I do not share the optimism of forecasts inundating lately the LinkedIn forums and predicting quick recovery of the water market. All of them neglect one important factor - the client mentality changing under the pressure of internet technologies advances. Client expectations jumped, while traditional engineering services providers' ability to match them actually keeps on dwindling. This disparity will eventually lead to disruption.
Engineering like any other type of business activity shall enrich the client experience, demonstrate unmatched level of professionalism, and, of course, be profitable. By far the most important part of the client experience is trust out of first impression gained navigating the internet. I presume researching the purchase of the multi-million-dollar desalination plant shall be much more engaging than ordering the 20$ pizza which, unlike the former, is fully trackable on smartphone today. But the project is much more complicated; the single menu click is not enough. What will the first impression be if no company today offers interactive web tools (menus) guiding the client through her/his requirements sharpening?
We are accustomed to Google search. Surveys say that the clients are 55 - 75 percent of the way through the decision-making process before they contact companies for information. Obvious question is what the quality of information is inside this percentage and who will be the first to feed it?
Any engineering company today faces two choices - to invest into SEO - search engine optimization - and move up the Google search ladder or invest into the content - into expansion of the products and services range, into the client education and leads generation.
The first is much easier to implement; there are a lot of web companies on the market promising to raise the number of clicks of your web pages from meager 30 to 300. (Usually they forget to mention that 100 clicks may come from robots and the bounce rate will be around 50%).
In today's stressed times and shrinking economies the first direction is the absolute winner. Costly web site renovations make it intentionally spectacular and noisy to detract the client from a cornerstone question – where and what the content is?
The first (static) component of any meaningful content is well known - the past experience exposure. At best, it is represented by one-page leaflets describing the multi-million-dollar projects. At worst, the client is forced to contact the company through "Contact Us" which takes substantially more than the 9 seconds – average time limit to catch the client attention. Long list of the world technology providers (over 30) makes chances of the client return very slim.
The content should help the client experience the joy of right conclusion. "Trust us as we executed 100 projects and we are 100 years on the market" does not work anymore as it is already a conclusion.
The client is curious to know how the company can maintain the highest expertise level (to call itself a technology provider) if it has been awarded the last similar project two or three years ago?
If the company valuation is on the same level with the project cost, the client will definitely search web for any news from the engineering offices and the project construction sites as well as company quarterly financial reports. "What's new", RSS and posts on forums are the second (dynamic) component of any value-adding content. To the client, silence reigning on the Linkedin forums may have only one plausible explanation - no lead technology provider has any obvious advantage worth talking about.
The client righteously expects more free browsing of the projects history, feedbacks and "likes" from the former clients, satisfaction expressed on the forums and after-sales history - just not to be another case in a sad metrics saying that over 50% of the infrastructure projects are behind schedule or/and above the budget. In other words, the client direly needs transparency.
Next step after googling is requesting companies for the project quotation. How long is the client willing to wait for the project offer meeting her/his expectations?
The client does not know that the first step the company does is try to assess the immediate seriousness of the quotation request, thus admitting that there will be the second "first impression" and the third, and so on.
The logic of the company is simple: higher project offer quality means substantially higher costs and more man-hours. Detailed project offer is in fact the FEED package. FEED means front end engineering and design. Its preparation takes 6 - 9 months and may cost up to US$1.0 million for the SWRO desalination project of above 75000 m3/day. Can available CAD software accelerate this process? Surprisingly not, as it is used only at the detail mechanical design phase of the project accounting for less than 25% of workload.
Nowadays no client is willing to wait so long. So old "ball-park-figure-offer" mentality tenaciously persists. It opens Pandora's box for the avalanche of changes during the project execution, triggered by vague definition of the project scope.
"Ball park figure" and "overnight construction" times are gone; instead Client prefers to get the projection of the cumulative expenditures over the project life - the solid basis for project financing, indexing and cancellation. It's a dream that never came true.
The project offer and first impression "dents" cannot be mended by any guarantees - they are useless in building the brand. It is all about the scope details. The less details, the longer the bidders' queue and more fierce the competition are. As Peter Thiel put it, competition is for non-professionals?
Today professionalism is not measured by a number of patents. An example is the ERI company (ERII), founded in 1992 as OEM - Original Equipment Manufacturer - of a single patented product for desalination plants - PX energy exchanger. Later it extended its business to pumps and to oil & gas industry.
Professionalism is in deep understanding that the days of relying on a single sustainable competitive advantage are over. I truly appreciate the XX company with "RO systems featuring the YY patented technology", but "Quenching thirst for services" of H2O Innovations is appealing more.
Unlike OEM, the engineering services providers (ESP) deal with virtual products - procedures, documents, graphics, drawings, and physical data. These logically-interrelated digital assets should be produced and maintained in consistent state over the project life. Observed lately phenomenon of the engineering data volume escalation makes this task next to impossible. For instance, the typical file directory of the mid-size desalination project may contain more than 100,000 files, total of more than 100 GB. So-called consistent state of the above mentioned project is described by 100,000 physical parameters, the time schedule adding another 1500 - 4500 activities and milestones!
This Bid Data scares ESPs seating in a densely populated niche of below 35,000 m3/day capacities from even thinking of extending the services range upward, of the business globalization driven by concurrent engineering, of collaboration and outsourcing.
As international collaboration in water industry gains momentum (more PPP contracts and less EPC ones), to maintain the same annual turnover more projects shall be executed in parallel. It is not feasible due to resources limitation problem - direct result of continuing downsizing of ESPs as a quick-fix myopic solution to keep profitability above zero.
Under these conditions business globalization - viewed as separating and dispersing marketing, engineering and assembling the products over the water-stressed countries (with lower hourly pay rates) - hits the wall. Other directions of any business model innovation - agility and flexibility - follow globalization.
Latest studies have shown that business model innovation yields 25 times higher return on investments and 5 times higher operating margin growth compared to product or process innovation.
What is the solution? CRENGER.