Innovation & the AEC Angels Part 1
In an industry that’s been historically slow to adopt the latest technologies, the architecture, engineering, and construction fields present incredible opportunities for tech investors and developers alike. Determined to drive innovative change from within the industry, Thornton Tomasetti, STO Building Group, Syska Hennessy, and SHoP Architechs formed the AEC Angels to assess, test, fund, and accelerate promising AEC technologies. Join Rob Leon, executive VP of STOBG Global, as he discusses the origin and purpose of the AEC Angels group with two founding members—Executive Chairman of Thornton Tomasetti, Tom Scarangello, and Executive Chairman of STO Building Group, Jim Donaghy. This is PART 1 of our two-part interview with Tom and Jim.
Rob LeonExecutive VP, Global Services, STO Building Group
Jim DonaghyExecutive Chairman, STO Building Group
Tom ScarangelloExecutive Chairman, Thornton Tomasetti
Welcome to STO Building Conversations, a construction podcast powered by the STO Building Group. On today’s episode, Rob Leon, Executive Vice President of STO’s global services group speaks with Tom Scarangello, Executive Chairman of Thornton Tomasetti, and Jim Donaghy, Executive Chairman of STO Building Group, about the origin of the AEC Angels group and how they’re driving innovation from within the industry. This episode is part one of our interview with Tom and Jim.
Rob Leon (00:54):
Today, we are joined by Tom Scarangello, Chairman of Thornton Tomasetti, and Jim Donaghy, Executive Chairman of STO Building Group. And the topic of conversation today is innovation and the AEC Angels. So, gentlemen, starting off, would you mind giving us a little introduction to yourselves and your companies and how long you’ve been in the business?
Jim Donaghy (01:12):
Go ahead, Tom.
Tom Scarangello (01:14):
So, I’ve been in the business over 40 years. Our firm has been around for 70 plus. We just had our anniversary about a year ago, back in the pre-COVID days where we were all able to get together and have a big celebration, looking forward to that happening again. And we are an employee-owned international team of a genius engineers, everything from architects, scientists, and support professionals who evaluate and solve our client’s challenges throughout the life cycle of their assets. And those assets could be anything from buildings to stadiums to submarines to heart stents. We’re almost 1500 people. And we’re in more than 50 offices around the world.
Rob Leon (01:50):
Great. Thanks Tom. Jim.
Jim Donaghy (01:52):
So, I’ve been with Structure Tone my whole career. Started in 1989, full-time out of college and today I’m executive chairman. I kind of grew up through the ranks in Structure Tone through to operations and estimating and got into some of our national stuff as well. I spent time on the road at Structure Tone, two and a half years, in fact, in our Florida, Texas, and then one of our overseas projects. So got a good training program inside Structure Tone before getting to the executive suite. So, my whole industry experience is at Structure Tone, it’s been great. We have really diversified the company and today there’s a lot to talk about as far as innovation. So that’s my background.
Rob Leon (02:30):
Great. Thank you. So, our industry has been labeled as slow to adopt new technologies and innovation, but innovation is clearly a passion of each of yours, but also embedded in each company. Can you talk a little bit about what sparked your desire to push for more innovative and efficient processes in respective to those companies? And Tom, we can start with you.
Tom Scarangello (02:51):
As I said, we’re over 70 years old as a company and no company lasts or thrives for that long, without innovating, but about 10 years as we were expanding both geographically and in our service line, we started to think about what was the big goal that we could unify our employees around and excite them and really drive the company forward. We landed on being the global driver of change and innovation in our industry. And I think the key word in that statement is driver. What was clear was we were always both an adopter and we would react to innovation and try to be an early adopter, but we weren’t really driving it, I would say in the way that, and I would say our industry has never really been a driver of innovation. You know, if you look at things like BIM, the aviation industry was using building information modeling in the 90s, early 90s, the mid 90s.
