Marketing expert Matt Michel in his column this month (Get big or go home) talks about all the advantages large contractors have over small ones. And he’s right. Large companies have more money to work with. They can spread the costs of doing business – be it taxes or regulations or even rising fuel prices – over more sales. They have more clout when negotiating prices with vendors. They can offer better pay and incentives to their workers. As almost any of the contractors in our 2018 Book of Giants would attest, it’s good to be big.
But smaller companies have their own advantages. It is easier to grow a small company than it is a large one. Run well, smaller companies are lighter, more nimble, more able to adapt to a changing marketplace. Large companies can become so wedded to a business model that they find themselves unable to respond to disruptive technological innovation. Remember, in 2004 Blockbuster had more than 9,000 stores employing more than 84,000 people. Today, people are surprised to find they are still in business at all (with just four stores remaining).
Distributed networks are more robust than centralized ones.
The Holy Grail for a successful contracting business then, would be to get big while still “thinking” small. One of the companies I interviewed for my Book of Giants article was TDIndustries. The company is 100 percent partner- (read: employee) owned, and believes that every partner is a potential leader. An illustrative example is how the company decides which technologies to invest in. While some companies would have a Chief Technology Officer or an innovation committee make the decisions, through the company’s TDBank, almost any partner can make a case for investment in a new technology, tool or software, and get the funds to make it happen.
It reminds me of something I learned while moonlighting for one of Informa’s energy magazines: distributed networks are more robust than centralized ones. A surge that could blackout a centralized power grid will only cause temporary spot disruptions to a network of micro-grids. Big companies are finding ways to act more like a network of small companies.
For years now, contractors have been trying to steal pages out of the manufacturers’ playbook. Thanks to BIM, building plans are so accurate that entire sections of a mechanical system can be assembled in the fabrication shop, be RFID or bar code tagged, and then shipped off to the job site as modules on pallets (see last year’s Book of Giants, Workforce crisis turns contractors into manufacturers). It saves a ridiculous number of man-hours.
Well it’s time to steal a few new pages. Lean methodology, where the focus is on value to the customer and directing all processes to constantly reinforce it, is something that more contractors should adopt. While we’re at it, why not steal a page out of the software developer playbook? Agile methodology has customer requirements and solutions evolving through collaboration between self-organizing teams. An Agile “scrum” has participants boil their workday down to five-minute, stand-up meeting with just three questions: What are you working on? What have you accomplished? Do you need help?
Big contractors and small contractors may face different challenges, but both have a lot they can learn from each other.