Epic Partnering: Unifying the Value Stream

One of the important takeaways from last month’s Pipeline workshop was the conclusion, drawn by a number of building company executives in attendance, that – in order for homebuilding production to be managed as a system – a notoriously fragmented value stream needs to be unified.

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 (whether a good, a service, or, increasingly, a combination of the two) through the three critical management tasks of any business.”  They went on to describe a set of processes (that 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;  a value stream is enterprise-specific;  each value stream belongs to its enterprise.

That fact notwithstanding, I challenge you to cite an industry vertical, in which the sequence of tasks in the most common versions of that industry’s core-critical process (start-to-completion, the physical transformation task) are performed by so many separate entities, as is commonly seen – and accepted – in the homebuilding industry.  Look at the value stream of any homebuilding enterprise, and you will find a myriad combination of independent, separately-owned, non-proprietary, non-exclusive, unaffiliated businesses with different goals.

In some of 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.”

Repeatedly, builders attending the Pipeline workshop stated – emphasized – the need for more partnering, more coordination, more cohesiveness, a more unified approach in managing their production.  These builders understood that they could not perform, with their own resources, “the set of all the specific actions” required to bring houses through the start-to-completion process;  they also understood that they could not command that it be done, or create competitive separation by attempting to do so.

They acknowledged the current shortage of skilled construction resources.

Set aside, for now, discussion about whether vertical integration has a strategic role going forward in the homebuilding industry (an area we explored in “The Road That Lies Ahead: The Giants’ Perspective on Growth Strategies, Consolidation and Other Issues” in the July, 2000 issue of Professional Builder).

Even if vertical integration never resonates in the homebuilding industry, success in unifying the effort of the existing value stream has profound ramifications, on both the margin component and the velocity component of Return on Assets;  and success in unifying the value stream has profound implications for creating competitive separation.

It will require Epic Partnering®.