January 14, 2013 By CI Staff
When NSCA and Commercial Integrator collaborated for their 3rd Annual Integration Business Outlook in January 2013, they were careful not to label it as a “state of the industry.” That moniker, said CI editor Tom LeBlanc during the web event, “insinuates that we’re talking only about the past and the present.” However, his and NSCA executive director Chuck Wilson’s presentation was “very much about the future and the year that lies ahead.”
Wilson and LeBlanc began by highlighting and analyzing data from a joint CI/NSCA survey of over 200 qualified commercial integrators. Had they stopped there, it would have been a warm and fuzzy presentation. More than half of integrators reported that their year-end backlog entering 2013 is up versus that of a year ago; construction spending is projected to be up in every commercial sector; and over 60 percent project their overall revenues to rise in 2013.
The good news, however, was short-lived. Wilson and LeBlanc zeroed in on several major concerns integrators shared about their prospects for 2013. In short, they feel like the market is turbulent and working against them. External forces like a challenging economy, manufacturers’ liberal distribution practices, low profitability due to more competitors’ bid-and-chase practices, miniscule product margins, government regulations, escalating labor costs and more have integrators uneasy about 2013 and beyond.
Wilson’s advice is integration firms to acknowledge that it’s a challenging market and to seek success by getting back to basics. In other words, he said, “find your sweet spot.”
To be successful in a tough, turbulent 2013, many integration firms will need their leaders to step up in a big way. There is temptation to swing for the fences and try new things in a challenging market, but Wilson says that’s precisely what integration firm leaders need to make sure they do not do.
3rd Annual Integration Business Outlook Presented by CI & NSCA
Want more State of the Industry analysis? NSCA’s Chuck Wilson and CI’s Tom LeBlanc analyze industry trends and offer advice to help integrators begin 2013 on the right track in the 3rd Annual Integration Business Outlook Presented by CI & NSCA on Jan. 9. Click here to register.
When profitability on projects tends to be low – and that absolutely is the case according to integrators surveyed by CI and NSCA – it’s dangerous to chase new verticals, explore new technologies and better to focus on core competencies, Wilson said.
“The companies that we see that are profitable year after year manage this carefully. They only do so much experimenting,” he says. Wilson suggests setting a standard such as only 20 percent of revenue will be the result of chasing a new vertical or new product category.
For integrators to find their sweet spot, they should ask themselves three questions:
When is my company most efficient?
When is my company most productive?
When is my company most profitable?
The answer to all three questions is likely to be the same. “It’s when we do what we do best with our very best people. It’s not rocket science,” Wilson concedes, but some leader within an integration firm has to take responsibility for realizing it and acting upon it. “The CEO, the chief visionary, whoever it is has to say we’re going to go into 2013 doing what we do best.”
A good way for integration firm leaders to address these questions is to look at their percentage of new employees versus tried and true employees and their backlog percentage of core competency projects versus non-core. That’s an indicator of how many 2013 projects have a good chance of going astray somehow and causing profitability to plummet.
“Good leaders,” Wilson says, “know where their company’s sweet spot is. They know when they grew too fast, when they hired too many knew people at the same time, when they chased a piece of business that wasn’t really right for them.”
Good communication is also critical in a challenging market. Wilson advices integration firm leaders to take a look at their internal communication to improve efficiency and eliminate redundancy and to improve external communications to minimize variables with clients.”
Eliminating turmoil, in general, is how integration firms can find their sweet spot and position themselves for success in 2013.
Easier said than done, according to many integrators who submitted questions during the 3rd Annual Integration Business Outlook web event. Following are some key questions (paraphrased) and concerns from integrators as they enter 2013 and Wilson’s responses: