DEDICATED TO STRATEGIC BUSINESS ISSUES FACING OWNERS, DEVELOPERS, & THE Project
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DEDICATED TO STRATEGIC BUSINESS ISSUES FACING OWNERS, DEVELOPERS, & THE Project |
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Maintaining Competitiveness by Zoltan A. Stacho and Paul D. Steinke Maintaining competitiveness is a concept much like the Supreme Court's definition of obscenity - it is difficult to define but you know it when you see it. When thinking about maintaining competitiveness, a veritable management consultant's dictionary races through the mind — downsizing, process improvement, reengineering, paradigm shift — the list is long. The fact of the matter is that there is no simple definition for maintaining competitiveness. However, in order to reach some sort of consensus on terms, we define maintaining competitiveness as the continuing process of self-examination to improve efficiency, compete effectively, and win work.
There is no one way to do this. There is no formula. There is no quick fix. Maintaining competitiveness, especially in today's marketplace, is an ever changing process — and what is exactly necessary for your firm might be the worst possible solution for another firm. So, at first, it is less important to know what concrete steps to take in an effort to increase or maintain competitiveness. It is much more important to learn how to think, to train your mind to creatively approach your situation and develop processes addressing the issues specific to your firm. When football coach Vince Lombardi said that winning is an attitude, he was not simply talking about football. Holmes & Narver was founded in 1933. For many years, our main client base was government, especially the U.S. Departments of Defense and Energy. Six years ago, we lost one of our longest standing contracts (a client of 38 years) and overnight we went from being comfortable and profitable to being a company barely operating at breakeven. You can imagine the panic and confusion. Overnight, we went from profit to no profit. Obviously changes had to be made. We had become insulated and reliant on government contracts; we were not competitive. The company was at a crossroads. Work that we did for the military we did extremely well, arguably the best in the business. But, times had changed. The military was downsizing, government budgets were being cut, and other more competitive firms were looking at the military business that was left to expand their markets. It became very clear: adapt or throw in the towel. Senior vice president Art Fort puts it most succinctly, "Just because you've been excellent in designing tall towers for 30 or 40 years doesn't mean much. If no one is buying those, you better jolly well move on to something else and adapt to what clients want." If there is a golden rule to maintaining competitiveness, it is this: focus on the client. "The fundamental essence of competitiveness is developing long-term client relationships. In our industry, that means creating value for clients. You must constantly give clients value for what you're doing for them" responds Bruce Toro of our Infrastructure Group. He is right. It is easier to continue to do work and do new work with someone who knows and trusts you than it is to develop that relationship. While that may sound like common sense, as Voltaire said, common sense is all too uncommon. Building that trust and confidence in your ability to support the client's needs is a combination of marketing and interpersonal skills, as well as quality service. It is vital that the first step in the competitive process is to examine yourself as a company and determine whether or not your focus is on the client's needs. If it is not, make it so. A common misconception when talking about competitiveness is that being competitive means offering the cheapest price. Interestingly enough, competitiveness has less to do with price than it does with value. In a service market, low price is not necessarily best value. Clients do not buy the cheapest designer more than once; more often than not, they end up getting what they paid for. When you look at the price of design versus the price of construction, an extra percent on the design fee does not even show up in the construction cost. But, on the flip side, a five percent bust on the design side is a huge amount of money. Clients have become sophisticated in realizing that price is not necessarily the deciding factor when choosing a firm. So, competitive focus should be put on the value your firm provides to the client and not simply on cutting price.
