AEC Firms Invest in Technology for a Competitive Edge, So Can Yours

Wealthy Friedman

A pattern in the previous couple of years is the rising variety of structure and engineering companies and building firms with technology-based subsidiaries or divisions.

This extends past the widespread instruments utilized by architects, scientists and engineers, resembling 3D modeling or computer-aided design and drafting, to proudly owning expertise processes or merchandise utilized in challenge supply which have historically been a reimbursable merchandise or subconsultant service. There are advantages and challenges of this rising follow and far will be discovered from examples of the experiences of two industry-leading companies which have made this leap.

Alternative Knocked

Environmental Science Associates is a 700-employee environmental consulting agency with 21 workplaces throughout California, the Pacific Northwest and the Southeast. In late 2021, it acquired 36-person Sitka Technology Group, which develops and manages information infrastructure for conservation, restoration and sustainable growth. With Sitka because the centerpiece, ESA launched its new Expertise Companies Group in 2022. 

ESA President and CEO Leslie Moulton-Publish stated the acquisition was a logical step in an space of follow changing into more and more extra reliant on expertise. 

“We’re an environmental science firm at our core,” she stated. “We do plenty of subject assortment, and we’ve superior from paper types to tablets and drones. With new expertise instruments, you may acquire information sooner, put it on the cloud, and get it again in actual time. Additional, rising the scope of scale of your information administration, analytics and visualization capabilities not solely will increase efficiencies, it unlocks larger insights and higher resolution choices. As all this expertise exploded, and as we wanted to deal with extra information on a a lot greater scale, we put a method in place to turn into a extra technology-focused group.”

ESA started creating its personal software program merchandise in hydrology, biology, subject information assortment and environmental documentation, hiring information managers and software program builders to get it off the bottom. On the similar time, it was teaming on a number of initiatives with Sitka Expertise Group, which was offering information administration companies much like what ESA was creating, however at larger vary, depth and scale. Merging forces was the pure evolution for each companies – for ESA to develop its expertise companies space, and for Sitka to broaden its attain.

“After we determined to see if we may deliver Sitka in home, we knew that they’d make us a stronger tech-enabled agency and get us to the place we needed to be sooner,” Moulton-Publish stated. “They’ve achieved that; they’ve been a robust addition. They’re additionally nice businesspeople, and so they’re consultants as effectively. That is essential as a result of we don’t simply promote our purchasers {hardware} and software program; we promote them options.”

Moulton-Publish provides that ESA is dedicated to utilizing open-source code {that a} consumer or neighborhood can construct on. Its personalized expertise platforms are tailor-made to a consumer’s particular wants, and the agency gives subscription administration companies when requested.

Shoppers Spoke, They Listened

For 1,500-person design, consulting engineering and infrastructure advisory agency Moffatt & Nichol, the choice to delve into technology-based services was a easy matter of listening. 

“If there’s a necessity and nobody else in that area is filling it, your purchasers will inform you; you simply must hearken to your purchasers,” Eric Nichol, president and CEO, stated. “Our purchasers had issues that couldn’t be solved within the engineering area. The options they wanted required expertise that we didn’t have. So we made the choice 12 years in the past to purchase supply code and create a growth crew.”

The way in which Nichol sees it, A/E companies are higher outfitted to offer expertise options to their purchasers than a devoted vendor of {hardware} or software program. 

“Now we have the area information of what our purchasers want and the way we can assist them resolve their issues. Growing the expertise is secondary. Expertise companies will attempt to create an answer based mostly on what the expertise can do. However we all know our purchasers’ wants and the way the expertise can meet these wants. After you have that mindset, you may give attention to fixing their issues, not on the bells and whistles.” he defined. 

Moffatt & Nichol’s expertise choices embody FlexTerm, which is the outgrowth of a simulation and emulation software program product known as FlexSim CT (which stands for “container terminals”). Moffatt & Nichol, the ENR #1 ranked agency in marine and port amenities, collectively developed the product after which bought it from FlexSim (now a part of Autodesk) in 2012.

FlexTerm’s capabilities have allowed Moffatt & Nichol to offer its maritime purchasers with the fast-growing device of digital twinning. And whereas the FlexTerm product was initially meant solely for container ports, they discovered it’s also helpful for optimizing rail, ferry and wind port amenities.

