Last week, Engineering News Record released its 2012 list of the Top 500 U.S. Design Firms. As usual, ENR did a fabulous job of pinpointing top-of-mind issues in the sector while highlighting driving trends likely to impact engineering firms in the near-term. While total sector revenue has not yet recovered to its 2008 level (and likely won’t until 2015), it was refreshing to see top-line revenue growth for the first time in 3 years. This data echoes broader professional services sector data published by SPI Research that we shared earlier this year in the following blog post, A Resurgence in Professional Services.

After reading the article in some detail, and looking closely at some of the insightful quotes from firm leaders around the country, I see three major trends that leaders of any engineering firm should be monitoring quite closely and minding how to respond.

1. Financing of Projects.
I’ll be straightforward in saying I don’t think this is a positive trend in any way. Participatory financing of projects is a very dangerous trend and one you should analyze very cautiously before choosing to participate. Here’s the thing, large banks have thousands of analysts who’s very job is to analyze risk all day every day. Despite that 80% of the largest ones found themselves on the brink of financial collapse just three years ago because they grossly underestimated their exposure to risk within the consumer housing market. What makes an A/E firm think they could do better in the commercial or public markets? In my opinion, very few, if any, A/E firms have the financial skills required to assess the systemic and macro risks associated with participatory financing. If you’re thinking about entering this arena, do yourself a favor — close your firm and start a bank. At least then you can allocate your funds towards hiring the financial analysts and risk managers you need to have a reasonable opportunity for success in your new endeavor.

2. The Commoditization of Design
ENR notes a growing feeling among firm leaders that design is becoming commoditized. “One of the biggest frustrations among design firms is the increasingly held view that design is just a commodity.” While there are a lot of macro issues driving this trend, the primary explanation is simple supply and demand. The supply of competent, qualified designers and engineers exceeds the demand for their services. I delved into this trend deeply in my January article, The Supply of Professional Services Exceeds Demand. This issue is not going away. No manner of economic recovery will change it. If anything this problem is only going to exacerbate itself over time. While firms can continue to bemoan this trend and the negative effects it has on the designer’s ability to create innovative structures and solutions, the fact of the matter is that the ability to produce great work does not differentiate an A/E firm. The only way to positively respond to this trend is to build deep, meaningful specialized expertise. Clients will continue to spend above average fees with A/E firms who demonstrate deep expertise solving their specific business problems. The only response to commoditization is better positioning. For more thoughts on this topic read my March article, Three Proven Ways to Position a Professional Services Firm.

3. Industry Consolidation.
Consolidation is really an extension of the supply/demand issue I outlined above. When supply exceeds demand, it only makes sense that firms would look to merge or roll up smaller firms. For midsize firms this is all the more reason to deal with the forces driving commoditization as soon as possible. A generalist design or engineering practice, when forced to sell will be lucky to attract many, or possibly any, interested buyers. Dean Oskvig, CEO of the Black & Veatch energy group puts it best in the article when he states, “There will be acquisitions for scope and skill, rather than scale. In this industry, an acquisition to simply make a bigger version of your company very seldom creates value.” When a firm acquires another firm for economies of scope this means it is acquiring the firm’s unique expertise. This expertise is perceived to be both narrow and highly valuable to the acquiring firm. A well positioned, highly focused firm can often find itself having many potential high value suitors when the time comes for firm leadership to exit. So, if the commoditization of design isn’t forcing firms to get serious about positioning, hopefully the opportunity for a higher exit valuation might.

Thanks to the folks at Engineering News Record for another thorough analysis of the sector.

Source:
Engineering News Record. “The Top 500 Design Firms Begin To Rise Above Economic Woes” by Gary J. Tulacz. April 23, 2012.

It’s a fact. The internet has completed its transformation from a text based medium into a fully interactive tool that relies heavily on video. ComScore released a survey in early 2011 which showed that the average user of Google consumed an 283 minutes of video online in January 2011 alone. That equates to almost 57 hours a year and those numbers are only increasing.

