Ronald David Laing, the great Scottish thinker and psychiatrist, once poignantly remarked, “We live in a moment in history where change is so speeded up that we begin to see the present only when it is already disappearing.” As you ponder that quote, see if you can name this country:

• Richest in the world
• Largest military
• Center of world business and finance
• Strongest educational system
• Currency used as the standard of valueacross the world
• Highest standard of living

If your answer was England at the turn of the 20th century, then you know that change does happen. The A/E/C industry has witnessed this level of fundamental, accelerated change firsthand over the last two years. As our world becomes increasingly connected, it becomes more likely that our industry and economy will continue to experience dramatic and sudden events spurring change. The peaks and valleys will become more acute. That said, some firms have thrived in these disruptive times and have positioned themselves well to continue to adapt in a world marked by heighted uncertainty. We would like to share a few lessons learned from our clients that have weathered the current cycle of change
and remained agile as the sands continued to shift beneath the foundation of our industry.

Drivers of Change

While the future notoriously eludes our best attempts to plan for it, there is little doubt that signposts exist for business leaders to use in guiding their businesses forward. In the midst of so much uncertainty, FMI and a forum of industry leaders engaged in a collaborative scenario planning event to understand the possible futures that might unfold for our industry going forward: the “Future of the A/E/C Industry” report was published in 2010. The study identified six drivers and accelerants of change that today’s leaders in the A/E/C sector must evaluate in order to prepare for continuous change:

Global: Globalization is the tendency for or against free trade, levels of international hostility or alliance, and the ability of companies and citizens to work, travel and immigrate internationally.

Social: Social norms, mores and expectations are the differences between classes, education and training levels, relations between people and organizations, desire and ability to relocate, and societal aspirations or expectations.

Technological: This includes the research, development and application of innovations and technologies, particularly as they affect the A/E/C industry in process use and application of labor and other resources. Examples include Building Information Modeling (BIM), nanotechnology applications for new materials, etc.

Economic: Economic performance includes the macroeconomic trends at both a global and national level for money supply, debt, lending practices and growth expectations, in particular, as these factors affect the A/E/C industry.

Political: Political stability is the trend toward or away from democratic society, the maturity or stability of governments, levels of corruption and the tendency to be bureaucratic or lean and efficient.

Environmental: Environmental influence is the rate at which people embrace practices that lead to cleaner air and water, growth of alternative energy infrastructure and sustainable living practices, especially as they affect the built environment.

By considering all of these exogenous forces and understanding their interdependencies, one can overcome the conventional wisdom that the A/E/C industry does not shape its own destiny; instead, it continuously reacts and responds to economic fluctuations, customer needs and demands.

Lessons From Firms Successfully Navigating Change

In our travels around the industry, we have had the good fortune to work with many firms that not only embrace change but also thrive on it. Our time with these agile and focused companies has afforded us the opportunity to study some of their best practices when it comes to adjusting and adapting to the forces of change that present both opportunities and threats in the marketplace. A few of these critical lessons include:

1) Avoid the trap of thinking that the future is likely to mirror the past. Organizations must:

• Think deeply about how well-prepared they are for a dramatically different future by benchmarking themselves against known long-term trends and industry drivers. Perform a gap analysis between the current state and potential states of the future.
• Incorporate scenario planning into the strategy development process to ensure that plausible and seemingly far-reaching states of the future are evaluated.
• Challenge management teams to think both practically and creatively about how organizations will adapt and survive if they face situations where the viability of their core business models are threatened.
• Challenge the conventional wisdom that inevitably creeps into strategy discussions and identify those past assumptions that are no longer valid. Pursue outsiders to help challenge the status quo and avoid the trappings of insular thinking.

2) As the world around your firm changes – change your strategy.

• Know thyself. Research shows that many failures occur when firms chase new markets – they have to be brutally honest about their capabilities to move into markets where others have made a living for years.
• Diversify logically and prudently into areas where risk can be effectively managed. Avoid big leaps unless you have a strategy in place to bridge the gap between current competencies and those required for success in the new arena.
• Segment your strategy between what is necessary to protect market share and what is required to grow market share, if you are well-positioned in a viable marketplace. Markets with real project opportunities are fast becoming everyone’s specialty.
• Take advantage of an increasingly favorable mergers and acquisitions market to quickly gain competence in a new area, deploy excess capital on the balance sheet, drive substantial post-recession earnings and alter the competitive landscape.

3) Now is the time to make bold changes.

• Do not miss an opportunity to reshape your organization for the long term. Many executives have been using the cover provided by a deep recession to recast the future direction of their firms.
• Outlier events have occurred that necessitate a bold strategic response. Be cognizant of paralysis and act quickly once the right decision or opportunity presents itself.
• If your firm is well-positioned in key markets or has a strong balance sheet, take advantage of the opportunity to acquire attractive targets and weaken the competition.
• Some international markets are much stronger than U.S. markets – overseas diversification will be the primary earnings driver for many of the industry’s largest firms.
• If you choose to stay in place, do so intentionally. Know that you are operating in your sweet spot and respond appropriately to the environment. “Doc” Emol Fails, FMI’s founder, coined the phrase, “Profit thrills, volume kills,” which could not be more appropriate in this environment.

Change happens. Successful companies realize that change can offer opportunities for growth and profits. It is one of the few certainties in business – embrace it and make it work in your favor.

Written by Briston Blair  

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