Tom Scarangello (03:39):
And, we woke up to it in the mid-2000s like we had discovered something. I think throughout the industry, you’ve seen that it’s not just us. We always reference, Harvard business review ranking where the construction industry was ranked 40th of 40 industries at adopting innovation. And that was only back in 2013 or 2014. So, what we looked at was when we recognized the difference between being an early adopter versus a driver, we started to build an ecosystem that would allow that to happen. And so we created a group within Thornton Tomasetti, an incubator called Core in which we have people who are dedicated to taking the best ideas of Thornton Tomasetti and moving them forward in the categories of both incremental innovation, adjacent and blue sky innovation. We created twin and outside accelerators so that we could take the IP that was trapped or not being able to have the support it would need if it was something outside of our sweet spot that we could take it outside the firm.
Tom Scarangello (04:33):
And then we started to recognize the need to broaden our exposure beyond just our own ecosystem. And that’s where we started to talk to firms like the STO Group about how do we do this as an industry and we’ll get into it later. But, that’s kind of where the AEC Angels came from, this idea of getting outside our own space in an industry that’s driven by collaboration, but also constrained by collaboration. That’s the third leg of the stool, at least in our approach to innovation. That’s key. It’s making sure that the whole industry is engaged, not just our individual firm.
Rob Leon (05:04):
Yeah. I think that’s a, that’s a great point. I think that really goes to the core of some of our values here at STO Building Group too, is that we have been, I would say a very innovative company and I’ve been here since 1994. So, I’ve been here for a long time and seeing the changes, but it’s really over the last, probably about three years, Jim, that we really started putting structure to the innovation process. Maybe talk a little bit about that here.
Jim Donaghy (05:27):
Yeah, in the last few years we’ve realized there’s a need to organize ourselves internally and to position ourselves correctly so that our national clients and our large partners and national partners that we work with, like Thornton Tomasetti view us as a value added team member. We knew we had to start making bigger and more strategic investments, and to do so,
Jim Donaghy (05:49):
We had to be really strategic in selecting those investments and incorporating a lot more input internal to us, not at the senior executive level, but at all ranks throughout the company. So, we had to really organize, and we’ve got quite a few groups internally. We’ve got our emerging leader group, Rob, as you know, is one of our upcoming groups in the organization. Our future leaders are in that group. And it starts with our RPE program, in fact, where we really try to work hard at training our staff, and don’t just let them grow in the field or in the office and let time be their guide. As far as their training, we really try to accelerate training. We believe in experiential training and really bringing our staff to some of the great training centers. Thayer Leadership is one of those places where we’ve spent a lot of time up at West point, having our staff be exposed to some of the great ideas from our military, as far as leadership goes, but in those training sessions and in all of those interactions, we gather ideas.
Jim Donaghy (06:40):
And now we have a structure internal to take those ideas and bring them into a very focused group, whether it’s the center of excellence and innovation for operations or center of excellence, innovation for estimating or for business development, we have three of them. Those groups are leaders in all their respective disciplines throughout our company, and they not only talk about best practices and knowledge sharing, but they consider all those great ideas that are circulating in from our training programs. And it’s a good structure. It makes its way up to the top. We have an innovation council, and, in that council, we have really the leaders of our company, including Bob Mullin, our CEO and Greg Dunkle, our CAO, we’re going to add to our executive ranks in innovation executives today. It’s a handful of us that represent that at STO, but by next year, this time there’ll be another executive in our group spearheading I renovation council.
Jim Donaghy (07:27):
We’ve also decided it was important to go outside ourselves and not just be talking to ourselves like in an echo chamber. So the AEC angel group, which we’ll talk more about shortly is one of our many efforts to be out in the market in a meaningful way, partnering and getting outside the box and not just being a contractor and understanding the world around us.
Rob Leon (07:45):
Yeah, I think that’s great. And one of the things that from talking to the two of you on several occasions and just, being involved in the AEC Angels group and our innovation group internally, the theme that I hear consistently is that we need to do this from within the industry, not outside disruptors and we also need to do it collaboratively. And I think that’s what really drove the partnership of AEC Angels. So, I’m going to read the, the AEC Angels mission statement.
Rob Leon (08:13):
Cause I think it says a lot to how the group was put together. And then I think we can go into the vision of the two of you of how it started and how it can grow. So the mission statement is to leverage our collective complimentary knowledge investing in best of class AEC sector technologies to help transform the industry while driving exposure, to leading industry technologies and striving to provide long-term returns over a five to seven year horizon. So, knowing the story behind that a bit, maybe you can talk about, it’s not only about the investment, the dollar, the check that you’re writing. It’s also about the investment in the technology of how we incorporate it, test it within our companies, but then also improve it for the greater good of the industry. So, this is not meant to be just within Thornton Tomasetti Structure Tone, Syska Hennessy, SHoP. This is the group that wants to really drive change throughout the industry from within the industry. So, Tom, maybe you can talk a bit about who are the Angels and where did the idea come from?
