Ted Garrison's October 2013 Second Report

Ted Garrison’s 2013 October Second Report

What Contractors Must Do to Compete Successfully

One of my favorite talks is on “Why Contractors Should Get Out of the Construction Business.” Of course, I don’t suggest they stop building things because that’s what they do, but that’s not the business they are in. The program explains why they need to redefine or reposition their business in the minds of their prospects.


Why is this so important? When owners are asked about contractors, they offer descriptions such as overpriced, unreliable, confrontational, difficult to deal with, and on and on. I hope that’s not the way your clients think about you. But in discussions with many quality contractors who tend to negotiate their work, I hear complaints, especially during the slowdown, that after doing several projects for a client, the client wants them to bid for the next job. If you’re honest with yourself, then you realize that action indicates that at least some people in that organization think you are overpriced.


The problem is the actual construction work is pretty much a commodity; it’s very difficult to differentiate one contractor from another in placing concrete, hanging drywall, or painting. Of course, there are differences among contractors, but in the client’s mind, there is little if any difference in this area. Therefore, they believe the only variable is price. Unfortunately for contractors the only perception that matters is the client’s.


Daniel Pink says, “For business, it’s no longer enough to create a product that’s reasonably priced and adequately functional.” Unfortunately, that’s what most contractors do as they simply try to deliver a set of plans and specifications for a reasonable price. The problem is that keeps you in the mind of the client as a vendor, not a partner.


Instead, a contractor needs to redefine what it does as a contractor in the prospect’s mind. I would argue that contractors need to be perceived as problem solvers throughout the entire life cycle of the project, from inception until the day it’s torn down. This opens all kinds of opportunities for contractors to add value. The construction process itself is very limited. It represents something less than 10 percent of the life cycle of the structure, and construction costs typically range somewhere between 10 and 18 percent of the total life-cycle cost of a building, depending on the type of building. When contractors consider projects holistically, they increase their opportunities to provide unique value and differentiate themselves from their competitors.


This concept isn’t new. There are many contractors pursuing this strategy. The question is, “Are they maximizing the potential of this strategy? To do this, they must create the image in the client’s mind that they are the solution to the client’s problems. In essence, you need to be thought of as a partner, not as a vendor.


You will have fewer options if you primarily competitive bid work, but even in that environment, extraordinary performance can change a potential prospect’s image of your company. For example, a road builder from Delaware was awarded a project as the low bidder, only to learn they had left several things out of the estimate. The president told his project team to meet with the city and do everything possible to finish the project early to obtain the early completion bonus and salvage the project. They worked with the city and finished early. What surprised everyone was they made money because of the faster schedule. Then they received the bonus, and the project became a great financial success. The president of the company explained the best was yet to come. He started receiving calls from all over the state, asking if his company could design-build their next road so they could take advantage of his aggressive schedule. The idea is to get into the mind of the prospect by creating a favorable image. It should be obvious if you don’t differentiate yourself on your projects, it will difficult to continually attempt to sell that. Therefore, to sell value, one must deliver value. The problem is despite delivering great value, many contractors stub their toes when they make an attempt to leverage their high performance into additional work.


The reason is they have the mistaken belief that the prospect cares about them. Of course, prospects want qualified contractors, but in most cases where a prospect sits down across the table to discuss his project, he knows that you can build his project. So spending time telling him you can do it because you have built many previously does little to increase his interest in your company. Yet contractors come in with their fantasy brochures and PowerPoint presentations and talk about how great they are or how much experience they have. In reality, the prospect doesn’t care or at least isn’t influenced by that type of presentation when all the contractors do the same thing. Don’t tell me this doesn’t happen because I’ve sat through too many of those types of presentations from both sides of the table.


The prospect is interested in what he perceives as his unique situation and how you can help him through the process. Therefore, focus on the prospect. One of the best questions to ask is, “What are your concerns about this project?” When the prospect responds, you can demonstrate your expertise instead of talking about it. Just like the great athlete who doesn’t tell you how great he is but just gets the job and done, in the end, you will be much more impressive.


Focus on how you can add value for the prospect. This may include how you can simplify the construction process. Keep in mind most people aren’t really interested in building something; they merely want the end product. They dread the construction process, so making it less painful can be a great differentiator. Further discuss how you can help make the end product for the prospect better, not just how to make the construction cheaper. One of the best ways to add value is to design a project that allows the prospect to be more profitable in his new building. Since this savings will go on indefinitely, it might even approach the construction cost. Just think how powerful your position would be if over the lifetime of the project, the construction was free.


To make it simple, the discussion should always be about the client. Of course, if they ask a question about you, you can answer it. That will normally occur when you promise something. The prospect may ask you to provide your assertions. Now you can give past examples or references where you did something similar for another client. That approach has a whole different impact than coming in, pounding your chest.


A few weeks ago, I had lunch with Neil Southwell, a friend and colleague, and we discussed this issue. We both agreed that contractor presentations should focus on the client and not on the contractor. Since Neil coaches contractors on preparing their bids, I asked if he had any specific recommendations to improve the process. He provided a list of ten suggestions. Since I don’t have room to share those here, I will write about them in my blog as soon as I finish the current series of Sun Tzu and strategy. To sign up and follow my biweekly blog, go to www.tedgarrison.com/resources/blog.


Ted Garrison, president of Garrison Associates, is a catalyst for change. As a consultant, author and speaker he provides breakthrough strategies for the construction industry by focusing on critical issues in leadership, project management, strategic thinking, strategic alliances and marketing. Contact Ted at 800-861-0874 or Ted@TedGarrison.com. Further information can be found at www.TedGarrison.com."