For the last few years Starnet has been urging our membership to explore alternative approaches to the marketplace. This effort has been an attempt to expand the best practices out of the robust Starnet committee content and encourage innovation throughout the membership. Many of our entrepreneurial leaders have started their innovation journey to transition from the irregular post-pandemic demand curve to the traditional segmented cycle of commercial construction. Some members have been a bit slow to respond, allowing the unsustainable demand of the last few years to consume their day-to-day. Despite the healthy backlogs nearly every member has reported through our regular backlog surveys, next year’s surge in seasonal demand may be preceded by a few months of scarce activity. The only way to avoid the anticipated operational and cash flow disturbance is to create demand.
Sourcewell Alternative to Tender Work
At the recent Starnet Fall Membership meeting we were fortunate to have Kirstin Westby, a supplier development executive at Sourcewell, address our entire network of attendees. A self-sustaining government organization, Sourcewell helps government, education, and nonprofit agencies operate more efficiently through a variety of solutions. Its program is branded as Canoe in Canada and Sourcewell in the USA.
Sourcewell has a framework built to manage suppliers of flooring products. Suppliers compete to win multi-year agreements and access Sourcewell cooperative purchasing professionals. These agreements include a menu of products that are useless without site fabrication and installation. To unlock real value, the agreements also allow for a full range of services associated with the flooring SKUs. This enables Starnet members to create demand for flooring SKU’s by offering properly installed floors per the manufacturer’s recommendations ready for use by the Sourcewell client.
Recalling Blue Ocean Principles
Recognized as one of the most impactful strategy books ever written, Blue Ocean Strategy by Chan Kim and Renee Mauborgne argues that cutthroat competition results in a bloody red ocean of rivals fighting over a shrinking opportunity pool. Red oceans are all the industries in existence today – the known market space, where industry boundaries are defined, and companies try to outperform their rivals to grab a greater share of the existing market. Cutthroat competition turns the marketplace bloody red. Hence, the term “red” oceans. Only one company can be low.
Blue oceans denote conditions that may not exist today—the unknown market space, unexplored and relatively untainted by competition. These markets are vast, deep, and powerful in terms of opportunity and profitable growth.
This red or blue ocean concept describes the world where our members operate successfully every day‚—the red commercial flooring bid market and the blue negotiated market. Over the years, many members have expanded their business to “blue” negotiated work with key end users who have become lifetime clients.
The Starnet Best Practices and Training Committee constantly reinforces and amplifies every example they find in the membership that reflects this alternative to the bid market. Starnet members believe that finding clients who are interested in the value of commercial flooring is expanding the market. This is far different from the ‘red’ specified market to bid, which is taking market share.
Our industry must expand the market to remain healthy. Sourcewell is a perfect example to leverage Blue Ocean Principles with practical connections to the advantages of being Starnet members and Preferred Vendor Partners. Blue Ocean strategists recognize that red market limitations exist only in managers’ minds and do not let assumptions around existing market structures limit their thinking. To Blue Ocean leaders, extra demand is out there, largely untapped. The crux of the problem is how to create it. This requires a shift of attention from supply to demand, redirecting part of their team to abandon bidding and using the Sourcewell infrastructure to unlock new demand. This is achieved via the simultaneous pursuit of service differentiation value creation.
Using Sourcewell to Create Blue Oceans
An owner once shared with Starnet staff, “We are so focused on the general contractor work, if an end user called in here and asked us to come out and look at their space, I am not sure which of our team members we would send to handle the client.” We are sure they can handle those requests, but it does show that a member who has dialed standard operating procedures for general contractor work (Red Ocean) may have to improvise for end user work (Blue Ocean.) We are recommending the following steps to our membership:
- Skills Upgrade: Rather than relying on intuition, leaders must stop and consider if they have the right people in the right roles with the right skills to be successful in this Blue Ocean. Is this an opportunity to reduce onboarding productive associates from the industry norm of two years to less than one year? Successful sales leaders will need to build alternative sales processes to support this effort. Before launching an initiative like this, they can use Starnet resources and members who have already made the adjustment to prepare for a private market recession.
- Lead by Example in Support from the Top: Leadership support can make or break any initiative. When leaders engage with Sourcewell clients in their spaces and show support of their employees’ effort, the team will get behind the effort.
- Establish Key Performance Indicator KPI Goals: Determine your key success measures you want to be working toward. “Sell more stuff” is not a key performance indicator (KPI), it is a result. An example may be 7% of total revenue with Sourcewell clients in the first year. Another may be to identify and provide educational communication to at least one Sourcewell client per day. Each KPI should have skills upgrade tied to it that requires training. The connection between sales learning activities and the Blue Ocean sales process must be there, or the sales process won’t be sustainable and scalable.
- Ongoing Reinforcement with Preferred Vendor Partners Sales Leadership: We are starting to see higher turnover in local manufacturer sales representative tenure. Increasingly our members are seeing the same person in a role for only 18-24 months. If you consider the massive disruption to Starnet member businesses and the average replacement cost of 150-200% of an employee’s annual salary, the impact on the bottom line can be startling. By rallying all our network partners to this initiative in a local market, more success can be realized, and tenure can be extended with Blue Ocean sustainable success.
- Use Technology and Data to Optimize Value: Having the right tools, most notably a Customer Relationship Management (CRM) system, is integral to sustaining a Blue Ocean effort. These tools are pointless if your team isn’t using them. Sourcewell clients are a perfect opportunity to expand a member’s capability in offering clients transparent reporting around spend, forward looking budget support, and accompany every quote with visualization to create excitement for future work. In addition, members can document and report unique data points interesting to Sourcewell clients such as sustainability, reclamation metrics, and participation of minority and disadvantaged contractor participation if the Starnet member is qualified.
Concepts are Easy – Execution is Difficult
Is Starnet creating a Red Ocean by exposing this opportunity publicly to the world in a trade magazine? We don’t think so. Writing or reading this article is easier than the effort required to execute this strategy. Beyond the capability needed to provide service to Sourcewell clients in the field, Starnet members must have entrepreneurial leadership ability. They have to be able to encourage commitment and lead their teams to approach the market fundamentally differently. Changing established human behavior in successful organizations is the most challenging business leadership obstacle. It is not for the faint-hearted, and weak leaders won’t even attempt it. They will continue allowing their teams to swim the Red Ocean out of habit if they meet traditional profit expectations.
Sourcewell clients can be an example of a relatively unlimited Blue Ocean opportunity. Professionals manage hundreds of millions (potentially billions) of square feet of commercial space across the USA and Canada. Those spaces serve citizens daily and require an ongoing refresh to keep them safe and productive to serve society. Our Starnet members are highly qualified to participate in that Blue Ocean of Sourcewell clients.
