Managing Innovation & Technology Final Project K&M Home Improvements Alex Nilsen May 12, 2011

Introduction
The following report is the culmination of work done for K&M Home Enhancements to determine the best solution for employee time tracking. The results of this report have been integrated into the normal business operations of K&M Home Enhancements and have provide numerous benefits having been only implemented for one pay period.

Business Description
K&M Home Enhancements is in the market of home improvement. The company was founded by Kyle Adamczyk and Mike Stanwick who have been swinging hammers since the first grade. Their business has evolved into doing anything shy of constructing the house itself. Kyle and Mike are both in their late twenties and have many years ahead to grow their already successful business. They started small and have grown to have up to sixteen employees working full time. A majority of their work force would be considered baby boomers. They are skilled tradesman who have worked in the construction business or in labor unions in previous employment. They are drawn to the company for the flexibility in work schedules as well as having the ability to be the lead on any number of projects. The employees truly do care for the work that they do and make the customer their top priority on any project. The five major areas of work for the company are hardscaping and decks, landscaping, remodeling, handyman repairs, and also cleanouts. Due to the vast scope of the company they have skilled laborers and certified tradesman in many areas Electricians, Carpenters, Plumbers, and Masons to name a few.

K&Ms target audience is residential homeowners and also realtors. Work done for residential homeowners is about 80% of their business. The other 20% comes from realtors who have homes that need modifications before being put to market for sale or rental. Kyle and Mike started the business with the intentions of just provide landscaping services. They would create gardens around the home or in the back yard and also plant shrubs, bushes, and trees. They also provided custom solutions at the request of any customer. In landscaping there is not a one size fits all plan. Each individual has their own idea of beauty and their property will reflect that. It became evident that there were numerous other opportunities that Kyle and Mike could take advantage of once they had finished a landscaping project at a customers residence. The natural progression was to providing hardscape solutions along with landscaping. They could turn any lot into a well-manicured and pristine property. It is also important to note that they stuck strictly to design, landscaping, and hardscaping. They did not provide maintenance such as lawn care or gardening services. If customers happened to request lawn maintenance they would provide a trusted subcontractor to provide the service requested.( Su Han Chan, W. John Kensinger, J. Arthur Keown, and D. John Martin) Many homeowners who just purchased a home in a development are left with a cookie cutter house on a half-acre to two acres of land. Kyle and Mike were able to take advantage of the fact the Toll Brothers, the large developer in the area, only provide a structure and not a home. In many developments there were sliding doors to the back lawn but they were four feet off the ground with no outdoor porch or even steps for to access the back yard. Because of this design and failure of the developer to include a deck in the solution of building the house

there was a strong demand for people who crafted custom decks. Many people have above ground pools behind their house and a deck was an afterthought but a great investment. The company integrated the construction of decks into their solutions for landscaping and hardscaping. They hired skilled carpenters to assist with the construction and design of decks, which gave the company the skills to move into the home of their customers. Offerings of remodeling and handyman repairs were soon to follow and became the turning point for K&M to be a one stop shop for home improvement. The company strives to provide a custom and specialized solution to each customer to fit their needs. No project is too small and none too large. Although if the project is outside their expertise they will enlist the help of a trusted subcontractor who will be able to provide the service the customer is looking for. The philosophy at K&M Home Enhancements is Reliability, Communication, and Customer Service. They pride themselves in providing excellent customer service to each and every client. Proof of their exceptional customer service is that the majority of their work is received through referrals and word of mouth. When they put in a deck at someones house their friends see it and say, Wow what a nice deck I have to have one! Who did the work for you? Then their name gets thrown out to a new potential customer who already has a positive perception of their work. Porters five forces model has been used to help gain a better understanding of where K&M stand in their market. The evaluation details existing rivalry, threat of potential entrants, the bargaining power of customers, the bargaining power of suppliers, and the threat of substitutes.

Degree of existing rivalry Rivals to K&Ms business would be general contractors in the area as well as specialists. Since K&M does take on a variety of different projects it is hard to pin them down as a general contractor or a specialty company. Because a majority of their revenue comes from projects that they complete themselves they would not be considered general contractors. General contractors make most of their revenue off of subcontractors for individual tasks from a project. Specialty contractors know one trade and can only provide a narrow focus as where K&M has an enormous amount of resources in all areas of home improvement. For customers looking for a specific solution they would be drawn towards a company that specialized in that trade. A person looking to replace windows in their house will logically call Roman & Son Windows and Doors before contacting K&M Home Improvements. The generous amount of specialty companies in the area creates rivalry for K&M. There is also a national chain Mr. Handyman which has a presence in Warrington, PA. Since Mr. Handyman is franchising operation they have strong national support from their website, to employee training, and also customer service. Mr. Handyman also has a large advantage when it comes to advertising. Richard Karn more affectingly known as Al Borland from the 1990s hit tv show Home Improvement has was the national spokesman for Mr. Handyman and appeared in several commercials.(Kelly, Dave) Although Mr. Handyman sounds like they are the big player in town the industry of construction and home improvement more specifically is not and oligopolistic industry.(Schilliing, 2008)

