Most construction companies succeed by becoming 'stars'

By GERALD BARON
Baron & Co.

Construction company owners and managers, like most other business leaders, tend to think they are all alone. They believe the situations they face are unique and that solutions they come up apply only to them. But by talking with a number of other leaders they realize how much similarity exists.

One clear example of this is how many construction companies have grown. While some may believe that growth "just happened" and others believe it was as a result of clear-headed strategy and planning, what is remarkable is the similarity in pattern.

Many, if not most, construction companies have followed what we call "The Star Model" of business growth. Usually these company leaders were not aware that they were following a pattern and a path set down by many others. You don't have to be conscious of the model to succeed; however, understanding it may be very helpful in sharpening your focus, reducing time and money spent developing new business, and in evaluating where you are in the process.

The Star Model consists of a star and concentric circles. The circles represent geography. The star points represent specific, focused business opportunities defined by specific industries, relationships or specialty services. The narrower the star point, the more finely-tuned the services offered or the market served.

The smallest circle represents the geographic reach of the company in its early stages. It may be a county, a city, even a neighborhood. Let's take a hypothetical example.

Sunrise Construction company started by building small commercial projects in a community of 150,000 people. Skill, dedication and community contacts resulted in growth so that it became one of the more well known construction companies in the community. A local developer hired them to do several major projects, asked Sunrise to build his house, which resulted in doing upper end homes. Sunrise did a great job on a bank which led to an introduction to a manufacturing owner who needed a new plant. Within this geographic area encompassing circle of no more than 60 miles, Sunrise did a wide range of services, which is represented by the broad base or middle area of the star.

The developer friend hired Sunrise to build a strip mall, which was greatly expanded when one of those box stores decided to come to town. The developer recommended the firm to the retailer and Sunrise made the box-store folks very happy. Suddenly these stores become the hot thing and company expansion plans called for three new stores in the next four years. Could Sunrise handle it? Sure. The company worked hard, built the stores, and it was asked to build five more in two surrounding states.

Office overhead was now growing, and the owner realized he needed more business to sustain what had been built. He also realized he now had superintendents with good work experience in tilt-up concrete; he had project managers who knew how to mobilize quickly and how to deal responsively with fast-track owner representatives, and he knew other companies who had the need for the same kind of capabilities.

The owner also understood that basing so much of his business on one key relationship was a little risky. So after a few phone calls, letters, personal visits there was another expanding national retailer to serve.

Now Sunrise was serving major national customers on a super-regional basis by presenting a high degree of expertise in a narrow area -- and a superb track record to back it up. Sunrise has a fully developed "star point," that is, a business opportunity that is highly focused, based on strategic relationships, and that requires special capabilities in order to be highly competitive. The business opportunity takes Sunrise to an outer circle, away from its home base.

Fast forward a few years later and the pattern has been repeated at Sunrise. A good customer needed some specialty paving done. The required process and equipment wasn't readily available. The entrepreneurially-oriented owner of Sunrise saw an opportunity and invested in the equipment and training necessary to do paving for this job, then turned around and sold these services on a sub-contract basis to a number of other contractors in the state.

A small star point, but a star point nevertheless. And like most other home-grown construction companies that are opportunistic, Sunrise soon had several star points going at the same time -- while still managing its base of business closer to home.

It is a pattern that is repeated over and over again in the construction industry. It may strike you as pure common sense and nothing revolutionary. Yet, few construction companies are focusing their new business development efforts in a way that demonstrates they understand the star model.

If you're going to consciously follow the star model here are some tips:

1. Focus on key relationships.

   Marketing is helping the right few place a high value on what you do. Selecting the right few, then clearly understanding, communicating and delivering the value you offer are the key steps in strategic marketing. Star points are created and developed by knowing the critical few people then serving them in a way that creates trust and confidence.

2. Commit team to complete satisfaction.

   One person can't do it. Even an important small group can't do it. The more the entire company understands who the strategic relationships are and how important it is to build trust with them, the greater capability the company has of exploiting its niche opportunities. Yet, this is perhaps the greatest hurdle most managers face. The passion to satisfy completely starts at the top and it is carried throughout the organization, primarily in the decisions that are made in dealing with difficult relationship situations. Those are the learning moments and they are of much greater value than all the seminars, workshops and training courses money can buy.

3. Develop special expertise, especially at the field management level.

   Great skill in relationship building can't compensate for shoddy or non-competitive work. Star points are based on creating exceptional value and usually that means providing a higher level of value through greater knowledge, skill, techniques or equipment. Entrepreneurial management has an instinct for the opportunities that learning new things may present. Profits are made or lost primarily on the training, abilities and good intentions of the field management. Superintendents and foremen with high integrity and excellent management and technical skills are the backbone of the company and the assets most closely protected.

4. Present your unique capabilities and track record professionally.

   Your company's credibility or reputation is ultimately the only thing you sell. And that credibility is based primarily on track record. Yet, few construction companies pay adequate attention to documenting their work and presenting their track record professionally. Then they wonder why competitors with less impressive track records run off with the good projects.

5. Get involved in your target industry face to face.

   Naisbitt was right: high tech demands high touch. Star points depend on face to face contact with the right people, and those people are not found at construction industry gatherings but at the gatherings of their own industries. Be selective of those points, because you can't be all things and in all places. To truly develop a star point you must focus so that you can become intimately involved with the people, the community and the goals of target group you are serving.

6. Exploit the media and your knowledge franchise.

   Peter Drucker astutely pointed out that knowledge is the new capital; it is the means by which wealth is created. It is also the means by which star points are created. Knowledge of your key customer's individuals needs combined with unique knowledge aimed at solving their problems is the basis of providing the value they seek. Companies that understand the power of their knowledge also frequently understand that the ever-hungry industry media is a powerful and natural ally. Developing the potential of a star point almost always involves making use of the media that serves that niche and demonstrating the special knowledge you possess.

Marketing is a complex art and science. Yet, some clear, consistent patterns can be seen in the progress of a great number of successful construction companies. Observing, understanding and adapting those patterns to your unique situation may very well help you spend less time, effort and money to produce greater results. That's what being strategic seems to be about.

Copyright © 1998 Seattle Daily Journal of Commerce.