Tom Scarangello (09:16):
Sure. Well, you just mentioned the partners, just going ahead, Syska Hennessy, SHoP, STL group, and Thornton Tomasetti and again, we have aspirations to broaden that group, but as you said, it’s not about being this siloed group. It’s just the opposite of the strength of our industry is its ability to collaborate. It’s also the challenge of our industry and the reason why in many ways, innovation has been slow to take root because it does everything requires a consensus and collaboration to move forward. But what we’ve seen in the last decade in the last five years, especially the outside world, has been looking with a laser focus now on our industry and why, because they see huge opportunities through both innovate and to streamline our process. There’s no question that the construction industry is an industry that, like I said earlier, it’s right for disruption and innovation.
Tom Scarangello (10:04):
And, I use construction industry. So, I’m, if people say, Hey, Tommy affirming you, you have architects, engineers, and scientists. But I always say that, we’re in the business of, of wanting to see whatever we work on, get built. So that’s the industry we’re in, right? Where if it didn’t get built, we’d just be mathematicians and artists. We pride ourselves in saying at the end of the day, whatever we work on comes to fruition. And so, we’re part of an industry that requires collaboration. It needs collaboration to move forward. So, the genesis in particular, for me for the AEC Angels was something that came for a little bit far afield field coming out of our twin accelorator. We spun out a company about five years ago when we merged with Weidlinger, that is become a company called On Scale. And it’s actually in the computer-generated engineering cloud-based solution space and it’s focused, believe it or not on kind of multi-physics analysis of things like 5g chips and mems and other things like that.
Tom Scarangello (10:57):
and again, it was, I talked about the three levels of innovation that there’s kind of the blue sky, an area in which we were working. And we developed a tool that was outside our space. So, we spun it out and it’s moving forward. But in its early days where we were looking for seed investment, our CEO of On Scale came to us and said there was a group called the band of angels that wanted to invest in onset and, tell us what the investment was and the terms I was like, wow, those are pretty nice terms. Why are we giving them these terms? And they said, well, if band of angels invest in this technology, follow on money will come because there are 300 or more people in Silicon Valley. Who’ve all had success. They’ve all had exits over the last 30 years.
Tom Scarangello (11:37):
They vet on a regular basis technology. And because they’re the experts, people really look to them as kind of a pre-vetting of what’s the best technology. I didn’t know about it, as we said, sure. Less than a year later, we had significant investment by Intel capital and gradient ventures, which is Google’s investment arm. And On Scale has kind of been off to the races ever since. So, as I thought about that, and as I talked to people like Jim and others in our group, we started to think of, why aren’t we, those people? So, it can, Valley is a very siloed area in and of itself. Our industry is, all over the world, but starting with a group of ours in New York and, and in the US, we know what can work and what can’t work.
Tom Scarangello (12:18):
We know, what the barriers are. And just as importantly, because of the, the focus on our industry, if we don’t do it, if we don’t disrupt our S our own industry in a positive way, we’re going to be disrupted from the outside. And none of us want that to happen because we want to be in charge of our future and not have somebody come and disrupt us. And so that’s where kind of the Genesis of the idea started. And then the group got together and really flushed it out in a way that I think is pretty exciting. And I think is going to expand and help us drive our industry from the inside out versus from the outside in
Rob Leon (12:53):
That’s great. And Jim being internal here at STO Building Group, I kind of get to see the wheels in motion and the years in motion. And, we pulled together a small group, Greg Dunkle and I led a small group, went to Oxford university. We did a co-innovation session with Syska and Gensler and the like, and from my point of view, I’ve always seen the innovative process happening, not just by yourself, personally, as an innovator, but also as an organization. We’ve always been allowed to and push to actually take those innovative steps, those entrepreneurial steps to better the organization and to form better or ties within the industry for our partners. So, the change happened, Structure Tone to STO Building Group, our footprint, partnerships, mergers and acquisitions. Can you talk a bit about how that fueled the desire and I guess the momentum for the innovation process within STO Building Group?
