3/09/2021

By Wayne Rivers, Family Business Institute

Super Bowl 55 is done, and 43-year-old Tom Brady is in the record books. He played in his first Super Bowl in 2002, and you'd be amazed at some of the businesses that advertised during the big game that year: AOL, Blockbuster, Circuit City, Sears, Gateway Computers, Voice Stream Wireless, Radio Shack, and Yahoo. Blockbuster, for example, was a huge business! They had over 9000 stores and 84,000 employees; now they have one store! Circuit City was prominently featured in Jim Collins’ book Built to Last. It didn’t. They declared bankruptcy in 2008 and shut their doors for good in 2009. Sears once had stores in every town, large and small, in America; they are now down to just 60 stores.

Jon Miltimore of the Foundation for Economic Education wrote an article about Brady and the Super Bowl advertisers of 2002 that illustrates a terrific point: It's really, really difficult to stay on top! Those nine companies were on top in 2002. In 19 short years, they are either gone altogether or shells of their former selves.

What does it take to keep your construction company on top? How can you make it sustainable over time? Joseph Schumpeter was an economist who coined the term creative destruction. It describes what happens in the marketplace when some competitors out-innovate and outcompete others. It's exactly what happened to Blockbuster. One particular Blockbuster customer grew to absolutely abhor the late fees which were a big part of their business model. In response, he started Netflix and, over time, out- innovated and outcompeted Blockbuster. The results are clear.

Creative destruction is good for the consumer marketplace; hungry businesspeople outcompete others who don't or won't innovate and change. But what about our individual businesses? We don't want to be outcompeted or out-innovated! The following are six questions for keeping your company relevant and competitive over long periods of time. 
 

1. How do you differentiate? If you can’t consistently find competitive advantages, you're always going to compete on price, and you'll be just another construction services commodity. You must find a way to make yourself unique in your marketplace. The 2004 book Blue Ocean Strategy discusses this concept at length and is worth your time.
   
   
2. Are you humble and willing to listen? One of the main problems successful contractors have is they become victims of their own success! They ask, "Why do we need to change? Why do we need to innovate? Look at all our successful projects!” That language indicates they are reading their own press clippings. Do you think Tom Brady read accounts of his success in 2002 and then decided he didn't need to improve? Heck no! He is still relevant in the hypercompetitive NFL at age 43 because he has undertaken radical diet and fitness strategies in order to stay on top.
   
   
3. What scalable processes, talents, or capabilities does your business possess? What parts of your company are really capable of scaling and growing? And which parts of your business do you need to deemphasize because they're not scalable?
   
   
4. Do you know your customers - not just now but in the future? Customer satisfaction analysis is pretty rare in construction even for otherwise progressive contractors. What do your customers love about your work now? What do they dislike? What obstacles can you smooth out of the construction process on their behalf? And what are their behaviors and wishes likely to be in five or 10 years?
   
   
5. What do you need to stop doing? What are you doing now that was important for your business at the time of Brady's first Super Bowl that's not so important now? When you stop doing unnecessary or outmoded things, you free up time, energy, and capacity to do new and different things.
   
   
6. Can you accurately forecast? Every construction executive reading this article receives a monthly P & L and balance sheet. They tell you what you've done in the past; did we have a good month last month, a good year last year? You must have accurate and timely figures to effectively operate, but it's equally important that you can forecast where you're going to be in ‘22 or ‘25. Have you developed the internal capabilities to forecast accurately? 
    

Miltimore ended his article saying, “Everything has a shelf life, including Tom Brady.” It may feel somewhat mercenary to look at your business that way, but all your companies, like Brady himself, have shelf lives. How can you innovate and change now so you extend the shelf life of your business and make it more sustainable?