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Innovation: The Path to Greater Profits (Part 1)

Tom Peters has proclaimed, "The victories of tomorrow will go to the masters of innovation.  Period!" Innovation is a powerful force because it increases profits by building customer loyalty - the most important factor in profitability.  Therefore, your company must focus on building customer loyalty - not just on constructing buildings.  Of course, construction success is part of the customer loyalty equation, but it's not the total picture.  Innovation is also critical because it's one of only two sustainable competitive advantages.  Continuous learning is the other and actually feeds innovation.

Innovation is how we manage change.  Those that do it poorly won't survive.  In contrast, successful companies find that innovation is the key to their prosperity because it increases earnings, increases company growth, and attracts top employees.

Innovation has a powerful impact because it focuses on delivering greater value to the customer.  Companies must focus on doing it better - not just cheaper.  Designers and the contractors can earn higher profit margins when they deliver greater value to their increasingly demanding customers - a perfect win-win situation.  Still, some prospects aren't interested in higher value - they only care about price.  These prospects make poor customers, so they should be fired.

Recently, I spoke with a CEO of a road-building contractor.  His story illustrates the advantage of innovation.

After a successful bid, his company explored every ways to speed up the construction process.  The goal was to earn the maximum bonus for early completion.  Through innovative they reduced the construction time while at the same time reducing their costs.  The result was increased company profits - and once the bonus was added it was one of their most profitable jobs in history.  In this case, the department of transportation recognized the shorter construction period saved the community millions of dollars and was delighted to pay the bonus.  This department of transportation focused on the total cost - not just construction costs - and realized it received greater value.

Other agencies are now attempting to work with this contractor on a negotiated or design-build basis.  They recognized the innovative approaches by this contractor produce greater value and they can't resist.

Many companies don't take full advantage of their innovation potential because they believe innovation is restricted to developing new products.  However, new product development is only one aspect of innovation.  Innovation involves new services, better business processes, better marketing efforts and better management practices.

For example, an architectural firm that specializes in tenant fit-out illustrates the value of new services.  An obstacle to getting new work was their prospect's resistance to moving.  To overcome this, the firm hired an expert on moving.  Now it promises clients that not only will they design the new tenant space, but will completely handle the move, too.  The client goes home on a Friday and shows up at its new office on Monday.  This new service has resulted in increased business for the architect at higher fees because the firm has eliminated its competition.

Now it's time to crank up your company's innovation quotient.  Don't worry if you think your people are not creative - because there is no such thing as a non-creative person.  Innovation is a skill that can be learned, practiced, and developed.  But if you want your company to thrive - you must get started now!

The most successful innovative companies have an innovative culture.  So how does your company measure up?'  To help you evaluate your company's innovative capabilities the next several issues of Southeast Construction will offer 12 traits that successful innovative companies have in common.  Benchmarking your company against these traits will allow you to focus on areas where improvement is needed.

Look for your next issue to start exploring the traits of a successful innovative company.

 

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Ted Garrison, president of Garrison Associates, is a consultant, author and speaker to the construction industry. His email is Growing@TedGarrison.com


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