Adapting your business in a changing marketplace
by Matthew Gill
December 8, 2016

The pace of change in the architecture, engineering and construction (AEC) industry is accelerating, and many leading organizations may not be prepared for the inescapable shifts taking place. AEC companies increasingly experience the impact of changes in how clients select design consultants and in how projects are funded. Global competition is growing as geographic barriers become more inconsequential.

The high level of merger and acquisition (M&A) activity, with a 4-percent increase in domestic deals in 2015 over the previous year and a 5.6-percent increase in international deals, is transforming the AEC industry as well. The experiences, insights and skills that were fundamental to success in the past can prove counterproductive to strategic decision making in today’s market. Firms that are thriving in the changing AEC market are building capabilities that allow them to adapt to changing market conditions quickly. Below are four strategy shifts that can help you enhance your organization’s agility and competitive success in the changing marketplace.

1. Replace episodic planning events with continuous planning

How often does your leadership team review your company’s strategy? On average, 64 percent of AEC firms have a current strategic plan and update it once every 3 1/2 years, according to data compiled from an ongoing “State of Strategy in the AEC Industry” study, which features industry data from more than 115 AEC firms and business units. Firms should create a robust core strategy, but follow up with continuous review and evolutionary planning. This helps leadership teams shift their focus from long-cycle, episodic strategic planning events to a continual process that links long-term assumptions and decisions to short-term goals and 6-month planning checkups. The best firms go a step further by integrating continuous planning with their operating systems. They are constantly evaluating and searching for opportunities that are seamlessly integrated into operational activities. However, strategy without alignment, engagement and execution is worse than useless.

2. Create an organizational structure that is guided, not controlled

Businesses in the AEC industry tend to favor a more highly structured organizational framework. However, the companies who are positioned to succeed over the next 5 to 10 years will place a premium on less centralized, networked and adaptive organizations that are guided, not controlled. Adaptive organizations demand adaptive leaders. Leaders ask better questions, create the right environment for honest exploration and build teams of strategic thinkers that thrive in new and evolving environments. This adaptive style thrives in an organizational structure that emphasizes facilitation versus command and control.

3. Optimize your firm for efficiency while actively embracing change

One of the greatest challenges that leaders in AEC firms face is managing the apparent conflict between becoming ever more efficient and increasing an organization’s ability to identify and systematically implement major change efforts. These two goals often seem at odds with one another. However, the successful firms of the future will do both—pursue continuous improvement and greater efficiencies, while at the same time increasing agility in identifying and driving key changes. Efficiency is critical as workforces come under increasing pressure and competition accelerates. Successful firms recognize that change, like strategy, is a way of thinking and acting that is embraced across the organization.

4. Make market intelligence an ongoing part of strategy

A majority of AEC firms are very client- and project-focused, but many lack the broader market insights needed to position the firm strategically. Only 22 percent of firms surveyed were satisfied or very satisfied with their efforts in market intelligence or proactively positioning their firms to compete and win. Successful firms are making market intelligence and strategic sensing an integral part of what drives both their businesses and their strategy. Many AEC firms only recognize opportunities once their peers and industry trades have collectively identified them, often taking action after the wave has crested and is receding. Success in the future will rely on more frequent insights into current and potential clients, markets and competitors. It will reward firms that value learning, demonstrate a willingness to take intelligent risks and shorten the “opportunity to action” decision loop.