Scott Stewart - IBI Group Inc.

In this episode of the Canadian Equities podcast Scott Stewart, CEO of IBI Group Inc., joins Robert Cooper to discuss  the architectural and engineering industry and how technology is transforming the business. For the full length version of the Canadian Equities podcast connect with us at acumencapital.com/podcast.  

Transcript

moderator 0:00

Welcome to Canadian Equities, a short biweekly podcast series, where we speak with top business leaders and hear their perspectives on the industries in which they operate for the full length version. Find our link in the podcast notes or connect with us at acumencapital.com

Scott Stewart 0:17

Group was founded in 1974 by nine partners to provide professional services and planning design for urban development and transportation. Since that time, the company has grown and now has over 60 offices across the world. With more than 3000 employees, it is the largest community in architectural firm, sixth largest in the world, and is in the top 15, the U S for engineering, one constant through nearly the entire history of the firm has been CEO. Scott.

moderator 0:44

Today on the community equities podcast, Scott Stewart, CEO of IBI group joins Robert Cooper as they discuss the architectural and engineering industry and how technology is transforming the business. Scott, welcome to the program.

Scott Stewart 0:58

Thank you. It's a pleasure to be.

moderator 1:01

For an outside generalist investor, looking at the Aimee industry, what are two or three things he or she needs to know or monitor that cuts to the heart of the business models and how they operate?

Scott Stewart 1:13

I would say that the first and the single most important thing is, is that it's a people industry. You rely heavily on the quality of the individual. It's the leadership that's provided the. Uh, the competency of, uh, of the individuals, um, and those assets of, uh, those companies go up and down the elevator or, or network remotely. So it's vastly different from a capital intensive, uh, um, uh, form of business. I would say the other really interesting thing, uh, about the business is, is that we have seen the business grow. Steadily, uh, over the past 25 years and with improved productivity, um, throughout. And what's been interesting about that growth as in that performance, is that even in the major downturns where there's been a re be traction, a reduction in revenue, the companies, when they're, well-run still make a profit and the growth generally then that we've seen is that, um, over that same period of time is. The growth rate is typically about 50% more than GDP. And part of that is reflecting historically the sort of normative growth that's taking place in countries, but also is the other reason that it's important is that it reflects the work that has to be done in refurbishing, if you will, existing infrastructure existing.

moderator 2:40

I think more technology practice was an innovative move and it now comprises about 12% of your business, but it wasn't without risk. Walk us through how you conceptualized it and then marshaled the resources to move it from idea to idea.

Scott Stewart 2:56

One we were doing, uh, on this goes back quite a number of years, we were defining, um, opportunities where technology could be applied to improve the efficiency, productivity, the environment of the engagement and the experience, whatever it might've been. But what we were seeing was that the technology companies, and it didn't matter if it's IBM or Honeywell or others, where we're then the solution provider and the problem is they had. Predefined solution that really doesn't understand the problem. And, and we felt that we could create more value for our clients because we inherently understood what the objectives were and what the value propositions were and what the outcome needed to be, uh, by an engaging, um, in the actual. Delivery creation and delivery of the solution. It was a huge step forward. We didn't have any software people. We had very few technology people and, but we took the step forward would be partnering with some other good firms who had had, uh, Bit of a leg up in the market at the time. And, um, we ended up with the project and we delivered a solution. And what we really liked about it, it was that we then ended up with recurring revenue of supporting the system and, and, uh, so we have one project. One client and that scared the hell out of us, out of us. And we said, well, this is not good. We need to be sustainable. We need to be resilient. And we then were able to do that by finding a second client. And by that point, we had really identified IBI as having a unique proposition in the marketplace. Globally. And with that, we were then able to, uh, albeit in a niche market, we were able to go around the world from Scotland to England, to Greece, to the middle east, to India, and, and, uh, also across the United States. So we were able to couple this knowledge of, and understanding of the client's needs our inherent capabilities through the design engineering side, and then into creating good solutions. And that really distinguishes us in the market.

moderator 5:12

What in your view has been the biggest change in the industry that you've seen in your career?

Scott Stewart 5:18

Um, he, I would have to say, well, there are a few things. One is globalization. Um, when I started out in my career so the consolidation that has taken place and you now see firms including IBI, we would have been a dominant firm in Canada, uh, with the scale that we're currently at some 3,100. So that's, that's one, The other is, and the application of technology, um, that has facilitated that kind of consolidation in the marketplace. And, and also being able to deliver new kinds of services in a much more cost-effective way, but it also has highlighted our dependence, absolute dependence on technology, um, through the pandemic. Uh, and it was not so unique to IPI. Would not have survived, had it not been for technology and the likes of zoom and, and, um, and teams and such. Uh, so technology, has been huge, but I think we're just at the beginning of what its impact could be.

moderator 6:17

looking into your crystal ball, what does one thing? A concept that's just a new stage of commercialization that is widely deployed or something else that you think will be a big part of urban life in the next 20 or 25 years.

Scott Stewart 6:34

When I look out 20, 25 years, what I anticipate will be that, uh, quotes ownership as we have known it, uh, it's going to change radically that, um, because of environmental pressures. Uh, because of the fit needs for efficiencies and because the way technology is moving, we are going to be very much a, um, a user-based and the user fee-based of society, where it doesn't matter if it's a vehicle, or, um, accommodations. it will all be on a, a user fee basis. And there won't be very little what I would call tradition. ownership at the individual level. And with that, there are all kinds of opportunities. I think it gets really exciting, I think in the gray kind of environment, um, and much more fluid environment for people who work and live in these places. But, that's what I see. and yeah, and we're seeing it even now in a lot of our urban design work where, um, Rental has now, then is replacing condominium, uh, market, uh, because, uh, it seemed to be, um, more, a more cost-effective and there's a huge market for it because people are not as interested in nor as able to, buy, um, condos and the same applies to vehicles. Certainly people in urban environments are not as inclined to buy vehicles anymore, but they look to subscribe to services on an as needed basis, or if, or as an, as, as needed fee service basis.

moderator 8:17

Scott Stewart IBI group. Thank you for joining us on the Canadian equities podcast.

Scott Stewart 8:24

Robert, thank you very much. It's been a real pleasure.

8:30

Note that this podcast is not making an investment recommendation on any companies discussed. We welcome your comments on today's episode or any other episode. Connect with us at Acumen Capital dot com.