“Does the world really need one more average homebuilding company?”®

EFA La Brea Tar Pits

La Brea Tar Pits

“As RB Builders did it’s planning and budgeting for the then-upcoming year, 2008 looked to have market and economic conditions very similar to those in 2007.   In 2007, RB Builders produced Gross Margins of 22%, earning Gross Income of $11 million, down significantly from the 30%+ margins it enjoyed during the final, halcyon years of the Age of Homebuilder Entitlement®.

“In many ways, RB Builders was a product of that age, just another homebuilding company, satisfied with occasionally adopting other builders’ ‘best practices’, content to be good, no-better-but-no-worse than the other builders with whom it competed.  It was a homebuilding company with a middle-of-the-road approach to delivering the value homebuyers demanded.

“Although its owners knew what housing cycles were like, its management did not.  Terms like TEFRA and RTC were faint acronyms from a different era.  For the past 10 years, life had been good.  But, it was becoming a dangerous approach, because – as the saying went – ‘the only things in the middle of the road are yellow lines and dead armadillos’.

“It was becoming homebuilding no-man’s land.

“Locked into an operating model – into organizational structures, management systems, processes, cultures, and employees – that could not deliver extraordinary levels of distinctive value, the company found itself dumped into a teeming mass of homebuilders that looked-alike and sounded-alike.

“Now, indistinguishable from other builders, and unable to create any type of competitive advantage, RB Builders was trapped and sinking – like a modern-day dinosaur – into the tar pits of averageness.”

 

That was a short excerpt from the beginning of The Saga of RB Builders©.  

When I speak at IBS, Housing Leadership Summit, and other builder conferences, I sometimes ask my audience a question related to the condition of RB Builders:  “Does the world really need one more average homebuilding company?”®

For the longest time, I was convinced the resounding answer was, “Yes, of course.”.

As new home sales continue to rise, however slowly and erratically, it matters – it matters very much – what steps every homebuilding enterprise takes as it continues to emerge from the abyss, and how it deals with its current reality and whatever the future holds for it.  It matters, the answers it formulates to these questions:  What has to change?  How do you create sustainable competitive separation?  How do you move beyond operations and performance that was previously considered acceptable?  How do you escape from averageness?

That last question was the focus of this weblog, when I began writing it more than six years ago, in January 2009, at a point where we had already been in a housing depression for more than two years.  And, it was at that point, more than eight years ago, in early 2007, that I had written The Saga of RB Builders©, to help explain a new consulting approach – an approach which would offer a high-yield, value-driven, results-based alternative to conventional consulting, one which would result in a new client-consultant partnership, and one which would require significant changes in how client homebuilding companies paid performance compensation, how they made management decisions, and how they focused the improvement effort.

The Saga of RB Builders© traced the story of a homebuilding company, as it went through a five-year effort to improve operating performance and business outcomes in a changing and challenging housing market.  RB Builders and its characters were fictional, but the context in which they existed was not.  The story became a prequel to The Pipeline: A Picture of Homebuilding Production©, which was published in early 2013.

Written, as it were, in 2007 and looking back — presciently, as it turns out — from a point at the end of 2012, The Saga of RB Builders©, in effect, looked back to the future, and read like historical fiction.  Written, as it were, in 2007, The Saga of RB Builders© could not do justice to the length and depth of the hosing depression, the immense carnage to come, the extraordinary damage to margins and volumes, to Balance Sheets and careers, that would ensue.

Yet, if I were asked, as the author, what aspect with which I am most satisfied, it would be that the story seems unaffected by the passage of period of time — and, thus, The Saga of RB Builders© remains extraordinarily relevant.