In This Issue
Pardon The Disruption
Profits at an all-time high? Check. M&A multiples in the stratosphere? Yup. Backlogs stretching over the horizon? Sure. IIJA dollars ahead? You betcha. These are heady days for AE and environmental firms. Most CEOs think the biggest challenge for their firms is finding talent to meet demand. It’s not. The biggest challenge for firms—and for the industry—is complacency ahead of massive industry disruption.
“We sell paper maps, lots of them”: Said the smiling paper-map business owner smoking a cigar on the deck of his brand-new 100-foot yacht moored off his private Caribbean island in 2004. The following year NBA star Yao Ming became the spokesperson for Garmin to promote GPS products. What happened next? Paper-map sales tanked. Related, a barely used 100-foot yacht was repossessed the same year. Put another way: Prior to 2013, owning a yellow taxi medallion in New York City was a sure-fire bet to guaranteed, worry-free income. In 2012, lenders foreclosed on just five New York yellow cab medallions. Uber arrived in New York in 2013. Fast forward: In 2019, lenders foreclosed on 510 yellow cab medallions. Uber destroyed demand for taxis and in the process cannibalized the value of yellow cab medallions. Industry disruption is real and painful. But it’s the way of the world, the law of the jungle. Just as it’s better to own the casino than gamble there, it’s better to be the disruptor than to get disrupted.
External industry disruptors: The power of Facebook, Google, Apple, and Twitter is to make its users believe that they are the beneficiaries of the products and services available to them via those platforms. In reality, the product is the data gleaned from the users on the platform, which is used to sell ads to third parties. Our industry—like every other one—is viewed the same way by various vendors, suppliers, and venture-backed brainiacs. Every keystroke, every calculation is being factored into algorithms that end up on whiteboards titled “Target for Disruption—The Design and Environmental Industry.” (Thank you to the CEO I had dinner with in New York City on Wednesday night for this visual.)
“Faster, Better, Stronger”: Leadership teams across the industry are leaning into harnessing the power of disruptive tech—be it AI, ML, AR, Predictive Analytics, Digital or SaaS. The largest firms in the industry are deploying four distinct strategies—sometimes in parallel—to harness the power of disruptive technologies in an effort to be the disruptors, not the disrupted. They are investing time, treasure, and talent at unprecedented levels to remake their firms via technology. Some are selling proprietary SaaS or digital technologies either developed in-house or piggy-backed on third-party apps. Others are partnering with technology firms—from household names like Microsoft to start-ups with no name recognition but big ideas. A smaller set of leading firms has launched disruptive tech subsidiaries, while those that have the vision and the wallet are making acquisitions of disruptive tech firms. These strategies are not limited to the largest firms. Visit with any CEO these days, and they will tell you about their team’s pursuit of the disruptive tech unicorn.
Keep your eye on the ball: In his role as Director of AI & Analytics at BST Global (Tampa, FL), Hank Tran gets to see these innovation and disruptive tech initiatives play out across the industry. According to Tran, “There are three critical success factors for successful innovation or deployment of disruptive technologies. The first is to make sure there is a clear business case for the initiative; the second is to have the right KPIs to measure its progress and success; the third is to become a data-driven organization. Treat data as an asset. Use it to predict and verify machine learning outcomes. Machine learning results provide a margin of safety.” Says Tran, “Act on these results early before it is too late.”
Why digital will win: In January, industry-leader CDM Smith (Boston, MA) (ENR #23) launched Trinnex, a wholly owned SaaS and digital strategy subsidiary. CDM created Trinnex specifically to help utilities and infrastructure owners embark on their digital journeys. The firm is focused on helping clients achieve digital-first resiliency by developing innovative and powerful technology tools and products. Eoin Howlett, Vice President Product Development, explains the challenges for clients on the digital journey: “Our clients are bombarded with discussions of topics such as digital twins and AI. They know they need to go digital and are struggling to do that without distracting operations with significant enterprise tech investments and multi-year change management and implementation strategies. We see lightweight, elegant tech solutions can be transformational in how they deliver value efficiently.”