Why video?
The most basic answer is prospective clients and prospective employees want authenticity. Having a slick looking brand, website, and impactful copy only illustrates the professionalism you want your firm to convey. But site visitors are smart. They know all things can look good when they’re polished and scripted but they want to know what is behind the curtain so to speak. Use video to introduce prospective clients to your team and the professionals actually doing the everyday work. It’s a way to back-up your firm’s positioning by putting your employees at the front of communications. After all, in professional services we’re selling the knowledge of our staff and their ability to deliver on what the brand promises. The best way to do this is by generating trust. And trust comes from knowing who you’re dealing with.

How to Get Started Developing Video Content
We know the concern. We actually dealt with it ourselves. “We don’t have the workload or ability to justify buying high-end equipment or a videographer and/or video editor.” The good news is you don’t need to. Developing video does not need to be hard or expensive. It does take a little bit of time but relative to the entire year it can actually be a small commitment from your team if participation is spread across the organization. Here are a few tips to get started:

1. Equipment: Have a simple handheld camera capable of recording HD quality video. Even smartphones have this capability these days. In addition invest the $300-500 on simple audio equipment rather than using the camera’s microphone. Nobody likes it when they watch a video and they hear every sound in the room except the person talking. What you’ll need is a small portable audio mixer, microphone, cable, and headphones for the camera operator. As for an editor, iMovie will work just fine or if you’re inclined invest in a high-end software editor such as Final Cut.
2. Keep It Short: Unless it’s so inspiring and educational it becomes the next “The Last Lecture” (one of my personal favorites), nobody wants to watch a long video online. Keep it in the range of 30 seconds to 2 minutes at most.
3. Tell a Story: Spend a little time and organize a simple script to tell your story before sitting in front of the camera. If not, you’ll likely get scatter brained because a camera is pointing at you. The human mind works in a very linear fashion. We like what we consume to have a beginning, middle, and end.
4. Use On-Screen Graphics & Text: To avoid a talking head for 30 straight seconds, supplement it with visuals. Add on-screen text and cut to graphics that represent what is being discussed. It helps keep the viewer engaged by adding dimension and connecting words to visuals.
5. Don’t Script It: Above I mentioned the importance of having a simple script. I mean just that, a simple script and not a word-for-word script. Unless you are a professional actor, I promise you will not be able to read something word-for-word and not frequently get tripped up or sound like a robot. Speak from the heart and off the cuff like you would in normal conversation. Not only will it be easier, it will help you appear more authentic which is your end goal anyways.
6. Have a CTA: It is important a prospect know what you want them to do next. Have a call-to-action at the end of the video directing them to next steps. Is there a white paper you’re offering related to what you just discussed? Drive them to it. Is there a “service offer” page on your website that explains more into what your company offers regarding the topic? Tell them how to find it.
7. Don’t be Afraid of Imperfection: It’s likely you’re not an actor and people know that. It’s ok to trip over a word or two and not speak every word crystal clear. I promise it will happen and to not do it will take a hundred takes. Don’t be afraid to show a little human nature and imperfection. People understand.

What I am not suggesting is for video to become the primary form of content marketing you produce. At the least, I’d say one video every six months would suffice for starting out. Get the hang of it, figure out the process and increase volume from there. Here at Mlicki we’re on about a once every 6 month schedule and are aiming to get better. Traditional text based blog posts and articles are better for showcasing insight and/or analysis — not to mention they’re critical components of search engine optimization. Video should be used to build trust by augmenting traditional written forms of content marketing with a form that is more dynamic and transparent.

Need Ideas?
Learn about the type of content you should develop by taking in our recent posts “Content that Educates” and “Content that Motivates.” You can also see a good low-cost video example by viewing our last video post regarding the Wendy’s High School Heisman Program.

In my last two posts I’ve described the role of marketing in a professional services firm as being that of facilitating change management (See Marketing Professional Services is Change Management and Content Marketing: Content that Educates). A prospective client is embarking on a journey. That journey is likely one of moving from a place of frustration to a place of greater advantage. Well executed marketing slowly moves a prospect down the process of buying and positions the firm as an expert along the way. By the time the prospect is ready to buy, the firm has credibly established its expertise, reduced competitive influences and increased the likelihood of closure.

