Hockey legend Wayne Gretzky once said, “I skate to where the puck is going to be, not where it has been.”
Construction companies would be wise to follow his example. Business owners turn to strategic planning to guide their firms to success, but far too many keep their strategies on track with where they’ve already been, rather than where they should be going.
Relying on Past Performance
Continuing to follow past strategies can lead to:
- Market saturation. By only concentrating on one type of project, building or customer base, such as plants within the semiconductor industry or big-box stores within the retail industry, companies are vulnerable when the market turns.
- Relying on poor organizational leadership. The same management team responsible for growing the company is not always equipped to strategically carry the company forward. For example, an operations manager may struggle to balance manpower, materials and training, or a business development director may not be able to penetrate new market segments.
- Informal market strategies. Many companies fail to develop a successful marketing program—complete with a formal work acquisition budget and tracking system—to promote the company’s unique services to targeted customers.
Nonresidential construction firms that stay the course with outdated strategies tend to concede the loss of market share, customers, quality employees, work acquisition and strategic focus at the first signs of economic distress. Once companies start down this slippery slope, it is not long before they question whether it’s worth rebuilding during the next economic upturn.
Visionary Leadership
Construction firms that commit to where they should be going continue to succeed during turbulent economic times. These companies view their success strategies as non-negotiable in the face of adversity. Steps construction companies can take to drive their long-term visions include:
- Avoid market saturation. Conduct market research for project opportunities and diversify customer and project targets while producing high profits during economic upswings. Set parameters for market penetration to avoid being at the mercy of customers and market segments when the economy falters.
- Continually assess organizational leadership. Top managers commonly hit a performance ceiling. Constantly seek the best talent and do not wait for an economic downturn to implement organizational transformations.
- Turn informal market strategies into detailed plans. Produce work acquisition plans that define how to promote and sell the companies’ unique services, outline personnel needs, calculate budgets, deploy an array of marketing tools and profile targeted customers. Determine revenue and gross profit projections per market segment and geographical territory, and determine the number of leads needed to get there.
What History Reveals Prior to 2009, the most recent economic downturn in nonresidential construction work occurred in 2003 and 2004, resulting in serious declines. One state suffered a 20 percent drop in overall nonresidential construction in just one year.
Construction firms tracking market segment volumes found one targeted market segment was projected to decline 83 percent, while another was increasing 78 percent. That market research provided contractors with the motivation to change their game plans and adjust work acquisitions.
A similar approach would be wise in the current downturn. The cost of doing nothing is far greater than the cost of investing in change.