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How Strategy Can Impact Your Position in the Economic Recovery

How Strategy Can Impact Your Position in the Economic Recovery

by Craig Neal, Paveman Pro

    

It’s been a tough few years for almost everyone in business. Those who have made it through this last downturn could be in a position to benefit from the recovery that seems to loom somewhere in the near future. The question is “how” do I capitalize on the upturn and are there opportunities for me to “reposition” or “redefine” my business. Are there new opportunities or market segments that can provide my business with an advantage that is sustainable? In many cases the competitive environment has changed: some have gone out of business, some have been forced to scale back their operations and no longer have the capacity to do work they once did, and in some markets we see a drift of “low cost” competitors entering the market and capitalizing on property owners with reduced budgets.

So let’s talk about what “strategy” really is and what you should consider.  First, strategy is not “operational effectiveness”.  This means that while there is value to quality and the process of the work you do, the ability to perform this work is not limited to your company.  It’s probably fair to say that sealcoating and paving are somewhat mature markets—meaning that most property owners are aware of the process and in competitive environments “cost” is a strong driver.  We struggle on a daily bases to differentiate from the low cost contractors, but often we find ourselves pressured to surcome to matching price.  Unfortunately, the entry barriers to our business are low; having a spray sealcoating machine or a conveyor fed paver can provide some advantage in operational effectiveness and improvement in profit, but it’s not necessarily a distinct advantage. Let’s face it, we are in an industry were what we do can be replicated.  

Lets start with three principles:

The basis of Strategy is how you position yourself amongst your competitors. Strategic positioning lies in performing different activities than your rivals or performing similar activities in different ways.  The key word is “different”.  If you do not have a mission statement for your business, now may be the time to re-define who you are as an organization and what makes you unique in your marketplace.  Define what do you do “very well” as an organization; moreover, what do you do well that your competitors cannot replicate.  This is how you develop at true competitive advantage.

A sustainable strategic position requires trade-offs. This is where it gets tough because you must drive your stake deep in the ground and decide what you “will do” and what you “will not do”.  If your position yourself as a premium contractor, you can’t compromise the quality of your work or your position is lost.  Yes, the pressure of revenue generation is always great; however, anyone can do cheap work, and you have no unique value in the market if you follow the low-cost leader.  This also translates into maintaining focus on your core business.  Your advantage lies in what you do best; so carefully consider moving into other potential areas where the “advantage” cannot be translated.  You may have a unique advantage in the market as a paving or sealcoating contractor, but that does not mean you can do the same in the crackfilling or striping business.  Defend and leverage your core business at all cost!

Build the value chain. After you determine your strategic position, and hence define your competitive advantage, make sure all of the activities within your organization are aligned.  Let’s go back to the market position of the “premium contractor”.  You can say your “value proposition” is quality and you may replicate that concept in your advertising and marketing campaigns; however, if your salesperson misses the appointment with the property owner the value chain is broken.  If the bid is delivered on a old quote sheet with the corners bent, or if he shows up in dirty jeans and a tee-shirt; guess what, you don’t occupy the premium position in the market place.  Every activity, or interaction that a potential customer has with you must align with your strategy.  This means there should be consistency in every event from the first sales call to collecting on the invoice.  Of course you do not have to be a premium contractor to be successful, it just means that whatever position you decide to occupy you need to live!  Competitive advantage can also be translated into being a “low-cost provider”; however, you have to decide if being low cost aligns with your vision and mission statement and inevitably the financial health of your business.

Every business has a certain position in the marketplace and in our day-to-day activities its not uncommon to lose our sense of identify and direction.  The old saying of being a “ship without a rudder” makes traversing a tough economy even more difficult.  Assess where your position is today, or even better, what position you want to occupy in the future.  Define who you are and what makes you unique and deliver on each of those activities to develop a truly competitive advantage!

Craig Neal grew up in the asphalt sealcoating industry as the eldest son of Harold Neal, founder of Neal Manufacturing.  He spent 14 years with a fortune 500 company exiting as Vice-President, General Manager.  In his most recent position he managed Corporate Strategy for a 100 year old Japanese industrial manufacturing company.  Craig would love to hear your comments and insights on the article, as well as reconnect with old friends in the industry.  He can be reached at craig@pavemanpro.com.