Happy New Year! Here are my thoughts about 12 trends that will be important for the construction industry in 2016. I prepared the list for a keynote I gave at the American Institute of Certified Public Accountants’ Construction and Real Estate Conference in Las Vegas in early December. It was a great opportunity to meet professionals in this essential service discipline. Since we were in the run up to the holiday season, I framed my discussion in the holiday spirit and with an effort to find points that firms could use to maintain or even help improve profitability. Here is an abbreviated version with links to stories on ENR.com and elsewhere that helped me develop the trends.
On the first day of next year,
We'll start to keep track
Of a strategy to keep us in the black.
The first factor that we have to consider, of course, is the economy. Tim Grogan, ENR’s Chief economist, analyzes the forecasts for the year ahead produced by four major forecasting organizations. In our Nov. 16 issue, he concluded that after a tentative start, the construction recovery hit full stride this year, and it is expected to keep it up in 2016, according to the range of economists he surveyed. The consensus among these economists is very tight. Dodge Data & Analytics forecasts a 6% increase in total construction starts next year, while both FMI and the Portland Cement Association are looking for a 7% increase in construction put-in-place in 2016. The fourth group, the National Association of Home Builders, expects pent-up demand for housing to explode in 2016,
On the second day of next year ,
We'll make sure that we have
Two tech teams
And a strategy to keep us in the black.
Brad Hardin, chief technology officer for Black & Veatch, spoke at ENR’s FutureTech conference in New York City on Oct. 1, and I featured a story in ENR’s next issue. A point he emphasizes is that now is not the time to be an ostrich! Firms have to be open to new technology that goes way beyond BIM, mobile devices, and the collaboration and data analysis tools of today—and learn how to adapt and put advanced systems to work to improve productivity.
On the third day of next year ,
We'll make sure that we have
Three global forces,
Two tech teams
And a strategy to keep us in the black.
It’s not just the U.S. economy that will influence the fortunes of your firm. We live ever more in a global economy where global forces affect our businesses. ENR Business Editor Debra Rubin wrote about Graham Robinson, director of London-based Global Construction Perspectives and Oxford Economics. Robinson gave a preview of his detailed global outlook through 2030 at ENR’s Global Construction Summit in New York City last September. His report sees an accelerating shift in construction growth to emerging markets. In 2005, over two-thirds of construction was in developed countries. “By 2030, the trend completely reverses,” he said. Robinson released a detailed 450-page forecast in London on Nov. 10. While the long view seems rosy, the survey authors emphasize that near-term prospects are at the mercy of inevitable central-bank lending-rate hikes from today’s historically low levels.
Also at the ENR Global Summit, Michael S. Burke, chairman and CEO of AECOM, outlined major forces that will shape global construction trends and keep them interconnected. AECOM’s acquisition of URS Corp. last year created a $20-billion service provider. Burke pointed to climate change as one, adding that growing terrorism will drive security investments. “We never had to think about hacking into switching systems in the past,” he said. Lower oil prices and monetary policy shifts by countries also will shape the future construction outlook, he said.
On the fourth day of next year ,
We'll make sure that we have
Four infrastructure plans,
Three global forces,
Two tech teams
And a strategy to keep us in the black.
To take stock of America’s infrastructure, ENR Transportation Editor Aileen Cho set off last May with Dan McNeil, the author of The Roads that Build America. They spent five weeks driving coast to coast in Dan’s 1949 Hudson named Mrs. Martin (for her original owner). They visited public works departments on the front lines of infrastructure preservation and construction projects of all kinds—from the Ohio River Bridges to the St. Louis Arch redevelopment to Fastracks in Denver to Folsom Dam in California. We called the tour Low & Slow Across America’s Infrastructure, and it wrapped up at the American Public Works Association annual conference in Phoenix. Mrs. Martin symbolizes the aging of much of the nation’s infrastructure, and the challenges of pampering her across the country (on horsehair seats, with no air conditioning and clutch fluid that had to be replenished carefully every day) represent what has to be done to keep our infrastructure usable. Every where she went, Mrs. Martin drew a crowd, and every time they got a chance, Dan and Aileen talked about the nation’s infrastructure crisis.
Also highly notable, of course, is the passage of the first long-term transportation bill in many years, called Fixing America’s Surface Transportation Act (FAST)—authorizing about $225 billion for highways, $61 billion for public transit, $10 billion for Amtrak and $5 billion for highway safety programs.
On the fifth day of next year ,
We'll make sure that we have
Five LEED gold rings,
Four infrastructure plans,
Three global jobs,
Two BIM teams
And a strategy to keep us in the black.
The biggest news this year on sustainability came from Paris where after years of on-again-off-again negotiations, 150 global leaders at the United Nations’ Conference on Climate Change came to an agreement to limit rising global temperatures.
