This challenge certainly exists in the construction industry. Latham and Egan suggested the need for radical changes. Their suggestions have been accepted, but there is a reluctance to do enough or at the pace that is required.
But radical change brings opportunities. Organisations that create change also create opportunities for themselves. Look at Daewoo, Dell, Direct Line, Dyson, Egg, Federal Express, First Direct, JMC Holidays, Tesco and Virgin Atlantic. These are just a few examples where an organisation has done something different and broken away from the competition to create a new market, which they can then dominate. I think there could be similar opportunities, which no organisation has yet effectively exploited, in the UK construction industry.
So what is it that the above businesses do, or did, that enabled them to get so far ahead of their rivals? There are three key factors: efficiency, affinity and momentum. Most people are comfortable with the goal of becoming an ultra-efficient organisation. It makes sense to produce things to the highest quality possible, eliminate all unnecessary costs and waste, use the latest techniques, systems and technology, and employ the most effective working practices. These are all things that should be easy to target and measure, and the industry is starting to embrace benchmarking and improvement of performance.
But being ultra-efficient is no longer enough to lead most markets. It is an obvious, essential entry stake, but it will not ensure success. What else is needed? Affinity. This has two elements: involvement and empathy.
Involvement is the degree to which an organisation is able to create a deep, mutual understanding with its customers. This is done by constantly seeking their views and then acting on them; by keeping customers completely informed about plans and developments; by making everything transparent, so that customers know how things work; and by confiding in them as if they were trusted colleagues (business insiders).
Empathy begins by creating an internal culture in which people are expected to bring their emotions to work, and act with care and consideration towards colleagues. This culture can then form the basis of the principles for dealing with customers.
Momentum brings us back to Andretti's comment. It expresses perfectly why this third element is so vital. You cannot be, become or remain the best if a competitor sets a pace of improvement that beats yours. Also, customers' expectations are continually increasing, so what might be considered excellent today could become just ordinary tomorrow. Therefore, to sustain a position of dominance, you must find ways to generate improvement with a momentum that rivals can't match.
In physics, momentum is the product of direction, mass and velocity. In business, direction is the vision for the organisation. It must be one that everyone knows, understands and believes is worthy of their efforts. Mass means everyone in the organisation being involved in the achievement of this vision. No one can be allowed to sit this one out or become a passenger. Velocity is created by having lots of goals and activities (projects, programmes and action teams) to create energy, achievements and rewards that generate pace.
Each of these elements alone is potent, but together they create an extremely powerful cocktail for sustainable success in competitive markets.
My work with organisations that achieve success in these areas indicates that success brings a premium price. The construction industry operates on low margins but high turnover. This means that what appears to be a poor return on sales can provide a good return on capital.
It also means that a very small increase on the selling price can create a very big increase on the profits. Construction industry customers tell me that just 5% on the top line could add between 25% and 50% to the bottom line.
Construction firms are starting to embrace radical change. I have been working with Mansell to create the "Book of Wows". This contains 1000 ideas that Mansell managers can wow their clients with. So, opportunity knocks, with some big rewards to be had. Is anyone in the industry willing and able to grasp it? Chris Daffy has worked for Kier, Toyota and BA. He wrote the best-selling business book Once a Customer, Always a Customer. He can be contacted on 01663 766300.
Source
Construction Manager
