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KP Unpacked
KP Unpacked explores the biggest ideas in AEC, AI, and innovation, unpacking the trends, technology, discussions, and strategies shaping the built environment and beyond.
KP Unpacked
How to Build a Real Innovation Culture in AEC
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On this episode of KP Unpacked—the number one podcast in AEC—Jeff Echols sits down with Alan Montpellier, Principal and Chief Innovation Officer at PAE, to explore what it really takes to embed innovation into the DNA of an AEC firm.
Alan shares how PAE shifted from ad hoc ideas to a fully resourced innovation group, why innovation can't live in a silo, and how they prioritize experimentation—without sacrificing project delivery or profitability.
You’ll learn:
- How PAE structured its innovation group and budget
- Why innovation should come from everywhere—not just the “innovation team”
- How to balance client deadlines with long-term experimentation
- Real-world examples of tools, AI pilots, and failed-but-smart experiments
- What to do when PMs block innovation because of fees
This is a playbook for firms who want more than buzzwords—who actually want to build something new and better.
Hey , welcome back to KP Unpacked . This is where the biggest ideas in AEC , ai and innovation they all collide into one podcast . It's powered by KP ReadyCo . In this podcast , we break down the trends , the technology , the discussions and the strategies that are shaping the built environment and beyond , and sometimes I sit down with KP Ready , our CEO and founder , and we unpack some of his LinkedIn posts . Sometimes I sit down with KP Ready , our CEO and founder , and we unpack some of his LinkedIn posts . Sometimes I sit down with other people within the industry within the KP Ready ecosystem , if you will that are focusing on innovation for architecture , engineering , construction and beyond
Introduction to KP Unpacked
Speaker 1.
Speaker 1Today is one of those days . I get to sit down with one of our founding Mastermind members . He's a member of the Innovation Leaders Mastermind Group . He's out of the Pacific Northwest PAE , to be exact . We'll unpack what that means , but it's Alan Montpellier and he is the Principal and Chief Innovation Officer at PAE . My name is Jeff Eccles . I am the Executive Director of Catalyst and the facilitator of our Mastermind Program here at KP ReadyCo . Alan , thanks for joining me today .
Speaker 2Wonderful to be here , jeff , really appreciate it .
Speaker 1Yeah , absolutely , and I know you know this goes through my head . I've got this pet peeve about people's names . I don't know if we've ever talked about this , but I do a lot of public address announcing for sports as well , so it's you know . How many names can you mispronounce in an hour
Meet Alan Montpellier of PAE
Speaker 1is sort of what happens . I hate mispronouncing names and I probably butchered your last name as I was introducing you . So why don ? Why don't you introduce yourself ? Uh , including the correct pronunciation of your name , but who are you and what do you do ?
Speaker 2Well , appreciate that , Jeff . Yeah , Uh , I . I get a lot of interesting pronunciations for sure . Uh , I'm sure , but the uh proper pronunciation is if you wanna do , the full French is Montpellier , the T is silent , but uh , but yeah , I get a lot of interesting ones over the years .
Speaker 1I'm sure , I'm sure . Yeah , we , we we've talked about the fact and we were just joking about this before we went live . I'm in Indiana . I live in Indianapolis . I've been here about 30 years or so and one of the things that struck me when I first came to the state is hey , we've got a lot of French names on the map and not a single one of them uses the French pronunciation . So if you are a French speaker and you want to be offended , just come to Indiana . Well , I'm glad you're here and I appreciate the grace in the pronunciation of your name . I said in the intro that you're the chief innovation officer at PAE .
Speaker 2So what's first of all , what is PAE and what does it mean to be the chief innovation officer there ? Yeah , so , yeah , let's start with PAE . We're a consulting engineering firm and we focus on the built environment and , specifically , building systems , such as mechanical systems , electrical plumbing , fire protection technology and lighting design , and we have a passion and focus on sustainability , where our vision is clean air , energy and water for all . It's a big vision , it's very aspirational , but we think it's an important vision
PAE's Vision and Sustainability Focus
Speaker 2and we really try to live that vision every day as we work with clients and colleagues and try to deliver really amazing , sustainable buildings . Go ahead .
