When Revenue Growth And Innovation Don't Align
The UK economy has had a tough ride bouncing back from the 2008 economic crisis but the last two years have seen considerable growth and this has been reflected in job availability, GDP growth and overall optimism across a broad stroke of sectors. According to news reports, the UK economy is now six percent larger than before the financial crisis but when looking at the infrastructure sector, which has significant impact in the UK, neither manufacturing or construction have returned to pre-crisis levels. However, KPMG has stated that while “output has fallen around 20 percent from its peak in 2008… recent indicators suggest the [infrastructure] industry is finally picking up, benefiting from improving sentiment across the UK economy generally”.
This commentary has been reflected in recent research Deltek has conducted in partnership with Infrastructure Intelligence. Only 24 percent of respondents say they have experienced fee recovery to pre-2008 levels and a further 48 percent are primarily focused on boosting revenue.
For many though the struggle to maximise revenue is a contentious issue because it is having a damaging effect on their creativity and innovation. As many as 64 percent of senior industry professionals believe innovation is being stifled as a direct result of low fees.
There is a small minority (12%) who take the opposing view stating that low fees inspire innovation. The comments talked of how innovation will always shine through, regardless of cost, so long as a person is geared that way. Indeed, UK Trade & Investment follow this line of thinking, commenting that “despite the need for widespread cost-cutting to ensure survival, innovation budgets will usually be last in line for a reduction. A downturn can often spur companies to greater heights.”
However for the majority they are experiencing a cruel cyclical twist where they need innovation to increase revenue, and revenue to increase innovation. So, what can be done to counter this – how can firms increase revenue without increasing prices or pricing themselves out of the market?
Fortunately there are a number of ways to encourage revenue growth. Look in the right places and there are many ways of adding value to your operation – from expanding services to cutting administration; improving lead times to better collaboration. Playing a large part of this though is ensuring you are utilising a strong enterprise resource planning tool to better manage each project. Once firms have a better grip and more granular understanding of each project it enables small changes to be made to ensure maximum efficiency and profitability.
Looking forward and confidence within the infrastructure industry is high, in all likelihood buoyed by the potential transport initiatives on the horizon, such as the third runway at Heathrow. It is now just a matter of firms being sure to capitalise on the technology available in order to swing themselves out of the revenue versus innovation conundrum, and allow them to make timely and profitable decisions.
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