• Generic selectors
    Exact matches only
    Search in title
    Search in content
    Search in posts
    Search in pages
    FMI Quarterly
    Special Reports
    Industry Outlooks
    News
×
  • I'm here to...
  • Services
  • About Us
  • Generic selectors
    Exact matches only
    Search in title
    Search in content
    Search in posts
    Search in pages
    FMI Quarterly
    Special Reports
    Industry Outlooks
    News
  • Generic selectors
    Exact matches only
    Search in title
    Search in content
    Search in posts
    Search in pages
    FMI Quarterly
    Special Reports
    Industry Outlooks
    News
×
  • I'm here to...
  • Services
  • About Us
  • Generic selectors
    Exact matches only
    Search in title
    Search in content
    Search in posts
    Search in pages
    FMI Quarterly
    Special Reports
    Industry Outlooks
    News
FMI Quarterly/September 2013/September 1, 2013

Competitive Research

getty_man_imageThe nature of competitive intelligence is largelymisunderstood and consequently misdirected in theconstruction industry. Quite commonly, efforts are madeto reveal some well-guarded secret or secrets as to the success of competitors that merely need to be replicated or topped in order to negate their perceived advantage in the marketplace.

In FMI’s experience, the most successful contractors employ no such secrets. Their advantages are no mysteries. They have mastered two things: 1) the simple execution of day-to-day activities that matter most to project owners and 2) early recognition of how recent developments and various trends combine to create a new and emerging set of opportunities.

Perhaps the highest compliment a project owner can give a contractor on project completion is, “It was a pleasant experience.” Herein lies the most common misconception among contractors about their competitors. The assumption is that the “best” competitors are doing something unique that creates unexpectedly superior outcomes. No doubt, some outcomes are superior to others, but “superior” is almost always defined as “not inferior.” In more simple terms, a “superior” outcome for most project owners occurs when his or her expectations are met. Few project owners, it may be argued, expect anything more. The industry is littered with examples of unmet expectations, to the point that expectations actually being met are the rarity. Project owners are quite satisfied that things go according to plan. And when they do not, they only want a contractor that has the desire and the wherewithal to minimize disruptions and return to plan as quickly as possible.

Many contractors engage in a quixotic pursuit of some mystical combination of service offerings and solutions to achieve a “superior” outcome, one greater than has been defined and agreed to by all parties as sufficient. Consider the young boor who wants to become a gentleman and randomly adopts one kind gesture after another. He helps the widow across the street. He tips his hat to the elderly man in his apartment building. All the while, he needed only to quit acting like a boor. Likewise, many contractors adopt one seemingly important ingredient for success after another, whether it is building information modeling, LEED or some other technology du jour. It is like icing without the cake; there is no substance and few are interested for long.

Every project owner has his or her own determinants of value. Generically, these may be placed in five broad categories. They include price, quality, schedule, reflection and response (please see sidebar.) What a project owner values most may not be limited to a single one of these broad categories, but he or she will not value all five equally. It may be said that all contractors inherently understand this, but there are three things that conspire against them in finding meaning in these determinants of value. First, they are too often distracted by ill-designed client and customer surveys and the like that can only be interpreted as “all of these things are important.” Therefore, no attempt is made to understand project owners better. This universality of importance is true, but again in variation. Choice means accepting one thing at the exclusion of another. Second, few, if any, contractors have segmented their clients and customers according to what they value. Rather, project owners are roughly described, for example, as commercial, education or health care clients and customers, although their values may differ greatly. Third, few contractors can articulate a value proposition that marries the first two. Instead, most contractors promote something akin to a corporate mission or vision and statement of qualification.

As simple as it may sound, the “best” contractors heavily invest in understanding the needs of their clients and customers (or better stated, what they value). They then pursue those clients and projects that fit with their own capabilities and resources and avoid those customers and projects that do not fit. Their value propositions, as academic as the term sounds, are just a statement of the value (or benefit) of the features the contractor possesses. For example, a utility contractor with a substantial fleet of equipment and mobilization skills communicates to the client or customer an ability to respond to any emergency within 24 hours, or even better, to restore power to consumers within 24 hours.