Speaker 1I find that really intriguing because one of the things and you may have heard a little bit about this and others around the industry may have heard a little bit about this but as we think about the expansion of our mastermind program , one of the things that we've been trying to figure out is how do we create a sustainability mastermind group ? What does that even mean ? What does the word sustainability even mean ? That's a whole episode in and of itself , but it's important to us that that be a focus on the intersection of sustainability and innovation , which is what you're saying , it's what you're doing there at PAE . So I , I I find that intriguing because that's , I guess it's worth everything . This is very biased , it's a very biased statement , but we've got to look at different ways of of creating sustainability , of creating resilience , et cetera , and I love the fact that that's really your focus in a nutshell there at PAE .
Speaker 2Yeah it's . You know , accepting status quo just won't get us , won't allow us to see any progress , and so we're always trying to question how we're doing things and challenge ourselves , challenge our clients to think differently . You mentioned the CIO or chief innovation officer role . A little bit about that . The firm as a whole has been considered , or we have a reputation for being innovative , and that's happened over organically over last 20-25 years . The challenge , though , and the concern that we identified about three , four years ago was , as our firm grew to at the time , 250 plus people , multiple offices , mostly up and down the West Coast , and then now we're 400 plus people and we have now East Coast presence in New York City and even
The Innovation Group: Theater Producers Not Actors
Speaker 2more offices . We were just concerned that this kind of ad hoc approach to innovation was not cutting it and that we were at serious risk of not fully capitalizing and taking advantage of all these great ideas that were being generated within the firm , and we decided that we would do two things One is create the chief innovation officer role but , at the same time , create the innovation group within PAE , and as we kick things off that inaugural year , we wanted to really find , figure out what our mission was . Number one , right , and we . What we settled on was this idea that our mission really should be to create and generate and reinforce this culture of innovation within PAE . And it was interesting because as we rolled things out to the firm and started to socialize it with people , immediately we had a lot of people saying , hey , I need to be in the innovation group because I'm an innovator and I want to innovate and I need to be in that group . And what we were trying to do is reinforce that . No , you don't need to be in the innovation group to innovate . And the analogy that we ended up using was that of a theater production group right , and the idea that we look the innovation group and the chief innovation officer role . We look at ourselves as the producers , the stagehands , the director , if you will , for the theater production group , but we're not the actors or innovators on the stage . And I think that resonated pretty well and people then started to understand okay , I can innovate , no matter what I'm doing and what role I have in the firm , and I don't need to be in the innovation group .
Speaker 2And then we ended up identifying these key charges , if you will , that we would take on , or responsibilities we would take on , including identifying and removing barriers to innovation .
Speaker 2We also wanted to make sure that we were offering challenge opportunities to our colleagues , specific challenges that we put on the table asking people what their thoughts were . We also wanted to pull people together into cohorts or groups that would brainstorm . We call our brainstorm sessions jamborees , to kind of bring a little bit of levity to it and bring some energy , just using that word . And we also do these things called feature casting sessions where we try to project ourselves out 5 , 10 , 15 , 20 years to see , you know , to try to guess at what might be happening in that timeframe . And then the other really big thing that we do is we actively collect ideas , evaluate them and then we put resources , including dollar value and or allowances for people to spend time to develop those ideas . So it's really become quite a significant part of the business . And you know there's still a risk that we're missing some things , but we feel much more confident now that we're capturing a lot .
Speaker 1Yeah , one of the things that we hear and I think this is probably especially in young innovation initiatives , if you will , or young innovation teams , you know , respective to the age of the firm , perhaps , or something like that .
Speaker 1But you know that I want to be on the innovation team , or I should be on the innovation team , exactly as you described it . One of the dangers that we've heard is that , hey , when you launch this thing and you say this innovation team , chief innovation officer , et cetera , it may create that mindset that you were fighting there at the very beginning , that , hey , only these people on this team can innovate and , as you have described very , very nicely the way that it works in your firm , that's actually not the case at all and I love the analogy , I love the theater production group analogy . That explains it really really well . So , like sustainability , right , what in the world does sustainability mean ? What does innovation mean at PAE ? When you're focused on innovation , what are you focusing on ? How does that manifest itself in ? Maybe in your work , or your tools , or , or you know , your culture .