Moffatt & Nichol employs greater than 50 builders, with about 40 in Spain and 15 in Southern California. The agency is at the moment testing two different expertise merchandise associated to ports and marine terminals.

Valuing Expertise

There are myriad advantages to having a proprietary expertise to supply purchasers, together with: 

Differentiation. Most A/E/C companies stay centered solely on the skilled companies facet of the {industry}. Branching into expertise is, in the intervening time, a differentiator.

Market Management/Vertical Integration: Going a step additional, by offering skilled companies and expertise to a selected consumer market, a agency positions itself as a market chief. As illustrated by the experiences of ESA and Moffatt & Nichol, a expertise element extends the consumer relationship from conventional design companies to the precise implementation of these options — which may make a agency an indispensable useful resource for its purchasers.

Income Development/Diversification: A expertise product results in extra income from a larger variety of sources. Not like different diversification methods, this will likely not guard as effectively towards a downturn as a result of the AEC companies and tech merchandise are prone to be centered on the identical current core markets. Nevertheless, it will probably improve the variety of methods to help a consumer, prolong the time frame that income is earned in a challenge, and entice new and completely different purchasers within the expertise product you’re providing.

Mental Property Possession: Growing proprietary expertise companies can result in the creation of useful mental property (IP), resembling patents, emblems or commerce secrets and techniques. This IP can present a aggressive benefit and doubtlessly generate further income by licensing or royalties.

Future-proofing: Companies that develop expertise to satisfy rising traits, resembling digital twins and superior machine studying, guard towards commoditization and enhance the probability of long-term sustainability. Moulton-Publish stated, “In our strategic plan, we acknowledge that being a tech-enabled agency is our future. This contains establishing a tradition and mindset round expertise and innovation, along with offering a selected expertise product.”

Recruitment and Retention: Having a expertise providing isn’t solely a differentiator for purchasers, it may also be an thrilling, attractive characteristic that may assist set the agency aside in recruiting and retention.

The Challenges of a Tech Product

One other profit for AEC companies that present a expertise resolution is that it may be a gateway to worth pricing. For companies in search of to base their income on the worth of their work as a substitute of the time they spend doing it, this may be the motivation they should escape the entice of charging by the hour.

This is usually a double-edged sword. Expertise distributors historically promote subscriptions or one-off merchandise, so adapting an AEC agency’s operations to accommodate this may be problematic. Eric Nichol stated, “Our largest problem has really been our accounting system. Software program gross sales and subscription income, coupled with 100% overhead growth time, doesn’t play effectively with how skilled companies take into consideration enterprise.” 

The experiences of ESA and Moffatt & Nichol supply just a few different suggestions for companies contemplating the leap right into a expertise product:

Growing expertise isn’t a part-time job: It may be tempting to attempt to take an current worker adept at laptop programming and allow them to take a stab at creating a software program product. Nichol advises towards this concept. 

“To succeed at creating expertise, it must be very purposeful,” he stated. “It’s a must to get out of the mindset that this is usually a aspect job. It must be all they do.” 

It’s important that the A/E/C aspect understands the expertise aspect of the enterprise: Some agency leaders have been gradual to know and be capable to pitch [the technology] as a part of what ESA does, Moulton-Publish stated. 

“That has been just a little irritating – it’s a studying technique of change administration to combine expertise all through ESA, inside and outside,” she stated. Because of this, the agency has redoubled its efforts to have Sitka’s key folks work together with its legacy workers and leaders to speak and inform them about how the expertise works and advantages a challenge.

The event aspect wants help and autonomy, not interference or heavy-handed “steerage:” “We’ve been at this for 12 years and we’ve discovered so much alongside the way in which,” says Nichol. “We rent builders who haven’t any bother explaining what they’re doing so everybody can perceive it. It’s a must to rent the correct folks, give them the help they want, and test in with them on a regular basis. You possibly can’t micromanage it.”

Wealthy Friedman is president of Friedman & Partners, he has labored in and consulted for the AEC and environmental consulting industries for greater than 25 years.
You possibly can write Wealthy at rich@friedmanpartners.com or name him at 508-397-9213. He would love to listen to any tales about companies’ experiences creating expertise.