Should engineering firms diversify in a recession?

CE May 2010 » Features » BUSINESS STRATEGIES
Paul A. Klein, P.E.

While an economic recession offers significant challenges, it also offers significant opportunities to build for the future through diversification into new service areas and geographic markets. Diversification takes planning and insight into the political and social changes that shape who our clients may be and the services they may need, as well as the agility as a company to diversify and meet those challenges.

In past downturns, companies quickly realized that being too heavily dependent on one market sector or a small group of large clients can be a recipe for disaster. In the 1980s, RBF Consulting looked to the future and made the commitment to develop a more diverse balance of clients, increase its geographic reach, and expand existing services. The result has been a more robust mix of services and clients that has allowed the firm to better weather changing market conditions.

A prime example of RBF’s commitment to diversification during the last recession was its shift in focus toward more public-sector clients, a strategy that 30 years later has proven to be the foundation for its continued success through a variety of market conditions. Along with that shift, RBF diversified by expanding environmental planning, urban planning, and other disciplines that are now a large part of the company’s success.

In the early years of the firm, planning and environmental work meant supporting its civil engineering clients. By the 1970s, the California Environmental Quality Act, National Environmental Protection Act, Clean Water Act, and other key legislative actions were all indications that the market for environmental services was changing.

While some business leaders in the engineering industry didn’t fully see the opportunity, those who had client service at the core of their philosophy diversified to provide services to help clients comply with these laws. As the markets and the demand for those services changed, RBF invested in and promoted these services. As a result, planning, environmental, and regulatory work became thriving business areas of their own.

More recently, clients have become committed to sustainable development practices and green technologies, and are looking to consultants to support their vision. Engineers and planners who saw the benefits of providing more sustainable solutions focused their attention toward LEED principles and more sustainable building practices. To meet the needs of this market area, RBF made a corporate commitment to implement sustainable planning and design approaches. That commitment to sustainability has in turn been supported by 60 of the firm’s professionals taking the initiative to achieve LEED Accreditation.

With the financial incentives available for the development of green technologies and the governmental standards set for the use of green energy sources, the alternative energy market has also presented an opportunity for diversification in an otherwise down economy. The development of solar, hydroelectric, and wind power have all become growth areas that offer the chance to use existing areas of expertise to serve new clients. RBF has been able to bring together its existing services in a new way to support the development of alternative energy sites and to grow quickly in a new and challenging market area.

As we continue to come out of the recession, RBF has taken this as an opportunity to assess the marketplace and continue to reposition the firm to meet the needs of a changing economy by providing additional technical training for existing staff, making strategic hires, opening a new office, and implementing new interdisciplinary approaches to meeting client needs.

The following are a few strategic steps that any firm can use to plan for the future, in either an economic downturn or a booming economy:

  • Scenario planning — Look to the future to develop possible business scenarios of how the company will respond to changing technologies, social movements and demographics.
  • Introspective inventory — Evaluate internal strengths and weaknesses, and how the company can respond to a changing marketplace for professional services.
  • Flexibility — Be willing to change and grow beyond the original company model.
  • Governmental insight — Be aware of initiatives at the local, state, and national levels that affect existing areas of expertise or drive new markets.
  • Funding intelligence — Identify where governmental incentives and private investment are going. Following the money and knowing where it will be spent in the near term can focus proposal, marketing, and public relations efforts into new market areas and increase success on future project pursuits.
  • Social capital — Maintain existing client relationships during tough times. Those clients will be the first to trust you in a new business area.

Recessions are agents of change. Firms that have been through multiple downturns have learned not only to plan for them before they arrive, but also to use them as an opportunity to invest in the future and meet the needs of a changing world.

Paul Klein is an executive vice president at RBF Consulting with more than 20 years of experience in civil engineering. He is based in the firm’s Sacramento, Calif., office.


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