CONTENTS Page no
Summary 3
Introduction 4
Gilbane Building Company 5
Business Model Canvas Analysis 6
Recommendation 12
Conclusion 12
Bibliography 13
Executive Summary
This report presents briefly about the health of the family business. The company chosen for analysis is Gilbane Building Company, a 140 year old family managed firm with 2400 employees and a revenue of $3.5 billion. The company is in construction business and is very stable financially and in meeting customer expectations. The analysis is dome with the help of a tool developed by Alexander Osterwalde and Ives Pigneur called Business model generation. The model has nine intuitive sections that would help to analyze a business. The nine building blocks of the tool are Customer segments, Value proposition, Channels, Customer Relationships, Revenue streams, Key resources, Key Activities, Key partnerships and Cost Structure. The Gilbane Company is strong id value proposition, Customer segment, Key resources and Key activities. The reports also have a short recommendation section and a brief conclusion.
Introduction
Family businesses are considered as the back bone of Americas’ economic engine. Businesses owned in family context pay substantial taxes, create jobs and enable communities to flourish (Conway Centre for Family Business, u.d). Strong entrepreneurial spirit runs deep in the family businesses and also they live longer. Thirty five percent of Fortune 500 companies are reported to be family owned and cover the entire spectrum of enterprises ranging from small business to large corporations. Fifty percent of gross domestic product and sixty percent of the employment in the US is contributed by family businesses (Perman, Stacy, 2006). Of all the business enterprises in North America, about eighty percent are family controlled and a lion’s share of the wealth in America is with the family enterprises (Astrachan, J. H. and Shanker, M. C. 2003).
However, there are inherent challenges existing in the family businesses; the major ones are, family conflicts, nepotism, allowing personal sentiments to rule rather than through business acumen, creating glass ceiling for non-family employees and lack of succession planning (Tina Indalecio, u.d.).
As in any other enterprise, it is essential for family businesses to have a clear business model / strategy, growth leadership, appropriate organizational structure, sharp execution, performance orientation and talent management. These aspects are especially important for family business because most of the founders are entrepreneurs without managerial experience, and emotions / sentiments influence the decisions rather than pure business acumen. Myopia and inertia are the two major traps the successful businesses get into. In order to avoid pitfalls created by these traps, family businesses must utilize not only the internal human resources, they also must seek the services of external consultants and professionals to infuse new perspectives, promote organizational learning and update on market changes.
This report is a review of the business and the business processes of Gilbane Inc., one of the largest construction companies in the US. The major paradigm used to analyze the business of Gilbane is the one proposed by Osterwalder and Pigneur (2010) which depicts nine component business model canvas.
Gilbane Building Company
Gilbane Inc. is one of the oldest and major contractor / builder in America. It is a privately owned company engaged in huge building and construction projects, especially commercial and industrial buildings. Typical projects of Gilbane are airports, large educational institutions, water treatment plants, and giant government complexes, facilities for the pharmaceutical companies and laboratories for biotechnology establishments. Smithsonian National Air and Space Museum, the Winter Olympics Facilities in Lake Placid, the National World War II Memorial, the Vietnam Veterans Memorial, etc. are a few of the large projects handled by Gilbane Inc. Gilbane is diversified into two operating businesses i.e. Gilbane Building Company and Gilbane Development Company. There are synergistic advantages in this diversification, because it provides opportunities to integrate expertise in finance, develop business, and manage the projects with efficiency. Gilbane Inc. is headquartered at Providence, Rhode Island. The Irish immigrant brothers William Gilbane (elder) and Thomas Gilbane (younger) founded the Gilbane Inc. in the year1873. Currently, the fifth-generation family members run Gilbane Building Company.
The 135 years of experience in the construction field has earned it a nationwide name. It is now one of the five oldest construction companies of the US. The company boasts of its experience in the field of construction as unmatchable. Gilbane is just not interested in managing project quality; they are keen in relationship building too. After the completion of the project they expect their clients to approach them again. Gilbane’s revenue per year is around $ 3.5 billion and every now and then the company is involved in claims and litigations. Gilbane’s executives states that most of the cases are inconsequential in nature and will not have any adverse impact on the financial or market position of the company. Another notable thing about Gilbane is that they implement the sustainable designs which are environmentally conducive without scaling the cost of the project.
Gilbane has become a worldwide company now, serving a variety of markets in four continents. Comprehensive construction, multi-phase design and facilities based solutions are the specializations of Gilbane. It is now the construction industry leader with respect to capability to build state of the art sustainable buildings and to adopt latest technology in the field of construction.
But, some of the expected challenges by the company are it is expected that as the construction workload increases in the coming years, a shortage of skilled manpower may have a negative effect on cost, productivity, and the volume of construction(TAIOA 2014). Another challenge is recent economic situation has caused interest rates to increase. At the same time, lending criteria is still constricted and borrowers are reluctant to take new debt. When interest rates continue to raise the total cost of future projects also would increase.
