A few months ago I began developing a lunch & learn program for my co-workers. The topic was mega-trends in the design and construction industry. I created an initial list of 17 trends, gleaned from both my personal opinion as well as an analysis of A/E/C industry and business publications including Engineering News-Record and the SMPS Foundation’s book, A/E/C Business Development – The Decade Ahead. On a whim, I decided to share my thoughts with some of my colleagues in the Society for Marketing Professional Services. I asked if they agreed with the list, and if there were any other trends they were experiencing or predicting.
This group included thirteen Fellows of SMPS – many of whom had served as president of either SMPS or the SMPS Foundation at some point! In other words, these people are smart. Really smart. We engaged in a fascinating email dialogue, each person building upon the others’ insights. In the end, we developed a list of 31 trends that everyone in the design and construction industry needs to be tracking.
As you read through these trends, you’ll notice that some are closely related, while others will greatly impact one-another. Here they are – in no particular order:
1. Urban is becoming the new suburban as people move back to the cities and seek walkable lifestyles. The positive result of this trend has been a reinvestment in cities and revitalization of old, vacant buildings. The downside is that the blight has moved to the suburbs, as shopping centers and factories sit abandoned and deteriorating.
2. Business development challenges will increasingly make for strange bedfellows – competitors one day are teammate the next. For governmental contracts, this is often driven by set-aside requirements. But for private industry, this is driven by clients “selecting” the individuals or firms that they prefer to work with, asking A/E/C firms to unbundle services and shopping a la cart. Donna Corlew, FSMPS, CPSM, Chief Whatever-It-Takes Officer with C*Connect, believes that the key is value for all parties involved: “There’s a trend toward strategic teaming with firms against whom you compete. The client gets access to multiple talent sources, but the approach has to be worthwhile for both firms.”
3. Public Private Partnerships (P3) and Integrated Project Delivery (IPD) will see their day in the sun … but to what extent is still unknown. In fact, according to the McGraw Hill Smart Market Report on Project Delivery Systems, just 4% of architects and 3% of contractors expect to be doing Integrated Project Delivery in 2017. Governmental agencies have huge project backlogs (see Trend #27) and limited funds to accomplish them, necessitating P3-type solutions.
4. Lean construction will be a major driver to create higher quality and lower risk project delivery. It is also a way to employ innovative approaches to generate higher profits by eliminating waste and rework. Unfortunately, while manufacturing has experienced significant increases in productivity in recent years, the construction industry has seen stagnating or even decline over the last fifty years. This must be reversed.
5. Prefabrication and modular construction will increasingly become the norm, to the extent possible, because constructing parts of a building in a factory allows for greater control, increased safety, and reduced risk. It also allows for expedited project delivery, something that clients are demanding.
6. Razor-thin margins for design and construction firms are here to stay – we’ve retrained our clients, and there’s always a firm out there willing to do it for less. So the question of “How can we charge more to increase profits?” has become “How can we become more productive to increase profits?” Lean and modular construction are potential solutions.
7. Slow or flat growth will continue for non-residential construction. This certainly varies by geographic region or type of building/heavy construction, but few expect the U.S. as a whole to suddenly experience “boom-time” again. Places like Houston are seeing massive construction projects. But some of the Rust Belt cities continue to plod along, inching forward and then inching backward.
8. Sustainability will continue to evolve, driven by changing building codes, alternative certification systems like Green Globes, and a focus on net-zero energy. America’s energy report card is barely passing, and building owners and users are continually looking for ways to reduce energy costs. The condition of the electric grid – aging, vulnerable to cyber attacks and, apparently now, solar storms – has a lot of people concerned. These issues will drive the quest for efficient and affordable alternative energy solutions.
9. Saving coastal cities from rising oceans will become a critical challenge and opportunity for design and construction firms. Will our industry rise to the occasion? What are the costs of this rescue mission and from where will the money come? There are more questions than answers right now, but Mother Nature doesn’t appear to be willing to sit this one out for a while so we can figure it out.
10. Building Information Modeling will mature as more designers and contractors hop on the bandwagon, however reluctantly, enabling greater use of BIM 4D and 5D tools and eventually filtering down to owners when the true promise of BIM 6D will be realized. But first, a lot of firms must catch up to the BIM revolution … or be left behind.
11. Field technologies will continue to be enhanced, as 3D laser scanning, 3D printing, and augmented reality go mainstream. Not convinced that 3D printing will be a huge disrupter in the construction industry? Just check out the world’s first 3D-printed house.