Speaker 2Yeah , it takes many forms and it's interesting because we've also tried to reinforce that it's not just on the technical or engineering part of the business . Innovation can happen in the business side of the business , the marketing team or the accounting team , or , you know , it's not just a engineering centric effort because innovation can happen in all those areas and disciplines . But you know , we see innovation happening where it's the small
Innovation Across All Business Areas
Speaker 2, incremental things , kind of like the Kaizen approach , incremental pieces . So that's one end of the spectrum and then you know , we've seen some kind of bigger swings come through where , for example , we , we , we asked ourselves , we challenged the office to see if they are not the office but the people in our firm to try to come up with ideas that would leverage software and applications to help us with our clients .
Speaker 2One of the really neat ideas that came out of it was a phone app where you could , as a homeowner into it , type in your address .
Speaker 2It would pull all the information off the mls system and house size and age and things like that , and then you could type in what kind of sustainability improvements you would like to do . Maybe you want to go all electric , maybe you want to reduce your electrical bill . Maybe you want to add solar panels or batteries , reduce your water use , whatever your goals are , and then it would generate ideas for you and then even connect you with potential consultants or or contractors to do the work . And we had this great experience of pitching that to a fellow who is in the VC world and it was not like a full-on . You know , hardcore Dragon's Den or , if you're in Canada or I can't remember the Shark Tank in the US situation . I can't remember with the shark tank in the US situation , but it was real enough that it was a great experience and we got some really good feedback . So you kind of have these two ends of the spectrum and then anything in between .
Speaker 1Yeah , yeah , I love . First of all , I love that idea . That's fantastic , and we may have talked about this before , but when I run my graduate class , I run it as an incubator and the final is Shark Tank . That's how we go through it . So I love that you went through that process and I'm intrigued about the app .
Speaker 1Actually , you actually answered a question that I was contemplating is you know the innovation ? You know , you said innovation is looking at all areas of the business . It's not just the engineering , it's not just how we produce the deliverables you didn't say it that way , but but but it's all aspects of the business . So the the question I was going to ask was you know ? And the question I was going to ask was are you focused solely on efficiency or heavily on efficiency versus new things that you can do for your clients ?
Speaker 1I mean , that app is a great example of new offerings , so to speak , very outside the box , if someone thinks about a consulting engineering firm that's focused on sustainability and hey , we created this phone app like what you know , what's what's that have to do with ? But I think that's a great example of how , of innovation . So when , when you and your team are gathering ideas and vetting ideas , I I'm sure , and figuring out how to implement them . Is there sort of a natural balance of what's efficiency , what's for in-house and what's for out-of-house , or how does you know in a realistic application in a firm , what does that look like in a realistic ?
Speaker 2application in a firm . What does that look like ? I got to be honest with you , jeff . It's something that we are constantly struggling to navigate us to , you know , with these different opportunities that we're seeing . You know , a good example off the top of my head is , you know , micro grids are becoming a very hot market or topic these days . More and more clients are interested in microgrids because they're either interested in reducing their carbon footprint with on-site renewables and or they are interested in bringing more resilience to their property or their development , and what we're finding is that there's not really any good mechanisms out there to evaluate all of the thousands of permutations of of pv panel , you know , photovoltaic panel sizing , uh , battery sizing how much your uh . You know how much load you have , electrical load you have . Bringing that all together to , um , you know , find the right answer for your client . And so that's a good example of a new service offering that we've been developing over the last two , three years .
Speaker 2It also highlighted one of the barriers that we came upon in the last year , which is often innovation is happening at the project level , and the barrier ended up being that we had a group of people that wanted to develop a tool and use .
Speaker 2Well , it started out as a really heavy-duty spreadsheet , as things often do , but we really needed to move it into Python and make it more user-friendly and the team wanted to do that .
Speaker 2But the project manager for that particular development said no , I can't support that on the fees that we have , right . So the barrier became a kpi , a key performance indicator , in that , you know , the pm was thinking about their profitability on the project and not wanting to sacrifice that for the sake of innovation .
Navigating Innovation Budget Barriers
Speaker 2And so then that became this great opportunity for the innovation group to step in and say , hey , guess what we will ? We have budget available , we will give you 100 hours , 150 hours , I can't remember the exact number and you can go and develop that tool , because we see it as this great opportunity to not just leverage it on this project but then use it on countless number of projects down the road and really help a number of clients . So it ends up being we've definitely been seeing these opportunities to get into these different capabilities and service offerings that we were not as focused on previously .
