Horizon Newsletter • December 7, 2020
Good contractors compete within, great contractors compete in their market, but the best contractors compete with what's possible.

According to conventional wisdom, the best organizations leverage healthy competition as a key component of their management approach and corporate culture.

While I agree that competition is valuable, it's possible to choose the wrong competitors. The purpose of this newsletter is to help identify the right competitors and avoid common competition traps.

Local competition is almost certainly not the best

I was a very good high school football player, at least when compared to my local competition. I grew up in a rural town outside of Albany, NY, and I was fast enough to be a stand out running back and kick returner. That's how I measured myself until the very last football game that I ever played. I was one of the four running backs in the Upstate NY Senior Bowl game on Thanksgiving weekend of 1995. It was an "all star" game with players selected from schools of all sizes from around the state. Of the four at my position, I was clearly the fourth best. Perhaps that was the best that I could have ever been - I'm not exactly a physically imposing specimen. But I'll never know because I'd spent the previous four years measuring myself against the teams I was playing, not the teams I could play. Being the best in my little world was holding me back, and I never went any further.

This same phenomenon happens often in our industry. Since the business is so local and fragmented, most contractors have been exposed to a very limited set of competitors, and odds are that those competitors aren't excellent. But eventually, if and when we're exposed to the bigger world around us, we find out that what we'd seen was possible is much less impressive than what is possible.

Achieving what's possible requires selflessness

One of the benefits of playing football in a small town is that there was relatively little competition within the team. We didn't have enough players that were viable candidates at each position for that to be a serious problem! We had to make the most of what we had and help each other if we had a chance of winning each weekend.

Horizontal construction is a team sport too, and it requires tight coordination across functions and companies. While American culture and industry is built on individualism, a contractor built on the same will be an average performer. Instead of glimpsing what's possible for all in the differences between crews and plants and trucks, an individualistic organization will see and reward "the winners". This might lead to improved performance at the margin, but will not improve most team members, and will cause the organization to miss out on "breakthrough" improvements. Instead, the differences should be studied carefully to understand who needs help, and what ideas should be leveraged everywhere. Additionally, when determining who should be promoted, a primary consideration should be whether a team member made their peers better. Only by rewarding selflessness can management compete with what's possible.

If you only have a couple of great crews, and they don't make the other crews better, you'll be no better than good.

The best contractors compete with what's possible

To be the best, you need to imagine what's possible - it's the only relevant benchmark for the best organizations. Even though perfection is unreachable, the best organizations keep trying. And since it can't be fully achieved, it has to be glimpsed and imagined, but with the clarity of careful observation. Given its elusiveness, "the possible" needs the organization's full focus. Any distractions arising from internal politics and local relativism will rob the team of the cohesion and perspective required to win.

To imagine what's possible as a team, you must first be demand-driven, and then work backwards to balance the resources required to fulfill that demand with minimal waste. You can't achieve more than the demand allows for, and if you try, you'll only do worse. On the other hand, if you are supply-driven, you'll wind up fixated on maximizing the asset utilization of one particular type of asset (i.e. crews, plants, trucks) and mess up the optimal resource trade or underperform for the customer. The time to be supply-driven is at the bid table, not in daily operations. Once you've won the business, information about the award must be communicated to all stakeholders accurately and with as much lead time as possible to drive downstream planning decisions.

Optimally balancing resources requires a precise understanding of the capabilities of each component. At what rate will each roller compact given the temperature and mix design? How fast can we produce each finished product? How much of each finished product can we inventory? What can each truck haul per load on each route? What will the drive time be in both directions? What are the other demands on the plant during the same time period? You can't use averages, and you can't round up all the way down.

To succeed, the team needs to expect each part to deliver what it's capable of and plan accordingly. That level of precise execution leaves no extra time for any team member to try to do someone else's job. As Coach Sapienza said, "We can't have the Right Guard worrying about what the Left Tackle's not doing".

Some specific practices that indicate that an organization is competing against what's possible

Here are some of the telltale signs of an organization chasing what's possible:

  • Everyone sweats the small stuff while staying positive
  • Demand is visible as job production plans far in advance of the production date
  • Teams review lessons learned from all plans to identify ideas that would work everywhere
  • Knowledge is made public through detailed comments, incidents, and action items
  • Success is celebrated publicly to help draw attention to effective practices
  • Benchmarking meetings are conducted with organizations in different industries and geographies
  • Experts are identified and leveraged as trainers of peers
  • Outcomes are fed back into the estimation and bidding process
  • Questions are asked without reservation, and answers are provided freely

We've built the XBE platform to enable this strategy, but there's a long way for us to go. As always, if there is something that we can do (software, data, introductions, insight, etc) to help you compete against what's possible, let us know.

Regards,

Sean Devine
Founder & CEO, XBE