Threat of potential entrants The threat of potential entrants in Warrington PA for the home improvement industry is moderate. The main threat is the existing competition and the market is leaning towards being saturated. There is also a strong loyalty for local businesses in the area. An outsider would have a hard time moving into the area and starting a successful home improvement business unless he could beat the competition with an exception price and higher quality. Competition is the only large entry barrier to hurdle. The startup costs are not very high and there is plenty of access to suppliers and distributors to gain products. The government does not put many strict regulations on home improvements businesses and starting a business is relatively easy. Bargaining power of suppliers As stated before the construction market in the area is almost saturated and this has led to a market saturation of suppliers as well. Large home improvement chains such as Lowes and Home Improvement exist often right across the street from each other. Also lumber yards and landscaping supply companies are everywhere. From most job sites a run to the store to pick up a forgotten material takes an average of just thirty minutes. Due to the saturation of suppliers prices are normally driven be the large home improvement chains. Specialty suppliers offer a higher level of customer service to gain the business of potential customers but their prices are in line with the large chains. There are not switching cost involved with changing suppliers which diminishes the bargaining power of the suppliers. Bargaining Power of buyers

The fundamental ideas behind the bargaining power of suppliers also applies to buyers as well. A supplier may offer a range of attractive options for some buyers and not others. Due to the sheer volume and number of customers each supplier has it would take a major market shift for the buyers to gain control over the suppliers. Threat of substitutes Substitutes are services that are equivalent and can fulfill the customers needs. There are only two options that are substitutes to home improvement, do it yourself, or do nothing. The do nothing alternative is often considered in home improvement. There are also plenty of able bodied people who fall into the do it yourself category. Fortunately the do it yourself category is small in the Warrington area because many families are affluent and are able to reconcile the difference in price by the value of their time. For the less affluent to do nothing option is always attractive unless the repair becomes critical by whatever measure they use to determine.

Technology Audit
As a small company K&M has integrated technology into its business from the time it started. Their initial quotes and invoices were made using a custom spreadsheet design. They then moved to QuickBooks for all of their accounting and payroll services. The use of QuickBooks has allowed for customized and precise billing. Each invoice provides a detailed scope of work done and the customer is able to tell where their money went on the project. Since all finances are entered through QuickBooks the company knows at all times how much money is in the bank. They are also easily able generate reports for the company such as profit

and loss statements. QuickBooks provides K&M the opportunity to expand into many areas such as a POS system and also the ability to take credit cards as payment for work. Moving to the QuickBooks will prove to be a valuable business decision by letting the PC handle work that was traditionally done by an extra employee. The PC has become an integral part of many businesses at this date in time and K&M is no different. They heavily rely on email communication between employees, customers, and suppliers. Their accounting software as well as databases for all customers and suppliers resides on their PCs. They have developed a website so in their further efforts to reach their target audience. Having a strong web presence brings legitimacy to your business to consumers. Their website provides many examples of work that they have completed and what they can do for you as a customer. It also answers common questions and gives the customer a sense of their business practices. The only form of advertising done is on the web. Other areas of marketing such as newspaper ads, billboards, direct mail, and strategically placed magazine ads have not been investigated. Each method would provides different outcomes for specified target audiences. (Kotler, Philip) The main form of marketing for the company is done through networking and word of mouth. Kyle and Mike both belong to several professional organizations such as BNI (Business Networking International), and many local homeowners associations. BNI gives members the platform to get to know other highly regarded business people in the community. Each member in the BNI group all have different professions. Once you feel comfortable with those professionals you can use your network to provide referrals to others in the group.(About BNI, 2011) Being a member also means

reciprocating referrals to other members of the group. Kyle and Mike have greatly benefited from the strategy of personal networking. They also apply the same concepts they have learned in BNI and practice it with their customers. This keeps on opening up an endless amount of networking opportunities and the work soon after follows. Cell phones have grown to be an important part of networking. The ability to send emails and exchange contact information almost instantly is a huge help. Cell phones have also been a critical part of K&Ms technological strategy. Providing constant communication to the customer requires excellent communication between employees and management. Cell phones allow employees to give courtesy calls to the customer to let them know that the crew will be late because they are stuck in traffic or there is a circumstance beyond their control that will cause them to be late. When unknown or unplanned for circumstances present themselves employees always have a way to contact the customer so they can deal with the situation in the best manor possible and to the liking of the customer. Cell phones are also utilized in the rare case of an emergency situation at the customers residence. Employees will have a means to contact the customer or proper authorities to resolve the emergency. Bringing technology into a service has not traditionally used technology before has its challenges but it also allows for substantial increases in efficiency if it is utilized the proper way. K&M have been adopters of technology and allow other firms to prove the benefits of the technology. They are not in a position where they can spend $10,000 on a system that turns out not to be the best system for the company. A valiant effort is put forth to evaluate their

