Engineering & construction

CEO interview quotes

"I think we need to have a good baseline business that is very secure and that develops and delivers predictable cash flows, and we need to take a fairly conservative approach to our balance sheet so that we have enough buffers."
"...I think it's absolutely necessary to be a risk-taker at the same time, and choose areas where you just decide that okay, I will invest in growth in this particular area at the same time when I'm taking care of the fundamentals."
"I think that we will see new competitors. Digitalisation will change a lot of things also in the manufacturing and the service industry where we are playing, and will create a lot of opportunities for new entrants, new start-ups that come from outside of our traditional competitors."
"What the new technologies are now already enabling is a new generation of machines... And this fact that the machines will be intelligent and networked will open up completely new opportunities for new types of service models..."

Engineering & construction (E&C) CEOs worry about the economy and a range of risks, but are still fairly confident of revenue growth. They’re looking to new sectors, actively investing in digital technologies and forming alliances with new partners. Many are even collaborating with competitors.

Cautious confidence

Engineering & construction CEOs are more pessimistic about the economic outlook than their peers in other industries: only 28% believe the global economy will improve this year (versus 50% last year). Despite their reservations about the economy, 67% of engineering & construction CEOs think there are more opportunities for growth than there were three years ago. And they are just as confident as last year that they can generate higher revenues in both the short (81%) and mid (92%) term. They’re looking to the US and China – albeit at lower levels than CEOs in most other sectors – to produce much of this growth. But Saudi Arabia and Africa are on their radar too.

Gearing up for disruptive megatrends

They’re well aware of the risks, though. Over-regulation and higher taxes top their concerns, but 30% are also extremely worried about bribery and corruption, compared to 20% of the sample overall. They’re also steeling themselves for major disruptions over the next five years, as various megatrends converge. The likelihood of more direct and indirect competition makes them nervous. But they’re generally more relaxed about the disruptive potential of new regulations, distribution channels and production technologies, and changes in the way customers behave, than their peers in other industries.

Active in new and adjacent industries

More than half of all engineering & construction CEOs think a growing number of companies from adjacent industries will enter the sector in the next five years, although 31% don’t expect any significant rivals to emerge (versus 22% overall). This may reflect the competitive nature and low returns available in the sector.

In fact, 41% of engineering & construction CEOs say they have already entered another sector, which is markedly more than the average of 33%. These pioneers are targeting the energy, utilities and mining, professional and business services, and industrial manufacturing sectors.

Digital delivers efficiency and innovation

Most engineering & construction CEOs are also investing in digital technologies to create value in new ways. Their top three priorities are cybersecurity, mobile technologies for engaging with customers and data mining and analysis. They’re also more interested in the potential of 3D printing than CEOs in most sectors; that suggests increasing levels of off-site manufacturing could become the norm.

So how have these investments paid off? Engineering & construction CEOs say that digital technologies have been especially valuable in improving their company’s operational efficiency, enhancing its reputation, strengthening its ability to innovate and making its cyber activities more secure. But maximising the returns is difficult, they warn. It requires a clear vision of how digital technologies can help to deliver a competitive advantage, together with a robust plan that includes concrete measures of success.

Dynamic alliances, different talent

The percentage of engineering & construction CEOs who plan to form a new alliance has leapt to 61% this year, up from 49% in 2014. And they’re far more willing to join forces with competitors than CEOs in other sectors are (45% versus 27% overall).

Half of all engineering & construction CEOs also intend to hire more people this year, but finding candidates with the right skills is a key concern.

Engineering & construction CEOs have already taken several steps to address the talent shortfall: 72% have widened their search to different countries, industries or demographic segments. Similarly, 61% have implemented a strategy for promoting talent diversity.

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