12. Mobility will reign supreme, forcing A/E/C firms to rethink their technologies and even employment policies as staff will be able to do almost anything from anywhere. Many of you are reading this from your phone or tablet. Just a short decade ago, doing so was a dream far off for most of us! Where will mobility be in ten years? And while the technology is changing almost daily, we’re all struggling to catch up. For instance, very few firms have websites with “responsive design” – yet we all need to have this to maximize the viewing experience on phones, tablets, and big screen televisions.
13. Firms will move towards the “cloud” as security improves and they gain greater confidence in the reliability of access and back-up. But as we become more confortable with the concept and the technology, what will this mean for bandwidth if everyone in our firms is online 100% of the time, working on very large files? And what happens if our Internet connection goes down and all our data is stored in the cloud?
14. The workplace will virtualize. Closely tied to the two previous trends, technology will create integrated international teams and allow firms to hire employees from the far reaches of the country, and the world, without needing them to be onsite at a company office or project location. It’s a top-of-mind trend for Atlanta-based Kevin Hebblethwaite, FSMPS, CPSM, Executive Free Agent for Hebblethwaite, LLC: “Driving 2-3 hours per day through the same traffic jam with the same morons doing the same thing is soooo productive,” he jokes.
15. The war for talent will only intensify. Even with the continued lack of jobs in the architecture and non-residential construction industries (both still have 20% fewer employees than in 2008), the job market for certain professions is already tight. There’s not enough students currently enrolled in collegiate A/E/C programs to make up for the pending Baby Boomer retirements. And the shortage of skilled trades workers is looming large, addressed in this recent article in Forbes. This will impact firms’ abilities to deliver projects and necessitate changes in salary structures and employee benefits.
16. Power will continue to shift from companies to employees. The workforce shortage is one driver of this, but so is the client focus on selecting key people, not companies, for projects. A firm is only as good as its weakest team member, and this means that a few strategic hires can make a firm – while a few key departures can break it. But, as Frank Lippert, FSMPS, CPSM, Business Development Manager with Parson Brinckerhoff notes, “The industry has not invested in people in a long time. I think the recession beat us down and Gen X has been wearing so many hats just to get the job done, that the investment in leadership skills has just not been a priority.” So while the power may be shifting to the employees, firms must better invest in those employees to turn them into leaders – and keep them from leaving for a competitor.
17. The seller-doer model will continue to be prominent as clients increasingly demand to be “sold” by the professionals who will be working on their project. This in turn will change how business development and marketing professionals are utilized as they become trainers, coaches, mentors, and researchers. However, as Donna Jakubowicz, Marketing Director for URS Corporation, notes: “Seller-doers need support – training, marketing, administration – and a more balanced approach to billable and overhead hours.”
18. Some staff will become commodities and thus expendable as A/E/C firms seek out employees with strong personal brands and deep skill sets that include both technical and soft skills. Professionals that refuse to adapt will have trouble finding and keeping jobs. Ron Worth, CAE, FSMPS, CPSM, CEO of SMPS says, “The evolving Seller-Doer model is not all driven by the owner, but is also influenced by technical professionals who are striving to position themselves for a challenging future marketplace. Survival will be by the most adaptable, or technical professionals risk being a pawn and treated/paid accordingly.” Adds Pete Kienle, FSMPS, CPSM, MBA, Consultant with Kienle Communications, LLC: “Generation Z (Millennials) is projected to have very poor public speaking skills, driven by the lack of ‘practice’.” So the “one-trick pony” employee will have limited upward mobility.
19. Millennials will become the majority of the workforce. Soon. While one third of employees currently in the workforce are from this generation, within fifteen years that figure is expected to be 75%! That means that Millennials will advance more rapidly within firms than Gen-Xers and Baby Boomers did because there will increasingly be a need to fill senior positions. This will significantly change the dynamics and corporate cultures within A/E/C firms. However, as Melissa Lutz, FSMPS, CPSM, Director of Marketing/Principal with Champlin Architecture, cautions: “The Project Principals who have been ‘doers’ in their firms over the last few years will need to mentor younger professionals to take over more of the ‘doer’ role so they can get away from their desks and become ‘seller-doers’ … they are having a tough time doing this and letting go of the work.” For Millennials to become firm leaders, they must be gaining the experience and exposure now.
20. A/E/C employment will become an import business. Many students enrolled in collegiate design and construction programs were foreign born, and plan to return home upon graduation. Because of the workforce shortage, A/E/C firms will work harder to keep them in America, and/or open more overseas offices, where these individuals may in fact be working on projects to be built in the U.S.