Speaker 1Yeah , I'd like to dig into things like that because that's real , we hear that . So , as I mentioned in the intro , you are one of the founding members of our Innovation Leaders Mastermind Group and , as we look across , which is now actually split into two groups because of the interest in it . So , as we look across the firms that are represented in the Innovation Leaders and Construction tech leaders mastermind groups , I think I can safely say this that all of the firms that are represented have innovation teams of some sort . Right , they may be very small , they may be very new , some are quite mature and , you know , some have slightly different focus , et cetera , and we hear that a lot . Right , well , the project manager is looking at their budget and they don't have the budget to develop this tool , and then that becomes a barrier to innovation . So , you know , anybody that's out there listening to this right now that's wondering how this , how this works in the wild , in the real world . I mean , this is real . Right , that's a real barrier that you're talking about . We hear that over and over because it's , you know , in in aec firms , we're so project driven , so deadline driven as well , but so project driven , so budget driven , budget per that project . That's , you know , ties back to the fee and the billable hours and your different factors that you're considering there . So it's not surprising at all that that becomes a barrier to innovation .
Speaker 1And I love the example . Hey , the innovation team says we'll give you 100 hours , we'll give you 150 hours , something like that . How do you set the budget for the innovation team says we'll give you 100 hours , we'll give you 150 hours , something like that . How do you set the budget for the innovation team that you can then distribute in that way ?
Speaker 2Yeah , we're mixed in with the year-end budgeting process which starts in late September , october , as I think most firms probably follow a similar schedule . September , october is , as I think most firms probably follow a similar schedule . And you know what we're . What we're trying to do is set aside both dollars and hours on the hour side . Of course , that impacts our utilization and utilization is for consultancy , is a big driver of profitability and and how well we're performing financially . So you know it's a balance .
Speaker 2We're like any , like any initiative within the firm . You know we're we're trying to figure out the right number of hours and dollars to assign . Um , and often you know we go in with a , an ask , and then that comes back . Well , you know we can't quite do that because you know we would be negatively impacting our profit and you know performance goals there . So you know , alan , what can you do to dial that back ? And so then we go back and we start to prioritize . We start to prioritize . So it's not unlike any other budgeting effort . But I think the big thing is , as a leadership team within PAE , we did commit to a budget that we would have available to do these things , and that was actually one of the , in addition to the chief innovation officer role and the innovation group . We did commit that . Hey , if we're going to really be serious about this , we got to put our money where our mouth is , and we need to assign some amount of funding to do this stuff .
Speaker 1Is PAE structured as an ESOP ?
Speaker 2we are not an esop um , we are privately held um , but we are , we're more broadly , uh , our shareholders are more broad than just the principles in the firm . We allow , uh , as soon as you become part of management at the associate level , we allow people to start buying in , and there's maximum amounts of buy-in at each level . So it's a gradual buy-in . If you're growing up within the firm , if you're coming in at a senior level , you can start buying in right away at whatever level you're coming into .
Speaker 1Yeah , does that structure well , does it ? That's sort of a softball . That structure must somehow affect the way that that , the , the budget for the , the innovation group , is allowed . You know , hey , I , I bought into this , I want , you know , I want my shares to be , I want my , I want the profit to be right . It becomes personal once you , once you've bought into it , at that point . So , um , and I'm always curious about this , in in the esops , which , as you said , you're not , but but how does ? How does how does that structure ? What kind of conversations does that structure drive when it comes to budgeting for innovation ? Because I'm I'm guessing you're not going . Oh yeah , well , the ROI on on . You know , giving a hundred hours for for that tool that we built , the ROI on that was tremendous . We can talk about ROI . So when you have many , many stakeholders , I'm going to say
Cultivating and Funding Innovation Ideas
Speaker 1how does that consideration impact innovation ? Has everybody bought in on that or is there some resistance sometimes ?
Speaker 2I have not encountered that resistance yet . You know we're still a pretty young entity within the PAE organization . I will say that I think people are really supportive and bought in overall . I'm guessing that there's probably a few shareholders within the firm that think , well , I wish we wouldn't be spending money on that . But I think overall there's genuine support and I think people again my colleagues I think they see the value of the innovation group , in part because we have really benefited from a brand of being innovative in the industry and that's part of one of our monikers . It's how we differentiate ourselves from our competitors .
