Entrepreneurs
Contractors begin as entrepreneurs. Entrepreneurs generally set out to turn random opportunities into viable organizations that create value. It is our mission to assist construction professionals to develop their own approaches, guidelines, and skills for evolving from optimistic entrepreneurs into professional business managers. The path from entrepreneur to manager has been well trodden by successful contractors who have established construction as one of the most significant industries of the 20th century. Their well-trodden path follows these five steps:
- Start by identifying potentially valuable opportunities.
- Obtain the resources necessary to pursue that opportunity and to create an entrepreneurial organization.
- Manage the entrepreneurial organization once it has been established.
- Grow the business into a sustainable enterprise.
- Create and harvest value for the organization’s stakeholders.
Managers
Contractors know how to build things. If they didn’t, they wouldn’t take the first step into the business. Construction industry media primarily focuses their attention on our production, on the latest in building technology and efficiency, on safety, and quality control. Unfortunately, less time or space is spent on the business management skills it takes to transform an entrepreneurial start-up into a sustainable enterprise that creates value for its stakeholders.
I am trying to convince my contractor audience that just because we know how to build does not mean we know how to manage a business. My 40 years of research, books, articles, seminars, and this blog series have all been focused on the business of contracting.
Business management is a science that must be learned through instruction and experience just like every other science. Just because we have finally learned how to balance our checkbook doesn’t mean that we know enough about business to run a complex concern. The following business management skills must be mastered and applied before a contractor can be confident they have established a going concern that will contribute future value to all stakeholders.
Business Science
- Strategic Planning – Every time I mention “strategic planning” in my seminars, a low groan comes up from the audience. But the key to transforming a start-up concern into a viable business is to develop a vision of what you want the company to be and do ‘if’ it matures into a viable concern. That goal is not achieved automatically but requires vision and planning. The vision begins with a picture of the firm’s operative environment and how to sustain a competitive advantage. The planning addresses how to generate superior value for customers by creating the optimum configuration of the product mix and functional activities.
- Forecasting – The second skill required is to know how to interpret the tactical plans discussed above through financial metrics. The purpose of all business is to make a profit. This critical step plans for profit because profits don’t result from a fortunate accident.
- Modeling – This tool enables the newly minted business manager to perform an in-depth analysis of the industry and competitors, predict competitive behavior, and analyze how successful firms develop and sustain competitive advantage over time. This analysis is then used as a model and a yardstick for the company’s performance. Particular attention is paid to competitive positioning and understanding comparative costs.
- Risk Assessment – When we talk about risk assessment, we are not talking about work-place risk management but rather the frequency and magnitude of the business risks imbedded in every new project. How to balance the opportunities and risks associated with dynamic and uncertain changes in industry attractiveness and competitive position.
- Capital Formation – What is the nature and importance of dependable capital and how to accumulate capital and understand how to calculate how much will be needed going forward.
- Organizational Development – When is the moment to cease providing employment for family members and friends, and to hire experts and make them team members. (That’s how the football coaches do it.)
- Market Segmentation – Finally, analyzing different markets and market participants to identify your firm’s current and unique competitive position and how it will compete in the future.
The above is an outline of how we will be approaching this discussion of the business of construction in the coming weeks. Business management is a science. Science doesn’t have all the answers but it’s the next best thing. See you next week.
For more information on business development, read more here: DEVELOPMENT
For a broader view on business science, read more here: SCIENCE
To receive the free weekly Construction Messages, ask questions, or make comments contact me at research@simplarfoundation.org.
Please circulate this widely. It will benefit your constituents. This research is continuous and includes new information weekly as it becomes available. Thank you.
