Innovation: The Path to Greater Profits — Part 2

By Ted Garrison

In Part 1 of this article in the July issue of Southeast Construction it was explained why innovation is critical to a company's success. During this and the next five issues, the author will explore 12 critical traits of the successful innovative company. These traits will allow readers to benchmark their company's innovative activities against what is needed.

1) Remain close to your customers - they will provide ideas:

This trait is the driving force of the entire innovation process, because innovation is about offering the customer greater value. The best way to learn how to add value for the customer is to ask them. Therefore, you need to educate your project managers and other jobsite representatives who are responsible for dealing with building owners to understand they are responsible for acting as the company's rainmakers.

Yet, too many companies do just the opposite. When I ask project managers what's the first question their boss asks them about the project - they usually respond, "How is the job coming with regard to schedule and budget?" This should be no surprise since most construction industry executives admit they start by asking something similar. The problem is it is the absolute wrong question!

The question should be: "What have you done for the customer this week?" This is at the heart of finding out how to deliver greater value to the customer. The schedule and budget are important, because if you don't achieve these objectives you are not serving the customer very well. But these two items are only the starting point in adding greater value.

This trait requires a change in the way contractors and designers approach their role in the construction process. Their role must be to focus on how they can provide greater value through innovation - instead of merely focusing on their own company's success. One of the definitions of a client is "someone under the protection of." How long would you keep your attorney, financial planner or accountant if you didn't think they were protecting you? Well, why should buyers of construction services keep contractors or designers who don't protect them? This means protecting them from surprises; it means protecting them from price overruns; it means protecting them from schedule delays; it means protecting them from poor quality, and it means protecting the customer from themselves.

Most people accept that this approach is absolutely necessary in a negotiated environment. Doubts occur for some in the highly competitive bid environment. However, while the contractor has less flexibility in the bid environment, there are still many inexpensive innovations that the contractor can uncover and employ to add value to the customer and they must!

2) Seek competitive advantage in all areas of the organization - not just the major areas:

Obviously, you need to seek innovation in all the major areas of your business - or you will be left behind and wake up one morning to learn that you have a competitive "disadvantage" in your major areas of service. But in today's highly competitive environment this isn't enough. We need to seek every advantage we can.

Also, many of your competitors will only focus on their major areas of service. This may make it difficult for your company to differentiate itself from your competitors in these areas. Therefore, by focusing on other areas of the business you can still differentiate your company.

For example, many subcontractors approach me after seminars and say something like: "Your ideas are interesting but they tend to focus on the general contractor because they have direct contact with the building owner while we are isolated." I point out that while their situation is more complicated they need to find creative ways to build relationships with their customers.

Two simple approaches are to provide maintenance services and extended warranties. These two services provide the contractor access to the building owner while offering a chance to build credibility and develop a strong relationship. These interactions give the contractor the ability to ask questions and observe the customer's operations. This process can provide the contractor the opportunity to offer innovative solutions to the customer's problems that increase the value to the customer and help differentiate them from the competition.

In Part 3 of this article in the next issue of Southeast Construction the traits that will be discussed will include becoming a value-driven company and why consistent and incremental improvement is needed.

Ted Garrison is a consultant, author and speaker who works with businesses in the construction industry. He can be reached at Growing@TedGarrison.com