needs and match technologies that will allow them to reach their desired goal. A critical assessment was completed before signing up for a wireless phone service provider. The three main things considered when adopting a technology are how will it affect the customer, how will it affect business operations, what is the return on the investment, and what are the continual costs to up keep this technology? There are many companies with attractive deals and great devices for wireless phone service. The strength and reputation of the wireless network was also considered because they wanted to be able to have service at every customer site in their service area and not have to deal with dropped calls while transporting from site to site. The features that were offered with the contract were also important to business operations such as text messaging, email, mobile broadband, and GPS tracking. They determined that Verizon had the best coverage in the area also provided other features the business could take advantage of. They also provided the lowest monthly cost with relatively low upkeep costs for a fleet of business phones. All of the technology that K&M have integrated in to their business has served one very important purpose which is increased efficiency. Reducing time to get a project done allows them to lower cost for the customers and also makes them more competitive against other companies competing for work in the same line of business. Being as efficient as possible is the approach that is taken towards pricing of jobs. Of course there are some projects where extra time is built into the project just in case anything goes wrong or there are unexpected setbacks. They prices their jobs as lean as possible while still accounting for a profit and also not lowering their standard on quality of materials and workmanship. The company prides itself on integrity and pricing reflects that.

There were three problems that were identified by the company which they believed they could implement technology to solve. The first was a way to track employee time on the jobsite and also know where workers were throughout the day. The second was to find a software solution that would serve as an interface for the customer to update them on the progress of their project. The third idea he had was to find a way to improve the volume of work during the winter months. After hearing a little more about the company I decided to attack the task of creating a solution for accurate employee time tracking. I also committed myself to look into possible solutions for a customer interface software.

Work Completed
The current system involved time cards filled out by employees and was strictly on the honor system. The motivation for introducing technology to this process is for worker accountability, decrease paperwork, and decrease time to process payroll. I decided to research and develop three strategies for the company. Since the company has an mechanistic structure rather than an organic structure the best solution will provide structure and create efficiency.( M. P. Miles, J. G. Covin, and M. B. Heely) The goal of the three strategies is to provider worker accountability, decrease the time to process payroll, and be seamless to the customer. These three strategies were low tech, some tech, and high tech. The low tech option would require minimal investment and would be a set of processes to follow. The main obstacle for the low tech option is accountability. Most of this system is based on the honor of the worker. The system I devised still required workers to fill out time sheets to account for hours. The difference is that workers would have to arrive at a

centralized location, the office, to clock in for the day. At the office the secretary would stamp their time sheet with the time they arrived. They could then proceed from there to the jobsite. At the end of the day they would have to return to the office to clock out and received another time stamp. This solution provides accountability for workers at the beginning and end of the day and insures that they will be making it to the jobsite on time. The customers will benefit from this system because employees are more likely to be on time than before and if they have not showed up to the office the office will be able to notify the customer that the employee may be late or they can reschedule. This does create some unnecessary travel for workers. Some do not live close to the office and would have to travel rather far at the beginning and end of each day. It also might not make sense to drive to the office if the place you are working is only 5 minutes down the road from your house. With gas prices being very high it is not the most efficient use of resources. People who live further from the office are sacrificing more time off the clock than someone who lives closer. With the existing system of workers traveling directly to the jobsite there is not as much inequality because the jobsite is constantly changing and may be longer for some and shorter for others. It all depends up on the job. The second option I considered was some tech. Workers would send a SMS message to a email address. When they arrived at their shift they would text Start and when they have ended their shift they would text Stop. They would also text a description of what they worked on during that day. These text messages will all have date and time stamps which can be recorded to obtain the hours worked for each employee. The secretary would access these emails and could enter the information directly into the payroll system. This system takes the paper out of the equation but still does not solve the issue of knowing if the employee is really