Jim Donaghy (13:50):
Sure. Rob, as you said, mergers and Acquisitions have accelerated our growth and our footprint. And just to step back for a moment, even prior to the accelerated growth, we were growing on average about 7% a year over 25 years, which is a nice, steady growth, but in doing so, we had expanded to over 20 locations and the number of types of projects we were working on, probably the most unique project demographic there is in the ENR say top 50, for the last decade, that would be true because of the amount of small projects and the number of sectors we work in. You know, when you add in the number of cities, and then there’s all these large national accounts, we’re a very, very diverse and almost complicated company. If you haven’t been here your whole career, like most of us have this quite a few long tenured executives and management team in place in our organization, which is a benefit, but also explains how we’re able to run this machine the way we do without the assistance of tremendously smart data.
Jim Donaghy (14:43):
And I think we have all recognized in the past five or so years, the need to take this data that we have. We’ve got an enormous amount of data and it, so we can get a lot more value back out of our data, whether it’s the artificial intelligence, the predictive analytics that we wish we had, but it’s also the idea sharing and the knowledge sharing across the platform. So our merger acquisition strategy, our growth strategy with these new firms that have joined the family in the past five years is that we very much want them to not change a single thing about their culture, their brand intact, a hundred percent, their management teams intact a hundred percent. All of that is critically important to us, but in doing so, we want to make sure that our platforms, our systems, we can all talk technologically and digitally in a very seamless manner.
Jim Donaghy (15:28):
So, we’ve got to integrate these companies. We’re really working hard at doing that, but it’s challenged us to consider what are the best tools for the future FTO building group, not just the current one. And at the same time, we have hundreds of these startups that are coming out with some great ideas and how we can become even more efficient and more productive and create better dashboards and creating more truth in data. So, the opportunity is really what’s motivating and driving us right now. As I sit here, the opportunity to become so much more intelligent and have the smart systems really make our people more scalable and, sharing knowledge across this type of platform just empowers people. And it creates an excitement as well. This year we’ll have our first big hackathon, and it’s all these little events that we’re now able to have as an organization where the ideas are not only going to be just that much more exciting because of our size, but we’re structured now to invest in these ideas and partner with the outside world around us to bring ideas, even maybe commercialize some of our great ideas.
Jim Donaghy (16:24):
So, timing has never been better, but we also have never needed some of these innovation changes more than we do now. So, I’m excited about the future and where this is going.
Tom Scarangello (16:34):
So then, do you have any idea to talk about data? And I think it’s really, people kind of say to me, and who’ve known that I’ve been in this industry a long time, why now? And when you think about the last 10 years, we have digitized our business. It wasn’t that long ago that we were still, paper and envelop, right? And over the last 10 years, everything has started to be digitized, not just our deliverables from a design standpoint, even our concepts, we’re using parametric modeling and other tools. And, and if you look at, in the construction world, you can talk to all the opportunities where you’ve collected this data. Now, whether it’s imagery, videos, or just the data that as people tapping on their iPads, where they used to be putting it down on a clipboard.
Tom Scarangello (17:14):
So, all this data is at a moment now that it’s all there. And what we’re finally recognizing is the data is what we can share. And it’s not, yeah, sure. There’s some data that is proprietary. It can give you a, an advantage, but in all honesty, the real advantage for, for the industry is when we share that data and we drive things like efficiency of design or safety in the field, all of that stuff is data we can share and drives the industry together. I think the firms that are going to kind of win the race are the ones who are first to embrace the digitization and efficient use of that data. But I think the sharing of the data is the thing that’s going to finally change our industry from a siloed industry to an industry where people look at it and go, wow, that’s, that’s an innovative force for change. And so that’s why, to me, the AEC Angels, and the kind of conversations we’re having, because it’s not just about, let’s keep it them on the four of us. It’s like, how do we, how do we get all these firms to, to share their data and use these tools so that we’re all out there driving the industry together,
Jim Donaghy (18:12):
Tom, you hit the nail on the head, the dimension of the AECA angel group. That’s going to have the biggest impact in five years, we’ll look back and say it was this piece that made all the difference in the world and justifies any investment we made in resources or funds is taking down the silos. So just one quick example, and this is something we’ve discussed before, the design phase where the contractor is kind of only invited up for certain pieces where they provide the schedule, provide a budget and step back out again. And that literally, but it almost feels that way where we’re not truly adding the value. That’s now going to be possible. If the digitization continues the way we see it, continuing in the supply chain, and those barriers are broken down. And the major manufacturers and suppliers see us as absolute partners working on a single platform together, the data we now provide upstream in the design phase, embedding data alongside your team and all the design teams, we truly are working together and putting the data in the places where it belongs the most, allowing our client team to make decisions that much better and faster.