Speaker 1Yeah , yeah , that makes total sense to me . I mean , like you said , I'm glad you brought a brand right , because your brand is tied to this idea of sustainability and innovation . And so , if , if you are a shareholder or an employee or wherever you are in the organization , if you're aligned with the brand , then that's going to make sense to you right . Investing , investing in the innovation . When , when we get to that idea of ROI which is , you know , for those of you that are listening , you're in the audio only version Just imagine , I picked up a great big can of worms and now I'm opening it . When you talk about ROI for innovation , what does that mean ? Or is there even any discussion of it ? There's so much gray and so much nuance , of course , around it , but how or if does ROI come into a discussion of innovation at PAE ?
Speaker 2Yeah , it's definitely one of those touch points , jeff . I like your can of worms analogy . Yeah , let me think about how to respond to that one . What we have been doing as a litmus test so far , when ideas come in front of us as an innovation group , is we have , um , our analogy is we use , we think of ideas as seeds and , uh , we like that because , of course , we're nature focused and environmentally focused so equating ideas to seeds is a natural .
Speaker 2So as a seed comes into us , an idea seed comes into us , we first incubate it and what we do there is we are spending only 10 , 20 hours to vet the idea , see if it has legs , see if there's potential has legs , see if there's potential . And then the ideator comes in front of the innovation group we have . You know , it's not like a judge jury type scenario , but they present what they found and then we might go to the germination stage , which is where we're willing to spend 100 to 200 hours and then put additional actual dollars if maybe we need a software developer to help us with something or what have you , or maybe we need to physically build something . And as we go through that germination phase , we're doing check-ins periodically , to you know , at these like checkpoints , to make sure that as we're moving forward , because a lot of these things are just kind of complete unknowns it's like where this might or may or may not go .
Speaker 2So we're doing these checkpoints periodically just to confirm viability . A really kind of neat example that came in front of us was one of my colleagues on our fire protection group had this idea that the water that gets drained out of fire protection systems in buildings each time that there's maintenance required is wasted and then just gets dumped to the sewer and then when they're done with their work , they refill the fire protection system . That's a lot of water , yeah , and if you think about them people doing maintenance on fire protection systems or doing tenant fit out changes and buildings every day , especially in an arid location like a Phoenix or you know Southwest United States in general , you know Southwest United States in general you know what about this idea of collecting all that water and then putting it back into the system when you're done your work ? And so we were actually going down a path of maybe even building a test skid where we would have pumps and we would do a little bit of filtration , put it in this big bladder on the site somewhere , and , yeah , so we're thinking down those lines .
Speaker 2But at some point we then also were doing some checks on the cost of water and the cost of the equipment . And we were doing some calcs and we were just like got to a point where you know the cost of the equipment . And we were doing some calcs and we were just like got to a point where you know what this just doesn't pencil from a financial standpoint , we can't see a path to where , uh , you know , any contractor would would do this .
Speaker 2um , in part because our water is so darn cheap here in the United States . Uh , even though we're in part because our water is so darn cheap here in the united states , uh , even though we're it's scarce in a lot of regions , um , we felt like the only way to make that idea happen would be if , if it was a part of the code change in a city , for example right um , so we're actually exploring that path , but uh , you know , it's just an example of trying to , uh , you know , vet these things out not only from a technical standpoint , but from an economic standpoint right , right , yeah , yeah .
Speaker 1So , if you know , if you're listening to this , you're getting real world right here , right , it's like , does it pencil out , or does it not ? Um , that makes a lot of sense . And I , I think you know back to your earlier example where the project manager was resisting and you , let's just say you , gave them 100 hours out of the innovation budget . You know that's every week . You know , in addition to KP and I recording episodes every week , I record episodes with my colleague , frank Lazaro , and we talk about we unpack AI for AEC .
Speaker 1We do an episode or two every week and one of the things Frank's actually got a book about this and you know his theory and he freely admits that he used 12 minutes because the math is easier . But if you save 12 minutes a day using AI , it starts to add up and , yes , the math on 12 minutes over five days is an hour . That's easier math . But the idea of , okay , well , what if we did invest 100 hours from the innovation budget to build this , and then that starts to get amortized over , or the use of that tool starts to get amortized over , project after project after project , then we start getting somewhere , don't we ?
Speaker 2Yeah , absolutely yeah . That's the other ROI calc that we can do as well is you know what are the efficiency improvements that we're seeing ? Another ROI calc that we have looked at is to look at or to try to estimate , you know what , how many projects might be looking at , say micro grids again back to that example and you know what kind of fees do we think we could garner over the next five years and do we think that we can be profitable in that offering ? And so that's the other ROI calc that we can employ .
