“In his second edition of The Pipeline: A Picture of Homebuilding Production©, Fletcher L. Groves III provides another invaluable tool to those who manage a home building production business.  Combining his in-depth experience in the construction industry with a passion for its business aspects, Fletcher describes practical guidelines for improving the velocity side of the ROA.  Fletcher recognizes that this is the best way a homebuilder can achieve what he calls ‘competitive separation’.

The Pipeline: A Picture of Homebuilding Production© Second Edition is a ‘must-read’ for all of those home builders that are determined not just to survive, but to thrive.”  (Carlos Alvarez, President, Alvarez Construction, Baton Rouge, Louisiana)

“Be prepared to dog-ear and highlight.  Fantastic book chocked full of practical, useful strategies for a production home builder.  It’s like a mini MBA for the home building professional.  I returned today to purchase another copy for a friend who is the most veracious student of the industry I know… I’m sure he’ll love it.”  (David Keller, Keller CDD, LLC, Construction Design Documents for Architecture and Engineering, Orlando, FL)

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The Pipeline: A Picture of Homebuilding Production©, Second Edition, is the latest in Fletcher Groves’ collection of work that uses real examples and lessons learned to educate the reader on the application of principles and disciplines needed to successfully manage a homebuilding production system.  The story contains a revised Pipeline game™ that simulates the risks and rewards based on the decisions a company can make when navigating through the ever-changing environment in which decisions are made.  The updated game is more representative of a homebuilding operation in today’s marketplace and it’s worth the purchase.  This book is a must-read and it will have a significant impact throughout your entire organization.”  (Jeff Kornblau, Vice President, Land Acquisition, Eagle Construction of VA, LLC, Glen Allen, Virginia)

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The Pipeline: A Picture of Homebuilding Production©, 2nd Edition, published earlier this month contains revisions to the Pipeline game™ that (a) introduces a shorter game with an operating statement that is a better reflection of a homebuilding operation, and (b) compares an integrated building model to an outsourced building model.

“The clarification of terms to those that are more familiar to the traditional homebuilder makes the game both more interesting and easier for participating in the process.  As with most simulations, being able to compare the game to the day-to-day reality of the operations within a traditional homebuilder provides ‘experiential’ understanding of the process and the results.

“Definitely a worthwhile read and exercise for increasing understanding, if you are intending to continue to improve your homebuilding operation.”  (Hoyt G. Lowder, HGB & Associates, LLC, Tampa, Florida;  former Director and Principal, FMI Corporation)

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The Pipeline: A Picture of Homebuilding Production tells the story of how RB Builders learned the principles of homebuilding production in the turbulent years following the end of the period known as the “Age of Homebuilder Entitlement”.  It is a story told in the exchanges of dialog between team members, senior management, and RB Builders’ intrepid results-based consultant.

The result is a deep understanding of a production system with an enduring visual image, the elements of which are crafted to the specific conditions, requirements, and parameters of the homebuilding industry, and a realization that improving performance on the velocity side of the ROA equation is the best path a homebuilder has to achieving sustainable competitive separation.

The Pipeline is about the specific application of underlying principles and disciplines of production that are universal – physics rooted in the laws that govern all production systems.  The book is about using the tools that work for homebuilding production, without regard to the consulting religion from which they come.

The Pipeline makes the connection between operating performance and business outcomes.

 

The Pipeline: A Picture of Homebuilding Production©, Second Edition is available through the publisher’s bookstore, and from any of the main booksellers (amazon.com, barnesandnoble.com, or booksamillion.com).

www.virtualbookworm.com/the-pipeline-a-picture-of-homebuilding-production

It is always carried in-stock on amazon.com:  amzn.com/1621378047

 

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Pipeline Workshop™ No. 12: Save the Date

Posted June 8, 2019 By Fletcher Groves

The latest in the series of production management workshops in the open, sponsored Pipeline channel, Pipeline Workshop™ No. 12 will be held October 17-18, 2019, at the Ponte Vedra Inn and Club in Ponte Vedra Beach, Florida.

