Archive for March, 2009

Fast, Nimble, Adaptable

Posted March 20, 2009 By Fletcher Groves

I want to comment on recent posts on two other web logs. One of them is at housingcrisis.com and the other is Bill Lurz’s Ear to the Ground web log on housingzone.com. In different ways, both posts speak to the dangers of averageness – and the antidote to that averageness – that “Escape from Averageness” addresses.

On the “Bottoms Fish” post (on housingcrisis.com), the point is made that “home sales volume may hit its low point this year . . . that point finally means that from a sector standpoint, some homebuilders will have reached their moment of opportunity. Access to cash and capital will have a lot to do with who is there to jump on the chance to thrive amid a wide landscape of distress – lowest direct costs per square foot will be a building company’s lever back into high volume business. Equally important . . . will be who will nail the right product for the moment . . . “

On the “Game Plan for the Future?” post (housingzone.com), Bill Lurz describes what he terms the “land-heavy, debt-light” land acquisition strategy of Pat Neal: “For a number of years, he has been buying land – when he finds a good deal – for cash, with his own money, then entitling it to the maximum density he can get. But he does not always build to that density. This strategy allows Neal to build to the market. Whatever product will sell best is what he builds.”

Although secondary, certainly unintentional, and probably unnoticed, both cases validate the need for homebuilders to deliver extraordinary levels of distinctive value to a narrowly-defined segment of the homebuying market. They also both hint at the main attribute required to drive that kind of value: a fast, nimble, adaptable business operating model.

That type of value and that attribute simply does not emerge from a focus on “industry best practices”.

The problem with best practices

Posted March 2, 2009 By Fletcher Groves

Virtually every consulting engagement that I have lead at SAI Consulting, has, in some way, dealt with processes. There is a reason. When you talk about an enterprise, whether it is a homebuilding company or a company in some other industry vertical, the most basic proposition of that enterprise – the reason for its existence – is the value that it creates for customers and other stakeholders. That value is created by the work that it performs, and that work has to be performed in processes.

Those processes exist – they are present – whether intentional or not.

From a process standpoint, during the course of conducting those engagements, we have seen almost everything and worked on most of it. Business Process Improvement (BPI), Business Process Management (BPM), Business Process Reengineering (BPR), all of the notation languages, process flowcharting, process modeling, value stream mapping, the new execution languages that accompany it, not to mention the TQM, Six Sigma, Lean, Lean Six Sigma, and Theory of Constraints methodologies that act upon it.

To process management, you can add project management. Different, yet complementary.

Given the essential nature of processes (not to mention project management), I am struck by the homebuilding industry’s fascination with “industry best practices”. Were it any other industry vertical, the argument could be made that industry best practices might be a worthwhile baseline (although a dangerous measure to settle for).

Homebuilding is different. The deal-driven mentality that permeates homebuilding, coupled with an unfathomable disregard for process discipline, and a degree of outsourcing that relegates value creation to the level of strip mining, makes industry best practices a perspective you can just throw out. Not that the case for robust, dependable, effective processes has not been made. The National Housing Quality (NHQ) Award program, sponsored for more than 15 years by Professional Builder, NAHB Research Center, and others, was modeled after the Malcolm Baldrige Award program.

Processes are front-and-center in the NHQ, yet even those widely-regarded best practices are not widely-adopted (it is a measure of the depth of this housing market and economic debacle that its victims include previous NHQ winners).

But, the bigger problem is the limitation of best practices. At best, industry best practices promote a satisfaction with some sort of competitive equality, a settling for the expediency of the ideas of someone else. The problem with best practices is that it stifles creativity and innovation, works against creating competitive advantage, and creates the illusion of continuous improvement. It is one step above average-ness, something like above-average-ness.

My advice? Figure your processes out for yourselves, and regard industry best practices as something to understand, but nothing to settle for.