We Have Sold Out of Quality

The other day, I was shopping for my daughter’s 16^th birthday present, which dictated that I visit stores like Forever 21 and H & M so I’d have half a chance of selecting something she would actually wear.  While I was browsing through the stores with throngs of female “tweens”, I was amazed at the incredibly cheap design of the clothing.  Virtually everything in those stores is designed to make it through one season.  I’ve purchased rags at Home Depot that are made of better material.  Its pretty obvious that apparel marketers are selling fashion rather than durability.  This made me think about how the same trend toward marketing inferior products is beginning to dominate much of US industry including construction materials.  I decided to delve into this topic to see if I could determine what is causing this disturbing trend.

Why is the quality of clothing, electronics, appliances, building materials, automobiles, etc. on the decline?  The answer turns out to be more complex than just blaming greedy US manufacturers, outsourced Chinese fabricators, or the sluggish economy.  There happens to be several factors that are driving this development.  Although the deterioration of quality has affected all industries, I’ll focus on the factors that seem to be shaping the construction industry.

Just as rapidly changing styles are driving the clothing industry to use materials that only last one season, the construction industry is also a slave to fashion.  Look at the rapidly changing designs of appliances, lighting fixtures, furniture, and plumbing fixtures.  Interior finish colors, floor covering, and hardware finish frequently change based upon consumer preferences and what’s trendy at the time.  It’ll be a sad day when granite countertops and stainless steel go out of style, because kitchens across the country are going end up in the landfill.  This rapidly changing style influences manufacturers to design products with only a ten year lifespan.  There is no need to design a shower head to last more than ten years if it’ll be replaced in eight.  That stainless steel refrigerator is designed for a seven year lifespan since it will be replaced by white enamel in the next decade. Manufacturers are designing their products to perform for the fashion lifecycle rather than focusing on enduring quality.

Another element that contributes to the decline in product quality of the construction industry is the speedy development of new technologies. Innovative technologies have had a big impact on the sales of appliances, windows, wood alternatives, lighting, home automation, and home entertainment. There is no need to design kitchen appliances that will last for two decades if consumers are going to exchange them for Wi-Fi enabled products that can be controlled with a smartphone as soon as the technology presents itself.  Why would a manufacturer waste resources designing a durable product if it is going to become obsolete with a technological change? Consumers are paying for new technologies, not for products that will last for a lifetime.

Another contributor to diminished quality in construction products is the mindset of the American consumer.  The typical American has been conditioned by advertising media for his/her entire life.  Thousands of advertising messages play every day and reinforce how Madison Avenue wants us to think and behave.  The typical American consumer has become a sucker for the media.  The hypnotic effect of the advertising machine convinces the populace that happiness can be found in a new living room sectional.  We are well trained to appreciate the sizzle rather than the steak.  We want new stuff, and we want it to be inexpensive. So manufacturers have responded by providing low-cost products using inferior materials like laminates, plastics, and substandard metals.  Where manufacturers used to be focused on building a better quality mousetrap, they are now designing to meet a price point.  So when you hear someone say, “They don’t building them like they used to,” you only have yourself to blame.

Finally, many markets in the construction industry are very mature and have succumbed to a commodity status.  Product design has matured to the point where there is only minor differentiation between manufacturers.  Take a look at the window business for example.  There are very few differences between one US manufacturer and another.  They use the same glass, wood, aluminum, finish, weather strip, and hardware. They achieve the same results in a battery of performance tests.  In an effort to compete, these manufacturers have scurried to cut costs in materials, manufacturing, and distribution.  The result is a host of manufacturers that produce mediocre quality products at a minimum cost to the company.  I represented one manufacturer for many years that had an edict to cut 10% of their costs every year for four years straight.  Although they gained a competitive advantage in pricing, they lost the quality that originally made the company a success. 

Given the influences outlined above, there is going to be an influx of material heading to the landfill over the next couple of decades.  I believe there is a big opportunity for companies to design and manufacture quality products that double or triple the current lifecycles.  Re-View has been successful in occupying a small niche market that demands a 100 year lifecycle window, which proves there is demand for quality products.  I think there is a nascent trend that recognizes the positive impact of increasing product lifecycles, but until that trend catches on across the board, I’ll have to settle for purchasing this T-shirt that looks nice but will probably fall apart after five wash cycles.    

