Capitalizing Market Research in Construction

Most successful companies in the engineering and construction industry are constantly monitoring the market and staying abreast of the most recent trends. They try to best prepare for what the future will look like in the market and how the company will compete. One of the lessons we have learned at FMI is that market research must be placed in a proper strategic framework to guide your thinking and ultimately increase your ability to make the right decisions for your company’s future success.

Without this framework, it is simply a collection of data points without a unified purpose. As seen in Exhibit 1, the strategic framework we suggest to our clients for implementation is the 4-C approach of climate, customers, competitors and company.

Below is a brief overview of each of these areas and what is typically involved in the research process. At the conclusion of the process, this approach merges the external market analysis with the company’s internal value drivers and core competencies to help ensure the business is positioned to succeed.

Climate

Over the years, FMI has developed hundreds of construction put in place forecasts at the national, provincial and local levels to assist clients in gaining an appreciation for a market’s size and growth potential. Climate research tries to uncover what the opportunity or demand is for a company’s services. This involves a collection of historical and projected construction spending figures, in terms of size and growth, as well as an analysis of the underlying market trends and drivers that most influence related spending.

Typically, these market factors fall into four primary areas, including political (e.g., legislation), economic (e.g., industry employment, commodity prices), sociocultural (e.g., population) and technological (e.g., prefabrication/ modularization). Once these factors have been identified, it often can be beneficial to rank them based on two criteria, which include: 1) the likelihood to occur and 2) the potential impact. By completing this step, you can prioritize those factors that will have the greatest effect on your company’s business.

Customers

FMI works with customers that are focused on expanding their market presence and growing their business. Growth strategies may include a building segment (e.g., health care), a geographic market (e.g., Toronto) and/or services (e.g., operations and maintenance). They will ask us to provide them with a climate analysis including forecast construction spending, but overlook a significant component, which is the customer. In general, we have found that business development skill and competency are more important now than ever. Customer research begins by identifying who the leading active buyers are in a particular market and what the particular needs of the company are in terms of capital expenditure plans.

For example, is the company looking to expand the business by constructing new structures, or does it prefer to maintain and upgrade an existing structure? Either case has direct implications for how you may approach the customer. In addition to identifying the customers, you will want to know about their procurement process. Procurement involves an analysis of the delivery (e.g., design-bid-build, design-build, construction management, EPC) and contracting (e.g., open, negotiated, prequalified) methods in addition to key selection criteria, including price, quality, project team, schedule, safety, etc. Finally, a customer analysis provides identification of the primary decision-makers (e.g., vice president of operations) within an organization.

Competitors

Perhaps the most difficult component of this research approach is the competitor analysis, due to the sensitivity of the information involved. Marketing research helps in ascertaining and understanding competitor information, such as its identity, customer focus, scale of operations and market positioning. By speaking with owners in the market, competitive research can allow you to gain an appreciation for a company’s perceived strengths and weaknesses, resource advantages, personnel capabilities, etc. This helps in surviving and, in certain cases, even exploiting the competition. Moreover, with market research, you can also better understand the underserved segments and customer needs that have not been met. There may be a situation where your company has skill and experience that can be leveraged.

Company

Finally, once the external analysis has been completed, which includes the climate, customer and competitor research, an internal analysis is conducted to examine the company and determine whether it is advantageously positioned and structured appropriately to exploit these opportunities. This analysis involves looking at the company’s internal capabilities (e.g., work acquisition practices, business development behaviors, project execution and control systems, management information systems, safety and risk management practices, and financial management practices).

Market research will help to determine the underlying forces and trends that are driving your customers, your competitors and your business. In addition, analysis of the data and information can allow you to prepare for shifts in the market before they happen and increase your chances for success. With an understanding of the climate, customers, competitors and the company, this research can equip management with the power to make better business decisions, increase revenue and maximize profit.