Labour Day: Smile Curve

A smiling curve is an illustration of value-adding potentials of different components of the value chain in an IT-related manufacturing industry.

Stan Shih revealed that both ends of the production chain create the value of a product, not the middle part.

Not Manufacturing, but Concept, Research & Development, Branding and Design together with Marketing, Distribution, Sales and Service are responsible for the added value. If represented by a curve, a smile appears.

According to the VeraSage institute of the $400 price of an iPhone a mere $5 goes to manufacturing in China…  That is why outsourcing of IT fabrication to low wage countries is not per se a sacrifice.However, if you look at the fee of architects through the different phases of the construction process, you’ll notice a different pattern. The concept phase (VO + DO / PD + SD) amounts to only one third of the total fee.

And more and more the actual production of contract and working drawings is handled by specialized firms, design institutes, cad companies. This used to be the phase in which you could actually make some money. Now this phase is often amputated…Although Architects are not particularly good at communicating the positive effects of their interventions, still the true added value of a project might be in its conception… isn’t it time for a new model of remuneration?

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