of service and product than your reputation has been built upon.

Can you tell us about your scope of work contrasted with work in the U.S.?

ADAMS: Over last 15 years, up to 30 percent of our gross revenues has come from Asian countries. The work tends to be larger in scope and scale than our U.S. work, so the fees are somewhat higher. There also seems to be a stronger emphasis on design as a differentiator, though we are pushing to play a larger role on the documentation side of the equation to ensure a higher level of quality. One other big difference is the necessity to work with a local architect or, in the case of China, a Design Institute.

HUH: Asian countries are usually seeking more "front end" work from us: conceptual design, master planning, sometimes schematic design, and 50 percent D.D. In America, we usually do all of the design work and continue our efforts into the construction administration portion of the project. The latter allows us to ensure our quality standards throughout the project. Conversely, in Asia, you never know what the end result will be. After our work is done, the owner of the project or the other firm(s) we are working with takes over, and there are often many changes made to our work, and our input is not always requested. Even when it is, they may ultimately choose not to implement our high quality standards.

Often times, we are not licensed to sign drawings in the Asian country where we are performing work, therefore the firm(s) we are teaming with will need to sign them. Even in cases where we're licensed, however, we don't always like to sign drawings. Most Asian countries we work in do not have liability insurance systems, therefore you physically "pay the price" if there is a mishap.

Wolff: It's generally what we call "design only" work, taken to a certain point in design development, at which point the majority of the work is then done by the local firm, and our role diminishes in construction documentation and administration.

Did anything come as a pleasant surprise?

ADAMS: Wonderful friendships and the clients drive for the very best leading edge work. There also seems to be a remarkable sense of loyalty. That first client that brought us over to Japan 15 years ago still calls.

HUH: Participation in international design competitions has been a very pleasant, rewarding experience. Through these we are able to design many different types of buildings. In America, lots of experience and pre-qualification is necessary in order to be considered for a project. In Asian countries, if you win a design competition, you might very quickly be viewed as an expert in the area.

We insist that our firm’s expenses be paid when we enter an international design competition. We feel that this ensures that the sponsors of the contest have faith in our ability to deliver a winning design. TLPA/Durrant has an approximately 50 percent win rate in such competitions.

Another pleasant surprise is simply the opportunity to meet people from other countries and to learn about their cultures. It is a tremendous sense of pride and accomplishment to have our designs accepted by people from other cultures.

What caught you completely unaware that you would give a lot to have known about?

ADAMS: The great differences between the culture and people of each country and how those differences influenced the way we conduct business, negotiate, design, and so on. While it seems self-evident, and you try to prepare yourself for it, it's just something you don't understand until you get there and experience it first-hand.

HUH: In many cases, the project programming is modified throughout the design process. Many of our Asian clients do not understand or don't want to hear about additional services. This has been a major stumbling block at times. Because of their unwillingness to pay for additional services, these clients sometimes include specific contract language which says that the "architect/engineer shall modify the design to meet the final program." It depends on how you read the language and negotiate the contract. This is a real tough one. During the contract negotiation, the client might insist that changes will be minimal, but this is usually not the case once work begins.

Give a recent Asian project: size, scope, market sector and duration of project: start and completion dates.

ADAMS: The Shanghai Science and Technology Museum, a 1,200,000 sq ft building that hosted the 2001 APEC Conference and has garnered universal accolades for its design. It's a distinctly modern building that stands as an excellent example of the new China—bold, strong but respectful of history.

Another very different effort is our urban design for Shanghai's North Bund district, an historic district of dilapidated warehouses that will be transformed into a lively urban district that resembles lower Manhattan. Both projects were awarded based on a competition.

HUH: The Lotte World II project in Pusan, Korea is a 5.5 million square foot, multi-use complex. This project features what will ultimately be the world's tallest building, at 494 meters high. We've been working on that for a year and a half now, beginning with conceptual design, and for the past six months it's been in schematic design.

Another project is the Dalian Mixed-Use project, which is similar to Lotte Pusan. It features retail space, theatres, hotels, housing, and entertainment centers. This is approximately 3 million square feet, and took around eight months to complete the conceptual, schematic, and 50% D.D.
Construction on both of these projects has already begun. Lotte World II in Pusan is a phased project scheduled for completion in 2010. Dalian is expected to be completed in 2006.

How important is China going to be to the U.S. AEC industry? Is it a way of escaping our own down market?

ADAMS: China is probably the most important force right now in the AEC industry, if only for the sheer volume it's generating! It's by far the most active foreign market for us and promises to continue that way for the foreseeable future. I think if the industry learned a significant lesson from the Southeast Asian collapse in the early 1990's it was not to rely on a single market. But one thing does seem clear, I believe that within a few years Chinese firms are going to among our biggest competitors at fees we cannot touch. Beware.

HUH: I can see that in the next 10-15 years, China will be the best international market. Their economic progress is tremendous, and it's a huge country with many people, therefore the opportunities are considerable.
While exploring international projects is a tremendous way to expand our marketing opportunities, I don't view the China market as an opportunity to escape our own down market. As I stated earlier, our policy is to have our international work account for around 30% of our business. We use the same criteria to evaluate both domestic and international projects: Is it an interesting project? Is it exciting? Will it be beneficial to us, financially and from a design standpoint?

Frankly, international work is also beneficial for recruiting young, talented designers. Most of them are very interested in international exposure, and we have hired many talented employees through these efforts.

We have designed over 20 major international projects with a total construction dollar value of well over $2.5 billion. These are primarily multi-use, multi-complex projects, convention centers, housing, museums, monumental and government buildings.

ZEHN: China is a market that has shown itself to be relatively immune to the global economic and political uncertainty that is gripping many other parts of the world. That fact, coupled with the slow economy in the US, is driving many American firms to try to sell their wares there. When things improve in the US, many of those firms will abandon China; it's simply easier to do work in one's backyard. WATG has been working in China since 1976. In 2002, over $7 million of our fees were earned from projects in Greater China (China, Hong Kong, Taiwan, Macau).

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