Blurring boundaries

Why is industry convergence happening?

• Clients want holistic solutions that align business strategy with the right project, ownership and operating model, funding and financing, risk profile, and life-cycle costs.
• Clients are focusing on sustainability and technology (e.g., green building design, decarbonization, smart building technology, and life-cycle costs).
• Clients have limited in-house resources. They need outside help.
• Project size, complexity, and financial structuring are increasing.
• Client organizations and A/E firms increasingly strive for differentiation and competitive advantage in their respective markets.
• A/E firms strive to attract and retain the best people. Advisory services provide professional growth opportunities and alternate career ladders to reduce turnover.
• Artificial intelligence provides AEC leaders the opportunity to innovate and add new value, including more strategic insight, to traditional business models.
• Huge market opportunity. ($400,000/FTE (management consulting) vs. $200,000/FTE (AEC))

What are these advisory services?

Advisory services include strategic and project development services sold to customers at the earliest stage of the project lifecycle, and advisory services provided at all other stages as illustrated in the AEC Project Value Chain below: 

AEC Project Value Chain – Adding New Value, Gerry W. Devine, 2023

A partial list of strategic and project development advisory services are summarized below:

• Clearly define the client’s problem or opportunity by articulating the strategic drivers for new capital investments (e.g., demand exceeds supply, regulatory changes, technology obsolescence, financial and economic opportunities).
• Formulate new development and redevelopment strategies.
• Optimize a portfolio of capital assets.
• Evaluate alternative ownership and operating models (e.g., private, joint-venture, public, P3 models, public-public, special purpose company, co-operative, shared services entity, non-profit society).
• Evaluate options (build new, modernize and expand, repurpose, acquire, lease).
• Prioritize projects in a portfolio of capital assets.
• Develop funding and financing strategies.
• Prepare capital and operating cost estimates (e.g, Class A -D)
• Prepare financial analysis (e.g., pro-formas, total cost of service, life cycle costs, NPV, IRR3, benefit cost ratio, payback period, profitability index, cash/cash return).
• Prepare a risk analysis.
• Prepare a market sounding and procurement strategy.
• Prepare feasibility studies.
• Business case development.

What are the benefits for clients:

• Enhanced decision quality and risk management.
• Launch new initiatives and achieve innovative business outcomes through integrated strategic, financial, technical, and project delivery thinking.
• Re-think proposed projects that are stranded.
• Optimize total cost of service delivery and life-cycle costs.
• Obtain additional resources to complement in-house resources.
• Smarter and faster decision making.
• Establish new partnerships and new sources of capital.
• Develop projects with triple bottom line impacts – economic, social, environmental. 

What are the benefits for AEC firms:

• Be the clients’ strategic partner.
• Shift from commoditization to new value creation (e.g., price setter vs. price taker).
• New business development skills for executive leadership, senior leaders and project managers. Provide new value to clients as part of the M&BD process.
• Paid business development (e.g., advisory services fees provide insight into a pipeline of potential projects).
• Advisory services, integrated with traditional pre-design services, create competitive advantage and new business opportunities.
• Accelerated growth and increased profitability (Increase the “win rate”, project backlog, and project margins).
• Staff attraction and retention (Career ladders into advisory services).
• Content marketing opportunities.

Where is industry consolidation sitting today?

Advisory services are emerging in small to medium-sized firms, developing in large AEC firms, and mature in management consulting firms.

How to implement and grow advisory services:

• Upskill your executive leadership, sector leaders, technical leaders, and front-line project management leaders (e.g., webinars, lunch and learns, master classes).
• Outsource advisory services to qualified sub-consultants (e.g., “buy versus make”).
• Establish a new venture in-house (e.g., “make versus buy”).
• Acquire boutique management consulting firms.
• Strategic hires.
• Acquire larger A/E firms that already have niche management consulting expertise.