Over the past year, I’ve been very fortunate to have the opportunity to speak about trends to a number of A/E/C audiences. What has surprised me every time is the lack of attention that firms are paying to trends in the marketplace. I hear it again and again from attendees.
Are you monitoring the trends that could impact your firm? If not, are you prepared to go out of business?
Lee Iaococa, the legendary former chairman of Chrysler, famously stated that you should “Lead, follow, or get out of the way.” By 21st century standards, that seems quaint, doesn’t it?
Today, the idiom is more accurately that you should “Lead, run like hell to catch up, or get run over.” Our industry is littered with the roadkill of firms that were unable to adapt to the changing marketplace. Some went out of business, some merged with other firms, and some were acquired. But the legacy of those firms is a footnote in the history of the A/E/C industry, which is a shame.
Certainly, there are disruptors that seemingly spring from nowhere, that leave solid firms as casualties as they pass through. Think of the subprime mortgage crisis and what that did to banks – which ultimately destroyed the housing industry and sent us into the Great Recession in 2008. No one saw that coming – even the overpaid economic prognosticators, who were caught flat-footed at the depth and severity of the economic crisis.
Unfortunately, many firms stubbornly cling to the thought processes of yesteryear, which makes them ill-equipped for the modern business environment.
For a firm to survive, much less thrive, it is imperative to scan the environment to determine what is happening now, or will be in the near future. And don’t just look at what’s happening once a year as you get ready for strategic planning! (You conduct annual strategic planning, don’t you?)
Trends: What Should You Monitor?
When it comes to environmental scanning, your focus should be on those trends that will impact the markets you serve or your industry (A/E/C) in general.
Macro-economic trends are critical. What’s happening in the marketplace? What’s happening with tax law (for instance, will the recent tax cuts for corporations lead to increased, sustained capital spending in your primary target markets?)?
What’s happening with the stock market? Obviously, when stock values are rising, companies and institutions are more likely to move forward with large capital projects, which impact A/E/C firms. Individuals and foundations are more likely to contribute to capital campaigns and endowments, and rising tax revenues create opportunities for more projects. Likewise, when the bear market appears, firms are less likely to move forward with major expenditures, individuals less likely to donate, and tax revenues decline, all of which negatively impact A/E/C opportunities.
How about legislation and regulatory issues? What changes in laws being considered will directly impact your primary markets or your firm specifically?
Technological advances is another area you need to consider. There’s massive disruption happening to the A/E/C industry as well as our client verticals, and much of it is due to technology. It amazes me that roughly a quarter of firms in our industry have yet to engage in their first BIM project, and Revit is already 17 years old! BIM is yesterday’s trend – and yet it is very much today’s (and tomorrow’s) trend because adoption is not uniform. And so many design firms using Revit primarily use it for 3D modeling, and then they print 2D drawings for contractors to bid!
BIM 4D (adding elements of time) and BIM 5D (adding elements of cost) only have scattered adoption, and the promise of BIM 6D (when the owners take the building models and use the for lifecycle management) is an unrealized dream.
And yet technology marches on. Coming soon to our industry are concepts like centralized information in the cloud that creates “one truth” when it comes to data, as well as generative design, which will be highly disruptive. Imagine using automation, and even artificial intelligence, to create “push-button design,” where human intelligence is required at the front-end and back-end of a project, but machines do a lot of the heavy lifting.
Speaking of heavy lifting, what about autonomous construction? Have you met SAM yet? SAM is the Semi-Automated Mason. While the average human mason can lay 500 bricks per day, SAM can lay 3000. Autonomous construction vehicles are already available.
And while these concepts seem a bit sci-fi, they have the very real potential to enhance design and construction productivity, improve safety, and even elevate quality. Beyond these direct benefits, there is a very real talent shortage in the A/E/C industry, so automation and AI can help offset this issue.
This talent shortage – or “talent war,” as it’s often called – is a trend you need to follow. If you have enough staff right now, you might not tomorrow. Employee recruitment and retention are critical functions of a business, and increasingly A/E/C firms are benefiting from marketing-HR teams that are engaged with everything from attracting potential employees to driving culture to keep existing employees. Should you be concerned about this?
Absolutely. According to the US Census Bureau, across all jobs, the average texture for an employee at a given firm is about 4.5 years. For the Millennial generation, it is more like 2.5 years. Look around your office; the majority of your coworkers may move on within the next five years.
That’s a terrifying concept, especially in this era of talent-driven marketing and business development. Clients have become more sophisticated, and they understand that there are a lot of firms out there trading on project experience of former employees. Increasingly, clients are focusing on the credentials of key team members. That is a theme that I hear again and again, directly from owners and from client panels that I attend. Requests for Proposals (RFPs) have become so restrictive that if you can’t check the boxes for project team members, you need to make a “no-go” decision because you have almost no chance of being awarded the project.
