Revolution vs. Resolutions
Competitive advantage in the construction industry used to be easier to achieve. Sustainable competitive advantage yielded profits and plentiful work. However, the market that evolved out of the most recent recession appears to remain hypercompetitive, and many would argue driven mostly on price. Companies no longer expect easy growth and profitability. Competitive advantages appear to be short-lived. Many companies may find themselves outbid by competitors and wonder why.
Companies that adapt to the volatile market identify and provide greater value to customers. There are business practices in construction many take for granted or assume are effective by “checking the box.” Techniques such as checklists can be immediately effective, but their value sometimes diminishes without continued adaptation to customer needs and great leadership. This lack of long-term commitment creates confusion across the company.
Done correctly, effective business leaders know that sustainable operational excellence can create a lower bid and still allow room for a higher profit margin. Market advantage seldom is gained by one or two well-implemented ideas. Rather, competitive advantage requires adaptation and the ability to implement new ideas quickly. No longer is it one technique or approach that gives a company an edge over its competition. Instead, advantage is gained by companies testing new practices and constantly evolving. In order to create this type of advantage, companies must be great at adapting and implementing ideas rapidly. From working with clients through the recession, there are five steps required to achieve a culture of adaptability:
- Align operations with strategy
- Create simplicity and effectiveness
- Lead effectively
- Develop best practices with the customer in mind
- Constantly improve
Align Operations with Strategy
Alignment allows focus and discipline on important issues, relating operational performance to the direction of the company. Most companies have many initiatives, but operational initiatives should not exist in isolation. Great companies focus on those tasks that tie in to the company strategy rather than wasting time on lower return items. Tying operational initiatives to company strategy also allows for a natural motivation or rallying cry to achieve results. By doing this, the leaders can focus on what is essential while the company continues building projects and remains disciplined to follow through on the initiatives it starts.
Simplicity in Operations
Simplicity starts with achieving clarity in how we are performing today. It requires integrity in information across the company. In order for you to improve your physical fitness level, you must know where you stand today and be honest about how much you are working out. You will certainly hit a roadblock if you tell your trainer you are running 20-mile weeks, yet are not losing weight because in reality, you are running three-mile weeks.
Once this clarity is established, the field and office can communicate clearly on the ground of truth. Labor budgets, cost code tracking and costs to complete are three systems that become most clouded as companies evolve. Each of these, when unclear, can create drastic consequences. The same applies to developing best practices. The simpler they are, the more likely they will be followed through the chaos of day-to-day operations. Reduce tasks to the vital core and execute with a vengeance.
Lead Effectively
Getting direct reports to follow new best practices is not achieved by direct orders from the top of the company. Influence is more effective than imperatives. Influence requires great leadership in engaging others and creating a common cause or vision of the future, in order to motivate through and achieve desired changes. By understanding and connecting these initiatives with the individual motivations of each direct report, you can connect each of them to a desire to achieve the goal. Compliance for its own sake is not effective leadership.
Society has shifted from rote-rule following to a broader application and understanding of the fundamentals. This broader understanding allows for adaptations and continued improvements, refined and largely “directed” from the field. Leading by seeking engagement from your company requires more energy and doesn’t happen quickly. Building a vision for the future and clearly communicating it across the organization so that those implementing it understand the value of their efforts is essential to great organizations.
Develop a Lean Company
Depending on the company and process discussed, defining the customer may be hard. Every best practice should have a clear purpose and customer identified. Establishing a goal will help keep the system simple and connected to “the bigger picture” and enhance effectiveness. Determining purpose, customers and goals can become complex with a number of best practices — accounts receivable for example. This can be a great discussion if done correctly. Lean organizations clearly identify how to deliver customer value consistently with the fewest resources.
For employees and managers outside of operations, this helps orient the office staff to recognize how important a role they play in managing the customer. As an example, accounts receivable staff is typically the last in the construction company to “touch” the customers and sometimes it is done in a less than cordial way. Another typical example is pre-job planning. Identifying the customer and purpose yields great insights for those executing the process and often takes us beyond the project binder handoff only.
Constantly Improve
The recession has created a search for improvements across the construction value chain. Vendors and suppliers of all types are eager to add value to the project by helping reduce costs. Many systems recently developed can result in great benefit upon implementation. Some of these include GPS-automated grade and location systems, telematics, digital/remote time cards, Building Information Modeling systems, digital estimating, online plans and bidding collaboration rooms and more. Many of these are in use as proven methods to improve productivity, collaboration and reduce costs. Adaptation and adoption of these “new” techniques can falter without effective leadership.
Other companies work directly with vendors to modify operations tools under development. Some call these collaborative project sites beta or pilot sites. This mutually benefits all parties as the project and vendor teams help design and improve the tools while gaining an advantage and providing input to equipment or software vendors. The recession has created a search for improvements across the construction value chain. Vendors and suppliers of all types are eager to add value to the project by helping reduce costs. Equipment manufacturers are constantly seeking feedback and input to redesign their fleets and justify the high cost of investment. Software vendors are often looking for focus groups. Companies that are the first to implement these efficiency-laden ideas will gain immediate advantage in the market until competitors catch up, which often happens during the regular product release and fielding for the vendor when the product goes to market.
Adapt to Succeed
Excellence is a constant journey. Seldom do companies have either strategies or customers that stand still. New employees and migrating leaders cause a decrease in institutional knowledge. By maintaining a constant focus on improvement, adaptations to customers and strategy will happen. As a result new employees will train and certify in critical skills.
Developing an adaptable company that consistently profits in this volatile market requires different skills and abilities than it did five years ago. Each set of customers, employees and services creates unique opportunities for transformation. Given a faster rate of change than ever, this requires a fundamental change to the company, rather than many small resolutions. Developing the ability to rapidly adopt new ideas and implement change will create an organization that succeeds in this new and demanding environment.
Jim Schug is a principal and engagement manager with FMI Corp. He can be reached at 813.636.1254 or via e-mail at jschug@fminet.com.