March Madness in the Construction Industry

As we enter another edition of March Madness for the NCAA basketball tournament, I reflected upon one of the reasons I truly enjoy this time of year.  I think it is fascinating to watch the match ups between teams that are oozing with skilled prima donna players and those teams who rely on teamwork rather than individual talent.  It is great to see teamwork triumph over flair. 

For some reason this battle of talent vs. teamwork make me reflect upon a relatively new project delivery method being used in the construction industry.  The Integrated Project Delivery (IPD) method is just beginning to gain traction in the United States.  This approach does away with the classic delivery method that relies on individual aptitude and creates a team atmosphere where the owner, architect, contractor, and key subcontractors all work together from design to completion.

As I consider some of my company’s most successful projects in the past, there is one common denominator that drove that success.  On our smoothest projects, the owner, architect, and general contractor all worked together effectively during all stages of the venture.  If a design change was required, access to the architect was immediate, and coordination with the contractor was prompt.  Without a doubt, the best projects had players who connected much like a finely tuned basketball team.

The IPD method of running a project is based upon the premise that the project can be structured to facilitate this type of teamwork.  Essentially IPD structures a contract where a preselected architect, general contractor, and key subcontractors sign an agreement to work on the project as a team before the design phase.  In a typical project, the owner selects an architect who designs the work to be performed.  Then the general contractor and subcontractors are selected from the low bids and the work commences.  In the IPD structure, the members are determined prior to the design of the project.  A great deal of emphasis is put on a collaborative design approach where the team works with the owner to mutually work through all design and budgetary issues.  This concerted effort on the upfront design results in a much more streamlined construction phase.

The AIA’s IPD guide states the following benefits for this method of delivery: “The integrated delivery process allows the designer to benefit from the early contribution of constructors’ expertise during the design phase, such as accurate budget estimates to inform design decisions and the pre-construction resolution of design-related issues resulting in improved project quality and financial performance. The IPD process increases the level of effort during early design phases, resulting in reduced documentation time, and improved cost control and budget management, all of which increase the likelihood that project goals, including schedule, life cycle costs, quality and sustainability, will be achieved”.   You can access this guide through the following link:   http://www.aia.org/contractdocs/AIAS077630

When you combine this new means of facilitating cooperation within the construction team with some of the technological developments in the industry, the IPD concept has an even better chance of working.  The flourishing of Building Information Modeling (BIM) and Virtual Design & Construction (VDC) make it possible for the IDP team to work together in the design process.  VDC enables the team to construct the building in the virtual world prior to breaking ground.  These systems provide a platform where all members can collaborate and the 3D modeling displays how everything will integrate. This article in Building Design & Construction does a good job of describing VDC. http://www.bdcnetwork.com/bim-becomes-vdc 

Another element of the IPD process is to force the team members to co-locate.  This “Big Room Concept” relocates the owner, architect, and contractor to a single physical location.  Although there have been great advances in teleconferencing over the years, there is nothing like physically getting people together.  This is especially true when you are combining large egos or dealing with complex or controversial issues.

It makes sense to involve key subcontractors in the IPD delivery method.  Subcontractors who have a unique design process or a niche skill can add a great deal to the design process.  Involving these players early can cut costs, improve quality, and reduce construction schedules.  Re-View, for example, contributes a great deal to the design process.  We often work with architects on upfront design issues relative to historic windows.  We also connect directly with general contractors to coordinate schedules, refine scopes, and wrestle with site logistics.  It also helps to have our company tuned into the other key subcontractors so we all work in concert.

It has yet to be determined whether IPD is going to catch on and become accepted in the mainstream of the construction industry.  Will the construction team be capable of setting aside egos and work as a team as opposed to functioning as disparate individuals?  For now, let’s see if a group of moderately talented basketball players will run away with the 2014 NCAA title because of their passion for the game.  If they do, then perhaps that gives fuel to the argument that teamwork is the best way to go in the construction industry as well.

Take Some Sage Advice

I was absolutely blown away by the winter Olympics men’s slopestyle event this past weekend when American Sage Kotsenberg secured a gold medal.  As a middle-aged snowboarder, I was certainly very impressed with the daring moves, flips, and speed displayed by all of the competitors.  But what really impressed me was the attitude of the victor.

