Learn from attorneys, business advisors, and other professional service providers on how to avoid commoditization in the AEC industry.
Firms struggle daily with the fact that much of the work in this industry is commodity-driven. While there is talk of specialization or differentiation, the reality is that the majority of work performed by typical design firms is not specialized and the related fees are subject to market pricing. Asking what the market will bear is the primary question instead of what the true value of your services is.
If asked how to avoid commoditization, typical responses for our industry are to specialize, differentiate, and diversify. These are all valid approaches and have worked well for many AEC firms. However, we should also look outside our industry to gain a broader perspective. We bemoan that attorneys, business advisors, and other professional service providers charge so much more than us, but we still pay their fees. Why is that and what can we learn from them?
- Become a trusted advisor. We are a service industry and the highest level of service you can provide is to become a trusted advisor to your clients. This transcends being an engineer or an architect as it means you are proactively helping your client achieve their goals and not just responding to questions thrown your way. This requires actively stepping into that client’s space – leaning into it in order to actively try to change the environment. While we don’t control the environment, we can help to direct it. You still have to deliver technical expertise, but you are also a problem-solver putting issues into context. Trust is gained over time as the client turns to you when they face a challenge requiring your expertise and perspective. It may also mean that you need to make a decision that is not in your personal best interest in the short-term to have bigger gains in the long-term.
- Recognize market changes. By abdicating some of our responsibilities and being slow adopters of technology, we have allowed others to take over some of our space. Manufacturers of specialized systems have stepped in to provide consulting as a “free” service to their customers as their costs can be hidden within the cost of their product. Granted, keeping up with the rapidly changing technology of some of these systems can be daunting, but your client needs unbiased professional advice which may not be forthcoming from the product producer. Our technical expertise has to evolve so we can remain relevant to the discussion.
- Capitalization to enhance growth. The lack of available capital from either internal or external sources can be challenging. Most firms are self-funded, and the owners remove the profits from the firm instead of investing for the future. This immediate reward approach may block the type of innovation and investments in technology that lead to specialized capability. As our industry margins may not be as appealing as newer markets, sources of external funding may also be limited. And we have to approach outside capital with a bit of apprehension as venture capital often comes with performance expectations that may not be achievable, and that may lead to a “bundle and sell” result a few years down the road. Bottom line, we have to be willing to reinvest if we want to change our firms. After all, if you do not personally invest, why would new talent in your firm, much less some external investor, put their funds at risk?
- Invent then deploy. Many firms develop and deploy innovative solutions for their own use, but some are now creating entirely new businesses to provide those same innovations to the industry. We know our industry best so it only makes sense that we also understand how best to innovate our industry. We should not talk about the AEC industry as a “mature” industry as so many societal challenges must be addressed by us and will require innovation. There is also increasing collaboration between academia and industry. Both sides recognize their symbiotic relationship in which neither can succeed without the other. This includes the industry pushing for improved curriculum and academia requiring industry input to shape and fund research with the ultimate mutual goal of attracting and retaining the best and brightest talent. Seek out and participate with the source of your future employees.
- Look to the future. Generational differences are evolving and how generations keep in touch and interact with their clients while still creating meaningful relationships differs considerably. My social media platform involves one-on-one face time, not clicking “like” on LinkedIn, but social media apps are definitely less costly, more accessible, and do not add inches to your waistline. Younger staff will also adopt and deploy technology more rapidly, and, given they do not have all the preconceived ideas of what is the norm, they tend to think outside the box on how to approach and address challenges. Let them be creative. There is risk with this approach, but our most dramatic and exciting changes in firm operations have been created when our young staff asked the question “why?”
There is no better way to avoid commoditization than to actively engage in our industry and with our clients. Embrace generational changes, become more adaptive, reinvest in your firm, and be willing to challenge the status quo. A little change will do us all good.
Stephen Lucy is CEO of JQ with offices in Austin, Dallas, Fort Worth, Houston, Lubbock, and San Antonio, Texas. Contact him at firstname.lastname@example.org.