By Robert Buday, President, Bloom Group LLC
Last month 14 KA Connect members weighed in on what emerged as a weighty issue:
how to convince an architecture /engineering /construction CEO that his firm needs knowledge management and thought leadership to thrive in the years ahead. But before summarizing what everyone said, let me explain why I agreed to Christopher Parsons’ request to write this guest post in the first place, because one could imagine the LinkedIn thread (now 62 comments long) being robust enough to stand on its own.
But I don’t think it is. If it’s a true microcosm of sentiments in the AEC industry, what it says to me is this: The AEC business needs a wake-up call. Now! And all of you on KA Connect need to be the ones who sound the alarm. It doesn’t seem like your CEOs are going to do it. You have to light the fuse or I doubt it will happen – until it may be too late.
So how do you light the fuse? As I stated in the thread, it comes down to playing to your CEO’s greed and fears. In what follows I will replay some of what we heard and tell you what I think it means for you as change agents in your firms (a role that you will see I’m saying you must play).
Selling KM and TL to a CEO on the basis of greed boils down to this: Demonstrate that his firm will make a lot more money if it develops services that provide uncommon levels of customer value. And such services, by definition, must be differentiated – i.e., they must offer unique insights and processes. To do this, Chris Parsons counseled us to share stories of how AEC firms like Cannon Design, WHR Architects, KieranTimberlake and Public Architecture created and marketed differentiated expertise (through books) to win business. As Amanda Walter reminded us, the ability to provide differentiated expertise requires you to have differentiated people. KM and TL “should also be sold to your executive as a major brand attribute,” one that can be used not only to lure clients but also entice new employees and induce existing talent to stay.
The fear part is this: Unless you want to see thousands of AEC jobs in North America soon shift to other parts of the world, your employers need to get serious about developing truly superior AEC services here staffed with people with highly differentiated skills. Realize that I am totally for jobs going wherever in the world it makes best sense to do them. I am not a protectionist. If a firm in Malaysia, India, Mexico, Egypt or another country can do the work of a professional firm for far less money and just as well (or well enough), the more power to that firm. It deserves the work.
The flight of AEC work is unavoidable, as Ed Friedrichs said. “Over time, particularly on projects of significant scale, [AEC firms] will move toward global or most efficient/cost effective sourcing of work and talent, just like the automobile or software industries.”
But if we want to make sure our country creates substantial job opportunities here in the AEC industry, firms in the sector will have to make service R&D investments that they aren’t used to making, and service R&D jobs that aren’t on their org charts today. And that isn’t just to create jobs but to create competitive advantage. As Ed Friedrichs told us, U.S. firms will soon be at risk to firms outside the U.S. that set up shop here and electronically send the “knowledge work” back home. As he mentioned, because American A&E firms several years ago set up production staff in these countries, many of the skills now exist there. “As people in [China, India and the Philippines] become increasingly skilled and knowledgeable about American design standards, technology and practices, and as design talent evolves ‘at home,’ we will see the emergence of Chinese, Indian and Philippine-based firms that can design as well as produce.” All they’ll lack to win business in the U.S., he said, is a local presence on the project. That’s the easy part. As Ed said, “They won’t need the Western brand and ‘Good Housekeeping Seal’ for much longer.”
So having a differentiated service – one that justifies a 20%, 50% or greater price premium – will become crucial. And that, in turn, will require AEC firms to ramp up “knowledge management.” (Note: I’m not sure “knowledge management” is the best term for this because it too often is regarded as a library function. What we’re talking about is AEC services R&D – creating innovative and superior ways of designing, engineering and constructing buildings.) As Mark Loomis pointed out, when times get tough, too many AEC firms gut R&D. But over the next 10 years, I believe this will create as big a risk as it has for high-tech firms in the last 20 years. (Apple almost went bankrupt when Steve Jobs wasn’t there to protect R&D spending.)
In addition to selling your CEOs on why your industry (like the automotive, chemical, high-technology, software, and countless other sectors before it) now needs to get serious about services R&D, you’ll need to explain why they need to invest in educating customers about why your firm has superior ways of designing, engineering and building buildings. That means investing in thought leadership marketing.
Now a big challenge with all of this is that AEC firms didn’t need KM and TL in the past. But I’ve seen this movie before – in the industry where my firm has largely provided thought leadership marketing services (consulting and IT services firms). The trend of off-shoring services that have become commodities has been in full swing for a decade in these two sectors, although to a much greater extent for IT services than the pure advice-giving consultants. Indian firms alone have taken $60 billion out of the $1.5 trillion market for IT and business process outsourcing services. Their share continues to increase, according to research firm Offshore Insights.