Sage didn’t expect to win a gold medal.  He was just there to compete in an event he truly loves and as a result, he unleashed his raw talent.  Sage didn’t care about expectations, the media, international politics, endorsements, or the competition.  He simply let his gifts speak for themselves.  This made me think about how we in business have a tendency to drift away from our essence and begin to focus more on results rather than on those basic emotional elements that can help get us there.  How does a business nurture the unadulterated spirit displayed in the Olympics to drive success in the future?

The slopestyle competitors are an anomaly to what one typically thinks of as the definition of an Olympic athlete.  They wear baggy clothing with hoods flapping in the wake of their descent, and sport long hair and several days of beard growth.  These guys look more like rock stars than Olympians.  Their mannerisms, vocabulary, and general attitude are anything but the sterling demeanor we've come to expect of Olympic athletes. 

When you contrast the style of the boarders to other sports in the winter Olympics, the differences are amazing.  Alpine skiing, bobsledding, and speed skating are consumed with aerodynamics where the suits, helmets, and equipment are designed for maximum speed.  Figure skating is obsessed with beauty and performance and has a strict set of rules guiding the performers.  Even curling has become fanatical with physical fitness, and participants spend more time in the gym working out than on the ice.

The pursuit of excellence as is typified by the conventional Olympic sports event is the same attitude that dominates American industry.  We become passionate about selecting the right team and equipping them with the finest in support.  Leading businesses dedicate millions to training and development of talent.  Then we install bonus systems to reward positive behavior and dismiss people who are not following the correct path.  Earnings per share, trending stock price, and profitability are goals that are tattooed onto our psyche.  Nothing else really matters…or does it?

I would submit that in this day and age, it is the outliers like the Sage Kotsenbergs who will determine the truly successful businesses of the future.  Slogging towards boring financial goals will yield lackluster results.  What really matters is that spirit that got you excited about the business in the beginning.  How do you capture the soul of your business?  We need to look at our businesses with a renewed clarity so this latent energy can be released. We need to soar like Sage, doing what we love.

Take Re-View for example.  Our company recently made a couple changes that are radical departures from our defined path.  First we exited a line of business that had been part of the company for 21 years because it no longer fit out current direction.  This division was engaged in promoting daylighting products such as skylights and tubular daylight devices.  Over the past two decades our company has exploded into the historic window business.  Our daylighting efforts really didn't fit with our passion for historic windows; it seemed to drag our energy down and interfere with our efforts to be truly successful in the preservation field. What was once a primary business line was now blurring our focus.  It had to go

We also began to pursue the crazy idea of manufacturing specialty wood items with waste from our manufacturing processes.  We have a great deal of exotic wood waste from the manufacturing of our historic windows.  The amount of this unusable material has grown beyond our ability to give it away.  So our brilliant woodworkers came up with designs for quilt racks, chopping boards, stools, and pizza peels.  I have no idea whether this venture will have a positive economic result, but it sure does fit nicely with our passion to create beauty with wood.

So what are the crazy ideas that strike at the essence of your company?  The time is right to jump in and pursue a wild thought.  In addition to energizing your team, a return to your core principles might generate very positive returns.  It is time to follow the wise Sage and get stoked about our businesses.  Come on dudes, let’s get gnarly and create some sick results! 

Raising the Bar

As I was watching the Florida State/Auburn NCAA football title game Monday night I reflected upon the Bowl Championship Series (BCS) system of ranking the teams.  This system uses a combination of polls and computer simulations to determine team rankings and post-season matchups.  Many people have been highly critical of the system over the years and next year it will be replaced by a college football playoff.

This made me think about how the construction industry is in need of a better way to determine who gets to play in the marquee games.  When I say “marquee games,” I am referring to projects that demand highly unique products and skills, or are significant in size.  They are the types of projects that only a select group of architects, general contractors, subcontractors, and manufacturers have the experience and resources to effectively manage.  So here are my thoughts on how the industry can better determine who plays in the championship game.

