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Emerging Opportunities Are Easy to Spot: Threats from rising competition are harder to detect

By Andrew McCoy and Fred Sargent | Oct 14, 2022
A pack of Juicy Fruit gum over a barcode | GS1 UAE
In the service and maintenance segment of electrical contracting, opportunities in emerging markets are not hard to find. After all, by definition, “emerging” means that they are on the rise and in plain view.

In the service and maintenance segment of electrical contracting, opportunities in emerging markets are not hard to find. After all, by definition, “emerging” means that they are on the rise and in plain view.

On the other hand, threats from emerging competition are generally more difficult to detect. Would-be competitors might, for example, seek an entree into a commercial customer’s decision-making through a different door than the one that the electrical contractor is accustomed to entering.

Introducing a novel theory of competition in 1997, Harvard professor Clayton Christensen granted a new connotation to the word “disruptive.” So much so that for years, it has unendingly made its way into business publications, convention talks and, of course, pitch pieces for startup companies looking for venture capital investment.

In one of the most celebrated business books, “The Innovator’s Dilemma,” Christensen showed many examples of what he called “disruptive innovation.” In a construction­-related example, he retold the history of hydraulic excavating equipment and how it replaced steam shovels (and put many steam shovel manufacturers out of business).

Thanks to everyone’s adopted belief in “disruption,” we have for many years anticipated that our greatest threat would come from competitors undercutting our prices with a substandard product that customers would come to accept (and perhaps simply come to expect).

But we may be in for a surprise. We may have been looking in the wrong direction.

Luckily, the construction industry—including electrical contracting service and maintenance—is like a kid who has always worn an older siblings’ hand-me-downs. Concepts that for decades were well-known in other lines of business have always taken years to show up in construction. For example, market share was a routine part of ordinary conversation in other industries long before anyone applied it to construction.

If what happened in comparable instances in other industries is predictive of the future of electrical contracting, we should learn from it.

Ironically, at the time Christensen released his first book, “disruption” may have been tapering off, only to be replaced in time by something far more ominous. There’s a new book all about it.

In “The New Goliaths: How Corporations Use Software to Dominate Industries, Kill Innovation, and Undermine Regulation,” author James Bessen shows how a small number of very large companies have risen to the top of their industries and remained there. They reached the pinnacles of their success by developing proprietary software that powerfully connects every aspect of their marketing, operations and analytics.

Even more significantly, according to Bessen, this super software has enabled these Goliaths to manage their behemoth organizations with the added advancement of de-centralized decision-making and logistics excellence.

Not that it would ever have been expected to be otherwise; nothing in the software currently used in the electrical contracting industry comes close to the capabilities of these proprietary systems. However, successfully bringing logistics excellence to any sector of our industry could be a game-changer.

Bessen begins his book with a vignette that symbolizes how smaller players in the supermarket industry enjoyed a short-lived rally with new technology to counter the competitive attack from their gigantic opponents. In June 1974, a medium-sized chain store inaugurated bar code scanning in their checkout aisle. (The first product scanned by a cashier was a 10-pack of Juicy Fruit gum). This created an early lead, but only a temporary fix. It did not take very long for the grocery goliaths to catch up with scanning and use additional tactics to overtake hometown stores in market after market.

As unimaginable as the situation may seem, the question is, could a comparable invasion come to electrical service and maintenance someday? Believe us, the biggest threat to disruption in construction is external industries that see opportunity and its profitability.

The first response we may hear is that the industry is too fragmented to be dominated by a few major companies. But just ask any number of the folks who once owned small, but now-defunct, retail companies if fragmentation was an effective defense against consolidation in their field.

Incidentally, the aforementioned 10-pack of gum is in the National Museum of American History, a 10-minute walk from NECA headquarters in Washington, D.C. It’s safely stored away, not currently on display, and largely forgotten after nearly a half-century, no doubt neither juicy nor fruity anymore.

About The Author

MCCOY is Beliveau professor in the Dept. of Building Construction, associate director of the Myers-Lawson School of Construction and director of the Virginia Center for Housing Research at Virginia Tech. Contact him at [email protected].

 

SARGENT is president of Great Service Forums, provider of management education for service managers. Contact him at [email protected].

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