Don’t Cling To History
Today I seem to be doing more strategy consulting and advisory work for engineering and construction firms, after a three-year hiatus to avoid conflict of interest after leaving corporate management. I am usually called in when things aren’t going great—either revenue is flat or declining and overhead is rising. That formula leads to declining profit and sustainability.
Engineering firms are the easiest enterprises to determine what is wrong and the hardest to get to do anything about it. They are stubborn and set in their ways. They are a people business, so business change means getting a mindset change in a diverse and distributed leadership base. At the exposed level of the iceberg, the problem will appear to be poor personnel utilization and low backlog. But that only indicates a more critical, below the surface problem of not having a competitive product and/or the marketing ability to sell it. The firm is just not winning enough work to allow it to hire new people and stay fresh, so they get older. The older the firm, the more energy goes down and expectations decline. The older managers complain that the new generation is not as talented as they are. It can be self-fulfilling prophesy and a resultant downward spiral.
Many of these firms have a long heritage of success that proves to the management that they must have had the ‘right’ model. Awards, plaques and project photos line the walls that beautifully describe the past leadership, the company’s stages of growth and landmark projects. Many older firms also have their age embedded into their business cards and letterheads.
I think all this is fine…if the company is doing well. ‘If it is not broken, don’t fix it.’ But I am usually called in because they are not growing and they don’t understand why. They want an outsider’s viewpoint.
Let me divert for a minute: assuming the education is from a similar fine teaching institution, do you want a 30-year-old doctor, a 45-year-old doctor or a 65-year-old doctor diagnosing your ailment? Forty years ago, the latter would be the quick answer because so much rested on the diagnosis judgment of the individual. The older doctor’s experience with more trial and error would mean many more replications. More experience was associated with more accurate diagnosis, which led to the correct remediation. But today, for me, if it were a serious illness requiring diagnosis and treatment plan, I would pick the 45-year-old. If it required a robotic microsurgery I would pick the 30-year-old to perform the remediation (i.e. technology versus wisdom). I might prefer the 65-year-old doctor to explain the aging process and what fails next (i.e. wisdom versus technology.)
Why would this be true? Technology is moving very fast. Technology is dividing and crossing over the lanes of traditional segmentation. Older might be wiser, but not necessarily better in technological terms. So, why do engineering firms believe that the historic projects on the wall are proof of solving client problems today? Further, if the company is not growing, could there be a correlation that the firm is living in the past?
Engineering has been an apprentice-to-master business model that started in England and Europe at the start of the Industrial Revolution. Hence, the older people in a long-established firm are more senior and theoretically have the most knowledge. They set the firm’s tone and fund the initiatives. But what happens if they have lost touch with the speed of change in the market and their competitors? Some attributes like client intimacy will never go out of style, but the products and services will. Furthermore, the solutions are now often bundled concepts that have nothing to do with the base historical technology.
Another example is the future of transportation. Smart cars…sure, they are automobiles with motors, tires and frames, but that is an insufficient expectation to influence a sale today. As a result, the auto manufacturers have had to bundle mechanical engineering, electronics and software to differentiate. Tesla, Google, Apple and Amazon are beating the large Detroit manufacturers to the smart car market because they don’t have their leadership wrapped up in historical achievements that honor their mechanical engineering prowess. They are younger companies defining themselves by an advanced solution rather than clinging to legacy.
So let’s go back to engineering firms. They are technology firms. Why are their walls covered with history? Would it not be more logical, like Apple or Microsoft or GE, that their latest innovations and future product concepts be displayed?
Certainly the corporate decor does not make any difference except in communicating culture and value to its employees. But when a company is stagnant—not growing or shrinking, this motif may provide an important clue. In today’s world, technology is moving so fast that companies have to change to survive. They need to be nimble and agile. Over-celebrating the past can be counter-productive. It hardens resistance to the younger generation’s ideas and blocks innovation. If a company is not growing (but the market is), the company is not offering products that clients want to buy that are better than your competitors’. It is as simple as that.
The challenge all technology companies have in this era is finding the right blend of age-related wisdom, advanced technology and energetic youth. Products must be driven by the youth, while the elders, who have a better ability to unlearn and re-learn, drive the business platform.
Simply put, if you are not growing, you either don’t have a product that people want to buy or the marketing capability to sell it. Either way, without rising backlog you have difficulty adding new personnel costs or initiatives. You have few options for adding resources without first stopping previously failed initiatives or trading out non-performers, but you need to do something!
If you have this issue, find a way to reengage with your younger population and then hire from the bottom as forcefully as you can, even if you don’t need the people. Overpopulate and cull out the least valuable. You need the technological ideas and energy that they possess. You also might want to sprinkle a few MBA’s who can better apply your technology to efficient business practices for the clients and bundle value.
© 2016 Robert Uhler and THE UHLER GROUP. All rights reserved.