There are several conditions that may dictate that a project requires a methodical selection process for the construction team.  Here is a list of a few that come to mind:

• The project is of monumental scope requiring the personnel, facilities, background, and financial resources to meet the demands
• A complicated technology is involved in some aspect of the project such as a new curtainwall system, rainscreen design, mechanical system, or unique structural conditions
• A specific skill set or craftsmanship required to perform the work such as finishing, masonry, or window restoration on preservation projects
• A challenging construction schedule that has no room for mistakes
• A very demanding owner that is overly involved in all aspects of the project

When a project contains one or more of the above conditions, it is important to establish a set of guidelines to prequalify who is going to have an opportunity to bid the job.  If no such restrictions exist, the team could be inviting a weak link to manage a critical function.  Instead of creating a computer simulation model to mimic the BCS to screen participants, I recommend that the construction team spend time drafting prequalification criteria for all those disciplines that are vital to the success of the project.  These criteria should consider the following elements:

1. Past Projects

One of the best determinations of future success is past performance.  A good prequalification form will have a list of past projects of the same scope of work and size of project.  The submissions should have a list of contacts so it can be verified that both the scope and magnitude of the work qualify the company.  For example, performing a window replacement scope on a historic project does not qualify a company for window restoration just as painting the exterior of a landmark building does not qualify a company to perform detailed fresco work.  The construction team must spend time to verify the validity of the submissions of past project experience.

2. Company Information

Basic background data on a company can be illuminating  in evaluating a company’s resources to manage a particular project.  The following items should be captured in the prequalification:

·         Number of employees by classification

·         Number of locations and size of locations

·         Legal name, date of incorporation, state of incorporation

·         Legal structure (corporation, S corp, LLC, partnership, sole proprietor)

·         Names, addresses and phone numbers of officers

·         Supplier references

·         Customer references

·         Number of contracts by contract size

·         Lawsuits and judgments against the company in the past five years

·         List of projects that company failed to complete

·         Website

·         SBA, WBE, DBE, MBE, Hubzone certifications

·         Certificate of Insurance from the insurance agent outlining coverage limits

3. Financial Information

The financial background of a company has become increasingly more important in the past decade given the economic challenges confronting the construction industry.  You don’t want a qualified player declaring bankruptcy in the middle of your project.  The following information can be helpful in securing information on the financial stability of a participant:

·         Income statement and balance sheet (preferably audited or reviewed)

·         Five year history of sales

·         Banking information including loans, lines of credit, and banking contacts to verify the information

·         Letter from the bonding company declaring overall and project-specific capacity, and the bonding agent contact information

·         Dun and Bradstreet number

4. Safety

The safety background of contractors and subcontractors is fundamental information for these players.  A well run project shouldn’t have to suffer the burden of lapses in safety.  The following information should be evaluated:

·         Workers Comp Experience Modification Rate (EMR) for the past three years.  Have these numbers submitted from the insurance agent to assure validity.

·         OSHA citations in the past five years

·         Copy of the company’s safety plan

·         Name and contact information of the Safety Officer

5. Project Backlog

A listing of the current projects with contract value, percent complete, and reference contacts can be very useful information in establishing the current condition of the company.  If the amount of current business is sparse, this information combined with the financial data can be a warning flag.  Conversely, an excessive backlog compared to the capacity of the business can indicate problematic conditions for this company in the near future.  It is important to invite balanced companies to the table.

6. Site Visit

I highly recommend visiting the company facilities as part of the selection process.  In this age of social media and electronic marketing, it is much easier to convey an image that doesn’t reflect the true nature of the business.  I have seen many a mom and pop organization look like the next IBM through their website.  There is no room for smoke and mirrors on a well managed project.  A site visit can do a great deal to validate all of the information provided above.

If the criteria outlined above are utilized in a formal prequalification process the construction team is much more likely to thrive.  I have found in the past that it doesn’t take many bad apples to spoil a good project.  Hopefully your prequalification efforts will be as successful as the BCS was this year and you have a result a thrilling as Florida State’s narrow victory over Auburn on Monday.

Death of a Salesman

I have always enjoyed the play, “Death of a Salesman”.  Maybe it’s because I remember meeting the playwright Arthur Miller when he spoke at my high school on the subject of McCarthyism back in 1979.  Or maybe I’m just a sucker for the cathartic effects of watching a drama about a life that remained stagnant while the rest of the world changed.  As I reflect upon the gist of the play, however, it is amazing how pertinent the play’s theme is in today’s business climate.

