The Future of Architecture and Engineering: A Q&A with KENCA Chairman, Jae Wan Lee
In an industry centered around innovation, the question always remains – what’s next?
To help answer this, we’ve launched a series of blog posts exploring the past, present, and future trends in architecture, engineering, and construction consultancies. Over the next few months, follow along with us as industry leaders share their thoughts.
In this post we spoke to Jae Wan Lee, Chairman of Korea Engineering & Consulting Association (KENCA). Jae Wan is also the CEO of Sekwang Engineering Consultant Co. Ltd., as well as the President of the International Federation of Consulting Engineers (FIDIC). He holds Ph.D. and Masters degrees in international transportation, as well as a Bachelors degree in civil engineering.
Q: What do you think is the most significant trend that will impact the future of the AEC industry in your region over the next 5 years?
A: The future of the AEC industry can be divided into two parts: business and technical. The business aspect of the industry is good in that the establishment of the Asian Infrastructure Investment Bank (AIIB) will increase opportunities in the Asia-Pacific region, including North Korea. Moreover, the Iranian economic sanction relief will not only create projects, but also will make firms more competitive to enter the Iranian market.
As for the technical side, there are no new trends that we are not already aware of. The forces which have been causing a major transformation in the AEC industry for the last several years are still in effect. Some of the most powerful catalysts for these changes include: information technology (IT) and environmental issues.
The firms’ core business strategies are being made through the use of IT, such as internet, intranet, and extranet, which may lead to the evolution of new business models in the AEC industry. Moreover, these new trends are also leading to changes in the way firms conduct business with regards to collaboration and competition with other firms. An example of this is the use of Building Information Modeling (BIM) for communication and management purposes.
In recent years, global appreciation for environmental issues has been shifting priorities for many industry leaders, emphasizing the need for conservation of natural resources and minimization of waste. Issues such as natural disasters, sea levels rising, and climate change need countermeasures and restorations. Moreover, where the industry was primarily focused on infrastructure and economic development, it has now shifted its focus to sustainability.
Q: How do you see the current role of AEC firms shifting, what do you think is causing that shift, and how must AEC firms react to survive?
A: In previous years, the primary role of AEC firms was the design and construction of facilities. However, with the trends mentioned above, their role is shifting to maintenance, management, and monitoring of facilities and people. Project management consulting (PMC) is becoming a popular service provided by global AEC firms, and they are adopting practices such as green procurement to appeal to their clients.
The reason for such a shift in the industry is due to various environmental issues and the need for sustainable infrastructure to combat these issues. Moreover, as people are becoming more aware of these problems, there’s a greater demand for highly trained experts in the AEC industry to consult and manage global facilities and infrastructures. Much of the decision-making in the AEC industry is knowledge and experience-based, hence individuals with such expertise become highly sought after by competing organizations. AEC firms must invest in ways to manage information, transform it into knowledge, and promote corporate learning to share the expertise across the organization. It is important that AEC firms recognize the benefits offered by new technology and use it to remove barriers in the physical world of business, thereby gaining competitive advantage in the global economy.
Q: Knowing what you know today, are there things you would or could have done differently to prepare for or react to the Global Financial Crisis of 2008? Are there things that you are doing differently now because of the GFC? How have you evolved your processes or policies post-GFC?
A: Until half way through the new millennium, Korean AEC firms were denied large-scale project opportunities in the global market. The reason being that they could not meet the prequalification requirements without forming a consortium with other firms. Instead, they built their presence in the global market by starting with smaller-sized projects and by successfully delivering these projects one by one. They gained the confidence of their customers and established a positive reputation in the industry. Korean AEC firms suffered low contract volume in 2008-09, mainly due to the global financial crisis. The worsening engineering contract environment was attributable to demand decline for products. This unfavorable turn of events intensified competition for the dwindling numbers of engineering contracts. Ultimately, Korean AEC firms were not discouraged and successfully overcame the crisis.
While experiencing the recent crisis, we learned that the Korean AEC industry had to eliminate a low pricing strategy to win contracts and abandon construction-oriented business models only for contract value consideration. In my opinion, risk management is a crucial factor to leading a successful project. Risk taking and its management is key to staying competitive in the global engineering business. Diverse risk factors exist in overseas markets.
Currently, with their very survival at risk, Korean AEC firms have made sweeping changes to improve their capabilities in areas from engineering to project management, while weeding out deficiencies in their business to find better solutions. Korean AEC firms are trying to diversify by looking overseas from the Middle East and Asia to other regions in order to mitigate business fluctuation. More than anything else, they are trying to develop high value engineering capabilities such as Front-End Engineering Design (FEED) and PMC to secure profitability and sustainable growth in an integrated global engineering market. Korean AEC firms are also focusing on nurturing global standard engineers who have extensive global experiences and diverse language skills. They actively invest in talent development and attract talented people by proactively recruiting promising new graduates and professional engineers who can compete at the international level.
Q: What is the biggest challenge you are currently tackling within your firm or association?
A: One of the biggest challenges being faced by KENCA is that there are too many AEC firms within the country competing with each other. In the past, when Korea was experiencing rapid economic growth and infrastructure development, there were enough projects for the growing number of AEC firms in the country. However, the domestic market has been slowing down gradually since 2010.
Due to the fact that there is no concept of mergers and acquisitions (M&A) in Korea, too many firms still exist and continue to grow despite a dwindling global economy. For example, even Samsung Heavy Industries Co Ltd and Samsung Engineering Co Ltd, who are affiliates of the South Korean conglomerate Samsung Group announced their merger in 2014, but then canceled. Moreover, as Korea’s procurement policy does not meet the global standards, firms are receiving earnings shock when conducting foreign business.
Q: How has your office environment changed, and how is your firm continuing to evolve your workplace environment, procedures, and technologies, to accommodate the evolving demands of the incoming millennial workforce? What considerations and changes are you making regarding collaboration, efficiencies, work/life balance, technologies, etc.?
A: As our member firms are slowly changing their business models and practices to accommodate the changes in the industry, KENCA has also been striving to meet their needs by rearranging our organizational structure and updating our technological resources. We are currently relying on the internet to conduct market research and to form alliances with national, as well as international, associations and firms.
However, we still have a long way to go as Korean firms are still using traditional management methods for all types of projects. Hence, we must conduct research on the types of projects conducted by our member firms as well as their management styles to provide them with better alternatives. We also need to introduce a new financial management system to our member firms that is more widely used by global firms today.
This post is part of a question and answer series with global industry leaders on the future of the architecture, engineering, and environmental consulting industries.