Is Bigger Really Better?

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Compared to other core construction trades, our industry is not really that old. When you think back to the history of technology and integration in construction, we’ve come a remarkably long way in a short period of time. As little as 15 years ago I would have described low-voltage systems and integration as a cottage industry. Business was mostly localized, the value of our packages was a very small part of an overall construction budget, and with the exception of fire alarm systems, most of our solutions were still considered luxuries or optional. The major brands were sold mostly through limited distribution models, and there simply weren’t that many brands.

During the 1970s and 1980s relationships with manufacturers were generally stable. For the most part, you could count on those you worked with to be long-time company employees. The business cultures were dependable, and when you found a quality manufacturer the relationship resembled more of a partnership. While there are still a few examples today of these quality manufacturer relationships, it’s clear that it’s become the exception rather than the rule.

When I speak to our customers and prospective clients I hear similar sentiments about us and our competitors. They lament the days when customer service wasn’t just a slogan and they had lasting relationships with employees who were building a career, not just marking time until their next job. They long for the days when loyalty was a two-way street and performance was guaranteed by a handshake, not a lengthy contract. It seems that the days of personal relationships, customer loyalty, and truly knowing the person you were doing business with have become old fashioned and outdated ideals.

Not meaning to paint this problem with too broad a brush, I’d like to suggest that what I have just described is partially an unintended consequence of the mergers and acquisition activity of the past 10 years. One sign that an industry has moved from the cottage phase to the mature stage is when venture capital targets the industry and begins rolling up businesses into larger conglomerates. They mean well, but it rarely works. In the venture capital world, words like “consolidation”, “synergism”, “arbitrage”, “return on investment”, and “exit strategy” reduce long-term strategies founded on patience and fortitude to short-term gains predicated on unrealistic expectations.

I bet you can think of several examples of both manufacturers and integrators whose reputations and cultures have been dashed after being acquired or rolled up into a much larger or national entity. The hardest part of growth is maintaining the values that brought you success while you adapt the business to an ever-changing environment. Outsiders to our industry are especially prone to overlook the people and values that built our businesses into attractive acquisition targets in the first place. Let’s face it, there’s a lot of capital out there looking for a good home where it can grow. From the outside, our industry looks pretty attractive.

For those of us still in privately held businesses, we would do well to find ways to continue to look small to our customers while we grow. Customers don’t mind how big you are as long as you act like a small and personal business. Clearly it’s our people that make this difference. In his book Good to Great, Jim Collins asserts the following: “If you have disciplined people you don’t need hierarchy, if you have disciplined thought you don’t need bureaucracy, and if you have disciplined action you don’t need excessive controls.” Creating a culture of discipline around people, thought, and action may be the best formula to make a bigger company look better to the customer.

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