I spoke with Robert Finfrock this week. His company, Finfrock Enterprises, is featured in the introduction to my book, Beyond Price, for how it escaped the ruthless construction industry competition. Bob transformed what had become a commoditized business into a one-of-a-kind business selling its services at a premium. The financial and enjoyment returns have been remarkable and enviable.
Years after his business model innovation, Bob’s firm finds itself in the toughest macro conditions of its lifetime. (Bob’s firm serves real estate developers and building owners in Orlando, Florida–a market very hard hit by the recent recession). Yet his company is still making money.
What about Bob’s industry peers? About 10% of the 275 US plants in his industry have already shut down, unlikely to ever open again. Furthermore, Bob and his team have stayed out of the nasty bid market in which contractors and subcontractors win business, only to squeeze out little or no profit.
I keep thinking about the other companies in the precast-prestressed concrete industry. I worked with forty companies for about two years and stay in touch with some of them. Most know of Finfrock Industries remarkable story of transformation, yet none have followed fully in Bob’s footprints. “Why?” I ask. “Because we’re precast firms, not contractors,” they answer. They thought the risk of competing against their customers (general contractors) was too high relative to the return of becoming the general contractor on projects.
I find this situation very sad. An entire industry could and should have been transformed. Instead, just one leader discovered the promised land of competing with a new business model.
One of the most important strategy decisions you make as a leadership team is: What business are we in? Don’t leave the answer to this question to history, your competition, or serendipity.
What business are you in? Find an answer that uniquely addresses an important issue facing a target market with the ability to pay for that answer. Bob redefined his business to give owners and developers more build features for their dollar, in a shorter period of time, and with less schedule risk. No wonder he’s succeeded on every measure.
For insight on business model strategy, read my recently released book, Beyond Price.
Fred H Schlegel says
I thought the Frinfrock example in your book was great, but as you’ve identified here, it’s hard to make a jump out of a comfortable bucket of business – even though you know it’s a leaky bucket. Asking what business you are in requires putting aside preconceived notions in a way that can be very uncomfortable.
Kay Plantes says
The challenge for leaders is that if you wait until the water level is too low, you’ve lost the resources to make the business model transition. Leaders need to see business model innovation as a necessary business practice, necessitated by the ongoing commoditization of all business models in a free economy. We’ve seen this transition happen with process improvements to gain efficiencies. Someday it will happen with business model innovation. Take care Fred.