The economic downturn isn’t permanent. Construction companies that are strategic in leveraging their company’s strengths and navigating the new market will have opportunities for success in the coming months and future. Here’s why you should start strategizing now.
The most important questions
Most construction leaders were already discussing how to prepare their companies for the next recession — with many asking, “How will we capitalize on the midterm and long-term opportunities revealed during a recession?” Countless construction owners and management teams were focused on building great teams and strong balance sheets to take advantage of the next downturn. Now they’re asking, “How do I plan for success tomorrow given so much uncertainty today?”.
Construction owners and managers are appropriately monitoring and containing nonessential costs right now; however, one activity that needs to be prioritized and deemed essential is strategic planning. Companies that are successful in the next several years will be those that take a step back today, mid-crisis, and ask themselves direct, strategic questions about the market and about themselves.
The first step is to gather your leadership team together to ask the following questions:
- What will our target markets look like in the next five years?
- What are our core strengths in each of our markets and service offerings?
- What are our current gaps and weaknesses in our current markets and service offerings?
- What new opportunities exist in the coming five years where we’re best or least equipped to capitalize?
In assessing these questions, your management team will need to conduct a fair amount of internal and external research. This level of planning can be done iteratively in several sessions, as the answers will require thought and research. You’ll likely find gaps between top opportunities and current, in-house capabilities as well as gaps between current top competencies and lack of opportunities.
Best-in-class contractors excel at reinvention because they continually identify where future opportunities will be and redirect their current talent into those areas. They also seek out solutions for those areas of opportunity where current talent is light and make the hard decisions to move away from traditional areas of strength that don’t look strong in the future.
Best-in-class contractors excel at reinvention because they continually identify where future opportunities will be and redirect their current talent into those areas.
Lessons from the past
Many leaders will recall when commercial and residential work was significantly reduced in 2008–2010. For example, many heavy highway contractors found their traditional bid lists of five to six bidders exploding to 20 or 30 bidders, which included the likes of distant out-of-state pavers to local landscaping contractors. These short-term behaviors caused pain and suffering for the customers, the contract winners and losers, and everyone involved.
Conversely, there were many contractors who were successful during the past recession such as contractors who followed the steps noted above and put together a highly diversified strategy, acknowledging few sectors would be “hot.” Contractors who focused on building a diversified portfolio, only sold up to targeted amounts of work, and directed their talent to a wider array of sectors than in the past not only survived, but their businesses thrived. These companies adjusted their strategy to respond to opportunity in traditional sectors, while also keeping a presence in each target sector without having to sell out to low or no-profit backlog.
Focus on the long view
The winning strategy in the coming months and years will be highly customized to your company’s market, resumes, relationships, competencies, and the enhancements and adjustments that you make as part of your strategic development. Restart plans should include your new short-term, midterm, and long-term strategies. It’s not only highly important that you develop a strategy in order to capitalize in the future, it’s also a bold statement from ownership and management to tell the leadership team and company staff that they’re here for the long haul and intend to continue long-term success.