A month earlier, the creators of the LEED ratings standards for buildings—the U.S. Green Buildings Council—held its Greenbuild conference in Washington, D.C., recently. ENR’s buildings editor Nadine Post attended and posted a story right before Thanksgiving. USGBC reported that the green building market is expected to valued at more than $3 billion by 2020. “Profitability is sustainable and sustainability is profitable,” said USGBC’s CEO Rick Fedrizzi.
On the sixth day of next year ,
We'll make sure that we have
Six geese a-laying,
Five LEED gold rings,
Four infrastructure plans,
Three global jobs,
Two tech teams
And a strategy to keep us in the black.
These geese are the ones from Aesop’s fable, laying golden eggs—so beware that your firm does not kill them in haste to get to quicker riches. Mythfolklore.net reminds us of the story about a cottager and his wife who had a goose that laid a golden egg every day. They supposed the goose must have a huge lump of gold inside, and killed her to get the gold. Of course, the goose was no different than any other. “The foolish couple, hoping to get rich quickly, deprived themselves of their steady source of income."
Your firm’s golden eggs are its differentiators, its experienced staff members, its long-standing satisfied customers, its solid financials and, of course, its reputation. All these things require nurturing and tender, loving care.
On the seventh day of next year ,
We'll make sure that we have
Seven swans a-swimming,
Six geese a-laying,
Five LEED gold rings,
Four infrastructure plans,
Three global forces,
Two tech teams
And a strategy to keep us in the black.
The seven swans I talked about are Black Swans. We used to call them “unk-unks”—the unknown unknowns. But author Nassim Nicholas Taleb dubbed such events Black Swans in his 2007 book "The Black Swan: The Impact of the Highly Improbable." It came into the spotlight because Taleb was one of the writers who saw the handwriting on the wall about the banking crisis that led to the Great Recession. The book predicts, on page 225, that “Fanny Mae … seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup.”
The name of the book comes from the idea that before the discovery of Australia, people in Europe were convinced that all swans were white. It seemed completely confirmed by empirical evidence. Taleb uses this to illustrate the “severe limitations to our learning from observations or experience and the fragility of our knowledge.” Black Swans, says Taleb—“with a capital B”—are outside the realm of regular expectation, carry extreme impact and seem explainable in retrospect.
On the eighth day of next year ,
We'll make sure that we have
Eight women working,
Seven swans a-swimming,
Six geese a-laying,
Five LEED gold rings,
Four infrastructure plans,
Three global forces,
Two tech teams
And a strategy to keep us in the black.
I put a diversity spin on this stanza. The eight maids a milking are women—working all kinds of construction jobs, from ironworkers to project managers to accountants. The construction industry will need more women in all kinds of jobs—and beyond women—professionals and craftworkers from all kinds of diverse backgrounds to fill the jobs of the future. The next few years will be telling about construction’s ability to attract the work force it needs for decades to come.
At its Year in Infrastructure global conference, software vendor Bentley Systems celebrated the accomplishments of women engineers around the world. Bentley’s vice president of corporate marketing, Chris Barron, wrote a song and invited women engineers from Bentley’s offices literally around the world to participate in a music video. These engineers, not too square to dance, sent video clips to Chris, who also sang and created all the graphics in this clip from his video. Women engineers rock!
On the ninth day of next year ,
We'll make sure that we have
Nine firms giving back,
Eight women working,
Seven swans a-swimming,
Six geese a-laying,
Five LEED gold rings,
Four infrastructure plans,
Three global forces,
Two tech teams
And a strategy to keep us in the black.
I highlight the trend of giving back because social responsibility (one of the three pillars of the Triple Bottom Line) is as important as environmental responsibility and financial responsibility to creating successful businesses. Construction industry firms reach out to all kinds of worthy organizations from Water for People to Helmets to Hardhats to the ACE mentor program to CANstruction. I would like to highlight one group that I have recently become involved with.
I was invited to join the board of directors of the nonprofit, Bridges to Prosperity, and attended my first board meeting in June. ENR has written about the program, but I learned much more about its Industry Partner Program. CEO Avery Bang says this initiative “pairs the skills and resources of leaders in the industry with our organization’s experience to make critical bridge projects possible in the developing world.” The pedestrian bridges create access to health care, education and economic opportunities. In 2014-15, the program put professionals from Flatiron, CH2M, Hochtief, Kiewit Engineering, Kiewit Marine & Bridge, Buckland & Taylor, Hilti, Arup, Fling + Neil, Balfour Beatty, PCL, and TY Lin to work building eight bridges in Nicaragua, Rwanda and Panama. The firms help finance the bridges and pay expenses for their teams. Some send single-firm teams, while others pair up. In a survey, 46 respondents unanimously reported “growing personally or professionally in some way,” with the most significant areas of growth being connection to company, ability to work effectively in a team, creative problem-solving and leadership.
Answering the question, “What was the least enjoyable part of your B2P experience?”, a Buckland & Taylor volunteer in Nicaragua said, “Leaving.” A CH2M volunteer said the bridge he worked on will be life-saving to a Panama community and for team members “will likely remain one of the most meaningful projects throughout our careers.” These sentiments are exactly why such activities—be it bridge-building, mentoring or food donation—can make a difference for any firm.
