Complete business transformation boosts a construction company’s financial performance

CASE STUDY
Share this: Complete business transformation boosts a construction company’s financial performance. How we helped a contracting company pull itself out of the red and recover from years of bad performance. The 2008 financial crisis, dubbed as the great recession, had a profound impact on the world economy. Following the crash, AM Contracting, a mid-sized construction company, struggled with slow sales and diminishing profit margins. It spent the next three years trying to restructure the business, but its financial performance worsened. The client turned to GravityThink for help with transforming its business performance. Together we redesigned the business, restructured debt, and improved operations. THE SITUATION A Top-down analysis identified the main challenges facing AM contracting: Aggressive pricing strategy led to below-average margins and profits. A need for more differentiation in the company’s communication strategy. Lack of standardized processes and project controls. Material and productivity waste, resulted in costly rework and delayed project delivery. Complete absence of data analytics in the decision-making process. A sizeable working capital funding gap led to frequent cash-flow problems. A crippling commercial debt that outpaced the company’s ability to generate revenue. OUR APPROACH Following focused management interviews and client surveys, GravityThink revised the company’s targeting strategy. The new strategy focused on targeting premium projects with large budgets. It allowed the company to bridge the gap between customers’ perception of value and current AM pricing practices. Our team also designed an improved communication strategy for AM contracting. This new strategy allowed the client to communicate its value proposition more clearly and to better engage with new and existing clients. Moreover, our team captured, documented, and standardized change management, document control, and quality assurance procedures. This process helped decrease supply-chain waste, reduce rework, and lower project costs. GravityThink then introduced AM to the Lean Construction Method. We led the implementation of the Last Planner System to help cut material and productivity waste on construction sites. The result: Increasingly predictable workflows Prompt identification and resolution of issues. Faster learning. A continuous improvement process At this stage, the decision making process received a well needed upgrade. Our team implemented analytics to help senior Management make data-driven decisions. AM was now able to track project-level and company-level performance in real-time. Senior Management could now use the data to drive strategic and operational decision-making. Our team also standardized and deployed a set of Performance Dashboards. The visual reports delivered insights into what was working, what was not working, and how the business could improve. On the financial front, our team worked with the client to improve their working capital funding gap. We introduced a more staggered payment strategy for suppliers. This change gave the company more time to collect payments while still delivering on its own payment obligations. The client also started offloading material costs to its clients so to improve its working capital funding gap position. Additionally, GravityThink helped AM restructure their debt obligations into manageable repayment schedules. The team renegotiated loan terms, lowered interest rates, and extended loan repayment periods. This improvement gave the company more breathing room and helped improve its financial standing. THE RESULTS GravityThink’s six-month intervention helped the client turn their business performance around. We improved client satisfaction by two folds, increased market share, and helped grow company revenues by 100%.

CASE STUDY

Complete business transformation boosts a construction company’s financial performance.

How we helped a contracting company pull itself out of the red and recover from years of bad performance.

The 2008 financial crisis, dubbed as the great recession, had a profound impact on the world economy. Following the crash, AM Contracting, a mid-sized construction company, struggled with slow sales and diminishing profit margins. It spent the next three years trying to restructure the business, but its financial performance worsened. The client turned to GravityThink for help with transforming its business performance. Together we redesigned the business, restructured debt, and improved operations.

THE SITUATION

A Top-down analysis identified the main challenges facing AM contracting:

Aggressive pricing strategy led to below-average margins and profits.
A need for more differentiation in the company’s communication strategy.
Lack of standardized processes and project controls.
Material and productivity waste, resulted in costly rework and delayed project delivery.
Complete absence of data analytics in the decision-making process.
A sizeable working capital funding gap led to frequent cash-flow problems.
A crippling commercial debt that outpaced the company’s ability to generate revenue.

OUR APPROACH

Following focused management interviews and client surveys, GravityThink revised the company’s targeting strategy. The new strategy focused on targeting premium projects with large budgets. It allowed the company to bridge the gap between customers’ perception of value and current AM pricing practices. Our team also designed an improved communication strategy for AM contracting. This new strategy allowed the client to communicate its value proposition more clearly and to better engage with new and existing clients.

Moreover, our team captured, documented, and standardized change management, document control, and quality assurance procedures. This process helped decrease supply-chain waste, reduce rework, and lower project costs. GravityThink then introduced AM to the Lean Construction Method. We led the implementation of the Last Planner System to help cut material and productivity waste on construction sites. The result:

Increasingly predictable workflows
Prompt identification and resolution of issues.
Faster learning.
A continuous improvement process

At this stage, the decision making process received a well needed upgrade. Our team implemented analytics to help senior Management make data-driven decisions. AM was now able to track project-level and company-level performance in real-time. Senior Management could now use the data to drive strategic and operational decision-making. Our team also standardized and deployed a set of Performance Dashboards. The visual reports delivered insights into what was working, what was not working, and how the business could improve.

On the financial front, our team worked with the client to improve their working capital funding gap. We introduced a more staggered payment strategy for suppliers. This change gave the company more time to collect payments while still delivering on its own payment obligations. The client also started offloading material costs to its clients so to improve its working capital funding gap position. Additionally, GravityThink helped AM restructure their debt obligations into manageable repayment schedules. The team renegotiated loan terms, lowered interest rates, and extended loan repayment periods. This improvement gave the company more breathing room and helped improve its financial standing.

THE RESULTS

GravityThink’s six-month intervention helped the client turn their business performance around. We improved client satisfaction by two folds, increased market share, and helped grow company revenues by 100%.