VHS or Betamax? WordPerfect or Word? Lotus or Excel? Like many firms that have highly developed, successful civil engineering and data collection businesses, the leadership team at 100-person Forte and Tablada, Inc. (Baton Rouge, LA) is focused on connecting both to create something special for clients. As the firm’s CEO Joey Coco succinctly puts it, “We have made a significant investment in advanced data collection. We’re really good on the engineering side, so it’s natural to marry them together.” The firm has been in business over 60 years and has a veritable treasure trove of accumulated infrastructure data from its legacy and recent projects. As the firm connects its GIS capabilities, data collection, and engineering capabilities, Coco says “We are moving into digital infrastructure management, which is more of an ‘ongoing’ business model as distinct to our traditional model of single, discrete one-off design engagements. It’s more of a digital subscription model where clients pay a monthly fee to access critical information.” Coco frames the associated existential challenge: “The big question is what platform do we use to make all of the data accessible to and usable for clients. It’s risky; we need to make sure that the platform will be around for the long term and that clients will trust it.”
The power of collaboration: Jeff Peacock, CEO of the perpetually innovating Parametrix (Seattle, WA) (ENR #140), sees collaboration—in two specific forms—as key to the firm’s continued successful deployment of technologies. According to Peacock, “We run parallel strategies—acquisitions and partnerships.” In the middle of the pandemic, Parametrix acquired Civil FX (Las Vegas, NV), a firm that blends civil engineering with visualization and immersive reality. Says Peacock, “The acquisition adds tremendous value to clients by allowing them to easily see and adjust alternative scenarios. Beyond that, it has really paid dividends for us in marketing and has helped differentiate us in the eyes of our clients.” In a parallel strategy, the firm has recently partnered with other firms, including Derq (Detroit, MI), a cloud-based software platform that uses state-of-the-art connected vehicle and machine learning technologies. “Our partnership brings together the Parametrix core competency of understanding the challenges and needs of transportation agencies with Derq’s AI and predictive analytics competency for the benefit of our clients.” Says Peacock, “Both acquisitions and partnerships require considerable upfront and ongoing consistent investment. When done right, the returns for both clients and the firms involved can be tremendous.”
Coda: It’s not clear who the winners and losers will be as our industry gets disrupted. No one is even sure what the “end state” will look like or when it will occur. What is apparent, however, is that when it comes to innovation and deployment of disruptive tech initiatives, some firms are further ahead than others. If you’d like to hear from thought leaders in this arena, then join us in San Francisco next month at our Western States M&A, Strategy and Innovation Symposium for the Innovation—from Concept to Market panel where both Eoin Howlett of Trinnex and Javier Baldor, CEO of BST Global, will be featured panelists along with others.
Questions? Insights? Email Mick at [email protected] or text him at 508.380.1868.
Big Issues, Big Thinking
Last week, I had a chance to chat with Leslie Moulton-Post, president & CEO of ESA, the ENR Top 100 environmental consulting firm based in San Francisco. We got to talking about the macro forces that are impacting the AE and environmental industry, and how her firm is responding to them. Here’s the ground we covered:
MGOOD: Leslie, thank you for contributing to Word on the Street! CEOs in our industry certainly have their hands full these days. The challenges seem to keep getting bigger and bigger. How the heck did you get yourself into this position?
LMP: (Laughs) I’ve been with ESA my whole career, and I appreciate that. I know that’s rare. The truth is, I didn’t always have my eye on the C-suite. I liked what I was doing and the industry space. But I felt I had some skills that could help bring us forward, so I stepped out of my beloved water practice and took on a leadership role in 2016. Gary Oates, my predecessor, did a great job mentoring me and ESA’s other up-and-coming leaders at what was a critical time for the firm.
MGOOD: The pace of change in our world is staggering. What’s got a hold of your attention right now, and why?
LMP: JEDI (justice, equity, diversity, inclusion) is quite front and center for me. Our current generation wants to go to a place where they feel a connection to their own purpose. But purpose is getting broader for all of us, and JEDI does a lot to capture that. It’s central to a more sustainable world as well as for attracting and retaining people. There’s a business element as well as “a-right-thing-to-do” element to it.
MGOOD: Wasn’t ESA somewhat of a pioneer in this area long before JEDI stood for something other than a member of the mystical knightly order in the Star Wars films?
LMP: Yes. In fact, we were 50% women, even in the 80s. And women were already at the top of the organization. I saw ESA as a place for a long career. That representation certainly did matter for me when I decided to join the firm.
MGOOD: What else is top of mind for you?
