Stocks have fallen, banks have failed, projects are being delayed and cancelled at an unprecedented rate, and bailouts have come. Most sectors of the construction industry are facing their most severe downturn in more than 25 years. All of this begs the question, how is the industry responding?

To answer this question, FMI, management consultants for the construction industry, surveyed 230 of the most influential executives in the U.S. construction industry to gauge exactly how executives of the industry’s leading firms were preparing for a rapidly changing landscape. It is clear that the world is changing, and participants in this year’s survey were asked to rate just how much the competitive environment had intensified over the last 12 months.

Briston Blair, author of the report titled, “2009 Construction Industry Strategy Survey: Strategy in the Eye of the Storm,” says, “Our findings suggest that while most companies anticipate a high degree of future uncertainty, they have not adapted the way they develop strategies. As uncertainty increases, so too should the level of preparation and depth of analysis that is used to determine a go-forward direction. Far too many contractors have yet to adapt to the changing context.”

Some of the more interesting report findings:
  • Many firms do not feel adequately prepared for the uncertainty that lies ahead.

  • Firms in the middle market are anticipating the most uncertainty and are the least prepared.

  • The lack of in-depth planning is preventing some firms from developing a strategy that aligns with the shifting industry context.
We can only be certain of uncertainty in the near-term. Firms are analyzing their macroclimate, customers and markets, competitors and themselves with varying degrees of rigor. The findings indicate that since most contractors are not deeply assessing all aspects of the industry context in preparation for challenging times ahead, they find themselves holding on to the strategies used during the glory days of the most recent market expansion. However, the firms approaching strategy development with the most detailed analysis and preparation are, not surprisingly, the most confident that they have the right strategy for the current economic environment.

The hardest hit firms usually are those stuck in the middle of the market as larger firms increase competition from the top and smaller companies become more aggressive from the bottom.

The final section of this year’s survey allowed participants to provide written commentary in response to the question, “How have the events of the last six months changed the way you think about your firm’s strategy?” The responses ranged from A to Z, but the undertones contained within varied primarily between opportunistic and concerned, proactive and reactive. Some of the more revealing comments:
  • “Nobody has a clue what the future holds, so we need to be ready for anything.”

  • “We are looking farther away geographically…with joint venture firms that are local, substantial and have experienced personnel to contribute.”

  • “We will also look at strategic growth through acquisition to enter new markets.”

  • “We’re engaged in intense visioning and strategy sessions to examine all products and services offered, cost position and customer requirements.”

  • “I don’t think you do anything ‘differently’ in tough economic times; you simply do ‘better’ what you should already be doing.”

  • “I am more concerned with survival than growth.”

  • “Our strategy is wait-and-see while we continue to invest in training and management succession.”

  • “Business as usual; ‘hoping’ things will get better soon.”
Unfortunately, as we learned in previous studies of business failures, contractors are not too big to fail (unlike Bear Stearns, Fannie Mae or Freddie Mac). At the same time, many of the successful contractors surveyed have been in business through many economic cycles and have done more than just survive – they have created cultures and business models that are resilient and sustainable.

No one can doubt that the construction markets have been severely disrupted by the global financial crisis, but the sky has not fallen. Contractors have made money in the past during similar times of uncertainty. Successful contractors will use this time to refocus the business, examine strategic opportunities, and right-size their operations. The latest storm will leave a world of opportunities in its wake, but the next boom is unlikely to mirror the last. There are many possible futures facing the industry, and those firms preparing and adapting their strategies now will be there to win big when the market recovers.