Business Model Canvas Analysis
The role of business model innovation as a mechanism for growth is becoming imperative and it is capturing attention from many senior managers. Traditional mode of doing business does no more provide competitive advantage. The companies need to constantly innovate the way they create, deliver and capture value (Osterwalder and Pigneur, 2010). Merging of market forces, speed of commoditization, need for mass customization, appearance of emerging-markets, fast changing competitors, introduction of disruptive technologies, and changes in regulatory and legal compliances provide an impetus to look for new ways of doing business i.e. new business model.
The Business model canvas proposed by Osterwalder and Pigneur (2010), allows the top management to describe and think through a technique about the organization, the competitors, or any business enterprise. This method has a unique advantage of carving out a shared language that can help the top management of a company to create new strategic alternatives. Osterwalder and Pigneur’s (2010) business model has nine building blocks that depict the logic of how an enterprise makes money. The nine blocks cover the four main areas of a business: customers, values, infrastructure, and financial sustainability. The proposed business model is like a canvas for business strategy that can be executed through organizational structures, processes, and systems. The nine components of the canvas are Customer segments, value propositions, channels, Revenue streams, Customer relationships, Key business activities, Key resources, Key partnerships and cost structure. Each business organization will have different thrusts on each of the components.
Customer Segments of Gilbane
Customer segment is the heart of any business enterprise. It is a distinct group of people or organizations the enterprise is aiming serve or get in touch. A segment will have common needs, behaviors and purchase capacity. Most successful businesses make conscious decision about which segment to serve and which one to abandon. Understanding the uniform needs of the customer is vital to customer segmentation. Different types of customer segmenting are possible.
Gilbane Building Company is a major and large business house, which is constructing for equally large customers. Gilbane's customer segments include construction of convention / cultural centers, corporate houses, Educational Institutions, Federal and Public buildings, Sports and Recreation facilities, water. Waste water treatment plants, Transportation / aviation complexes, Healthcare facilities, etc.
Value proposition in Gilbane business
The value of the products / services offered to the customers in a segment so as to meet the need constitute the value proposition. The reason why customers are buying from a company is its value proposition. Value offered may be quantitative or qualitative in nature. Newness, performance and customization are the value mix through which a company can offer value to the customer segment.
Gilbane explicitly attempts to build the value to its customers in the following manner.
- Gilbane is geared to provide focused attention, reliable service and unfailing delivery, irrespective of the project location. The company is positioning itself as a focal point of contact through which the client can access the company with specific needs. In one call the client would get what it needs
- Thorough understanding of the customer needs is very essential for Gilbane. It doesn’t begin execution of the project without understanding the customer inside out. For every project Gilbane dedicates an intact team from the start to end of the project.
- On-time delivery is supreme to Gilbane. It never allows a project to run over time and executes simply and quickly. It does everything to meet the schedule and makes it a point not to give surprises to the customer.
- Throughout, Gilbane practices core values of integrity, tough-mindedness, team work and commitment to excellence. Loyalty and discipline are yet another values practiced by Gilbane.
Gilman’s punch line “Building More Than Buildings” is sufficient to communicate what it intends to do in the market.
Key Business Activities of Gilbane
Every business demands a number of key activities without which the business cannot deliver or grow. Key business actives are requires creating and offering value proposition, connecting with the market, maintaining relationship and receiving revenues. Production, problem solving, providing a platform / cloud are the three major categories of business activity that usually happen in an organization. The fundamental activity of Gilbane is Design and Build model. Gilbane seem to have four key business activity i.e. pre-construction, Construction, Consulting and Sub-contracting.
Pre-construction: In this activity important building details are examined before commencement of construction. A construction manager is assigned to the job as soon as the project is finalized. This appointment creates a huge difference in the success of a project. An intact project team is empowered to make the necessary decisions regarding project’s design, schedule, budget, materials and subcontractors. This is a key activity for the success of the project and to meet the value proposition.
Construction: Gilbane’s core competency is in complex construction activities and through decades of experience it has invented robust construction management process. Now Gilbane have a variety of ways to meet the needs of the clients. Those delivery methods include: Construction management at risk, construction management as agent, Design – Build model, integrated project management, lump sum contracting and program management. Gilbane have mastered these activities and are confident to meet any contingencies.
Consulting: Gilbane has experience in handling every type of commercial, manufacturing, industrial, residential and recreational project. The consulting value of Gilbane is flexible, experience based and innovative. With these intellectual assets Gilbane offers optimal solution and delivery of services. When Gilbane works, it does it with full ownership and the customer is relieved of all the hassles.
Subcontracting: Gilbane would put the best teams together for achieving the client’s requirements. This principle applies even to subcontracting of companies and tradespeople. Gilbane has developed a reliable network of subcontractors over the years and even they have programs to build the capacity of sub-contractors.