Jim Donaghy (19:12):
The inefficiencies really happened in the construction cycle from, from design through construction and turnover is the lack of information to make faster decisions. So, imagine finishing design a hundred percent and the supply chain still doesn’t know what’s going on. It’s almost economic, it’s almost comical. Um, and I, you can see around the corner a little bit. It’s not maybe right on the horizon, but it’s, it’s, it’s out there. It’s right around the corner. And it’s the AEC angel type of group that’s going to help solve far faster by being really engaged in the market with the VCs and these it startups not letting them just kind of figure this out on their own, but helping them understand the tools that we want. And they can partner with us as a group to figure out how to digitize the supply chain, embed the data upfront, put us all on the same page from the day one of the planning, right through the turnover. And then, so the life cycle of the property, why not stay together the whole way through, it’s all digitized and implanted together. You know, why all these silos, it’s interesting time. Someone’s going to listen to this podcast in 20 years and say you were doing what, before we digitized everything, it’s going to be hard to believe that we did it this way.
Tom Scarangello (20:15):
And I think our recent history points, 10 years ago when we were talking about full adoption of BIM and delivering BIM models directly to the downstream user, whether that be the steel fabricator or the curtain wall, we really were, we were kind of out there on our own, with a very small group of other firms that were pushing it. And I used to make the argument, this is crazy. I spent most of my career where I’m sitting there in my head, I see everything in 3d. I see all the challenges of the design. Then I dumb it down in 2d, hand it to a contractor. And we argue about the D interpretation of that two D what’s in my head versus the piece of paper versus what they have to build. And why would you not give them the full view of what was in your head at, or as close to that as possible.
Tom Scarangello (20:55):
And I think that’s, that’s already changed the relationship between engineers, architects, and contractors, because that visualization and the data is there. The next phase which you’re talking about is, and I see it already, if I’m in schematic and DD and I can, in real time get information about pricing, not just from somebody who’s using their 40 years of saying, well, in the old days, somebody would say, well, there’s 60 drawings. I think it costs this much, right? We’re getting to the point now where we could get real input on, the, whether it’s steel connection cost or materiality in real time in schematic and DD. So, when we do finally get to a point where contractors and others are selected, we’re not arguing about whether or not we were right or wrong, about the pricing or the complexity. It was something that was tracked all along collaboratively and teams get selected for their expertise. Not because they can underbid because there’s a misinterpretation on one end or the other, when we can end that we can completely change the way that our industry works, the efficiency of it. and I think it’s, it’s starting to happen, but the next 10 years, I think it was going to really be even more transformative than the last time.
Jim Donaghy (22:02):
Yeah. And Tom, just add another dimension, which is the story where we truly are becoming partners in the expertise is where we’re valued more than mistakes or information. That’s not understood well enough, the re the expertise and evaluate it’s truly where the focus is, but we believe right around the corner. So, imagine this dimension is added to the storyline where the, manufacturers and suppliers around the world understand who their clients truly are. And they can see all the way end to end, and the clients can see back all the way back to the factory floor. You know, where’s my product truly coming from and being able to stand in front with the client team, the contractor, the designer, um, understanding the purchasing power of our clients, the number of units being bought from carrier or train, and to change the conversation with some of the manufacturers at the factory level.
Jim Donaghy (22:47):
And instead of all these layers of markup, and I’m not saying that it’s all about just savings as much as it’s about efficiency and partnering, because ultimately if we can be viewed for who we truly are in the marketplace, in our case, as a major contractor, buyer and expert, we would like to see the conversation change. Even with the manufacturers where our teams are invited in to have discussions about these units that are being fabricated, manufactured, the new models and bring our clients with us and have conversations about the needs of the client and the ongoing operations of the client and how that can interpolate into a better unit. And we can bulk buy differently based on the true needs of our clients and have an ongoing relationship. We don’t as a contractor, always need to be there between client and manufacturer, but we certainly want to be there for where it adds value.
