Australia’s engineers, architects and planning consultants are transforming the way we work, live, move and connect in our physical environments. And unlike other professional service consultancies, technology has not just changed the way they deliver their advice – it has transformed every detail within their scope of work.
From self-driving cars and drones to 3D-printed materials, future buildings and infrastructure need to allow for the impact of future technology. And with challenges such as housing affordability, climate change and urbanisation, there is pressure to rethink the way our built environment is planned, constructed and managed.
A split in the market
There has recently been significant market consolidation, with international acquisitions of Australian firms creating major global organisations. At the other end of the spectrum, forming around 85 per cent of the segment,1 are small specialist consultancies with 10 staff or fewer. Adjacent players are also making a move into this market, with major accounting firms expanding their infrastructure advisory practice – typically for major government investment and private-public partnerships.
“This is a sector ripe for globalisation,” explains Megan Motto, CEO Consult Australia. “The technical advice behind infrastructure is universal, and we are seeing more collaborative models to spread the risk of large-scale projects.
This leaves the middle of the market needing to articulate a clear value proposition to the market. This may come through specialising in value add services – such as the application of IoT technology in aged care, for example. Motto is also seeing a rise in multi-disciplinary practices in this segment, combining engineering, town planning, architecture, environmental approvals, community engagement, and quantity surveying services through partnerships or in-house acquisitions.
Margin pressure in a competitive market
Builders describe the recent market cycle as a ‘profitless boom’, with margins as low as two or three per cent. For contractors and consultants, maintaining sustainable profits as the development cycle peaks will be challenging – particularly if they’ve specialised in an area such as multi-residential that is now slowing down.
“Some are feeling the margin squeeze but others are doing well,” says Motto. “The difference is the efficiencies they’ve built into their offices, and how they focus on outcomes and value rather than outputs in billable hours. The way knowledge is managed digitally within these firms also allows them to quickly draw on best in class expertise for a specific project.”
To quickly position for the next wave of asset investment – such as education, hospitals or aged care – it may be necessary to acquire the talent and client book. But that again carries risk in a highly cyclical environment.
Staying on top of the next wave of tech
From big data and robotics to IoT and 3D printing, almost every new technology advance is impacting the way our built environment will be designed and constructed. This technology has the potential to significantly lower the long-term costs of management and maintenance, as well as the impact on the local environment and the experience of using the asset.
For example, the world’s first 3D-printed concrete bridge recently opened in Amsterdam, capable of bearing up to two tonnes in weight. This technique means fewer resources are needed, and less waste is created. In Russia, modular home construction has also demonstrated the potential to shorten project design and engineering time, providing more affordable, comfortable and eco-friendly housing – even in high-rise apartment buildings.
In the UK, the government’s Digital Built Britain program brings together BIM (building Information Modelling, which has been mandated for all government real estate), Internet of Things (IoT) and smart cities as a single strategy. It aims to reduce whole-life costs and carbon emissions while improving productivity and capacity. The Australian government is now embarking on a similar journey with its Smart Cities program, and there is widespread adoption of BIM, 3D design and digital manufacturing and fabrication technologies.
“Collaborative digital tools like BIM have the potential to massively change the game for design, construction and particularly facilities management,” says Motto. “Less wastage, earlier clash detections, better cost modelling – it’s really exciting, but there are still some interoperability challenges.”
Asset owners and developers rely on external consultants to ensure all these opportunities are embedded into the design – and any potential risks are identified and managed at every step of construction. So it’s never been more important to be informed of what’s possible now – and in the future.
Staying on top of the next wave of tech
Proactively manage the tension between construction and tech-enabled design
While consultants and major developers have moved quickly to embrace the potential of tools like BIM, builders have traditionally been slower to change long-embedded construction techniques. By building knowledge and capabilities across their partnerships, built environment consultants can add more value to the project delivery.
Avoid playing in a commoditised space
If everyone has access to the same tools and technology, the technical skills and expertise underling a built environment practice becomes commoditised. This is where relationship management becomes increasingly vital. Motto suggests taking the lead in advising government on how to manage the global infrastructure challenges of urbanisation, giving the financial and physical constraints every country faces. “This is a huge opportunity for our sector to use the voice we have.”
Focus on filling staff skill gaps
According to Consult Australia’s 2016 Skills Survey , just over half of built environment firms are recruiting, and there’s a skills shortage. 43 per cent also reported staff being ‘poached’ by other firms. To fill those gaps, 29 per cent were considering mergers or acquisitions.
Firms with owners who are approaching retirement may be good targets for acquisition, but make sure you run due diligence on the sustainable value of a firm – including client relationships, specialist expertise and technology and IP.
Motto suggests also looking to barriers to diversity, given just 10 per cent of engineers in private sector firms are female. “All leaders are accountable for putting the structures in place to address this.”
She believes the most important strategy for future growth is collaboration. “Beyond contractors and clients, build networks with the tech sector, start-ups and universities – embed those capabilities and behaviours into your firm.”
A strategy for growth
Businesses are operating in a completely new landscape, dealing with uncertainty, volatility and an accelerated momentum of technological change. And that may mean re-thinking the way you define your strategy.
In 2000, McKinsey defined three horizons of growth based on the maturity and relative risk of different types of projects.^ We believe this is a useful way to describe the three growth initiatives that will need to happen concurrently in order to sustain business growth in this changing business landscape.
Re-frame your perspective
This is a time of opportunity, not threat. We believe business owners are in a strong position to thrive.
To grow sustainably and profitably, it’s important to acknowledge that traditional rules no longer apply. Business models have been democratised and boundaries have dissolved. Customer expectations are driving the pace of change.
Consider your innovation model and mindset, the broader business ecosystem you can tap into, and the capabilities you need to put in place.
We trust you found this report informative and insightful, and we’d be happy to continue the conversation with you.