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Q: How might the business of EPCs and Civil & Environmental Engineering Companies evolve in the coming decade?
A: In the past, much of Engineering Companies’ focus has been on the design and construction of new facilities in response to their client’s growing business, or the need to meet changing environmental regulations. In the coming decade, their client’s needs will grow and become more complex due to the impact that Climate Change will have on their business.
Inherently, a warmer atmosphere will have a profound impact on the water cycle, driving changes in the amount of water (too much / too little) and impacting the quality of the water that is available. These changes in water quantity and quality represent a new and growing business risk to their clients. This new water reality will force Engineering Companies to evolve to meet their clients’ new challenges and changing needs.
These new challenges will revolve around two main areas: Mitigation (i.e., reducing the extent/pace of atmospheric warming, with a goal of eventually reversing the warming that has already occurred) and Adaptation (i.e., adjusting to the effects of a warmer atmosphere). The following diagram expands on each of these two new challenges
Q: How might these new challenges create new opportunities for Engineering Companies to expand their business base and meet the growing needs of their clients?
A: New client challenges bring new opportunities for their partners/suppliers to help their clients achieve their goals and grow their businesses profitably. In this case, the Engineering Companies will need to expand their offering portfolio to address their client’s changing needs and new challenges related to climate change mitigation and adaptation.
Engineering Companies will have to expand beyond their current focus revolving around the construction of new assets to take a more holistic view of their client’s problems. This holistic view contains three basic components: 1. Observe, 2. Analyze, and 3. Address, which is summarized below:
By taking this approach, the new challenges can be fully understood along with their impact on their client’s business so that the correct solution can be developed to address the “new water reality” and the resulting water-related risks. This offering expansion will provide business growth opportunities for Engineering Companies, and solidify and expand their value proposition to their business base.
Q: How will these new challenges and opportunities impact Engineering Companies’ approach to meeting their clients’ changing needs?
A: The “new water reality” will force Engineering Companies to change and adapt in two ways. First, as mentioned in the previous question, their solution portfolio will need to expand from the traditional engineering “worldview” that was focused on the “address” aspect of the three-step process to include more “observe and analyze” solutions so that they can take a holistic view of the problem and solution. Basically, they become the “one-stop” shop for their clients. This however means that Engineering companies will need to invest in their solution portfolio expansion either by organically growing them within the organization or looking to the outside for potential acquisitions.
Secondly, they will need to transform their business model from their current “project” based approach to more of a service-based business model. This will keep them “connected” to their clients as their “world” changes in the coming decades. The “service-based” model will also significantly transform their revenue model. The “observe and analyze” steps could transform into a subscription or recurring revenue model, while the “address” step would most likely remain as a one-time or project-based revenue model. This change will provide more revenue stability, which could fuel long-term growth. All in all, climate change will not only impact the client’s world, it will also have a significant impact on the solution providers to this client base.
Pete Nassos is a 40-year veteran of the industrial water industry with a strong understanding of known and unmet water problems and needs, and the available solutions to meet them. This understanding bridges from the current water space to expected future water trends and changes. He has a strong technical and business foundation in this area based on his educational and work experience. He is a graduate of the University of Michigan with an MS in Environmental Chemistry, while his work experience is a blend of seven years of technical consulting for an Environmental Consulting company and 31 years of Sales, Marketing, and General Management experience at Nalco Water. His last Nalco position, as Sr. Vice President of Marketing, included the following areas of responsibility: Product Lifecycle Management, Innovation Marketing, Technical Support, Sales & Marketing Training, MarCom, Equipment Supply Chain, and M &A Support. These areas of responsibility focused on supporting and growing the core water business and identifying and developing new business opportunities either in core or adjacent areas through innovation and/or M &A activities. Since his retirement from Nalco in late 2016, he has been providing consulting/advising services to technology companies and investors on key strategic initiatives in water and wastewater. In 2018 Pete became a Partner in Mazarine.