There is an opportunity for improvement in every department within your business or role. Though change can be overwhelming to consider, small steps can make a drastic difference toward gaining efficiencies back into your business and gearing towards profitability. What is more important is getting a plan in motion and identifying how to place value on what matters most to your business.
At Agile Frameworks, we like to talk about change management as readiness – i.e., what can you do to get ready to implement something new to break down the status quo in managing and delivering engineering services?
Below are 8 ways to elevate your engineering services offerings:
A massive challenge within the engineering services vertical is performance risk, which is always with us in the industry. To avoid this risk, it is becoming consistently imperative that we need to get work done right, the first time.
The concept of ‘Right First Time’ is a metric developed by Six Sigma, and it is defined in our industry as sending the right person to do the right work at the right time with the right equipment to produce the right results the first time. Stop and ask yourself – how frequently are we actually able to do that?
There are some potentially far-reaching implications when something is wrong the first time. On the low end it is a low-cost mistake that could be easily remedied over time or if undetected it has minimal impact, but it might be the ultimate mistake and that increases the liability in a lawsuit. And you may never know what went wrong. This focus on getting things right the first time is a very serious topic that warrants putting more pressure on.
Competitive pressure is building in the industry. There is a distinct increase in merger and acquisition activity, so whether you are being acquired or are an acquirer, or if you just want to stay independent, the impact of being able to produce profitable growth is critical to your business valuation.
M&A activity adds challenges and requires you to make decisions such as, do you consolidate systems and processes with a newly acquired firm and migrate them into your existing ERP, or do you let them run and stand alone on their current system and risk doing manual consolidations for your financial reporting? These types of decisions add to resource issues. Likely, it is the same set of resources within your firm that you are utilizing for these major projects. Regardless of whether it is an acquisition or a system upgrade, typically the same power players within your organization are being pulled in, and it is imperative we remember these folks have day jobs.
What we refer to as the ‘Big Red Flag’ is the cost of the status quo, or the cost of doing things the same in your organization. New tools and technology have become available and because of that more and more firms are beginning to take a closer look and evaluating these processes they have had in place for years. Progressive firms are looking for areas where they can create efficiencies by automating processes and eliminating redundancies. Again, resources are slim, so they need to find ways to make those same resources more efficient.
The status quo is a very powerful force, especially in engineering services firms because, simply put – you are busy. Being able to stop and look at how and why you are doing things the way that you do is a hard challenge to start to break the handcuffs that the status quo has on the engineering services vertical.
Firms are also dealing with outdated ERP systems. Some of these systems are increasingly expensive to maintain and they have performance issues and security challenges. Older ERP systems are lacking the modern interfaces that the younger generation is looking for in their day jobs and often focus heavily on the back-office accounting rather than project execution, so you must ask – who are they really geared toward? The average age of an ERP system in the AEC space is 10-15 years, and there have been huge technology gains made in that timeframe.
Another shift in focus is during system implementation. It used to be customization and how do we customize a solution, and now it is more toward configuration and scalability of a solution. This change stemmed from the new SaaS models available, which has created huge momentum for the industry.
If you are a business that uses multiple platforms, your various role players are operating in their own independent silos, and sadly, the way information is shared across those silos often takes the form of an email, phone call, or spreadsheet. With each of these tools there is limited control for versioning, accuracy, and timing. If that is the kind of technology you rely on today, it is time to break down those barriers. Finding your way out of that is one of the most important things you can do.
As an example, keeping pace with counties or municipalities that often change requirements without notice can cause a major disruption to the schedule or budget if you are operating in silos. This disconnect creates a ripple effect and it is amplified because everyone must manage and account for that change. When you have a solution that everyone is a part of, you can have one person make the change whether it is adjusting a form that everybody uses, a specification, or maybe some type of disclaimer on a deliverable. In doing so, you are automating with a simple adjustment that affects an entire operation. Achieving quality and speed is only done with technology that an entire organization touches, so that makes a big difference in keeping up with the everchanging standards that we are required to meet.
You may have heard the mantra ‘data is the new gold,’ and for engineering services firms, it really is. Regarding aging ERP systems, you may have a lot of data that is simply clutter. You might not have clear visibility to what your true KPIs are and what the important metrics are that truly help you to manage your business. Data integrity is crucial, and you must gain control of your data to use it to your advantage. If we circle back to the M&A piece, if you are merging data from multiple companies and different systems into a single ERP solution, you must be careful with how that data overlaps and how duplication of data can have a significant impact on the overall integrity.
You must also have an orientation around getting your data normalized and making sure that it is traceable, verifiable, and complete for you to do the analytics. Organizations often do not have the information they need to manage their business. If you do not have a normalized data model, you are going to be compromised so you need to start there as one of your go-forward initiatives.
We encourage you to pick two or three metrics for your firm to anchor to. Consider which metrics have the greatest impact to your speed of delivery and evaluate your high offenders. Once you identify what your metrics are, ensure they are clear, and ensure everyone not only understands them but knows how to interpret them. Then, provide visibility to results with those metrics to take you to the next level of business optimization.
There’s a new 24-hour standard in terms of report turnaround time. Clients that are paying for a service today are going to providers that can achieve quality results and fast delivery, which can only be achieved by leveraging technology.
Because the market is so hungry for this right now, the service providers that are achieving a 24-hour turnaround time are experiencing exponential growth in terms of clientele and the number of projects won. The market is aware of this new standard, and they are after quality, and they are after speed.
There is also an opportunity to restructure pricing. If you are a service provider and you are drastically changing your approach by introducing speed and quality, it opens the door more than ever for how you price, which ultimately impacts your overall profitability.
You are in a fast-paced model of execution. Manual processes (i.e., manual documentation, email communication, phone calls, spreadsheets, etc.) and general disconnects between this process flow is costly to your organization. On the low end, there are productivity gains ranging between 10% - 22% in field execution, and between 38% - 60% in project management. And this is not including additional gains in scheduling, time and activity, and finance. When you factor these gains into your bottom line, there are significant improvements available to you if you start to solve for these productivity conditions across the engineering services vertical.
The first step is to map out your business processes against your process workflow. You will then begin to identify areas where you can focus on and make improvements. Once you can identify where things are going wrong, you can start applying technology to solve for those problems. Many engineering services firms do that in reverse – they acquire technology and try to put it in place within a business process, and that will never work – it is the backwards way of going about it.
When it comes to some of the more provocative challenges in the engineering services vertical today, a big one is market conditions. Demand is growing. The opportunity in engineering services is sitting at our feet for an untold number of years to come; however, many would argue equally offsetting that opportunity is the challenge to acquire and retain the employees required to perform the work.
However, an antiquated solution is to think the only way to ramp up business is to hire more people. The labor shortage has presented an opportunity for engineering services firms to expand their business not by increasing headcount, but rather by investing in technology, embracing change, and applying lean business strategies.
So, what would happen if we decided to embrace the labor shortage issue rather than fight it like a looming plague? The reality is, we would profit and grow from it. Again, only after you understand what your true business process looks like, modernize it through leveraging technology while overcoming the labor shortage challenge. In doing so, you will inevitably improve your operational efficiency without adding headcount, position your firm to win more business and/or to win larger-scale projects, and create a competitive advantage.
At Agile Frameworks, we are committed to successful outcomes for our clients. Our team of industry experts has been focused on two key initiatives: 1) conduct research in the engineering services vertical to develop a set of performance based KPIs that we can help our clients achieve, and 2) quantify the impact of the inefficiencies that we observe in the business processes in place today within engineering services firms. So far, the numbers are stunning.