Speaker 1Yeah , I love digging into the strategy around that kind of thing too . It's how does innovation help us compete , how does innovating some new offering help us compete and drive fees ? And of course , it all comes back to how are we serving our clients or our owners , depending on what it is that we call those people that we work for . But I mentioned AI and it's like I said , frank and I record at least an episode , if not two or three a week . I guess only one a week gets published , but AI is everybody's favorite topic , it seems . Of course , I have really enjoyed this conversation because you've touched on so many different types of innovation and areas of innovation , and some very technical and some hey , what if we put a bladder on site ? I love that . That's cool . I've got this idea in my head . This is a giant bladder out there filled with the water from the wet sprinkler system . You've mentioned all different types of technology , if you will . How much and how are you exploring AI at PAE ?
Speaker 2Yeah , it's definitely been a hot topic
AI Implementation and Transformation
Speaker 2for us as well and kind of very , very appropriately nested into all of our discussions around innovation , and we've really taken that on within the innovation group and across the firm as a whole . Frankly , the you know , starting with the enterprise options out there you know chat , gpt , co-pilot , you know , of course we're exploring that . We're trying to figure out how to best leverage that within our day-to-day workflow . The thing that we're , I think , zeroing in on there is that , as much as we might want to roll out those things , there's also a very important investment that needs to happen in the training of the people that are using it . Just so that you know , if we're spending dollars on the software or these platforms and then we roll it out and then hardly anybody really understands how to really take advantage of it , then again , from an ROI , that's a terrible investment . So we're really trying to follow it up with the training side . So we're really trying to follow it up with the training side and the other area that we've gotten into isers .
Speaker 2Two years ago now , out in Atlanta , and one of the presenters was a group called Spect AI and they were out of Stanford , stanford , and they had this idea of using AI to pre-process submittals , and if anybody in the business understands the amount of effort that goes into reviewing submittals that come in from contractors , giving our comments and sending them back , it's pretty substantial . And so we've actually been partnering with them right , you know , even before they got any real seed money to help develop their platform , and you know , share with them how we would use it within our process and give them suggestions , and we're still working with them to this day and we're really excited about where they're going with the platform . There's a lot of potential there . So that's another example of how we're trying to interact .
Speaker 2The other big one and this seems to be where a lot of people are spending time these days is , you know , pae has a lot of data . We have all these projects over 50 , 50 , 55 plus years now that we've been in in existence probably don't have , you know , stuff older than 20 years kicking around . That's okay , still a lot of information , but we have this opportunity now with AI to have it be ingested and then be able to query it and do the similar searches that we're now getting used to with platforms like ChatGPT . So that's probably the next big thing , and I know all the firm so many firms out there are are are chasing that one down , so that'll be an exciting one .
Speaker 1Sure , yeah , yeah , yeah , yeah , I'm . I'm glad you brought up spec day . I they they actually , the event that you were referring to was our summit back in 2023 . And I think it was towards the end of the summit . I hosted a live demo day , if you will . So we had founders and co-founders from our incubator cohort that was wrapping up at that particular time . They all pitched from stage specht was one of them the group of students from from stanford and um , I believe . If I'm not mistaken , I believe after , uh , our incubator , they might have gone to y combinator , but um , but yeah , fascinating , um , and and very useful . I believe you have been much more involved with them than I have since they graduated out of our incubator , but I love examples like that . We see a lot . We see a lot of things come through our incubator that are asking questions like that .
Speaker 1You know , how do we pre-process submittals ? How do we ? You know , how do we , how do we pre-process submittals ? How do we ? You know ? What about specifications ? What about , um , you know , taking things down to the , uh , the permitting office , what about the permitting process ? And you know , all of all of those things , any of any of those really um , language intensive tasks ? Um , we see a lot of that .
Speaker 2Some of what we're trying to do there , Jeff , is the way we've talked about it internally is how can we leverage AI to take away the mundane tasks ?
Speaker 1Absolutely .
Speaker 2Just kind of take our energy away .
Speaker 1Yeah .
Speaker 2And then leave room to then innovate , because time is the other barrier for innovation in a business like ours .