2013q3_comptetive_research_ex1How then does one learn what his or her clients or customers value? As previously mentioned, most project owners claim everything is important. Asking who, meaning a contractor’s competitors, is performing better than others is what reveals true importance. This is realized by what the project owners state as the strengths of a particular competitor. Obtaining such candid responses from clients or customers may be tricky. Therefore, it is suggested that this information be collected as part of an ongoing performance feedback loop. In fact, the best competitive intelligence is often found when conducting such research. Again, the “best” contractors incorporate these efforts to confirm what their clients and customers value, measure their success in delivering value and prepare for possible changing values. This sort of research also inevitably reveals more competitors than typically regarded by contractors. In FMI’s experience, the number of competitors perceived by project owners regularly numbers three to four times those that the contractor would name. This data is most commonly illustrated by a competitive positioning map, as seen in Exhibit 1.

In addition to direct feedback from project owners, competitive intelligence can be gleaned from corporate websites, press releases, recruitment advertisements and industry presentations. Corporate websites reveal the target projects that a competitor is pursuing as well as key clients or customers. Few, if any, competitors list clients or customers that would provide a poor reference. Press releases can indicate the strategic direction a competitor is taking. Recruitment advertisements often carelessly reveal financial information such as revenue and growth or  the opening of a new division or office. Industry presentations are placed on the Internet and then forgotten. All of this information exists in the public domain and therefore meets no ethical violations.

One competitive intelligence tool believed to be most beneficial to contractors is a white space map, as seen in Exhibit 2. This is simply a table that lists a contractor’s various competitors as rows and construction segments, geographic markets and/or service offerings as columns. A check mark indicates that a competitor “plays” in that space. Where check marks are lacking presents potential opportunities for a contractor to exploit.

2013q3_comptetive_research_ex2

Last, market share estimates, which need not be exact, may be used to determine the maximum revenue a contractor may be able to capture in pursuit of a particular construction segment and/or geographic market.

Over time, competitive intelligence may very well disproportionately favor the midmarket contractor. At the end of World War II and the introduction of the Marshall Plan to rebuild Europe, government sponsorship of certain contractors was required. The task was too big in what is commonly experienced in the U.S. This was, in essence, the first modern public-private partnership. Winners and losers were chosen. Today, though there is no “rebuilding” effort in the U.S. stemming from war on our domestic shores, government involvement increasingly is felt in the industry. Yet, what is different about today is the proliferation of technologies that allow the midmarket contractor to “level the playing field.” While it is essential for these contractors to adopt these technologies, they do not provide competitive advantage in and of themselves. This is the mistake so many have made. Rather focusing on the fundamentals — the blocking and tackling, if you will — is where competitive advantage is achieved. And those that know when to block and when to tackle will emerge victorious.


FIVE CATEGORIES OF VALUE

Price is more than just a competitive price; it reflects how well the contractor understands the requirements of the project. For example, are major components or design elements missing from the contractor’s proposal? Also, if the contractor recognized something missing in the design, but accounted for it in the proposal and price, was it indicated to the buyer?

Quality is simply a product that meets the buyer’s expectations and is free of defect. Yet, buyers will often perceive quality by the appearance of the contractor’s equipment and staff as well as job site conditions (e.g., cleanliness). Poorly maintained equipment, the lack of a basic uniform, a trash-strewed jobsite — these all may lead a buyer to perceive poor quality (and professionalism), despite the final project outcome.

Schedule is as much communicating and managing the schedule as delivery against major milestones. Buyers who do not know where things stand schedule-wise naturally assume the worst.

Reflection is how the contractor represents the buyer, both internally and externally. Buyers want to be confident in their selection. Similar to the issues raised for quality, reflection also is exhibited by how a site is returned to its original state, how the contractor’s staff and subcontractors act in occupied or observable space, etc.

Response is simply how the contractor reacts to both simple and difficult requests. It is more than simply returning emails and phone calls. Rather, it is the inclusion of options and potential solutions to problems. Moreover, it is instilling the confidence in the buyer that, should difficulty be experienced, the contractor will accessible and actively engaged.


Jay Bowman is a senior consultant with FMI Corporation. He can be reached at 919.785.9336 or via email at jbowman@fminet.com.

 

Did you enjoy this article? Subscribe here for more FMI content.

Want to know more?