Key Resources of Gilbane
Similar to key business activities, key resources also are essential to meet the value proposition, reach the market and to manage cost structure. The resources may be classified as Human, Financial, Technology, Intellectual, material, etc. Gilbane's resources include, dedicated and experienced 2,600 professionals, network of offices around the world, network of reliable subcontractors, accumulated knowledge base over hundred years and access to material vendors.
Key partnerships of Gilbane
For many reasons an enterprise need to forge alliances. Right partnerships enhance the business. Gilbane has a robust network of sub-contractors and material vendors.
Channels of Gilbane
Channel determines how a company communicates and how it connects with the customer. Channels are required to raise awareness, deliver the value and provide post project services. Gilbane provides construction, consulting, subcontracting, and facilities management to commercial, institutional, and governmental markets. The segments are schools, hospitals, laboratories, public and private sectors, etc. Gilbane is in touch with its market and customers directly through offices in 35 locations across the US and elsewhere. It also manages the customers through web and other communicative media.
Key Management Personnel’s and Organizational structure
With excellent financial stability the company is focused in the execution of the project. The following roles in the organization drive the business of Gilbane. Chief Executive Officer, Chief Operating Officer, Senior Vice President cum Regional Manager, Regional Operations Manager, Regional Business Development Manager, Regional Controller, Chief Estimator, District Manager, General Counsel Secretary and Treasurer Controller.
Both CEO and COO are based in the Headquarters and they work on the guidance of Board of Governors. Most of the epmloyees do report to the Senior VP cum Regional Manager. District Manager and Regional Operations manager reports to Regional manager. The employment structure at Gilbane has the following functions Administration, Construction supervision, Mechanical / Electrical Engineers, Estimators, Project Engineeers, Project executives, Accountants, Purchase managers, Safety officers and construction experts (Quality, Documentation, Controllers, Inspection).
Marketing Review of Gilbane
Gilbane's marketing efforts seem to include national marketing, media relations, public relations, social media and the web. Event and branding efforts are another part of marketing. Gilbane has a marketing team for planning strategic marketing and advises the sixty offices for regional marketing strategies. Gilbane launches regular communications and social media campaigns via corporate website. Most of the lead generation and closing of the deal is done by the regional sales team.
Recommendations to Gilbane
The core competency of managing the construction project is very strong for Gilbane and it is far ahead of the competition. The company has survived for almost 140 years and the fifth generation family members are running the company. The age and the legacy of the company indicates that there strong business policies inherent in the company. The task of the present generation is to identify the competitive advantage that has helped the company to survive and capture market. Identification of core competence is not easy, but at various documents the core competency is indicated, but it need to be sharp to compete in the future.
Though the company is very strong in the construction industry, it seems that they lack focus or rather fail to define their business clearly. The construction of offices, Schools, hospitals etc. are aligned but the installation of water treatment plants and wastage management systems are misfits in the service portfolio. This spills that there are serious strategic flaws. The company needs to spend some time defining its business and in discovering the future potential business. The documents and company literature do not mention about the customer satisfaction surveys or customer reviews. The company needs to discover the current and the projected needs of the segments and plan for the future.
Conclusion
The evidence of passion is prevalent in the way the Gilbane is projecting to the public. Meritocracy, commitment to legacy and excellence are the core cultural values the company is practicing. The company was able to overcome the weakness of family business i.e. succession planning. The fifth generation family member is involved with same passion as that of the founder. One of the CEO of the Gilbane once said you have to love the business, or else do something you enjoy. Gilbane business has great potential to offer personal satisfaction, hence why look elsewhere. The company has a board in which there are at least three independent members are there. One of the family member once quoted that they are not hesitant to look for leadership outside the family.
REFERENCES
Osterwalder and Pigneur, 2010. Business Model Generation, John Wiley’s & Sons, Ed. New Jersey.
http://www.familybusinesscenter.com/resources/family-business-facts/
Perman, Stacy. 2006. Taking the Pulse of Family Business, Bloomberg Businessweek. Retrieved May 2014: http://www.businessweek.com/stories/2006-02-13/taking-the-pulse-of-family-businessbusinessweek-business-news-stock-market-and-financial-advice)
Astrachan, J. H. and Shanker, M. C. 2003, Family Businesses' Contribution to the U.S. Economy: A Closer Look, Family Business Review, 16: 211-219. Retrieved May 2014: http://onlinelibrary.wiley.com/doi/10.1111/j.1741-6248.2003.tb00015.x/abstract.)
http://familybusiness.about.com/od/managementandoperations/a/commonthreats.htm
http://www.aia.org/practicing/economics/AIAB082343
http://www.aia.org/practicing/AIAB101318
http://www.gilbaneco.com/uploadedFiles/Home/Gilbane/News_and_Events/Publications/2014/NationalAccounts_4P_Web.pdf