On the tenth day of next year ,
We’ll make sure that we have
Ten safety specialists,
Nine firms giving back,
Eight women working,
Seven swans a-swimming,
Six geese a-laying,
Five LEED gold rings,
Four infrastructure plans,
Three global forces,
Two tech teams
And a strategy to keep us in the black.
Believe me—I know there is still a huge safety problem in this industry, and it’s a reality problem, not an image problem. But do we wring our hands about it or try to do something? I applaud the grassroots drive of industry executives to focus the nation's attention on construction safety through Safety Week, which has grown by leaps and bounds.
Two groups dedicated to an industry-wide safety transformation—the Construction Industry Safety Initiative and the Incident and Injury-Free Executive Forum—launched the program last year. This year, 44 industry firms joined the movement as official sponsors, pledging daily activities on their jobsites, extra training and celebrations.
"Every incident is preventable," says Denis Hickey, Lend Lease's CEO for the Americas, at the kickoff event. "We don't yet prevent everything. That's why we're standing here." Charlie Bacon, CEO of Limbach and co-chair of Safety Week 2015, asks, "How do we wake up the hundreds and hundreds of others to join the journey? That's the point of Safety Week." For 2016, the execs are looking for alignment from top to bottom as well as getting more subs and owners involved. Will your firm join in?
On the eleventh day of next year ,
We'll make sure that we have
Eleven energy alternatives,
Ten safety specialists,
Nine firms giving back,
Eight women working,
Seven swans a-swimming,
Six geese a-laying,
Five LEED gold rings,
Four infrastructure plans,
Three global forces,
Two tech teams
And a strategy to keep us in the black.
Could I name 11? Off the top of my head, I only got to nine, but I found a study from the Renewable Energy Policy Network published in 2010 that listed biomass heat, solar hot water, geothermal heat, hydropower, ethanol, biodiesel, biomass electricity, wind power, geothermal electricity, solar photovoltaic power, concentrated solar power and ocean power (12 actually, but allowing for splitting the different kinds of solar, etc.). Energy alternatives are important as a market for construction services and also because energy prices are so important to the economy.
Recent news about energy alternatives also came out of Nadine Post’s Greenbuilding story, where Douglas Hollett, deputy assistant secretary for renewable power at the U.S. Dept. of Energy Office of Energy Efficiency and Renewable Energy (EERE), said, “We are in the middle of an energy revolution,” with LED lighting, smart buildings, rapid cost reduction in solar and wind energy. In 2012, cumulative installed solar photovoltaic capacity grew more than 83% and cumulative installed wind capacity increased by nearly 28% from the previous year, according to DOE statistics.
Also, Bill Gates, writing on Nov. 29 from the Paris climate change talks, discussed the promise of Mission Innovation (a commitment by 10 countries to invest more in clean energy research) and the Breakthrough Energy Coalition, “a global group of private investors who will support companies that are taking innovative clean-energy ideas out of the lab and into the marketplace.
And then there is always the possibility of the real game-changer. If we see the difference that shale gas has meant to the economy, imagine what the advent of fusion reactors would mean. I have been following the development of fusion since the late 1970s, and it has always been “just 20 years away.” ENR covered construction of the big test facility—the International Thermonuclear Experimental Reactor— and wrote another story earlier this year.
On the twelfth day of next year ,
We'll make sure that we have
Twelve candidates drumming,
Eleven energy alternatives,
Ten safety specialists,
Nine firms giving back,
Eight women working,
Seven swans a-swimming,
Six geese a-laying,
Five LEED gold rings,
Four infrastructure plans,
Three global forces,
Two tech teams
And a strategy to keep us in the black.
Although it is still very early, ENR’s DC bureau staff has been campaign watching as construction groups start to assess the candidates. Pam Hunter posted a story on ENR.com on Nov. 11 reporting that as the run-up to the 2016 presidential campaign intensifies, construction groups and unions are beginning to devote time and energy to identifying candidates they can support.
A coalition of business groups—including ABC, AGC, the National Association of Manufacturers and the National Federation of Independent Business—is hosting a series of conference calls with presidential candidates. The coalition has invited both Republican and Democratic candidates to speak.
How can you use all this to shape your strategy for profitability in 2016?
You will see much that is obvious, I’m sure. I propose that a successful strategy for construction businesses will include:
• Watching economic fundamentals
• Putting new technology to work (no ostriches)
• Understanding that global forces are at play beyond domestic ones
• Making sure your business is sustainable and looking for business opportunities in sustainability
• Nurturing your key assets: people, clients, solid financials, reputation
• Being aware that the unk-unks are out there
• Working toward diversity to build the work force of the future
• Giving back through myriad nonprofits to add meaning to your work
• Building a safety culture in your firm
• Tapping alternative energy markets and using energy alternatives
• Evaluating candidates who will strengthen our industry and its firms
Please consider these factors as your firm builds its 2016 strategy!
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