LMP: Technology. For our industry, it’s been about getting our hands around our clients’ data and taking it to the much more sophisticated level of determining what it’s telling us and how to use that information to make sound decisions. There is a lot of science in the San Francisco delta, for example, yet we still struggle to make a good decision. We need to keep advancing. What is the data telling us and how do we use it? We have a “set-it-and-forget-it” policy around mitigation, and it’s antiquated. It doesn’t get us a sustainable urban or natural environment. Everyone wants certainty, but it requires constant adaptive management, and our regulatory institutions aren’t set up for that kind of experimentation. The current situation doesn’t steward our resources very well.
MGOOD: What can be done about it?
LMP: Technology and data management are at least part of the answer—they enable better decision-making. We saw it coming and didn’t want to be left behind. We were building capabilities organically, starting with the rather obvious step of creating software that helped automate the organization of our clients’ data. We started working with a subconsultant, Sitka Technology Group, and we sort of hit it off. After three years of working together and collaboratively developing the market, we acquired them in January. Through their capabilities and accomplishments, they’ve immediately advanced us in this area five to ten years. We’re now in the position to move up the decision-making chain with our clients, which is our strategy.
MGOOD: Technology had traditionally been seen as perhaps the greatest disruptor in our industry—until Covid came along. How has ESA managed through the pandemic?
LMP: A main strategy in our firm has always been to be a high-trust organization, and that has served us well so far. It’s a very entrepreneurial place, and we focus on autonomy and trust. Employees decided when they came back to the office, for example, and we continue to give people a lot of agency. But still, the pandemic has taken a toll. We’ve become a little “Covid cranky.” We see the erosion of that social connection. We can work remotely (we call it “hub and spoke”), and that’s fine. But when do we start to lose cohesion? We need those big farm tables where we break bread. It’s not even so much about doing the work together. It’s about that connection (although working together is fun, too). As the pandemic was gearing up in the beginning, we trimmed back a lot of hours instead of letting people go. We accepted it and covered the cost. We took a hit, but we went people-first, and that has served us well. It’s who we are. It wasn’t the most financially efficient approach, but for attracting and retaining staff, that’s a commitment people want to see.
MGOOD: Many parts of the world are counting on firms like ESA to solve the water problem. What kind of pressure does that put on you and your firm?
LMP: For all of us, necessity is the mother of invention. It’s pushing us to innovate—indirect and direct potable, for example, is being piloted and planned all over California. The crisis is also shifting the focus much more to conservation. A desalinization plant might simply be a budget too far, but stormwater capture is doable. And rip out the lawns first before you grab more water. These issues are, and will continue to be, contentious. And we will fight those battles. The groundwater basins are getting exceedingly low. Lots of land must be taken out of agricultural production, and that is going to be painful. There will be many, many serious implications—but we are simply oversubscribed.
MGOOD: So, about the economy—you seem to be in a glass-half-empty frame of mind. What do you see?
LMP: I don’t want to be doomsday, but it seems like something is looming out there. I’d rather be in a place where I believe that with the infrastructure bill and the economy, it’s going to be a good next set of years for us. But I’m worried about it. The darker stuff could be much more significant than we might think. I want to grow a fabulous team and just be concerned about keeping up with the work. But I am worried about a longer, deep-seated recession. I guess that makes me the skunk at the picnic.
MGOOD: How do you keep ESA together in these uncertain times?
LMP: We went back to the core of our business. We finalized our mission and vision statements! They are simple statements and not terribly different than previous versions, but this time they resonated for people. We made explicit what had been implicit in our DNA. We excavated the purpose and vision, and that will serve us well. People know they have a toehold here, so getting clear about our purpose and direction has been important. I am a big-tent person and I want there to be a place in our mission and vison statements for everyone in the company so they can own it and drive it. With all of the trouble in the world, that kind of clarity is animating for us. We were right to make our mission and vision explicit, and to put it front and center. I’m proud of the team for getting there. Control what you can control, lock arms, and let’s go.
Leslie Moulton-Post will join Jim Brady, president & CEO of Wilson & Company, and Kevin Fitzpatrick, President and CEO of Benesch, as a Strategy Session panelist at Morrissey Goodale’s Western States M&A, Strategy and Innovation Symposium in San Francisco, June 8-9.
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