Jim Donaghy (23:35):
But today that the relationship has really broken down because of the digitization that hasn’t fully occurred yet. But we are working right now on understanding every single product, every screw in widget, we buy, we’re going to know those numbers. As soon as you know, it’s going to take a while. We’ve got, systems that have to still be built because the marketplace doesn’t provide systems and tools to be able to break down estimating in a way where we can then quantify all the purchasing that’s being done by client or by region or by-product type. It’s really done transactionally by trade is the way the industry works today. So that’s going to, once that’s broken down and, and all the little pieces are known and understood and digitized, put that into the designs, partnering that we just talked about. And I think about the empowering we would have for the big players in the market and for our clients, the efficiencies that we would gain. It’s, it’s pretty exciting. I’d rather be 25 years old right now for what’s coming down the pike
Tom Scarangello (24:29):
For, for a lot of reasons, right, Jim. But, it’s exciting. And, and, we, we look at the direct benefits, but you know, we’re also looking at a world in which we’re finally facing things like climate change. And we’re looking at the next big challenge of embodied carbon. And you talk about the supply chain. You know, you need the transparency of understanding where to materials come from. Is there a more efficient way to reduce the footprint and reduce embodied carbon? Think about just 10 years ago, how much more difficult that would have been to actually have a rational analysis of what is the embodied carbon, the impact of a design or of a renovation or anything else. And to your point, as we start to look at where suppliers come from, where we are, what is, what is the whole supply chain look like?
Tom Scarangello (25:12):
And how can we optimize that? It’s not just, we got optimize it for a whole bunch of levers. It can be cost, it can be efficiency, it can be speed, but it can also be environmental impact as well. And it needs to be that, and, and all of those parameters are there. Those were all dials that can be looked at now and can be transparently looked at in our industry. So, I’m think we have a huge leadership role now, and we capture and control that data. This can’t just be about four firms and it isn’t—it’s got to be about the whole industry. And that’s the exciting part. And I’d like you just said, I wish I was 25, just because it’s an industry. That to me will be a lot more exciting than even in the industry that I came into, which clearly I was excited as an engineer, but, but I think the industry wasn’t as exciting as what it’s going to be over the next 25 years,
Jim Donaghy (25:57):
Couldn’t say it better. Corporate social responsibility of all of our firms has really evolved. And the needs of the world around us today has changed quite a bit. And, um, I just think that in the future, as we’re gathering data, it’s going to be based on not just price and schedule and quality, it’s going to have all these other dimensions to it, even diversity and inclusion and things of that nature. So, I’m looking forward to seeing how this all turns out in 10 or 15 years as I’m waving goodbye to the industry. Sadly, at some point, right, we can’t go on forever, but like I said, there’s a lot of 25 and 30 year olds, the ones that are in this company, our company, and I’m sure on yours as well, Tom, they’re just brilliant. And they’re simply smarter than we were when we were at their age. And they’re getting educated and experiential training is occurring for them so much faster than it did back in the eighties and the nineties when we were growing
Jim Donaghy (26:44):
And learning. So, they’re just going to, they’re going to knock it out of the park. There’s going to be a great industry. I don’t think we’re going to be sitting on the bottom rung of that chart of industries that are learning how to adapt and change any longer. I think we’re going to really move up that chart fast,
Tom Scarangello (26:57):
That demographic is demanding it, right? And they’re not just demanding that we be innovative. They’re demanding that we have a positive impact on society. They’ve grown up in a new Euro where that was top of mind for them. And it’s exciting to see them come to maturity and live up to the things that we told them as parents, and that they’re actually turning it into action about how to, taking care of the environment and driving equity and inclusion diversity. And so, it’s exciting to see, and it’s exciting to see that this is an area where our industry could lead rather than falling.
Thanks for listening to STO building conversations. Tune in next week for part two of the conversation with Tom Scarangello and Jim Donaghy, as they dive deeper into where they see the biggest potential for innovation in the AEC space.