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Diversifying: What You Need to Do When Opportunity Knocks
 The second of two articles about diversifying into commercial construction.
After reading the first article in this series, you decided you still want to diversify into commercial construction — but not spread yourself too thin. You determined that you could overcome and thrive in a construction environment that differs tactically and strategically from residential construction and you want to take advantage of some of the opportunities that are out there.
Now, we will explore a systematic, step-by-step process that will help you assess whether you are properly prepared to make the transition into commercial construction and develop an effective strategy for being competitive.
Know Your SWOT
SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. Strengths and weaknesses are internal and can be controlled within your company.
Opportunities and threats are external. It’s important that contractors aggressively seek opportunities, but they need to check them out before leaping. Not every potential opportunity will fit your company’s capabilities
In order to make a sound decision to diversify, you must first have a clear understanding of your current business situation. Start with a brainstorming session with all your key employees and advisors to define the company’s SWOT. List all your company’s strengths, weaknesses, opportunities and threats during the session.
Once you have completed the SWOT list, go back and remove any suggestions that don’t fit. Some items may simply be duplicates. Others might not be as important as you think they are. For example, 10 years of construction experience, if your competitors all have similar experience, is not strong enough to set you apart and isn’t worth mentioning (in this exercise). Whenever you and your competitors have equivalent experience, neither of you has a competitive advantage.
Opportunities and Threats
The next round of self assessment is more challenging because it forces you to look at your company strategically.
No analysis would be complete without considering the competition, but you can’t ignore other key factors — political, economic, environmental, legal and technological — that will affect your success.
Here’s an example. A local private university announces plans to build several new dormitories. This may seem like a great opportunity because you’ve built several high-rise apartments and the necessary skills appear to be transferable. But, then you learn that a competitor has built all of the other dorms on campus and the university is not required to take public bids on this project. Unless your company has something significantly unique to offer the university, your competitor has the advantage.
Threats may be the most challenging, because they usually can’t be ignored.
The critical shortage of skilled mechanics is a huge threat. But if your company has a significant number of skilled workers who are happy and highly motivated, you have probably minimized the threat.
However, if you ignore this threat, you may stop doing the things that minimized the risk it poses for your company and suddenly find your company under siege.
Strengths and Weaknesses
Strengths and weaknesses focus on you and your company and therefore should be approached differently than opportunities and threats.
Weaknesses: Quite generally, you can handle or overcome weaknesses in one of two ways. First, you can avoid projects that require strengths in areas where you are weak.
The second option you have is to eliminate the weakness. If one of your weaknesses is a lack of superintendents with commercial experience, for example, you can eliminate that weakness or turn it into a strength by hiring experienced commercial superintendents.
Strengths: The most difficult assessment to make is identifying your strengths. This requires a bit of soul searching.
In reality, few company strengths actually translate into a competitive advantage because unless they create an advantage over your competitors, they merely are a ticket to the dance — essentially a requirement.
If you can’t do something significantly different or better than your competition, it’s not a strength. Usually, companies have only one or two things that give them a true competitive advantage.
Focus on Your Options
Once you have paired down your SWOT assessment to its most important, essential elements, you are prepared to focus on your options.
Do this by focusing on the remaining opportunities one at a time. Under each opportunity, list all of the strengths that offer you an advantage. Next, make a list of all the necessary skills and resources — the requirements needed — for you to pursue that opportunity successfully.
Once you have completed this list, determine which skills and resources you already possess. Those that you don’t have should be listed under weaknesses.
If you have any weaknesses, then you must determine how many there are and how difficult it will be for you to acquire the necessary skills and resources to overcome them. If it’s too difficult to pull together what you need, then pass on the opportunity.
Finally, you should examine the threats to make sure that none of them will negatively impact the opportunity. If they do, then you must determine whether you can eliminate the threat or at least reduce it to an acceptable level.
Repeat this process for each opportunity on your list. Once you do, you can evaluate which opportunities offer the greatest potential for your company and what’s required to pursue them. All this is before you have made a decision to diversity into commercial construction.
If you end up identifying one or more opportunities where your company can possess a competitive advantage, then perhaps you should seriously consider diversifying into commercial construction.
If you can’t identify a realistic opportunity, then you probably should focus more on your current residential business.
This doesn’t mean you can’t or shouldn’t diversify into commercial construction, it just means you must work harder to uncover a viable opportunity to pursue.
Also, this process isn’t like playing poker. You can’t bluff your way to a winning pot. If you don’t have the winning hand, you will usually lose.
There are many outstanding opportunities in the commercial market, but it’s highly competitive. The companies that do their homework are usually rewarded with success.
Ted Garrison is president of Garrison Associates and author of Strategic Planning for Contractors. As a consultant, author and speaker, he works with businesses in the construction industry to grow their business by improving profit margins and increasing productivity. For more information, e-mail Garrison.
This article was excerpted from Commercial Builder magazine.
To read the first article in this series, which appeared Feb. 27 in Nation's Building News, click here.
 ‘Moving to Commercial Construction’ Available at BuilderBooks.com
“Moving to Commercial Construction,” available through BuilderBooks.com, offers the general contractor, subcontractor and designer several step-by-step methods that will make the move from residential to commercial building a successful one.
To view or purchase this publication online, click here, or call 800-223-2665.
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