Do You Have the Right Business Strategy?
I often tease my audiences they should get of the construction industry. Of course, I’m not suggesting they stop building things, because that’s what they do, but that’s not the business they are in. Face it, construction work is perceived by many clients as a commodity, therefore they buy it based on price.
What makes this situation worse is the fact that most contractors tend to define themselves in same way. “We have great quality.” “We collaborate with our clients to produce better projects.” “We build projects fast.” Then there is the real killer, “We are cheaper.” The problem is that buyers of construction services hear the above all the time and have placed all those so called benefits into the basic category, which meant they are expected. If you don’t offer those services you are eliminated from bidding. Since all the bidders offer the same benefits, prospects assume all contractors are equal so it makes sense to take the lowest bid. Compounding the problem, most contractors spend most of their efforts improving and promoting the basic category where it is virtually impossible to differentiate their company.
Studies reveal that a large percentage of contractors don’t even have a strategic plan. Those that have a strategic plan tend to focus on a SWOT (strengths, weaknesses, opportunities, and threats) analysis. Doing it is useful because one must understand one’s own capabilities. The problem is a SWOT analysis is internally focused. Some argue that opportunities and threats are from outside the company. This true, but the discussion is on how they affect the company.
What’s needed is an approach that focuses on the prospect and client interests. Most clients are not interested in building a building, they simply need a building to do what they want it to do: therefore the building is an expense and they want to minimize it. As one contractor observed, “If they could figure out how to run their business out of a tent, they would.” The prospect’s desire is to make more money. Therefore, your strategy needs to be built around how you can add value for your prospects. Instead of trying to convince owners that your company or delivery method is better than the competitions, you need to be able to prove how you provide superior value reducing their expenses or increasing their revenue.
Since most contractors promise better quality, faster delivery, and lower total project costs, most prospects tend to discount those statements. The solution is what Professor Dean Kashiwagi at Arizona State calls “dominant proof.” Dominant proof is documentation that regardless of who reviews it, they will come to the same conclusion. For example, if you claim your buildings consume 10 percent less energy, then you need to provide documentation from all your prior buildings that proves they consumed at least 10 percent less energy than comparable buildings.
To survive in today’s hyper competitive marketplace, contractors need a strategy that helps their clients make more money.
About the Author
Ted Garrison is an international author, consultant, and speaker on important issues for the construction industry. Ted can be reached at Ted(Replace this parenthesis with the @ sign)TedGarrison.com Or you can follow him on Twitter @TedGarrison