To Specialize or Generalize

Should firms go through the hassle of specializing, or should they hedge their bets and aim to be good across all project categories? For larger firms, being good in several categories is much easier. For small- to mid-sized firms, it is impractical to expect that they have a résumé comparable to their larger peers.

Specialization

Specialization comes in many forms. Whether it is delivery method, niche or even sector, there is no shortage of options available. For many contractors, bridging across niches is a natural extension of one’s services. A contractor might be given an opportunity to become the builder based not on their experience within a niche, but their experience with a building technique. Great business developers are masters of capitalizing on this advantage. These firms differentiate themselves based on their capabilities as a builder exploiting a structure’s complexity, rather than exploiting a résumé of past projects. The best specialists are those who understand their customers’ businesses better than their own.

• Pre-Construction
• Know the correct design elements for a niche specific building
• Understand lead times for mission critical items
• Know the correct permitting and inspection rules outside of typicaljurisdictional requirements

• Integration of prefabricated elements and substructures
• Coordination of mission-critical trades
• Procurement of proper, sequenced trades and niche-specific vendors
• Value engineering based on field expertise input and past experience
• Hidden pitfall identification also based on field expertise

• Understanding of the true construction timeline based on relevant experience
• Realistic closeout procedures
• Specific coordination with non-construction vendors

Specialization usually becomes a factor of timing. As market conditions remain stable, it would make strategic sense to investigate new markets. However, experts will argue against this strategic mindset. True strategic thinking requires proactive, fact-based research. It is important to vet and test strategic assumptions.

Generalization

The majority of mid-market contractors would characterize themselves as generalists. Some of the best generalists are chameleon-like, in that they not only morph to appear specialized, but they almost seem to know their potential customer’s business better than their own. One of the best arguments for generalization is its ability to serve multiple markets. This same benefit also becomes a liability in some cases, though. Ask the following questions to improve the success probability.

• What is your brand in the marketplace? Conduct a market perception survey to gauge how your firm is perceived in the marketplace. What do end users, construction managers, architects and engineers think of your business?
• For a new market, what is one trait within your firm that can be parlayed to serve their needs? Firms that serve as estimating mills will not spend the amount of time necessary to find these competitive advantages.
• Can you bring a team that offers the total package? While you may not have the exact experience because of your generalist background, can your firm partner with experts that do have the right credentials?
• How are these divisions measured? Does each division have a set of goals, metrics and a business plan?
• What mechanisms are in place to cross-train associates? While the go-to market strategy might be specialized, a firm can be structured internally in such a way that leverages their talent and hedges against any eventual niche downturn.
• What portion of the firm is dedicated to finding new markets? While most firms do not have a deep research budget focused on new markets, there should be a committee or small contingent of the firm dedicated to finding the next big thing.
• When does the firm pull the plug on a niche? There should be a vehicle within the firm that drives constructive discussion on how to help ailing specialists, or when it is necessary to rethink the strategic direction altogether.

There is no right or wrong answer when it comes to choosing the firm’s strategy. Best-in-class specialists and generalists become market leaders because of the fact-based foundation on which they have built their businesses.