Change Management Requires Two Forms of Content
This process is largely enabled by the professional services marketer through two forms of content:

1. Content that Educates
2. Content that Motivates

Content that Motivates Helps An Educated Prospect Envision the Future
Imagine your prospect standing on an empty road. To her right is where she’s been. To her left is where she’d like to go. She’s consumed a lot of your educational content and she can start to imagine a future that is better than her past. But, that picture is fuzzy. While she can picture what’s to the right in stunning detail, what’s to the left is still a bit unclear. It’s simultaneously exciting and a bit frightening. She senses that it’s a better place to be, but she’s not entirely sure what it looks like.

Now, imagine standing in front of her is a street sign. That street sign describes with stunning simplicity what awaits her to the left. It doesn’t offer a detailed description per se, but it does something better. It paints a picture of what awaits her and it motivates her to proceed. This street sign is your motivating content.

Content We Use to Motivate
Once a prospect begins to identify a solution, he or she has to build the courage to invest time and money towards creating the change he seeks. At this point, the prospect is seeking the confidence necessary to move forward with his intended course of action. The role of your marketing in this process is to help the prospect visualize what that future looks like.

This can largely be done through “short form case studies,” though not likely through the typical “long form case studies” most firms have. A “long form case study” is usually a multi-page synopsis of the client relationship that provides a detailed description of a client’s business and industry, a summary of their challenges, documentation of the solution recommended, and a somewhat detailed synopsis of outcomes related to the solution. Case studies of this sort are best used in proposals for large engagements because they effectively document experience and by doing so reassure a buyer that we’ve done what we say we can do. That said, they don’t inspire change. Remember, at this point in the buying cycle the prospect is looking for the confidence to move forward. Building confidence is a largely emotional activity.

Use “Short Form Case Studies” to Motivate
A “short form case study” has three components:

1. It uses clear, root-level data to share the most important high-level business outcomes of the firm’s work.
2. It conveys a “before” and “after” state that helps the prospect envision the change her or she seeks — ideally this is accompanied with a visual component.
3. The best ones, incorporate short video clips featuring people directly involved in the program and the change the work enabled.

A few days ago, I wrote a post describing the marketing of professional services as change management. Well executed professional services marketing slowly moves a prospect down the process of buying and positions the firm as an expert along the way. By the time the prospect is ready to buy, the firm has credibly established its expertise, reduced competitive influences and increased the likelihood of closure. In that post, I described two forms of content the professional services marketer needs to provide to facilitate that process:

1. Content that Educates
2. Content that Motivates

Content that Educates: It Starts with Questions
The process of change the potential buyer is about to go through starts with a point of dissatisfaction or a point of curiosity. Those things he’s curious about take the form of a question and should be the root of the educational content you strive to create. In my last post (referenced above) I described a hypothetical engineer at a large producer of electrical power who is responsible for plant emissions. We’ll use him again here as our example. Though the questions he asks himself are surely more technical in nature than these, what he’s likely asking might sound something like this:

• Our emissions meet industry regulations, but I wonder if we could be exceeding them?
• I wonder if there’s a more efficient or less costly way for us to sustain emissions at their current levels?
• I wonder if there are alternative uses for our waste I haven’t thought of?
• What is the remaining life of our current emissions technology?

Where does our hypothetical buyer go for answers to some of these questions? He might go to trusted colleagues at other companies, he might visit association websites, he might consult industry publications, he might post a question to a LinkedIn group, or he might do a plain old fashioned Google search. In short, he reaches out for trusted experts who can educate him and answer his questions. He seeks answers in the form of content — be it written or spoken. Those firms or people producing informative useful content are likely deemed to be experts.

