By Connor Lokar on Jun 12, 2019 11:49:02 AM
For further insights, take a listen to our companion recording: Make the Best Strategic Decisions for Your Business.
Over my nearly five years at ITR, I have become the construction expert of sorts among the economists on our team. I will admit that a data-driven economist classifying himself an "expert" in the construction industry seems a bit implausible, given the sheer distance between the two fields, but I wear the label in an analytical sense. Many of my clients either operate directly within US and global construction markets or at least sell into them in a tangential capacity.
We know that most business leaders generally believe that leveraging external data will greatly enhance their forecasting and decision-making. However, the arduous process of discovering leading metrics, reconciling those data points with their own internal sales performance, and organizing the data to the point of usability can be confusing at best and maddeningly frustrating at worst. We come in to bridge these data challenges and help businesses understand their position within the macroeconomy and the industry. We take an unbiased, external data-based approach to improve operational and strategic decision-making and drive long-term profitability.
For my clients in the construction industry, I have found that data challenges can be greater than the norm. Construction is both highly seasonal and, often, hyper-cyclical — prone to periods of boom and bust. Regional operators contend with the added wrinkle of unique local population drivers. It takes immense executive talent to navigate the extreme seasonal ebbs and flows of business volume while simultaneously driving bold strategic moves with an eye on the longer-term business cycle. For those tasked with such responsibility, economic data is a powerful tool for improving and supporting the decision-making process and for accurately assessing the influence of external factors.
Many of the real-world challenges we work through with our clients concern market share. Most importantly: Are they keeping up with their market? External data and analytics, applied via benchmarking, can answer this question with ease. Benchmarking is a basic and useful self-assessment tool that enables firms to gauge their performance relative to their markets or their peers. We help businesses with this process by plotting their 12/12 rate-of-change (for sales, backlog, or any other trackable performance metric) against the 12/12 rates-of-change for the vertical markets into which they sell. A construction management firm may have vertical markets in the commercial, institutional, and industrial construction sectors, for example. There are appropriate national and regional metrics for all of these markets, and firms can compare and correlate them to their own performance. The resulting output will indicate whether the business is underperforming, outperforming, or simply keeping pace with market growth.
I often tie the value of benchmarking back to a phrase popularized by President John F. Kennedy: “A rising tide lifts all boats.” Benchmarking data is your gauge of the tide; if your market benchmarks are rising but you are not keeping pace, you have a hole in your boat. You are losing market share. The business leader tracking the primary benchmarks can leverage these insights and take steps to rectify the problem, whatever it may be. Obviously, it's a different, more pleasant story when benchmarking indicates that you are outperforming your markets. In this case, you can empirically verify your market share gain and identify the reason for your win: successful promotional or marketing campaigns, an innovative new product or service, entry into new markets, etc.
If you found this helpful and want to hear my guidance on other frustrations that economic data can help solve, please visit our website to download an additional recording. Topics I touch on in the 11-minute recording include targeting the most fruitful vertical markets, managing capacity and your pipeline, and evaluating US states and regions for economic growth prospects.