21. Globalization of A/E/C firms will increase in a big way. We like to say that the world is a small place, and getting smaller – based upon technological advances – but the reality that is that the world outside of the U.S. is quite large. In fact, according to ENR’s recent International Market Analysis, published in their 2014 Top Global Design Firms report, the United States only accounts for 10.4% of the global market. There’s a lot of work happening beyond our borders, and A/E/C firms that want to thrive in the future need to greatly expand their geographic target markets.
22. A/E/C firm ownership will change, greatly and by necessity. As Baby Boomers retire and look to sell their firms, they are left with Generation X, which is perhaps too small a generation to purchase all the available firms, and Millennials, who are not yet in a position to make such major investments. “There’s a looming disappearance of Baby Boomer firm owners/founders – who’s going to buy them out, assuming they don’t want to sell to a mega-firm?” asks Kevin Hebblethwaite. Some old-line firms will close. Mergers and acquisitions will continue unabated. Foreign investors and companies may purchase more U.S.-based firms.
23. Giants will lumber. As the mega-firms become more mega, they will struggle with management, innovation, and engaged employees. Branding issues will continue to arise, and key technical staff and rainmakers may leave for smaller firms. As noted by a senior professional employed by a mega-firm: “As we get larger and larger, it has become more difficult to get ahead of changes in the market, or even react quickly to changes. We are so bogged down in internal processes that we have no ability to be nimble.”
24. A/E/C firms will expand their service portfolios far beyond just design or construction. Clients are already looking at which non-traditional services firms can provide to them. They want companies that can “show them the money” to help make the projects a reality. They want companies that will be spokespeople for their projects. The A/E/C firms that can move beyond the ‘traditional’ services are the ones that will be able to truly differentiate themselves.
25. Content marketing will gain some serious traction. Our industry typically takes a while to catch on to marketing trends embraced by other industries, but we’re reaching the point of clarity and gaining an understanding that clients have no interest in being sold to, but rather they want to be educated. “Inbound is in,” says Holly Bolton, FSMPS, CPSM, Director of Marketing for CE Solutions, a structural engineering firm. “Don’t sell to prospects, help them.” A/E/C firms providing education to clients and prospects will be the winners.
26. Evidence-based design will expand across all market segments. As clients become more sophisticated, they expect firms to prove each and every claim they make. They want solid research to back up any assertion. They want proof, not boasts. So thought leadership and research will be key components of marketing strategy. This is also “evidenced based marketing” – thou shall make no claims without proof.
27. Construction dollars will be increasingly funneled to infrastructure. America is crumbling. The ASCE grade for our infrastructure is a D+, and in the next six years $3.6 trillion is needed just to keep up. But where will all that money come from? Governments will have to rob Peter to pay Paul. The question will be, “Who’s Peter?” Will it impact funding for buildings, require tax increases, or reduce education spending? The jury’s still out, but whether or not your firm serves the infrastructure segment, the impact will be felt.
28. Speed of delivery will trump strategic goals. “Faster, faster, faster” seems to be the rallying cry these days as clients want their projects finished immediately after making the decision to proceed. They delay pulling the trigger to move forward, but the end date never seems to change. So A/E/C firms that have aggressive strategies to mentor younger staff, innovate project delivery methodologies, increase profit margins, or utilize technical staff for business development will constantly put those plans on the back-burner because they have a project to deliver, and deliver NOW. What impact will this have on future firm leadership? This is a concern of Adam Kilbourne, CPSM, Director of Marketing for Tec Inc. Engineering & Design, who says, “The pace of work has minimized the amount of available time for other skill training – leadership, project management, business development, presenting, etc.”
29. Building investment and ownership will shift. Companies and institutions are increasingly focused on their core purpose, and often owning real estate isn’t part of that. So organizations that may have traditionally been facility owners will be content to be renters, looking for P3 arrangements, built-to-suit developers, and other creative approaches to satisfy their facility needs. As a result, the “true” clients for A/E/C firms will be a moving target. According to William Long, PE, LEED AP, FSMPS, Vice President/Principal of Canuso Jorden, “Corporations and institutions are reducing future investment in real estate and concentrating their dollars on their core products/services/mission. This is giving rise to a rapid increase in third-party owned facilities such as university housing, corporate headquarters, medical office buildings, etc.”