What Type of Content?
Your expertise-oriented content should be designed to answer the fundamental questions a prospective buyer of your services may be trying to answer right now. This content can start in the form of blogs and articles on your site and later be parlayed into articles for industry publications or speaking engagements. Regardless of the form you choose, your content is designed to be educational and informative in nature. It’s not designed to sell your services nor is it intended to persuade your prospect to take any one course of action. Its produced regularly and it exists solely to demonstrate your knowledge of the clear, root level questions your prospect is trying to answer. Ultimately, the type of content you choose is not hugely important as long as you pick a format your comfortable with and can sustain. For a detailed analysis of various forms of content, I’d suggest reading the article, Four Stages of Content Marketing, written by Christopher Butler at Newfangled Web Factory.

In my next post, we’ll look more closely at content that motivates.

If your firm is anything like ours, you have tried several different approaches at measuring your performance over the years. As a type of professional services firm ourselves, only our senior associates were typically engaged and aware of our financial performance. But even we weren’t confident that the right things were being measured and reported – until recently. Last year, we were introduced to two separate notions related to driving a professional services firm towards its goals that lit a fire under us:

• A regularly scheduled “huddle” where designated associates are assigned a key performance measure on which to report. The associate reports up-to-date numbers on their assigned metric, their forecast of how they expect the firm to perform on this measure over the next defined time-frame, identifies issues impeding success and identifies next steps towards addressing these issues. The reported metrics are directly tied to the key performance indicators as identified in the strategic plan. The thinking behind the regularly scheduled huddle is that keeping your associates accountable for reporting these numbers on a regular basis keeps indicators top-of-mind and assures that threats to achieving the desired level of performance in critical areas are quickly addressed and rectified before they get out-of-hand. To learn more about huddles and instilling a more performance focused culture at your firm, please visit our friends at Ownership Thinking: http://www.ownershipthinking.com/ .
• A “forward-facing” dashboard that reports the performance of leading indicator type metrics. We were first introduced to this concept through a Vistage meeting (http://www.vistage.com/ ) that featured Mitch Gooze from Customer Manufacturing Group (http://www.customermanufacturing.com/index.shtml). Where most dashboards are more rear-view mirror like tools that show you where you’ve been, the forward-facing dashboard tracks your progress on the activities that directly contribute toward achieving your desired performance on key metrics. These could range from website analytics to sales funnel measures to the total value of your outstanding proposals. The key is finding the right leading indicators for your firm.

We combined these ideas into what we call our “agency scorecard” meetings. The format in which this information is presented can be varied. We hold our scorecard meeting on the first and third Monday of the month. Being a creative and somewhat informal marketing agency, an Excel spreadsheet on a large flat screen monitor didn’t feel right for us. We know because we tried it and the creative team almost revolted. So we moved to a more free-form blackboard wall our creative team designed specifically for this purpose. During the scorecard meetings the associates step up to the board with a piece of chalk and an eraser and report their numbers and provide their explanations. We placed this board in a main corridor of the agency so everybody sees it every day so it stays top-of-mind.

There are three considerations when implementing such a performance-focused discipline:

1. What are the key activities in which we engage that determine our future success? This should be a mixture of short term measures like deal pipeline or percentage of backlog revenue and longer term measures like number of scheduled business development meetings. The key is that your tracking the right activities that drive your short and long term success rather than the ones that track where you’ve been.
2. What format should the huddles take that is right for our firm? Maybe a spreadsheet on a large monitor fits your firm just fine. Embedded in this step is determining who should be attending your huddles and who should be reporting what metrics. If you’re an accounting firm with a couple hundred associates, you probably don’t want everybody in the huddles. If you’re a small A/E/C firm, perhaps it’s an all-associate meeting. There’s no one size fits all solution. It’s more about getting the right people together to report the most important leading success indicators on a regular basis so that your key associates are aware of the firm’s performance on success-driving activities.
3. How often should your huddles be held? We settled on twice a month for ours since we felt our metrics don’t change a lot from week-to-week. Monthly meetings were too infrequent to keep our key metrics as top-of-mind as we would like with our associates. The dynamics of your business may dictate a different frequency.

One last note – your huddles should be short, no longer than 30 minutes. If they become too onerous, your associates will dread them. They need to be short and sweet and if you find yourselves getting sidetracked into a discussion about addressing an issue, schedule a separate follow-up meeting.

What comes to mind as forward-facing metrics for your firm? Please leave a comment and let us know.