This is the English translation of the interview with Director of Strategy & Operational Excellence Niels Schallenberg about Royal HaskoningDHV's digital transformation that appeared in the Transformers Special of Dutch newspaper Het Financieele Dagblad on 23 June 2018. Author: Arend Clahsen; Photos: Jasper Juinen. Copyright belongs to Het Financieele Dagblad. Click here to read the Dutch story on the FD website.
Royal HaskoningDHV explores new business and revenue models. How does a traditional engineering company deal with that? And what is the impact of digitization on staff? 'Our people were really ready for the next step,' says strategic director Niels Schallenberg.
Niels Schallenberg | ©Jasper Juinen
Royal HaskoningDHV must act. If the more than 135-year-old engineering and consultancy firm wants to remain relevant to its customers and employees, it must invest heavily in new technologies, software, services and employees. And that's what it does. Last year the company, with operating income of € 609 million and activities in 150 countries, launched its new strategy.
How are things going now, a year later? Are digitization and automation perhaps seen as a threat by the company's employees, who - in short - spent years on designing, calculating, drawing and invoicing billable hours? After all, a lot of effort is put into the automation of everyday engineering and design work.
So-called 'parametric design' starts to become customary. It means that the engineer inputs variables and the computer designs. This way a variety of variations can be conjured up. So no more paper or two-dimensional calculation and drawing.
'No, the resistance was not so bad,' responds Niels Schallenberg, member of the Executive Council of HaskoningDHV and as director Strategy & Operational Excellence responsible for the digital transition. 'We are an innovative company. People were really ready for a next step. Following the merger between Royal Haskoning and DHV in 2012, attention was mainly focused on integration and the increase of the profitability of the company. The organization was yearning for the next innovation.'
Fear of change is not necessary according to Schallenberg. He thinks that exactly because of digitization, with the knowledge of employees as a basis, more and other services can be sold. 'Technology strengthens human knowledge. Complex puzzles demand creativity, innovation and design knowledge that cannot be automated.'
We are also thinking of new forms of payment: license, subscription, pay-per-click. We do things completely different than before
Niels Schallenberg joined Royal HaskoningDHV in March 2016 and, a year later, moved on to the second highest level of governance to drive the transformation of the engineering firm. The former consultant at Deloitte accompanied mergers and acquisitions in the past, and advised clients on business strategy. 'At that time, Deloitte also started to change with the use of data analysis and big data, and the growing importance of security. So I have already experienced such a change process.'
After a stay in Australia for Deloitte, Schallenberg returned to the Netherlands to get to work with the ailing Grontmij, which was successfully sold to Sweco after a thorough restructuring. This was followed by the step to the second largest engineering firm in the Netherlands.
"The exact opposite applies here," he says. 'Royal HaskoningDHV is a healthy company that can invest in the future. The assignment of ceo Erik Oostwegel and then cfo Jaska de Bakker was, as a relative outsider, formulated fairly openly: just look around and come back with observations and proposals.
'There was already a new strategy to come, with significant changes in thinking about the future, says Schallenberg. 'Actually, it is about how we want to make the step from a world-class engineering consultants firm and project management firm with a very strong name to a company that makes the difference with innovation and co-creation. We want to be able to offer new services so that we can continue to distinguish ourselves. That is the core.'
Schallenberg mentions some important aspects of the change. First it was established what the company is really good at and in which markets. What is outside of it is rejected or terminated. For example, the Belgian activities of Royal HaskoningDHV have recently been sold to Sweco. The second thing that was tackled: although a number of good processes were already under way to improve operational management - such as reducing project losses - according to Schallenberg more savings could be made in this area. 'The third leg is what we call the new business and digital transformation. The latter we have very emphatically contributed to the new strategy that was launched in February 2017.'
Since then, the company has not been idle. People from Philips and Coolblue have been brought in, such as software developers and employees with different skills and qualities than HaskoningDHV had so far. He mentions the input of 'innovation coach' Carola Verschoor, formerly employed by Kraft Foods, Danone, Sara Lee and Coca-Cola, in the development of new products in collaboration with customers and partners.
There has also been a change in the organization of the engineering company itself. The meeting with Schallenberg takes place at the Amsterdam branch of Royal HaskoningDHV. That is no longer in a classic office building, but has been in a breeding ground for start-ups at Sloterdijk for a year. The interior is open. From the communal areas and workplaces you are at HaskoningDHV and vice versa. This way, the idea can be created by exchanging ideas every moment. Sometimes even with parties that otherwise would not have been thought of. Contact and cooperation are explicitly sought with customers and with partners in product development.
The other approach has already yielded the first new digital products. The Flowtack traffic system even won the 'Vernufteling' at the end of 2017, a Dutch engineering prize for the most innovative new product. At Flowtack, based on real-time data from traffic systems and road users, software and domain knowledge, every second is calculated which is the best adjustment for the entire system of traffic in a city. In this way the infrastructure gains in capacity and the emission of harmful gases is reduced by preventing unnecessary braking and acceleration. The system is now being introduced in, among others, Deventer.
