The Top 5 Anticipated Business Challenges of Architecture, Engineering, and Construction Firms

Architecture, engineering, and construction (AEC) firms have historically dealt with many of the same uncertainties and challenges as other professional services industries—as well as many unique to their field. The year 2020 was a watershed moment though… The COVID-19 pandemic disrupted the business landscape around the world and accelerated the adoption of digital solutions and our ability to deliver work remotely.

With such widespread change, so comes a wide variety of opportunities and challenges.

As part of the Hinge Research Institute’s ongoing High Growth Study, over 281 business leaders and marketers from AEC firms, representing $75 billion in combined revenue, were surveyed about their top anticipated business challenges for the next 3-5 years.

While there are many opportunities in the marketplace, this article will focus on the top five anticipated business challenges of AEC firms. Making the future a bit more manageable, the results are intended to offer insight into the best approaches for driving success in the coming year.

Top Anticipated Business Challenges of AEC Firms

For AEC firms aiming to grow and retain a competitive advantage over their competitors, obtaining a research-based understanding of how your peers and competitors view the marketplace is essential. So what are these top anticipated business challenges? In Figure 1, we see that the top challenges are quite different this year than in 2020.

Figure 1: Top Anticipated Challenges of AEC Firms

The top four challenges each saw a dramatic increase in 2021 while the fifth challenge dropped slightly from its fourth place position in 2020.

Let’s dig into each of these top anticipated business challenges from the 2021 High Growth Study: AEC Edition one-by-one.

1. Unpredictability in the marketplace

No matter the industry, there is one challenge that dominates the conversation—unpredictability in the marketplace. Yet the result here for AEC firms is still remarkable. Of all the other professional services industries surveyed, AEC had nearly the highest consensus on their number one issue at 61%. This is an indication that while many business leaders across industries are navigating through a dense fog of uncertainty, those in the AEC space have the most to consider.

While there was a notable 34% increase in this year’s study, unpredictability in the marketplace is not a new phenomenon for the AEC industry. In fact, it was the third highest response in last year’s study which was conducted well before the pandemic. Regulatory changes, election results, and the changes in buyer behavior are at the center of what makes the AEC business so unpredictable right now.

So what is to be done to combat this uncertainty? 

It’s more important than ever that AEC firms conduct research on their clients and prospects. Differentiating yourself as a business partner or an employee can only happen when a firm adequately understands their audience. Confidently uncovering top differentiators takes research into how your firm stands out from your competitors. Firms must talk to their clients, employees, and partners in order to find out what has set them apart in their collaborators’ eyes, and what hasn’t.

2. A shortage of top talent

For those who have followed the High Growth Study through the years, it won’t be a surprise to see that the war for top talent continues to be a major concern for AEC leaders. A shortage of top talent was last year’s number one anticipated business challenge and falls only slightly in 2021.

Because of the often highly specialized training, certification, and project management experience needed within the AEC industry, talent concerns are greater in this field than in other professional services industries. Not only do AEC firms need tenured project managers but those with the skills to keep projects on schedule and on budget while dealing with a lack of labor and resources. 

With success equating not only to bottom lines and customer satisfaction, but also adhering to safety standards and maintaining quality and efficiency, staffing will continue to be a concern moving forward for AEC firms. This means firms must make their organizational culture attractive to potential hires and make employee growth and satisfaction a priority.

3. Changes in how buyers buy your services

The largest change in sentiment between 2020 and 2021 was in how much more AEC marketers and leaders perceive changes in how buyers buy your services to be an emerging business challenge. Not even cracking the top five in last year’s study, this selection’s 61% increase should give us pause.

With the exception of some laggards, most AEC marketers and executives understand that buyers are turning to digital channels more than ever to search for solutions to work-related problems. The Hinge Research Institute has the data to back this up too. In our study Inside the Buyer’s Brain, we uncovered that turning to search engines was the top search method used by AEC buyers behind asking their peers and colleagues for a referral. Yet despite this rise in digital search, how many AEC firms have still neglected SEO, improvements to their corporate website and the rollout of basic content marketing strategies? More than you might expect. 

In Figure 2, we see the top methods AEC buyers use to evaluate possible service providers. Of course relevant experience and past performance remains at the top of the list… but notice the 58% rise in the importance that industry knowledge and subject matter expertise plays. This begs the question: When AEC buyers turn to search engines for issues that your firm could help solve, will your firm be found? Does your website include a resource hub that demonstrates your specific expertise? And finally, are your firm’s experts active in showcasing their knowledge at industry specific conferences, virtual events, or podcasts? Are they actively using social media?

Figure 2: Top Evaluation Methods of AEC Buyers

Buyers are changing… And to keep up with the increasingly competitive marketplace, your firm needs to make the necessary investments to be found where your buyers are searching. Targeted research on your clients and competitors can guide you on how buyers are changing today. Then it’s up to you to implement the right strategies.

4. Managing a remote workforce

In last year’s study, only 22.3% of survey participants anticipated that managing a remote workforce would be a top challenge in the next 3-5 years. Of course no one could have predicted the coming COVID-19 pandemic and the rapid pivot businesses would have to make to keep projects moving forward from a remote environment. Among all professional services firms, this challenge was the second highest anticipated challenge just behind unpredictability in the marketplace.

High Growth and No Growth firms may have different plans regarding their utilization of physical office spaces. In Figure 3, we see that High Growth firms are nearly twice as likely to say goodbye to office life by either downsizing or going fully remote. No Growth firms are more likely to keep their office configuration as is (35%) while the same proportion reported a shift to part-time remote work.

Figure 3: AEC Future Utilization of Office Space

Each AEC business will have to tackle their own unique challenges when it comes to managing a remote workforce. New employee policies might need to be implemented. Or perhaps new technology needs to be embraced to support more remote workers.

Nevertheless, it should be highlighted that just like digital marketing and business development has changed the way we attract new clients, a similar effect is happening in the way firm’s recruit and manage professionals in the future. With a shortage of top talent being such a big issue for the AEC space, one possible way to appeal to new recruits might be in yielding to the increased demand employees and possible recruits have for a flexible, remote (or part remote) work environment.

5. Increased competition from new firms/competitors

Moving down a position from last year, but still in the top five, was the challenge of increased competition from new competitors. Respondents from AEC firms also hold concerns about the positioning of larger competitors (39%), but the emphasis this year was on new competitors. This was true for every professional services market we studied.

As we discussed, market unpredictability is a major concern, prompted by a wide range of geopolitical, economic, and natural factors… and of course the pandemic. Larger firms who likely hold a greater diversity of markets and services may have a resiliency advantage over some smaller firms. So it’s interesting to see that the AEC firms studied had more of a concern about new competitors.

The strategy of using your proprietary technology or your niche area of focus as a key differentiator is opening the door wider and wider for AEC firms to make an impact. So in a crowded marketplace, it makes sense that firms are worried about new, more specialized firms that they’ve never heard of stepping up their game. In fact, Hinge’s research backs this up. In the AEC industry, there’s only about 30 percent overlap between who a firm identifies as its competitor and who their clients identify.

Conclusion

Times of uncertainty generate tremendous change, and this is the reality inside many AEC firms today. Many of the challenges AEC firms face are not new, but perhaps felt more acutely than ever before. The war for top talent, changing buyer behavior, and an evermore crowded marketplace were not challenges quelled by the pandemic, but rather exacerbated. 

But in adversity lies opportunity — to build resilient and robust brands. In order to thrive in this age of uncertainty, AEC firms must leverage powerful market research techniques and marketing tools to understand the marketplace and keep pace with the competition. If there were ever a moment to make necessary changes, that time would be now.