The past two years have been the worst global economic times in more than a generation and it is anyone's guess if we are coming out of it or if there are more challenges ahead. Change for anyone is difficult and for the vast majority of us it does not happen until we are up against the odds. So why is it that when I look at Construction, it does not appear that in the last couple of years we have not made any significant changes? The industry on some metrics has contracted by about 60%, yet fundamental change has not happened.
Sure there has been a reduction in force, project managers, estimators, managers, and field personnel have been laid off, but most of this was not part of a change in business practices it was a simple trimming of payroll. This required changes by those remaining to do the jobs of the departed, but not in a fundamentally different way. Any changes made to the way the work was done was more sacrificing quality than improvement of process.
Other industries have made substantial changes in the way they do business. Sometimes when faced with extinction (airlines) and sometimes through great innovation (retail). The airline industry faces bankruptcy threats it appears about every decade. They struggle through labor contracts and layoffs, but they also reinvent themselves. Some of the innovation is geared towards their customer's flaws and becomes annoying (baggage fees). Airlines looked at the current world and realized that most of their customers due to the internet were plugging in a few pieces of information and finding the cheapest available flight. In response, they took out all of the "extras" like food service, checking baggage, changing your flight, etc. By doing so they could reduce the base cost of the ticket, which is how their customers were selecting an airline. As Customer's get more annoyed with the extra fees, this may change, but they changed to changing market dynamics. As Contractors this lesson can be directly applied to some of our business practices. Even though it is not an ideal scenario, if our customers are demanding a no frill price that is the lowest in the market, we will need to change to stay alive.
Airlines also used innovation to save money. Online check in, the ticket kiosks, fuel futures, etc. The good airlines started to think outside the box to find more cost effective ways of doing their jobs to maintain market share. It is important to remember that airlines are part of the transportation industry. Even if all of the airlines are equal, they are in competition with trains, buses, and driving. To expand or maintain their business they have to continue to improve value against all of those options. As cars become more fuel efficient the cost of taking a weekend drive vacation reduces and the airlines need to innovate to compete with that mode of transportation.
In retail they have been driven by innovation mainly by Walmart. The retail giant focused on the basics of the industry and created a business plan that has changed the world. They found ways to reduce their costs so significantly below their competitors they grew leaps and bounds. Most of their big competitors had to modify the way they did business to the Walmart model just to stay alive. Walmart's model is much more than buying cheaper they cut every cost that is not important to their clients. They also use data analysis to understand what is going on in their stores and how to better move products and the data is real-time! As contractors we can learn a lot from Walmart's model. Are we purchasing as good as we can? Are there a lot of costs that are not important to our clients that we can trim (cell phone bills, fuel costs, paper printing, payroll costs, etc)?
So what does this mean? Beyond provoking thought, let me tell you where I sit. Our industry will change. The world has already changed, we have not just changed with it. When someone like Sam Walton puts their mind to reinvention of our industry they will lead it. Given the current financial situation it may be happening already. You should be looking at your current job and your companies practice. Change is difficult, but if you lead the pack and make the right changes to fundamentally change your role in the industry, you can be the one that makes our industry better for the entire community.
Sure there has been a reduction in force, project managers, estimators, managers, and field personnel have been laid off, but most of this was not part of a change in business practices it was a simple trimming of payroll. This required changes by those remaining to do the jobs of the departed, but not in a fundamentally different way. Any changes made to the way the work was done was more sacrificing quality than improvement of process.
Other industries have made substantial changes in the way they do business. Sometimes when faced with extinction (airlines) and sometimes through great innovation (retail). The airline industry faces bankruptcy threats it appears about every decade. They struggle through labor contracts and layoffs, but they also reinvent themselves. Some of the innovation is geared towards their customer's flaws and becomes annoying (baggage fees). Airlines looked at the current world and realized that most of their customers due to the internet were plugging in a few pieces of information and finding the cheapest available flight. In response, they took out all of the "extras" like food service, checking baggage, changing your flight, etc. By doing so they could reduce the base cost of the ticket, which is how their customers were selecting an airline. As Customer's get more annoyed with the extra fees, this may change, but they changed to changing market dynamics. As Contractors this lesson can be directly applied to some of our business practices. Even though it is not an ideal scenario, if our customers are demanding a no frill price that is the lowest in the market, we will need to change to stay alive.
Airlines also used innovation to save money. Online check in, the ticket kiosks, fuel futures, etc. The good airlines started to think outside the box to find more cost effective ways of doing their jobs to maintain market share. It is important to remember that airlines are part of the transportation industry. Even if all of the airlines are equal, they are in competition with trains, buses, and driving. To expand or maintain their business they have to continue to improve value against all of those options. As cars become more fuel efficient the cost of taking a weekend drive vacation reduces and the airlines need to innovate to compete with that mode of transportation.
In retail they have been driven by innovation mainly by Walmart. The retail giant focused on the basics of the industry and created a business plan that has changed the world. They found ways to reduce their costs so significantly below their competitors they grew leaps and bounds. Most of their big competitors had to modify the way they did business to the Walmart model just to stay alive. Walmart's model is much more than buying cheaper they cut every cost that is not important to their clients. They also use data analysis to understand what is going on in their stores and how to better move products and the data is real-time! As contractors we can learn a lot from Walmart's model. Are we purchasing as good as we can? Are there a lot of costs that are not important to our clients that we can trim (cell phone bills, fuel costs, paper printing, payroll costs, etc)?
So what does this mean? Beyond provoking thought, let me tell you where I sit. Our industry will change. The world has already changed, we have not just changed with it. When someone like Sam Walton puts their mind to reinvention of our industry they will lead it. Given the current financial situation it may be happening already. You should be looking at your current job and your companies practice. Change is difficult, but if you lead the pack and make the right changes to fundamentally change your role in the industry, you can be the one that makes our industry better for the entire community.