But maybe AEC firms are different, something on which Michelle Howard had a great point: Unlike management consulting firms, whose products are highly intangible (unless their advice wrecks your business), the products of AEC firms are not. You’ve built a building. That demonstrates your expertise. However, while I imagine one’s portfolio of buildings will continue to be a tool that influences the client’s decision, I also believe that when several firms all have impressive portfolios, the winner either wins on price or superior solution (which includes but goes far beyond the looks of the building). So on which basis do you want to win? If it’s price, I predict your firm won’t be around by 2020.
But whether or not you are for protectionism, I have to say that your (and my) opinions on this don’t matter. Only your customers’ opinions do. If your CEOs think customers won’t necessarily choose an offshore provider that can design and engineer (with comparable quality) a structure for half your fees, they are in for a rude surprise. If they respond to such off-shore competitors as the US automakers did to the Japanese car makers in the 1970s – i.e., belittling their quality – they are ripe for losing market share. And by the way, we should expect off-shore based AEC firms to catch up on quality, the way the Japanese automakers (and now Korean) have surpassed the U.S. manufacturers.
So if I was writing a book about the state of the professional services industry, my book proposal would start out something like this:
“Once upon a time, U.S. businesses like consulting, architecture, engineering, accounting and law firms had their markets to themselves. They could be sloppy and worry only about the competition in their geographies because the oceans were their moats. But the world has changed dramatically. Any profession whose work can be digitized and transmitted easily and inexpensively to another part of the world is competing now against the whole world.
“That dramatically changes the competitive equation. With IT and the Internet, no longer can AEC firms trade on clients who are ignorant of their options, competition that is local, prices that can’t be debated because clients have little choice (especially during construction booms), and making money on mediocrity. Those days are over.
“The AEC empires of the next 10 years will go to the firms that design, engineer and build much better office buildings, college campuses, parking garages, cafeterias, hospitals, factories, and other structures– just like the consulting and IT services empires went to firms that provided much better advice and far better software. Those that don’t have a superior offering will be competing on price – and losing to firms with major cost advantages.”
So will your CEO enjoy reading that book? I bet not. And this is where all of you come in – people who I sense are largely not at the top of your firms but are trying to get the folks at the top to recognize the value of leveraging the firm’s knowledge assets.
You need to start telling a compelling story to your CEOs. It starts with the need for competing on the basis of having superior services. It then is about how winning on the basis of innovative services requires collecting the experiences of the people who today do something very well (in your company and others), looking for practices in other industries that can be transferred to yours, seeing the patterns that lead to success, and formalizing processes that have not been codified. Then through methodology development and internal training and development, many other professionals in a firm can begin to gain those skills and practices.
That is the work of knowledge management. As Alan Mays said, that is a far cry from days when an AE firm’s knowledge database was what was in the heads of its chief draftsman and (later) the QC department.
The work of thought leadership marketing, then, is to let the world know about those new, superior skills. That, as Jeffery Lynch said, will require AEC subject experts to make the time to explain the superior services they develop. Conversely, as John Doehring said, it will require the AEC chief marketing officer to be “the prophet and evangelist in a city of unbelievers.”
Winston Churchill once had his own label for these types of people. He called them fanatics. “A fanatic is one who can’t change his mind and won’t change the subject.” Given that the executives atop AEC firms are not there yet, my short-term recommendation is that those of you who head up knowledge management and marketing need to become Churchill’s fanatics. I wish you all the best and remind you (as Churchill did with our relatives in the 1940s) to never give up.
About the Author
Bob Buday co-founded The Bloom Group in 1998. Since then, he has worked with numerous professional services firms on thought leadership content development, marketing strategy and marketing programs. He has helped his clients publish six Harvard Business Review articles since 2002 (see some of them here), and has published two of his own HBR articles, "A Consultant’s Comeuppance" (February 2003) and "Marketing Breakthrough Products" (with Tom Waite and Allan Cohen, in 1999).
Prior to The Bloom Group, Bob for 10 years was director of marketing at CSC Index, a management consulting based in Cambridge, Mass., that caught the attention of executives worldwide with the concepts of business reengineering and the value disciplines. Bob played a leading role in making reengineering a household word, directing Index’s extensive publications, PR, and survey research activities.