Things Are Looking Up

Skyline Building Envelope Solutions

Skyline is a privately owned company that got its start in residential roofing thirty-eight years ago. Ten years later, it brought in a partner who owned a small commercial roofing business. The company expanded over the years to include the installation of other products such as deck membranes and aluminium railings in addition to the distribution side to the business.

Skyline has since grown consistently, hitting its largest point about four years ago with $100 million in business. Although based primarily in Calgary, Red Deer, Vancouver and Saskatoon were also added as the company grew.

The last boom in the Calgary market occurred in the years immediately leading up to 2007-2008. There was more work around than anybody could wish for, and the feeling at the time was that it wasn’t going to end. Many companies rapidly grew beyond the limits of their organizational capabilities. It got to a point for Skyline where it found itself taking on too much. Something had to go; the residential roofing and single family residence side of the business was the logical choice. A lot of the competition in this arena was from small businesses that could work with very low overhead.

“We couldn’t compete on a meaningful basis. The other challenge was that a lot of the home builders started to buy shingles direct, leaving us with labour only with mandated fees and mark-ups. The business was just not profitable for a company of our scale. It was a logical decision based on the numbers but tough emotionally because it is part of our heritage.”

About two years ago, Skyline owner Howard Zerr realized that the company had grown to a size where it needed more sophistication than it had when it was smaller. “There was a need for more business knowledge and an individual who could bring that skill to the organizations. That was when Tom Hodson came on board, about a year ago.”

When Tom came in, the company had about five hundred projects on the go which were being done by eighty-five staff. The company is now being more selective about the projects that it takes on. It is strategically trying to better understand its customer base, to discover which are its most important customers and focus on how to best support them.

Skyline’s new focus is to be smaller, stronger and smarter. That may sound anti-growth but is actually not the case. To be profitable in the long term has required a shift to quality and a targeted focus over mere volume. Bill sums it up as “less breadth and more depth”. This is one of the reasons for leaving the residential market.

This approach employs a combination of completing projects on time, with top quality and for a specific market. “What we’ve seen historically is very little structure and process around the completion of projects, and we had too many.”

A number of people that have recently joined the organization have a vast experience in practices associated with the manufacturing sector rather than just the construction industry. Contractors build everything once whereas manufacturers repeat and refine processes until they are more effective and understand the value of that continuous improvement cycle. Bringing in the business background of Tom and some of the other individuals and merging these capabilities is quite an advantage to the organization and the collaborative effort is paying dividends.

In addition to roofing and commercial cladding, Skyline has also manufactured and distributed deck membrane and has also supplied the modular building industry with pre-cut and seamed roofing membrane. The deck membrane was introduced in the nineties as surfacing for balconies and decks. It is a substitute for paint or stain on decks and an alternative product for people who don’t want to have to deal with the maintenance of wood decking. This thermo plastic roofing membrane, only offered by one other competitor, has a textured finish, comes in a variety of colours and even graphics that can emulate stone, rock or stained concrete. It provides a seamless, virtually maintenance free surface that stands up to high levels of wear and tear.

“A big part of what’s unique in our product is that we’ve partnered with one of the largest global manufacturers of thermo plastic membranes, so it’s the highest quality membrane of its kind. It’s strong, it’s durable and you don’t have to constantly re-stain your deck. It doesn’t get slippery and creates a high quality visual. It also meets roofing standards.” The membrane has the highest fire resistance level making it an insurance company’s dream as well as providing peace of mind for the customer.

Of course, challenges in the sector are numerous. Firstly there those of the state of the industry itself; Bill and Tom both see construction as a “broken industry”. For Skyline, this meant a significant overhaul, reorganization and rethink around all aspects of the business. Skyline has striven to be the voice of the industry and has gained a huge amount of support and interest from many industry stakeholders who have similar views.

“The challenge to the industry is that there is a lack of sophistication and a distinct lack of technology. There is almost a deliberate effort to resist new ideas. Customers don’t realize that they are selling themselves short. They have continually lowered their expectations of our industry for decades and have allowed it to wallow under the decision that we are still okay.”

However, as customers become a little more educated they are raising the bar on these expectations. This serves to expose a lot of weaknesses and gaps that exist in the industry.

Over the last two to three years, the number of companies entering the industry has grown. When five or more companies decide to enter the field, prices are driven down. Many players in the industry are willing to live with less profit. “One of the real challenges in play is that we have to continually recraft the business model so that it makes sense versus just being in responder mode all the time. Instead of bidding on everything, we should concentrate on being smaller, stronger, smarter. We have a nineties business model in an environment now that is becoming more demanding, has new challenges and carries far more risk than 20 years ago.”

The Mindshift group is a thought leadership group that was started in 2005 by Bill’s former employer Haworth. It is made of individuals who represent the whole real estate industry supply chain from owners to manufacturers. “We all shared a common viewpoint, that the amount of energy we spent in an adversarial risk shedding model was entirely dysfunctional and led us to participate in projects that were not as good as they could have been had the model been different.”

The industry needed a complete change – or mind shift – before any change could happen. The group started to identify outlier projects in which achievements were taking place that the industry said could not happen. A developer in Colorado built a LEED Platinum certified building for $3 a square foot less than he built a non-certified building. According to the conventional industry, that is impossible – yet they made it happen. Mindshift spent time with and studied the people achieving these results to learn about what made them successful.

“We started to see new project delivery methods, more team based with a shared link / reward models. We saw manufacturing logic being applied to construction. 3D technology was being used to iron out all the issues before you got to site. There is a revolution coming and it’s a very exciting prospect!”

In 2008, Mindshift published a book called the ‘Commercial Real Estate Revolution: Nine Transforming Keys to Lowering Costs, Cutting Waste, and Driving Change in a Broken Industry.’ Since then, certain more efficient practices have been more commonly used and Skyline has become facilitators of industry dialogues between customers, architects and contractors – sometimes all in the same room. It was constantly advocating for change and is certainly placed significantly at the forefront of this revolution.

Another pressing challenge is in finding good people. “One of the challenges, when you are a trade contractor, is that you are seen as further down the hierarchy than a general contractor. So for a general contractor, an estimator or a project manager to come and work for an organization like us… We would be seen culturally within the industry as a demotion. We have to be seen as an employer of choice in an industry that has a tough time finding people.”

If a company can’t find the right people, it has to develop its own. Skyline sees the value in investing in people and encouraging them to take risks and learn to grow; the industry at large doesn’t seem to know how to do that. “Bringing in fresh talent and teaching them our business and having them bring some of their diversity: of all the things we’ve done, it’s the most exciting thing to start to see happen. It’s a different attitude – some excitement and engagement.”

In the short term, Skyline is improving its operational excellence by putting sound best practices in place. The focus is to get the company to a place where it is able to consistently meet the needs of customers while maintaining profitability to support further growth and development of the business. It is restructuring to create much more depth in every role, more accountability and much more role clarity. Bill and Tom acknowledge that change of this magnitude is not an overnight transition; however, Skyline is well underway and the positive results are beginning to accumulate.

The next phase of the company’s strategic plan will be to create and develop a unique value proposition for the market segments that it wants to serve. Those customers will then be secured with “a solution, versus just a pure product or labour.” To be sure, Skyline aims to change the way we look at the building envelope now and in the future.

July 17, 2018, 7:36 AM EDT

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