The Garrison Report #2009-4


A Lesson from the Art of War - How to Create an Excellent Company Strategy

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The last report explored the idea that an excellent strategy will often eliminate the competition without a fight. But how does a company create an excellent strategy that guarantees its success? Addressing this challenge, Sun Tzu's Art of War offers some sound advice.

"Know the enemy and know yourself, and your victory will never be endangered; know the weather and know the ground, and your victory will then be complete."
- Sun Tzu, Chapter 10 of Art of War

Of course, our clients aren't the enemy, but the idea to completely understand the client is sound advice. When a contractor focuses on only the construction activities, it limits itself and overlooks opportunities to set itself apart from its competition and increase its profit margins. This forces contractors to look at construction projects differently. When someone buys a drill, he is interested not in buying a drill, but in obtaining a hole. When a client constructs a building, the contractor should expand its focus to the use of the building, rather than focusing on just the construction process, because it offers greater opportunities. The construction costs of building represent about 11 percent of the total lifetime cost of the build. So why does the industry place so much emphasis on the construction process? The construction process has been reduced to a commodity that has forced contractors and vendors to compete on price. However, focusing on added value allows them to differentiate themselves and increase their profit margins.

After having this discussion with one of my contractor clients, the $20 million general contractor went back to all its clients and asked this simple question: "What can we do for you that we are not currently doing?" Each of the contractor's clients had a different list of services, but it certainly opened the door of opportunity. The contractor looked over the list, went back to the clients, and told them they could perform all the requested services, but the fee would be increased by 1 percent, which the clients quickly agreed to. This resulted in an increased income of $200,000, yet it cost only about $18,000 to perform the work. This extra work added significant profit to the company and created happy clients. This is the perfect win-win situation, but it would not have been possible without communication with the client on the client's needs.

 

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