30. Money will continue to hide overseas. Or relocate. The U.S. corporate tax rate of up to 35% of profits is attractive to few, and the system is broken. Companies can realize much lower tax rates in other countries. And while some may complain that tax inversion is un-patriotic, the reality is that companies that feel overburdened here in the U.S. may look to other countries for future expansion – and possible relocation.
31. Chinese investors will continue to snatch up U.S. real estate. With changes in how Chinese companies are allowed to invest their money overseas, coupled with declining investment opportunities in Asia and available U.S. real estate, this trend won’t abate anytime soon. Carla Thompson, FSMPS, of Carla Thompson Consulting notes that “They (Chinese investors) can’t own property in China, they have to lease it from the government, so America is a the land of opportunity!” To A/E/C firms, it means that the client profiles continue to change. Existing relationships with building owners become meaningless when these transactions occur. Perhaps it’s time to open that Beijing office to maintain market share in the U.S.? Carla also points to the Federal government’s EB-5 program as a driver for foreign investment: “By investing in commercial development in the U.S., foreign investors are granted citizenship or Visas. It was enacted in 1990 to promote economic growth and we’re seeing a lot of it now.”
Finally, here’s a trend that’s not really a trend at all: The more things change, the more things stay the same. SMPS President Barbara Shuck, FSMPS, CPSM, Firm-wide Marketing Communications Manager for Wilson & Company, says: “We are in a relationship business, and no matter the technology, speed, or global factors that affect our industry, it’s still a handshake and a look in the eye that matters. It’s the human connection, chemistry, and trust. Some things are eternal.”
So there you have it. Are there other concurrent trends? Of course! I don’t think anyone has an exhaustive list. But these are issues that are impacting many of us right now, or will be in the near future. The design and construction industry is dynamic but yet volatile. I recently spoke with a friend who has been in the construction industry for several decades. I asked him how business was going. He responded that the good news was that the highs are higher than they were a year or two ago. The bad news, however, was that the lows are lower. A lot of A/E/C firms are still riding a rollercoaster.
These trends don’t even begin to address the challenging domestic political environment much less the deteriorating Russian-NATO relationship, military action in Syria and Iraq, Ebola and other infectious disease concerns, terrorism fears, and a number of additional issues that have the potential to be huge economic disruptors.
The moral here is that it’s a crazy world out there, and you need to be continually listening. Follow the trends. Develop an insatiable appetite for information – read what your clients read, monitor industry publications and websites, follow the national and international business media outlets. Almost every article has a trend in it, whether or not you realize it. Learn to look for these trends.
We’ve all heard Wayne Gretzky’s famous quote – so overused that I’m afraid to include it, but yet so profound that I must: “I skate to where the puck is going to be, not where it has been.” Where’s the A/E/C puck headed? While it may be anybody’s guess, if you stay on top of the 31 trends listed above, you should have a pretty good idea about the puck’s trajectory!
Giving Credit Where Credit is Due!
A shout-out to my SMPS friends and colleagues who helped compile this list of trends:
Dana Birkes, APR, CPSM, FSMPS, FPRSA
Chief Marketing Officer, Clifford Power
Holly Bolton, FSMPS, CPSM
Director of Marketing, CE Solutions
Donna Corlew, FSMPS, CPSM
Chief Whatever-It-Takes Officer, C*Connect
J. Kevin Hebblethwaite, FSMPS, CPSM
Executive Free Agent, Hebblethwaite, LLC
Donna Jakubowicz, FSMPS, CPSM
Marketing Director, URS Corporation
Peter J. Kienle, FSMPS, CPSM, MBA
Consultant, Kienle Communications, LLC
Adam Kilbourne, CPSM
Director of Marketing, Tec Inc. Engineering & Design
Frank Lippert, FSMPS, CPSM
Business Development Manager, Parsons Brinckerhoff
William R. Long, PE, LEED AP, FSMPS
Principal & Vice President, Canuso Jorden
Melissa Lutz, FSMPS, CPSM
Director of Marketing/Principal, Champlin Architecture
Barbara Shuck, FSMPS, CPSM
Firm-wide Marketing Communications Manager, Wilson & Company, Inc.
Carla Thompson, FSMPS
Carla Thompson Consulting
Brad Thurman, PE, FSMPS, CPSM
Principal & Chief Marketing Officer, Wallace Engineering
Thomas Townes, AIA, FSMPS, CPSM
Director of Business Development, Van Note-Harvey Associates
Ron Worth, CAE, FSMPS, CPSM
CEO, Society for Marketing Professional Services
So what do you think about this list? What major trends are missing? And do you disagree with any of these trends? Share your thoughts in the Comments section.