Align Commercial Strategy With Top Growth Sectors

Are You Poised for Strong Multi-Year Growth?

Today’s economy faces multiple headwinds including inflation, slower GDP growth and geopolitical uncertainty. Many sectors have pulled back on investments, and consumers are more cautious with spending. Despite these very real challenges, there are strong signs of both short and long-term growth in commercial and industrial services. A broad array of companies support this sector and have a need to invest in new revenue models to capture their fair share of growth. End-customer needs, though growing, are increasingly complex. Customers value service-based firms with comprehensive and customized solutions—integrating service with technology, physical goods and business insights. From Alexander Group’s client work and research, here are the top growth sectors and their implications for your revenue model.

1. Manufacturing Onshoring and Near-Shoring

2022 trade in U.S. goods and services with Mexico reached almost $900 billion, making Mexico the second-largest trading partner for the U.S., behind another close neighbor, Canada. Meanwhile, trade with China has dropped 14.5% in the first half from the prior year. After decades of decline, the U.S. has added one million manufacturing jobs since 2014 and over 150K since 2019, despite unprecedented pullback driven by COVID restrictions[1].

Revenue Model Alignment

These shifts in trade patterns provide business service providers ample room to capture new revenue streams by pivoting revenue strategies. Companies need more focus on regional partners like Canada and Mexico, and ideally sales and delivery models that encompass all of North America. They need tighter alignment with global manufacturing firms and a better understanding of manufacturers’ unique service needs. This can encompass everything from facility construction to equipment maintenance to staffing. Service providers also need to embrace new and innovative offerings that may go beyond one or two core needs that they traditionally may have supported.

2. Renewable Energy

According to the IEA, by 2025 renewable energy will drive 35% of global power generation, up from 25% in 2015, and will also account for 90% of net new energy capacity[2]. This tremendous growth has strong implications for manufacturing services, as above, but the impact is even more far-reaching. The whole global energy infrastructure must be fundamentally rebuilt and refocused.

Revenue Model Alignment

Traditional utilities and other energy distribution and delivery companies must rethink their revenue models, facing significant competition and potential new entrants. The immense capital spending required for renewables provides ample opportunity for service companies to expand a wide variety of services across the energy supply chain. Again, a vertically focused revenue model will provide the best avenue for growth. Service providers who understand the full needs of all the players in the renewable energy revolution will provide the most valued solutions, ideally locking in long-term service agreements and customer relationships.

3. Transportation

Global electric vehicle production was up 40% in the first half of 2023, reaching a staggering new production volume of six million. In the same period, global EVs accounted for 14.1% of global light vehicle sales, up from 11.3% in the first half of 2022[3]. Recent U.S. legislation provides fuel for continued growth, and it is only a matter of time before electric vehicle (EV) share eclipses that of gas-powered vehicles.

Revenue Model Alignment

As in other service segments, aligning with manufacturers is key. From new facilities, parts and vehicle assembly, EV and battery manufacturers will have distinct needs from legacy automotive companies. They are also concentrated in new geographies, namely the South. Service revenue models must adapt and follow the investment. Additionally, there will be profound changes in commercial vehicle production and maintenance, where EV share is currently much lower, providing more avenues for long-term service growth.

4. Online and Mobile

U.S. e-commerce sales surpassed $1.0 trillion for the first time in 2022. Globally, e-commerce will continue to grow at near double-digit rates, reaching close to $6 trillion for the full year of 2023[4]. E-commerce operational models are driving the need for more widespread distribution facilities along with more complicated logistics, and in particular, last-mile delivery.

Revenue Model Alignment

E-commerce-focused companies have tremendous service needs, so much so that the biggest like Amazon are attempting to vertically integrate as much as they possibly can. Service providers need to intimately understand the e-commerce distribution model, and offer tailored solutions to both pureplay and hybrid e-commerce players.

5. Construction

JLL is estimating a 5.9% increase in construction deliveries for 2023 and a 5% overall increase in construction activity[5]. Multi-family construction has hit sustained highs not seen since the mid-1980s. While the commercial office sector is seeing headwinds with elevated interest rates and remote work trends, the broader construction outlook remains positive.

Revenue Model Alignment

The construction cycle offers ample opportunity for service providers, from design support to new facility maintenance. More stringent environmental standards require longer and more involved building processes along with newer technologies (electrical, monitoring, HVAC) that have more sophisticated service and maintenance requirements. Service providers should have a solid understanding of full life cycle building needs and must align to selling and delivery resources appropriately.

How Can You Capitalize on These Growth Trends?

Service companies require an overhaul of their revenue coverage models to better align with growth in the commercial and industrial sectors. The first step is to develop and execute a vertical and buyer-focused account strategy. To fully cover the opportunities in renewable energy, for example, business services firms must understand the dynamics and unique service needs of the potential customers – manufacturers, end-users and distributors. Then within target accounts, clear profiles of key service buyers are a necessity – plant managers, operations leads and facility owners. Each buyer has unique needs, and they may have many unmet needs when dealing with fundamentally new technologies.

Beyond a vertically-focused strategy, companies should re-align (and in many cases build from scratch) commercial teams.

• Marketing will need closer alignment with both product and sales teams. Marketing should focus on developing new buyer use cases and investing heavily in lead generation and business development.
• Sales will need new, hunting-oriented roles, to greatly expand share and support new and highly tailored service offerings. The sales team will need support from both industry and service line experts and will have to work collaboratively to support the largest and most strategic accounts.
• Service and Delivery teams must be tightly coordinated and may have to be fully dedicated to the key growth sectors above. Service roles may even need to take on a significant amount of account management, supporting renewals and service expansion within supported accounts.

If you want long-term growth, start focusing on your vertical strategy and be ready for some fundamental changes and new investments in your revenue model. Anywhere you are on this journey, Alexander Group can help. We have assisted companies in navigating disruption for nearly 40 years.

^[1] U.S. International Trade in Goods and Services, December and Annual 2022, Bureau of Economic Analysis, 2023

^[2] World Energy Outlook 2021

^[3] Global EV Sales for 2023 H1, EV-Volumes, 2023

^[4] US ecommerce in 2022 tops $1 trillion for first time, Digital Commerce 360, 2023

^[5] JLL’s 2023 Construction Outlook foresees growth tempered by cost increases, BDC Network, 2023