Over the past 20 years, the role of the salesman has changed dramatically in all industries.  In particular, I have noticed a major transformation in the construction industry where it is obvious that the sales role has been forever altered.  In the past, sales personnel were the key communicators of new products, technologies, and processes.  They were a critical factor in the success of any company.  Unfortunately there has been a steady devolution occurring that is leaving the traditional salesman in the unemployment line.

The sales process has been a key element in the construction industry for decades.  As manufacturers developed new products and technologies, they needed a means to communicate these developments to the marketplace.  Sales departments educated architects on changes in the industry through sales calls, architectural presentations, and product binder updates.  The floors of AIA and CSI shows teamed with architects and general contractors, hungry for information on product innovations.  Magazines catering to the industry were in high demand because they featured projects incorporating new technologies.  It was an exciting time to be on the front lines.

So let us take a good look at what has changed over the past ten years.  The industry has consolidated through attrition and mergers and acquisitions.  Sales departments have succumbed to the hatchet of cost control.  Architectural offices have little interest in sales presentations unless they are connected to continued education credits.  Trade show floors have turned into ghost towns.  Magazines and industry publications are struggling to stay in business.  Many people think these conditions are a temporary result of the anemic economy.  I would submit that the changes affecting the sales process is due to something else entirely.

One trend that has contributed to the death of the salesman as we know it is the commoditization of construction products.  Over the past couple decades most manufacturers have figured out how to copy virtually any product or technology in the construction industry to the point where there is little difference between the top competitors.  Take a close look at windows, doors, flooring, lighting, finishes, hardware, and specialties and you will see only minor differences between the players.  For example, the major window manufacturers use the same glass, wood, hardware, and weather stripping to fabricate their windows, resulting in a collection of me-too products.  The result of commoditization has reduced the decision making process down to one of price and availability.  The salesman is no longer needed to explain product differentiation. 

The growth of the internet as a research tool has also had a profound effect upon the sales cycle.  In the past, architects and general contractors relied upon salespeople to keep them informed about new products and developments in the industry.  In our current cyber world they can now access updated product manuals on thousands of websites from all over the world.  There is no sense in wasting time with a sales call when one can access current product data 24/7.  It also doesn’t make sense to attempt to maintain a product library when this same information is available online in an updated form.  Current versions of specifications can be accessed online in seconds from virtually any major manufacturer.  You can even tap into online videos of product demonstrations via YouTube.

The Internet also provides valuable information from users of products by providing them with a vehicle for sharing their experiences.  Social media sites like LinkedIn, Pinterest, and Facebook are good resources for opinions on the merits of different products.  LinkedIn, in particular, provides an outstanding forum for professionals to share valuable information on experiences in the construction industry.  In addition, you can search the Internet for blogs featuring opinions on thousands of topics related to the industry.  Existing litigation against manufacturers is now public information that is readily available to anyone.  Just type “class action lawsuit in the window industry” in a Google search to see what I mean.  It’s obvious that the Internet has replaced the salesman as the primary resource for product information in the construction industry.

So what is a salesman to do in this new environment where what worked in the past is no longer valid?  Should you just crawl into a hole and brush up your resume to prepare yourself for a future as a Wal-Mart greeter?  I don’t think so.  I believe that it is time to redefine the role of sales departments in the construction industry.  You can no longer make a living carrying the product message of the manufacturer and reciting the features and benefits of a particular widget.  You must now understand how your products relate to the entire industry and become more of a consultant than a peddler.  It is essential to have a background in the industry so you can provide solutions instead of product literature.  A firm grasp of the technical aspects of your product and your competitors’ products is essential.  Nobody will give you the time of day unless you can add value by providing relevant applications that solve current challenges for the construction team.

The construction industry is moving forward.  Are you going to act like Willy Loman and wait for the economic fog to clear, hoping that things will change back to the good old days?  Or are you going to embrace the new world where the salesman does much more than just peddle products?  The choice is yours to either adapt or to become fodder for another heartbreaking drama.

None of Their Business

I am typically a very positive person; one who sees the glass as half full. I think you almost have to be overly optimistic to succeed as a business owner these days. That is why I found it strange that I was so discomforted by waiting in the conference room at the regional OSHA office. As I sat there waiting for the director to attend the meeting, thoughts about how our government targets small business filled my head, and my normally sunny outlook turned gray.