at the jobsite when they check in. Employees also have to have to be proficient at texting in order for this system to work. This creates the same amount of hassle for the secretary who still has to manually enter each entry into the computer. Last but not least a high tech solution was developed. This solution would be much more expensive and would require each employee to have a smart phone. The company would purchase the smart phone application finarx timesheet for each employee. Each employee phone would be updated with the entire customer database as well as a list of different billable tasks with corresponding wages. The employee would open the application on their phone when they arrive at the jobsite. They would select the customer and the task that they were completing. They could leave notes as to what specifically they were doing. For example the general task would be drywall instillation. In the notes section the employee would write Installing drywall in the master bedroom and den. When the notes are complete the employee hits done and the clock starts ticking. Also at the time of the punch GPS coordinates are recorded. All of this data is then stored to a data base on the phone. The punch out process just simply requires you clock out. At the end of the week to submit the time card the employees just hit export and it will email the report in Microsoft Excel format to the secretary who compiles payroll. This system is transparent to the customers but it will bring accurate reporting of time which will allow the company to accurately quote small jobs and larger projects. Ultimately this is a win for customers and future customers. The employees do have a new process to follow but will benefit from not having to fill out paper work. Even if a punch is missed it is possible to go back and enter a time. The secretary processing payroll will spend a fraction of the time she normally did with this system. The Microsoft Excel document that is

exported from each employees phone is easy to import into the QuickBooks accounting software. I also created a process for the secretary to import the information into QuickBooks so the process went as smoothly as possible and it was repeatable if she was not preset the day payroll needed to be processed. After producing three solutions for employee time tracking I shifted my focus to the software issue. The software ideally would be able to integrate with their existing website and customers could access it from where ever they were. The software would provide a calendar that would keep customers up to date on the progress of the project as well as upcoming milestones and deadlines. The software would also have a communication tool so they could communicate with the customer about topics relevant to the project. A place to upload pictures of progress would also be nice. They also wanted an area where documents could be shared such as contracts and project drawings. The last item on their wish list was an option for the customers to pay for the project in increments, such as a materials fee, or in whole when the project was finished.

Recommendations
From the information that I have gathered from the company and its method of operation I would recommend the high tech solution for employee time tracking. Although this solution will be the most expensive to implement it will provide a large benefit in increased productivity and also keep workers accountable. This will require the activation of 6 android cell phones on the company plan which adds an additional $90 a month to the wireless bill. The phones are free with the contract. The application will cost $119.88 for all twelve employees to

purchase the application. Activation fees are free on a corporate account. The employees who already have smartphones will just need to purchase the application. The first year cost is $1199.88 and each year after that is $1080. To recuperate the recurring cost, 1.4 hours of work would need to be saved per week at a rate of $15/hr. To put that in perspective each employee would have to trim just 6 minutes a week for this system to pay off. Knowing real cost for each individual project will help with competitive bids on large projects. In regards to a customer interface software solution I would recommend the Builder Trend solution. This solution will nicely integrate into the existing technology that the company uses. The service is relatively low cost and has a tiered payment plan so the more you use the system the more you pay. This solution is hosted by Builder Trend so there are no worries about software upgrades or any problems with instillation or compatibility. All workers will be able to access the site from their smart phones to make changes immediate changes if need be. The customer will also be able to access their account from anywhere they can gain access to the internet. It truly is the best solution out there for K&M Home Enhancements. This solution provides complementary goods to the customer which can make up for having a smaller installed base of customers.(M. Katz and C. Shapiro) For students looking to replicate a project of similar stature I have some words of advice. I would recommend choosing a client that you can meet with in person and also schedule a weekly meeting time. I did have some communication issues. Presenting and describing my work was a lot harder over the phone without the use of visual aids. Email communication is also very time consuming when you are trying to gain a large amount of

information about a company. Being able to experience what the company does is worth more than you think. The other point of advice is making sure that you do not take on too much responsibility than you can handle. I made commitments to the company that I plan on following through with. I sacrificed my free time to fulfill commitments to finish a project on time. I did not have the support of other team members. Doing an project as an individual is a challenging task but it is also very rewarding.

Works Cited
Kelly, Dave. (2008, August 28). Mr. Handyman Franchisee also a Customer. Retrieved May 5, 2011. http://www.franchisewire.com/article.php?id=2987 Kotler, Philip. Marketing Management. 11th Edition. Pearson Education, Inc. No Author. (2011). About BNI. Retrieved May 8th, 2011. http://www.bni.com/AboutUs/tabid/54/Default.aspx M. Katz and C. Shapiro, Technology Adoption in the Presence of Network Externalities, Journal of Political Economy 94 (1986), pp 822-41. M. P. Miles, J. G. Covin, and M. B. Heely, The relationship between Enviromental Dynamism and Small Firm Structure, Strategy and Performance, Journal of Marketing Theory and Practice 8, no. 1 (1993), pp. 84-94. Schilling, M. (2008) Strategic Management of Technological Innovation. New York: McGraw-Hill/Irwin Su Han Chan, W. John Kensinger, J. Arthur Keown, and D. John Martin, Do Straegic Alliances Create Value? Journal of Financial Economics 46 (1997), pp. 199-221.