After refocusing on meeting our clients' needs, our next priority was to make some major internal changes. We looked at management style, personnel, retraining—everything— in an effort to change the old and entrenched perceptions and practices. The process of self-examination was painful and absolutely necessary. We established a five-year strategic plan with one-year operating plans, internal communication processes, and management/employee training and retraining programs. There were also several new key hires and in some cases, early retirements. "Basically, we did a top-down self examination and determined where we were fat, where we were thin and where we were balding just a little bit," muses Art Fort. "Many important lessons were learned in the process. Aside from the crucial change in company perception and attitude (not a minor part of this process), we actually got to see what it was our company did well, did very well and did not do so well; it gave us a clear view of our strengths and weaknesses." From that process, we embarked on a two-pronged campaign: exploit our strengths and export them to other profitable areas; and turn the weaknesses into strengths through key hires, training, use of our strategic alliances, and management vision. The biggest strength we had as a company was a strong core of technical professionals; when our people got a chance to perform, we performed well. Through the perspective of that technical expertise, we examined each market to determine if that expertise could be applied to our advantage. What we learned was surprising. While our technical expertise still applied in traditional areas, it was also adaptable to areas that we previously would never have approached. For example, the entertainment industry, specifically theme parks, is an expanding market where our previous military expertise on high-tech, one-of-a-kind projects had a clear and valuable application. And it helped us win work. This process continues and expands today. Our managers are constantly looking for new applications for our current skills in an effort to expand our market share. Another example is somewhat unique in that we have a large Operations and Maintenance group, which does a lot of very different things other than design and construction. Through the prism of maintaining competitiveness we discovered that we could take advantage of that huge skill base to improve how we do our own core business. "In an O&M contract," says Larry Boval, "we often assume the role that our clients normally assume relative to their business. When we operate and maintain a facility, we develop a perspective on how that facility serves its function—and we figure out how to do it better. Now, that is something that we are applying to our own design process to make us better and more responsive to our clients. "We are forcing an increase in the transfer of information and people between disciplines. We are pulling people out of the O&M group and using them on design and construction projects to bring those 'do it better' skills to bear in an effort to add value for our clients. This has been a tremendous success." As a result of changing our thinking, our ability to respond and anticipate marketplace changes has increased tremendously. For example, it became clear to us that the entrepreneurial requirements of the industry were being pushed to the level of middle management. We believe that the days where a firm has only a few senior people that sell and bring in the work are numbered. To respond to this change, we launched into a program to train our middle managers to become seller/doers, literally empowering the same people that do the work to sell the work. This has enabled our managers to see a direct correlation between what they do and their ability to bring in new work. It has forced them to take a broader perspective of the day-to-day impact of what they do in reference to the client. "What before might have been an issue between the client and our manager, is now a problem that our managers proactively solve because they want the next job with that client," Bruce Toro emphasizes. "Problems are looked at as things to solve rather than reasons why this or that client is a bad client. In turn, this has led to longer term client relationships. "Now, we have managers that have developed strong client relationships as empowered seller/doers; someone will have a very hard time coming in and displacing our firm with certain clients because of these relationships. The best added value at H&N is the people we have. They are the key to everything. And now, we are really thought of as problem solvers — not just people who respond to RFPs." There are any number of other examples, but by now our pattern has emerged. The idea is not to simply grab hold of something that worked for someone else and just do that. The idea is to look at everything that exists, both internally and externally and open yourself up for observation and action. Your ability to win work coincides with your ability to differentiate yourself from your competitor. But, you have to know yourself well as a company to determine what your edge is in the marketplace. The linchpin to this process is honest self-evaluation and the willingness and ability to take action. Obviously, the industry will continue to evolve and with that, business will get tougher every year. Competing in today's marketplace is not the same as it was even five years ago. With the reality of global economies, shrinking revenues and tougher competition, maintaining competitiveness is not an option. It is essential. The key is not to simply follow a cookie-cutter approach to changing the way you do business. It is time to use and trust your creative instincts. Encourage an atmosphere where people feel that their ideas are welcomed and respected. We do not sell widgets. We are a service industry and service means people; clients respond to people who are empowered and energized. When winning becomes an attitude, maintaining competitiveness becomes a label that someone applies to you when they are trying to analyze your success. Zoltan A. Stacho, P.E. is President and CEO, and Paul D. Steinke, P.E. is Senior Vice President in charge of marketing, for Holmes & Narver, Orange, California.
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