Everyone is familiar with how the construction industry has been challenged over the past five years. It is heartbreaking how many architects, contractors, developers, and manufacturers have been forced to call it quits during the recent recession. It strikes me as strange that during this time of economic hardship the government would be applying more pressure to small business. It seems to me that we are seen as a vital source of governmental revenue at the worst possible time. The cost increases of Affordable Healthcare, pension fund guarantees, OSHA, and other programs seem to be preying on the small business survivors.

Let’s take a look at the Affordable Heathcare program first. This has got to be one of the greatest oxymorons of all time. There is very little about the new healthcare program that is affordable for small business. My company has always offered excellent health, dental, and vision insurance for our employees. Just recently, we were informed that our premiums are going to increase by 30 to 40% next year because of the new national healthcare program. This is especially confounding when it was reported in the Wall Street Journal yesterday that healthcare costs increased by only 1% over the past twelve months. So how does a young and healthy group like Re-View have such a dramatic premium increase during a period of minor cost increases? I can only conclude that small business is helping to fund the program.

So what does a struggling business do? Many companies are going to discontinue insurance coverage, while others will decrease the quality of coverage to be able to afford it. Large companies are reclassifying employees to part time and reducing hours to avoid paying insurance. Walgreens, for example, just discontinued its health coverage and is going to offer a stipend to employees who qualify to purchase their own program on the exchange. It doesn’t sound like any of these survival tactics are good for the typical American citizen.

The decrepit pension system is another issue that affects many in the construction industry. A high percentage of the labor unions have underfunded pension plans. This was caused by a dramatic decrease in construction employment that directly reduced the contribution amount. Our country also has an aging workforce so the number of people covered by most pension funds is rapidly increasing. Add to these factors a challenging investment environment and you can easily see why many pension plans are close to broke. How does this affect you?

The Pension Protection Act of 2006 applies the burden of funding a pension to the employer. So if you are signatory to a union and that union has an underfunded pension plan, you might have to contribute additional money to correct the shortage. We frequently receive reports from our union affiliations across the country informing us of the precarious conditions of the local union pension plans. Very few plans are in a healthy standing. One plan was placed in critical status and we were required to pay thousands of dollars in addition to what was originally part of the standard plan. It can be an unsettling experience to be confronted with a major payment after you have dutifully contributed according to the tenets of the original plan.

And finally let me discuss my good friends at OSHA. As I was waiting in the conference room for 30 minutes for the area director to make our scheduled meeting, I noticed a chalkboard in the room. The board boldly outlined the new annual sales goals for OSHA. The total number of inspections was prominently displayed as well as the individual breakdown by compliance officer and his specific percentage of goal achieved. Encouraging words such as “We only have 22 more inspections to meet our goal!” emblazoned the board. The sales consultant, Jeffrey Gitomer, would have been proud of the sales incentive system displayed in this OSHA office.

I didn’t realize that OSHA was a governmental sales organization. I thought its mission was to promote and enforce safe work practices in American business. But it was obvious from this chalkboard that the new mission is to produce increased revenues from fines generated from inspections. I wouldn’t doubt that OSHA pays a commission to inspectors based upon completed inspections and revenues.

Our company happens to have an industry classification that puts us in a high risk for amputees since we engage in woodworking. As a result, OSHA calls on us every two years for a surprise inspection. Over the past six years, we have had three inspections. When an inspector visits, he has to leave with a list of violations. Several inspectors have told me that it is so easy to find violations that they could find a dozen back in their office alone. We spend a lot of time and money on safety and haven’t had a lost work injury for six years. But that didn’t stop OSHA from finding items like frayed insulation on a grinder, a ground missing from an extension cord, a ladder leaning against a paint booth, and other minor offenses. When all the fines are added up, the wages for the inspector and the cost for the swanky OSHA office space was more than covered. Once again, business is called upon to contribute.

So what is small business supposed to do about the prevailing conditions in Washington? One thing we can do is to support business-minded politicians who will recognize the importance of supporting the vitality of the small enterprise. Another thing we can do is to get the message out about the governmental challenges that hamper the health of businesses in the construction industry. Maybe this will motivate changing the system. And finally, we can maintain our optimism that the current circumstances will eventually improve at sometime in the future.

