The commercial flooring industry has enjoyed incredible demand over the last few years. Despite the relationship stressing price increases (which came in many creative iterations) and scarcity of flooring products, flooring contractor sales teams were able to build significant backlogs.
At Starnet, we have been working with our members to apply resources developing their talented associates, utilize information technology in the office and mechanical technology in the field to increase productivity and have a plan for the impact of artificial intelligence. Artificial Intelligence (AI) plans require calculated use inside member companies before disruptive new entrants use AI for asymmetric competitive advantages against our membership. They must also have a clear understanding which local clients (end-user institutions, not general contractors) may be at risk when the waves of creative destruction generated by AI deployment in the client world start to take hold. When members are ready to negotiate sales, there had better be a healthy company on the other side of the negotiation opportunity.
As we start to scan the future quarters, most Starnet flooring contractors are anticipating a gap that will need to be filled by negotiated work with clients or another form of demand generation. We are helping the Starnet members with demand generation execution by encouraging their entrepreneurial effort in these business building efforts. We anticipate investments made in the following areas will accelerate their growth after any significant market disruption or slowdown.
Leverage Incumbent Position to Access Adjacent Revenue Streams
Many flooring manufacturers have assembled broad offerings across carpet, resilient, accessories and porcelain tile. In some cases, they have also created vertical integration successes such as nylon fiber production. As a result, many of the Starnet members have successfully entered broader categories of flooring. Some have developed entirely new offerings such as site-applied flooring in epoxy, resinous, and polished concrete.
With the proliferation in mixed surfaces for commercial real estate flooring, members are offering adjacent product categories in acoustic treatments for walls and ceilings, entrance barrier matting, exterior landscape turf, exterior flooring pavers and exterior porcelain building cladding. Offering more products and services to clients that already trust them provides revenue diversification and stability through segment demand volatility.
Be Disciplined in Standard Operating Procedures to Realize Benefits from AI/Automation
Manufacturing and service has tremendous opportunities to implement standard operating procedures (SOPs). Technology should make these procedures or “human behavior best practices” easier to implement and follow. In manufacturing facilities, this is commonplace and part of the safety culture or cost reduction culture of operations. For some reason, these practices have not found widespread complimentary systems in the customer facing parts of the business such as sales or service operations.
We continue to hear leadership lament the lack of CRM utilization or business action planning (not budgeting) with the field teams. Without SOPs on the client facing parts of the business, our industry will not have the data sources to take advantage of AI, remote monitoring, automated labor routing and scheduling, or other powerful tools that enhance productivity or profitability. Too many excuses are made for the gaps in human behavior that take away from the client experience and negatively impact our industry profitability. In uncertain markets, SOPs are easier to implement as everyone is interested in getting better to protect their career and show more value to clients. Disciplined SOPs on client-facing activities will unlock the power of AI in the near future.
Client Interactions are Opportunities for “Life Of The Building Subscription Services”
Much of the industry continues to utilize commission-based compensation tied to transactions rather than strategic compensation tied to the goals of the company or client satisfaction. The construction industry is traditionally driven by a sacrifice in value-based decision making for price driven decisions. The industry is so complex and fractured that often the only sane way for a client to evaluate things is based on price. Much of the business world outside of contract flooring has moved to a subscription model around service execution. This is an intended strategy. There is a large opportunity for the industry to move part of the total mix to a subscription model for the life of buildings.
The Starnet Floor Care members have a good balance between client “subscribers” and transactional restorative cleaning projects. There is a huge unfilled space in our industry for a disruptive model on the product and installation side of the business for a square foot subscription model. This model is not compatible with the current design/bid/build model (price-driven) general contractor channel. We are hoping one of the Starnet members becomes a pioneer here rather than being disrupted by an outsider.
Take Advantage of Massive Investments by Proud Green Suppliers to Create Atypical Demand
Our industry partners on the manufacturing side have allocated millions of dollars of investment to respond to regulatory action or to market-making advisors that steer end user priorities for promoting health and well-being in the built environment. Our contractor members can take advantage of that massive investment by incorporating elements of ergonomics, biophilic design and sustainable materials in their value-proposition.
Today, most of the service providers roll their eyes at these topics or fail to utilize the resources available to them. This story is not for the general contractor, it is for sustainability officers and executives who want their operations to match the visionary responsibility statements on their websites. Our industry should enable these audiences, who traditionally ignore commercial flooring, with engagement, education and financial reporting they can use to quantify their organizational commitment to create atypical demand. This effort could grow the market for commercial flooring by increasing awareness at the user level. This approach is far more practical and realistic than the fakery of carbon offsets and public relations consultants.
The commercial flooring contractors servicing these businesses with lofty intentions can make their sustainable dreams come true by placing the correct materials in buildings and documenting the spend. The general contractor does not care, but their clients are committed at the highest levels. What would an executive pay for improved physical and mental health for associates, reducing absenteeism and increasing productivity?
Lead The Value Chain
Most of the industry desires positive results for bonus achievement but very few take a strategy (point of view) and rally all the functional leaders of the business to make that point of view come to life. Stakeholders outside the company are even more rarely included in this communication, despite their ability to support the execution of the strategy. It is an odd problem that holds our industry back and continues the fragmented structure commercial flooring operates in. A major gap in communication continues to be present between the flooring contractors, distributors and manufacturers surrounding demand.
It is very rare for flooring contractors to meet with their supply chain stakeholders on a regular basis to provide visibility to upcoming projects, work together to secure color selections in a timely manner, or coordinate interdependent products such as flooring and adhesive or treads and tile (plus adhesive.) We recommend members get in a room with their key manufacturers and distributors to share the strategy (not the results), assign accountability, and then meet often throughout the year to celebrate successes! This will generate the desired bonus-worthy results.
Entrepreneurs Respond To Uncertain Times
Our members will proceed with entrepreneurial vigor and conviction to capture these opportunities and surpass competitors in challenging market conditions. Starnet business building is a mindset for our members, not something they do when they look up from their take-offs. Our industry needs to be much more intentional, creating demand to ensure market support of innovative product development and healthy financial performance.