Schallenberg: 'It turns the model upside down. Instead of arranging the adjustment with measuring loops in the road, you take all of them at the same time and you can control the traffic flows. As a result, the inner-city traffic flow improves considerably and the accessibility of the city is increased. Traffic jams on the ring roads can be reduced. This is typically something connecting our strong domain knowledge of trafficcomes with modeling software and data science.'You really have to dare to look at existing issues in a new way. We must be a company that is at the forefront of this
He mentions another example. The company has developed the BlueLabel product together with insurance company Achmea and water consultancy firm Nelen & Schuurmans. With this digital service, flooding after heavy rainfall can be measured everywhere in the Netherlands from this summer. 'This goes to the level per square meter. So we know at which house in the street the water first crosses the threshold, and which shop is flooded,' says Schallenberg. By 2019, all municipalities are obliged to carry out a stress test into the effects of climate change and identify vulnerable areas.
According to the strategy director, the development of BlueLabel is a sign of the new way of working. The product was launched within a year. BlueLabel is a map of the Netherlands with as much data as possible about ground level, soil, surface water, sewage and extreme rainfall, enriched with smart algorithms. The information is translated into an easily understandable label that indicates the sensitivity to flooding for every house and street. To launch such a complex product in a short time, technical developers also used software developers, data scientists and marketers.
Schallenberg: 'On a product like this you can apply all kinds of new payment methods: a subscription, a license agreement or "pay-per-click". This is completely different from what we did before. And it is not the end point. You can also think of a connection with Flowtack. How should the traffic flows adapt to flooding? Or even better is the opposite: with which measures do you limit the consequences of the inconvenience to traffic?'
THE DIGITAL LESSONS OF NIELS SCHALLENBERG
The collaboration with Achmea is no coincidence. For the insurer, the advantage is that there will be fewer claims if municipalities can better arm themselves against flooding. For the engineering firm, Achmea is a strong player in the European network of insurers. 'It enables us to expand beyond our own country via Achmea's network, regardless of our physical presence in those countries. We are thus creating a new sales channel.'
According to Schallenberg, digitization is not just about the development of new services. It is also a change in the way of working. 'The digital acceleration that takes place is enormous. We had 25 years to transition from the drawing board to AutoCad. Now this kind of change takes place in one to two years. You have to go with that.'
According to him, the industry is already working on designs with the help of artificial intelligence. An engineer then only needs to enter a number of data and then the computer generates tens of thousands of designs based on AI and machine learning that meet the criteria from which the engineer then makes a choice. The software also learns the preferences of the engineers when generating new solutions.
Schallenberg: 'With the exponential growth of the moment, these functions are in the software packages of suppliers such as Autodesk or Bentley in one to two years' time. So you need bring in what is "on the edge" and develop along with the suppliers.'
At present, all designs are being placed in a digital library worldwide for smart management and maintenance of the built environment. 'Last week Vietnam, Indonesia this week and South Africa next week,' says Schallenberg.
Clear choices must be made by medium-sized agencies to remain relevant
In the meantime, the company is also closely monitoring the development of customer satisfaction and the involvement of employees. Automation also means that consultation with customers is different. Already during the initial design for example, a new bridge in real time consultation several alternatives can be shown. This is what Royal HaskoningDHV calls co-creation: together with the customer develop the best solution.
To speed up the strategy for 2022, the company is investing heavily. In addition to the recruitment of new employees, the company also chooses to participate in other companies. For example, in May Royal HaskoningDHV took a minority stake in data analysis company HAL24K. Furthermore, substantial investments are also made in our own employees. Since last year, seven hundred people have participated in a so-called 'Innovation Academy', to learn how they can contribute to innovation.
'Changing the mindset is most important,' says the strategy director. 'You really have to dare to look at existing issues in a new way. And we have to be a company that is at the forefront of this, because it is the future of the company.'
In recent years there has been a considerable increase in scale in the sector. For example, the British WS Atkins last year (an annual turnover of approximately € 2 mrd) taken over by the much larger SNC-Lavalin from Canada, and CH2M Hill (an annual turnover of approximately € 5 billion) by Jacobs. Both Atkins and CH2M Hill are a top fifteen company worldwide, but they are nevertheless bought by market leading engineering firms.
After the 'big four' in accountancy, there may also be a big four in engineering worldwide, Schallenberg thinks. 'That means that clear choices must be made by medium-sized agencies to remain relevant. We are fortunately a company that is growing, but a turnover of € 600 million is not a turnover of € 10 billion with the corresponding economies of scale. Hence our focus on the things we are very good at. For example, flood risk management, for which we can develop and deliver distinctive new services with our knowledge.'