Now where did I put that half-full glass of water?

Windows of Opportunity

I am upset. The American dream has been compromised. I found out this week that Custom Window Company out of Englewood, Colorado was purchased by Wausau Windows. It’s not that I am opposed to mergers and acquisitions; they happen every day. Some M&A activity can even include fascinating drama and intrigue such as the current situation going on with Dell Computers. So why does the fact that a large publicly traded conglomerate purchasing a small company like Custom Window Company hit me in the pit of my stomach?

I think that when a large corporation snatches up a small entrepreneurial company, it squelches the American spirit. This country was built on the premise that you can make your fortune by becoming really good at something unique to the marketplace. Custom Window served as a great example of such a success. The thing that concerns me is that the dog-eat-dog behavior exemplified by this recent purchase is becoming epidemic in the construction industry. Architectural firms, general contractors, and developers are all going through a consolidation that will affect the entire industry.

One aspect of the US economy that I truly appreciate is the role of the renegade who has the courage to take an industry to a new level. It is the pioneer spirit that our country’s forefathers exemplified when they forged the American character. It is how we earned our independence from the British and how we expanded into new territories. In business, people like Steve Jobs, Jeff Bezos, and Ross Perot wouldn’t succumb to convention and had to scratch and claw their way to the top of a new mountain. They defined entirely new industries. Custom Window followed this same formula.

The company was founded by Dick Gann back in 1981. Dick was an engineer by training and he became excited about how complacent the large aluminum window manufacturers were in their product development. Efco, Kawneer, Traco, and Wausau were all following the path of simplifying manufacturing to gain efficiencies of scale through commoditization. Dick capitalized on the opportunity to manufacture exactly what the customer wanted instead of feeding the marketplace a standard series of products. Features like a self balancing double hung window were designed specifically for a building at MIT. Custom Window was also the first aluminum window company to fabricate a true divided lite muntin. Unfortunately, Dick passed away years ago in a plane accident as he returned from a window testing facility. The man was always looking for a better way to do things and actually took his last breath in the pursuit of that goal.

Now flash forward to the current day. The industry is in a recession and companies like Custom Window are grappling to stay in business. The industry has tanked and the competition is fierce. Other aluminum window manufacturers like Graham, Quaker, and St. Cloud started to develop features that gave the appearance of customization, moving in on Custom’s marketplace and stealing sales. Add to that a couple of jobs that went south and Custom Window is on the ropes. So Wausau moves in and purchases the company so they can benefit from Custom’s flexibility and creativity. Let us hope for everyone’s sake that Wausau doesn’t squelch the essence of this small company from the suburbs of Denver.

So what does this industry news tidbit mean to you and your company? If you haven’t noticed, the languishing economy has had a consolidation impact on the entire construction industry. The Custom Window scenario has been playing out at architectural offices all over the country. I can’t tell you how many architectural firms I know that have either closed their doors or changed their names. General contractors are going out of business or consolidating with other companies in their markets or with national firms looking to expand. Developers who have experienced a decline in demand and increased financing pressures have also been set up for failure or purchase by others.

Unfortunately, consolidation tends to undermine creativity and breed group think behavior. As small firms are gobbled up by the larger companies, they succumb to the tedium of the rules and regulations of the larger enterprise. Systems and procedures are necessary to maintain control, achieve productivity, and satisfy stockholders. Individuality is squashed and conformity is rewarded. So get ready my friends, we can count on slogging through some boring years ahead.

We can also count on the indefatigable spirit of the entrepreneur to once again rise above this din of mediocrity sometime in the future. The Dick Ganns of the future will once again seize an opportunity that is unrecognized by the industry’s complacent giants. Such is the circle of life in our economy.

I feel much better now that I have gotten this off my chest. I guess I needed to remind myself that it will take more than the purchase of a family owned window company to undermine the entrepreneurial spirit. To all you entrepreneurs out there still trying to hold your own in this economy…hang in there! The industry needs you and your creative spirit even more than it needs economies of scale. Without your creative vision and entrepreneurial initiative the industry would just have to settle for mediocrity. Hats off to Custom Window for blazing a trail for the past 32 years! Rest in peace.