And when you have the people that can “check” those boxes, it is imperative that you do everything to keep them happy and engaged. Losing just one key staff member can mean the difference between pursuing, or not pursuing, a certain market. A/E/C firm with archaic policies need to update them to remain attractive to current and potential employees.
Your firm also needs to be monitoring what is happening with single family residential development – whether or not you directly serve this market. Our industry feeds off this market. When a new neighborhood is designed, infrastructure firms benefit: new roads and bridges, new electrical, water, and wastewater systems. Manufacturers benefit – building products, appliances, etc. As more adjacent developments are constructed, retail takes notice. Perhaps a neighborhood convenience store or gas station first, then a strip center with grocery store, then restaurants and other retail. Schools pay attention to demographics. They need to understand housing trends to determine if schools need renovated or expanded – or if new schools need to be constructed to bring education close to these new developments. Health care pays attention, too. In this modern environment, where health care systems focus on the hub and spoke, their spokes are neighborhood outpatient clinics. Health care systems build new clinics near their customers. Ultimately, even government facilities may follow the new housing developments.
If you want to go where the work is, geographically, pay attention to housing trends. Also pay attention to home ownership. One of the reasons why the current economic expansion is not as robust as prior ones is the demographics. We have more people entering retirement and downsizing – you’ve probably read the statistic that 10,000 Baby Boomers retire each day in the United States. Unfortunately, home ownership is at its nadir in recent decades. But as Millennials get married, start families, and pay off student debt, home ownership will increase, which will drive much of our industry.
Still think it is not important to follow trends? We’re just at the tip of the iceberg here.
Where are government dollars being spent? What happens if the current administration succeeds in its goal to spend one trillion dollars on infrastructure? Where will that money come from? In many cases, it involves robing Peter to pay Paul. So if Federal dollars are funneled to our crumbling infrastructure (and let’s be real: one trillion dollars is a few trillion short of just getting our infrastructure where it needs to be!), what does that mean for military construction spending? Or VA facilities? Or GSA? Beyond Federal markets, what does this mean for state and local governments that rely on Federal dollars to spur construction projects?
You also need to pay attention to the specific markets you serve. What is happening with health care delivery and government regulations? How will that change facilities in the future? How about higher education? What are the trends in enrollment now that the Millennial “bubble” has worked its way through? Just last week I attended a higher education panel discussion, and facility managers were discussing the challenges their institutions are facing with declining enrollment. Furthermore, how are private endowments faring? What about state funding to colleges? And distance learning – what impact is that having on college campuses, particularly in an era with free online courses and iTunes U?
It doesn’t matter which markets you serve, this information is critical to the prosperity and even survival of your firm!
Environmental Scanning: Who Should Do It?
Most firms cannot afford a full-time researcher. Fortunately, many firms already have professionals uniquely qualified to conduct this research: your sales and marketing team. They are on the front lines of data gathering, whether meeting with prospects or reviewing RFP criteria. Many also have been trained in research though their chosen degree. But they end up in the A/E/C industry, only to find that 90% of their skill set is either underutilized or not utilized at all!
Alas, they are too busy chasing down low-potential clients or working on low-probability proposals. If A/E/C firms would employ more stringent go/no-go criteria, they would free up their sales and marketing professionals to more effectively apply their talents!
What is the highest value use of these professionals? If you’re honest, it’s not what they are currently doing! Marketers in our industry rarely market because they are utilized as sales coordinators, working on proposals and presentations, which is part of the business development process, and definitely not marketing. Just because their title says marketing doesn’t mean they are actually empowered to market. Stop wasting their time with low-probably pursuits and proposals and let them actually add value to your company!
I’ve been to quite a few chapters, regional conferences, and national conferences for the Society for Marketing Professional Services, where I also serve on the board of directors for the organization. No mater where I go, a common theme is the abysmal approach that firms have to the go/no-go decision-making process! Even for firms with a formal process and detailed forms, bad scores are often overridden by principals and project managers who say, “Yeah, but…” And then they waste tens of thousands of dollars pursing work that their firm has almost no shot of getting.
What if your professionals weren’t bogged down wasting their time on these pursuits? What if they could be trendspotting, and determining which trends will be most impactful your firm? What if they were interpreting these trends and finding ways to gain a competitive advantage by leverage your capabilities and credentials – or making recommendations for strategic initiatives that could position your firm for the future?
Wouldn’t that be something?
No matter who conducts environmental scanning, it is critical that your firm embrace the process, assign a champion, and provide the tools and resources they need to succeed. The primary resource for them is of course time, but other tools and resources could include obtaining magazine (online or in print) and databases subscriptions, going for specialized market research training, attending conferences and conventions, joining client and professional organizations, purchasing studies, etc.
Prepare your firm for tomorrow by focusing on the trends and disruptors that are happening or heading toward you today. The key to your company’s vibrant future lies in the success of uncovering and understanding this information. Empower your marketing and business development professionals, assign a principal, or take on that responsibility yourself. At the end of the day, this use of time is of far greater value to your firm than more wasted project pursuits that should have had “no go” written all over them.