Speaker 1I love that because it's been several years ago now . I had an old interview show and on that show I interviewed E , interviewed ethan safardi , who is the uh , the founder of swap swapp architect , which is my background . For anybody listening that doesn't know that um architect who built this basically generative ai tool and they were focused on , I think , mainly um , I think mainly higher ed and maybe healthcare , but generative AI design tool , right , and this was several years ago that he and I were talking and so back then you know it's oh my gosh , it's you know you're replacing architects . So here's an architect developing this tool that's going to , quote unquote , replace architects . But he said something very , very similar to what you just said . He said think of it in terms of AI doing the mundane tasks , doing those repetitive , boring . Do we even need a human to be doing this task so that you can get back to doing what you were really meant to do , the things that you really excelled at in school and things like that , the things that you're really passionate about ? When he said that , I thought you know , that's a really great way to say it . It's so incredibly similar to the way that you just said it .
Speaker 1Yeah , why not leverage these tools to do the things that you know ? One question would be do we actually need
The Future: Value-Based Services Revolution
Speaker 1a human to do that ? But they are the mundane , the things that you know . Frankly , it's not getting an engineer out of bed or an architect out of bed in the morning to go do those types of things . So how can we have the AI that doesn't even sleep ? How can we have the AI take care of it ? Yeah , I love that . I love that approach as you look out into the future and you could frame this around PAE or you could frame it around the AEC industry in general . But what's the biggest barrier to innovation that you see out there into the future ? And then I'll follow that up with ?
Speaker 2basically , how do we solve it ? Biggest barrier , you know I mentioned it before time . You know , in a consultancy we most of our invoicing is centered around time spent on projects and that's becomes our revenue and that becomes our profitability . So if we have people that are normally billable but then we're asking them to do non billable things to support innovation , you know , inherently we're reducing our revenue , reducing our profitability . There's a couple of things at play here bit differently in that , is it really time or is it ? You know , something you mentioned before , which is we are so client driven , we're so deadline driven that we it's more . Is it more really , instead of time ? Is it really more prioritization ? Because you know , when we create our to-do lists , what lands at the top is usually . You know we're trying to prioritize all the time and often what lands at the top is you know the deadline that's coming either tomorrow or next week and we need to start working to achieve that deadline . So I feel like it's more about how do we assign the same level of priority to innovation at this , at the level , or maybe just slightly below , what we assign for dedicating our time to our projects and our clients ? It's easier to say than it is to do .
Speaker 2On the solution side , one of the things that we've been trying to do over the last few years is to approach it like a full on project .
Speaker 2So I mentioned , before we get to our , we do incubation it's a small investment and then we do germination , which is a bigger investment , and when we do that germination , we've been shifting more towards writing a proposal where the innovation group is the client and there's a budget , there's deliverables , there's a schedule , there's milestone markers , check-ins to make sure things are going on track , and there's a principal in charge , project manager . We're really trying to create the same project environment that we're also used to and driven by on our regular projects , and we've seen a bit more success there with that approach . With that approach , we've also encountered scenarios where if , for some reason , the firm is seeing a coalescence of major deadlines and stuff and we are pinched for resources , we'll have to just pause all of that for a few weeks or a month to get through that that hump . But but I think we've been seeing a bit more success with that . It's it's by no means perfect , but yeah , it's the the , the time or the prioritization , I think is probably for a consultancy , one of the biggest hurdles .
Speaker 1Yeah , do you see an evolution Because the professional services consultancy business model has changed little to none over 100 years or something like that ? Do you see a coming evolution of the way that consulting engineers or design architecture firms , engineering firms you know in a traditional sense ? Do you see an evolution coming in the way that they structure their businesses or the way that they serve clients ? Maybe even I don't think I want to say deliverables , but that would be a part of it . I'll go back the way that they serve clients .
Speaker 2Yeah , I think what you're hitting on , jeff , is historically , we're a time-based services delivery model . Even though sometimes we're working in a lump sum , it still comes back to time . Yeah , I'll tie it back . There's going to be this evolution over the next few years where that is going to be more in play , because as AI starts to be engaged more and more , you would think , then our time gets reduced and so , if you follow that along , we're going to be able to do things quicker , and then does that mean that those savings are passed directly back on to the client ?
Speaker 2and then it's a race to the bottom , as we've heard talked about in different conferences and things like that . So is it going to be purely a race to the bottom , or where we are hoping and what we're working towards is more of the race to the top , which is how do we demonstrate our value to clients such that it's not related to time ? And I don't have the answer to that . I wish I could just drop that , do a mic drop moment right now , but it is , I think , what a lot of us are trying to figure out . How do you , how do you , switch to that value based proposition ?
