The opening sentence in Good to Great by Jim Collins is, "Good is the enemy of great." This concept can be extended to, A good strategy is the enemy of a great strategy. But why is this so critical?
“Therefore, those skilled in war subdue the enemy’s army without fighting. They capture enemy’s cities without assaulting them and overthrow his state without protracted operations. Their aim must be to take all under heaven intact through strategic superiority. Thus, their troops are not worn out and their triumph will be complete. This is the art of attacking by stratagem.” – Sun Tzu, Art of War, Chapter 3
In essence, Sun Tzu argues that a great strategy will allow competitors to win without fighting. Unfortunately some miss the point and argue that contractors don’t fight wars. But what do you call “price wars?” While competitors in the construction industry don’t actually fire guns at each other, price wars do leave casualties all over the landscape and even the winner is often damaged financially.
When I raise this issue there are always those that respond that they have no choice because they compete for public work and therefore must compete on price. This comment is only half true.
It is true that many situations require contractors to compete based on price. However, not all bidding situations are created equal and contractors always have a choice where they will compete. The idea is to create a great strategy that provides the company a unique competitive advantage, therefore eliminating competition.
For example, Flatiron was awarded the St. Anthony Falls Bridge in Minneapolis despite being the high bidder, because the Minnesota Department of Transportation believed it would deliver greater value by building the bridge faster. In this situation there were only a few bidders because the demand for a rapid schedule discouraged most bidders.
In comparison, there was a project recently bid in California where there were 40 bidders. Also, I just attended a large general contractor’s company event. One of its senior executives explained to me that despite bidding work they have been very profitable because they focus only on tough projects where they have an advantage. This is the essence of an excellent strategy!
“Know the enemy and know yourself, and you can fight a hundred battles with no danger of defeat. When you are ignorant of the enemy but know yourself, your chances of winning and losing are equal. Ignorant both of your enemy and of yourself, you are sure to be defeated in every battle.” – Sun Tzu, Art of War, Chapter 3
The business equivalent is a company’s SWOT; strengths, weaknesses, opportunities, and threats. This analysis is the basis for developing an excellent strategy. Most business leaders understand that they should avoid projects that expose their weaknesses or areas where they are threatened. However, simply focusing on projects that best utilize your strengths with opportunities may not be enough, even though this might be considered a good strategy.
If you ignore your competitor’s strengths you may still lose. Obviously, if your competitor can trump your strength, you will lose. But even if your strength is superior, if your competitor is significantly larger, then the competitor may still be able to win by throwing enough resources at the situation. In this situation your company needs to develop a guerrilla strategy to hit the competitor where they can’t or don’t want to compete.
Back in the 1970s, the steel mini mills had inferior quality and lacked the resources to take on the giant integrated steel companies such as U.S. Steel and Bethlehem. Instead, they attacked them in the areas the integrated steel companies thought weren’t profitable. The mini mills consolidated their small victories and moved to the next product until they eventually put the giants out of business.
What made the strategy so spectacular was they rarely competed with the giants. Their strategy resulted in the big firms backing off because they knew they couldn’t compete profitably in the areas of attack. Also, since they were so much bigger they didn’t perceive the smaller mini mills a threat.
The conclusion is that when a company develops a truly great strategy, it sets itself apart from its competitors and thus eliminates the competition. Even if other pretenders show up to compete in your area of expertise, it will be like an amateur trying to beat Tiger Woods without strokes.