At a Pipeline workshop™, one of the most important takeaways, drawn by almost every building company executive in attendance, is that a notoriously fragmented value stream has to be unified, if they are ever going to be able to manage production as a system.
In their landmark 1996 book, Lean Thinking, Jim Womack and Dan Jones defined a value stream as “the set of all the specific actions required to bring a specific product through the three critical management tasks of any business.” They went on to describe a set of processes, which they termed tasks: a problem-solving task, an information management task, and a physical transformation task.
By definition, a value stream does not belong to an industry; it is enterprise-specific; each value stream belongs to its enterprise; every homebuilding company has its own value stream.
Nevertheless, it would be a challenge to cite another industry, in which the sequence of tasks in the most common versions of that industry’s core-critical process (start-to-completion, i.e., the physical transformation task) is entirely performed by so many separate entities, as is commonly seen and accepted in the homebuilding industry.
Look at the value stream of almost any homebuilding enterprise, and you will find a combination of independent, separately-owned, non-proprietary, non-exclusive, unaffiliated businesses, each having their own goals.
In her final comments to the team at RB Builders (The Pipeline: A Picture of Homebuilding Production©), the intrepid, results-based consultant reviews the components of RB Builders’ production management system, the RB-IPS, and has this to say about the final component:
“It is a production management system that specifies the means by which RB Builders fosters epic relationships of mutual interest with its building partners and supply partners. The RB-IPS provides both the process and the program for progressively transforming subcontractors and suppliers into true partners, into trusted allies, joined by shared, mutual interests.”
Builders attending Pipeline workshops™ consistently emphasize the need for stronger trade-partnering, better coordination, more cohesiveness, a more unified approach to managing the trade side of production.
They acknowledge the obvious: they do not have the internal resources necessary to perform “the set of all specific actions” required to bring houses through the start-to-completion process, and they are completely dependent and reliant on skilled construction resources that are in short supply; they understand that they can no longer dictate the terms.
Is vertical integration the answer? We have been suggesting, for almost 20 years, that builders at least consider that possibility. That suggestion is usually dismissed as a radical, undoable notion.
Which is usually where opportunity lies.
Whether or not vertical integration has a future strategic role to play in the homebuilding industry remains to be seen. It is an area that has been covered in the Lessons from the Pipeline© business case at previous Pipeline workshops™, and it is a new section in the second edition of The Pipeline: A Picture of Homebuilding Production©, which was released for publication in the Spring 2016.
The outcome of the vertical integration question doesn’t change the underlying imperative. Success in unifying the effort of even the existing value stream has profound ramifications, on both the margin and velocity components of Return on Assets; and success in unifying the value stream has profound implications for creating competitive separation.
With or without vertical integration, addressing the issue will require Epic Partnering™.
Come. Participate. Learn.
Epic Partnering™ – the attributes of the relationships being fostered, the program, the process – is one of the two velocity accelerators (along with Critical Chain Project Management) highlighted at the next Pipeline workshop™, March 16-17, 2016, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida. Cost is $850.00.
Sponsored by BUILDER and BuilderMT.