Speaker 1Yeah , 100% . I mean , as a guy that's been doing a talk called commodity is as commodity does since 2016 . So we're're , we're what , nine years in at this point , which is really , you know , a lot of that talk that I do is , um , touches on what you're talking about , right , and there is , there is no silver bullet . You know that's , that's the answer . But there is a necessity , right ? If you don't want to , if you don't want to run that race to the bottom , you have to I like the way you said it race to the top . You do have to to demonstrate your value and create differentiation in the way that you do that , and it's it's . It's a really , really big question . Maybe , maybe we'll have to bring you back at some point . We can dig into that as a topic , because it's a big topic in and of itself . Alan , I really appreciate you coming and telling us more about PAE and how you go about fostering it and supporting it and what it's allowing you to do , not only in-house , but for your brand and for your clients .
Speaker 2Much appreciated , Jeff . I really enjoyed this and yeah hope to come back and chat more . Yeah , absolutely appreciate it , Jeff . I really enjoyed this and yeah hope to come back and chat more ?
Speaker 1yeah , absolutely . Um , for those of you that are listening or watching this , I would say as , especially if you watch it , I think you know , I always have in my head that , because this started out purely as a podcast . I always have in my head well , people are listening to this , but we know that over on the YouTube channel , there are people , a lot of people , watching these as well , and that's probably the easier place to leave questions and comments and things like that , I suppose . But a couple of things , as Alan and I have been talking . Anything that needs a link , that needs a reference , our production team listens to these , they gather these things out and they put the links to everything that we've talked about that needs a reference . Our production team listens to these , they gather these things out and they put the links to everything that we've talked about into the show notes . So , whether you're listening to it on wherever it is that you consume podcasts or you're watching this on YouTube , just go to the show notes or the description , whatever it's called , on your platform and you can find the links to things that Alan and I talk about . Beyond that , if you have questions or comments , leave them . This may pop up on LinkedIn for you . Leave the questions or comments there . We also watch those and we allow those questions or comments to guide conversations or at least topics of conversations in the future .
Speaker 1We want to make this as engaging as we possibly can . You heard me say at the beginning this may have been the first episode where I introduced myself as the executive director of Catalyst We've rebranded and we're launching our online platform called Catalyst , and that's a place where we're going to be driving lots and lots of engagement around innovation for the built environment topics . Alan is already there because he's part of
Final Thoughts and Episode Wrap-up
Speaker 1the Innovation Leaders Mastermind Group and that's going to be growing very , very rapidly . It's going to be the hub of all things innovation for the built environment . So you can certainly leave a question or comment . If it's something that needs to go directly to Alan , I'll send it directly to Alan , but we always appreciate your engagement wherever it is that you're consuming this . So again , thank you for listening to us or watching us . Again , for some reason , I can't get that part of it through my brain . I'm looking at us , but I'm thinking of listening to us , but we appreciate you showing up for this .
Speaker 1Week after week after week . This is KP Impact . It's where the biggest ideas in AEC and AI and innovation all collide . Sometimes they collapse when Jeff fumbles over everything , but it's where everything collides . It is powered by KP ReadyCo , it's our mastermind groups , it's our catalyst , it's our advisory services , it's our research team , who you've probably heard some interviews with them by now , but this podcast breaks down the trends , the technology , the discussions , the strategies that are shaping the built environment and beyond . It's really the impetus for a lot of the conversations that are happening around our community . So , alan , thank you once again , not only for this conversation , but for being a member of our mastermind groups and , as we're recording this , I'm going to see you in a few days in Atlanta .
Speaker 1So that'll be fun as well . Yeah , absolutely Sorry , go ahead . I interrupted .
Speaker 2My pleasure , jeff , it's been a lot of fun .
Speaker 1Yeah , absolutely Great conversation . I appreciate that and again , thanks to everybody out there for listening . I'll be back again as I record this . I'll be back again in just a few hours to record some more as as I record this . I'll be back again in just a few hours to record some more . As you're listening to this , it'll probably be a week from now , but thanks , Thank you all for all of your support and we appreciate all of you and look forward to drawing you into more conversations as we go along . So see you next week . Thanks everybody .