SOME TIME BETWEEN 700 B.C. AND 200 B.C. a Chinese general, thought to be named Sun Tzu, prepared a text that has become known as The Art of War. The advice contained therein is still relevant today, especially where it pertains to small- and mid-sized builders (SMB) versus regional and national builders (RNB).
You may think you know everything about doing battle with the big guys, but, as Sun Tzu says, sometimes you've got to know when to hold them, when to fold them, and when to run.
Here are some of his principles that we use in our business that have proven to be worth their weight in gold.
Winning Without Battle “Thus those skilled in war subdue the enemy's army without battle ... . They conquer by strategy.”
The SMB do not possess the same resources of land, capital, and staying power as the RNB. Therefore, they must compete without pitting themselves directly against their larger, stronger opponent. They must use guile and learn to use their enemies' strengths against them.
SMB Tip: When possible, locate near enough to an RNB project to benefit from the traffic that their large advertising budgets produce. Capitalize on their efforts.
Knowledge “Know the enemy and know yourself; in a hundred battles you will never be in peril. When you are ignorant of the enemy, but know yourself, your chances of winning or losing are equal. If ignorant both of your enemy and yourself, you are certain in every battle to be in peril.”
Knowing and understanding the practices, procedures, policies, and tactics of your RNB competitors is an absolute necessity for the SMB trying to survive and prosper in an environment populated by larger, stronger competitors. Equally important is the willingness to truly analyze the strengths and weaknesses of your own organization. The leader of a successful home building company does not see the world (and his position in it) as he would like it to be—he sees it as it really is!
SMB Tip: To know about the competition, visit them—physically at their project sites and virtually on their Web sites. Look at what they do, and honestly compare it to what you do. And when you come up lacking, fix it at once. To know yourself, make sure your company has a vision, a purpose, and stated core values. Then create a program that guarantees that every employee and associate knows and understands them.
Strengths And Weaknesses “In war, numbers alone confer no advantage.”
While the RNB certainly have some advantages due to more extensive resources, they also have several clear and distinct disadvantages—specifically:
SMB Tip: Be bold, embrace change, and understand that your success is related to using the benefits that come from having the leaner, more efficient organization.
Preparation “To ... not prepare is the greatest of crimes; to be prepared beforehand for any contingency is the greatest of virtues.”
In business, as in warfare, it is the unexpected that causes the greatest damage. Planning, preparation, and a commitment to spending the resources necessary on the decision-making process are vital to successfully navigating today's complex home building environment. Committing time, capital, and people to planning and preparation may not seem as productive as “doing something.” But these resources are not being wasted—they are being invested.
SMB Tip: If you don't have a written three-year business plan, updated periodically, you are not really prepared. (P.S.: To us at Home Builders Network, periodically means quarterly.)
SPEED “What is of the greatest importance in war is extraordinary speed: One cannot afford to neglect opportunity.”
Consumers want instant gratification, 24/7 service, and a builder who responds not only well, but quickly. Asking clients to wait two weeks for a price or a proposal is really asking them to look elsewhere for a builder.
SMB Tip: On the highway, speed kills—in business, as in war, it is a lack of speed that is deadly. Work incessantly to reduce construction and preconstruction cycle times.
Vision And Leadership “The general must be first in the toils and fatigues of the army. In the heat of summer he does not spread his parasol, nor in the cold of winter don thick clothing ... . He waits until the army's wells have been dug and only then drinks; until the army's food is cooked before he eats; until the army's fortifications have been completed, to shelter himself.”
The role of leadership in business, as well as in war, cannot be overrated. Throughout history battles have turned on the examples set by generals and sergeants alike. And while words alone can inspire, they lack the power of a committed leader whose selflessness sets the tone for an army, or a company.
SMB Tip: “Do as I say, not as I do” is not a valid option for the successful small-to mid-sized builder. Pay attention to the example you set.
Staffing And Delegation “A sovereign of high character and intelligence must be able to know the right man, should place the responsibility on him, and expect results.”
What can be more important than finding and hiring the best people, and then giving them the opportunity to realize their full potential? From Peter Drucker's first texts to Jim Collins' Good to Great, management gurus have constantly expounded on the premise that great organizations exist because of outstanding people and terrific systems. The small builder has an advantage in this regard if he understands how to use it. By their nature smaller companies are inherently more appealing to first-rate people—they offer more challenges, more opportunities, more camaraderie, more freedom. To make these advantages real, the SMB must delegate willingly, encourage intellectual growth constantly, liberally reward emotionally and financially, and allow employees to find and be themselves.
SMB Tip: Don't hesitate—hire good talent whenever you find it. Outstanding abilities are always a good investment!
Allies “If an enemy has alliances, the problem is grave and the enemy's position strong; if he has no alliances, the problem is minor and the enemy's position weak.”
By inference, this quote explains the importance of allies to the SMB. As the difference in size and resources between the RNB and the SMB becomes greater, it is more important than ever for smaller builders to find like-minded allies so that their pooled resources allow them to compete in such areas as land acquisition, marketing, purchasing, and specialty services.
SMB Tip: Better to own 25 percent of a hundred-lot subdivision that you couldn't afford alone than 100 percent of nothing. Better to pay half of a $15,000 marketing brochure extolling the virtues of both you and a fellow builder than to own all of an inferior marketing piece for $7,500.
Al Trellis is a consultant based in Mount Airy, Md. His firm, Home Builders Network, offers services to builders in the areas of business strategy, product design, land development, financing, and marketing.