“This is my second attendance to the Pipeline Workshops™.  All I can simply say is WOW!  Fletcher and his team strive to improve the workshops and make [them] even more relevant.  I especially enjoyed playing the Pipeline Game™ again and learning about [the] Velocity Accelerators®.  I look forward to attending in the future!”  (Carlos Alvarez, President, Alvarez Homes, Baton Rouge, LA)

“The Pipeline workshop™ was really effective in showing how operational decisions affect business outcomes and how risky a ‘more for more’ approach to growing a home building company really is.  The Pipeline games™ were not only fun, but they were super-effective in showing how unbalancing the production system, managing the constraint resource, and managing the right amount of WIP, creates predictable operational results and maximizes financial outcomes.

“At the end of the day, running a successful business is about how much money you make on the amount of money you invest.  The Pipeline workshop™ helped me understand this better than any workshop or seminar I’ve ever attended.

“I highly recommend it.”  (Charles Roberts, VP – Operations, Providence Homes, Jacksonville, Florida)

“The Pipeline Workshop™ completely changed my approach to meeting my company’s productivity and profitability goals.  I came away with several actionable items that I was able to implement right away.  Any homebuilder with an open mind, who is willing to challenge the traditional ways of thinking that our industry has grown comfortable with, will benefit greatly by attending.”   (Ryan Band, Unbridled Homes, Louisville, KY)

Welcome to the most intense, demanding, interactive, and challenging homebuilding production management learning experience on the planet.

And – we keep making it better.

In past workshops, we trended toward doing more with the Velocity Accelerators®;  beginning with the last workshop (Pipeline Workshop™ No. 11), we narrowed the focus, reducing the number of deeper-dives from five to just three – Business Process Improvement, Critical Chain Project Management, and Epic Partnering™ – and touching on the remainder.  The emphasis is now on what is immediately-available, while still casting a vision toward the future.

Doing fewer Velocity Accelerators® allows us to do more production scenarios with the best simulator and business game in the business, the Pipeline game™.  Pipeline workshops™ are now in their sixth year.  During that time, we have:  (1) shortened the game, made it faster, easier to understand;  (2) early on, introduced an operating statement format that mirrors the unique characteristics of homebuilding operations;  (3) found ways to transfer the learning – make the connection between operating decisions and business outcomes – faster;  and (4) begun to examine areas of disruptive innovation (for example, looking at what happens – what has to happen – when an outsourced building model becomes an integrated building model).

Pipeline workshops™ are unlike any other homebuilding conference.

The learning split is 70% simulation/business case, only 30% lecture;  the format is intense, interactive and competitive;  the Pipeline game™ production simulations and the RB Builders: Lessons from the Pipeline© business case test attendees’ understanding of production management, and challenge their ability to solve production problems.

Pipeline workshops™ build an intuitive, instinctive understanding of production principles and disciplines, and they draw the subtle-yet-crucial distinction between just being in the homebuilding business, and being in the business of building homes.

And – we somehow find a way to make it incredibly fun:  the Ponte Vedra Inn and Club is a terrific AAA Five Diamond oceanfront golf and tennis resort;  there is a relaxing and enjoyable reception at the end of the first day;  we offer recommendations on outstanding local dining;  plenty of opportunity for networking.

Creating a visual image of homebuilding production;  establishing the connection between operating decisions and business outcomes;  building a new way of thinking systemically towards solving core problems and managing constraints;  managing limited capacity and resources, doing more without more, doing more with less;  dealing with variation;  managing homebuilding production as the multi-project-with-surrounding-supporting-and-embedded-processes type of workflow that it really is;  placing the emphasis on the actions that accelerate production velocity.

The fundamental proposition of a Pipeline workshop™ is this:  thriving on the velocity side of economic return – thriving on the velocity side of Return on Assets – is the best way to create sustainable competitive separation.

Registration for Pipeline Workshop™ No. 12 opens July 8, 2019.

Come.  Participate.  Learn.

 

Here is the permanent link to the website:  www.buildervelocity.com  As soon as early registration opens, all of the information, including the agenda and schedule, will be updated, along with the event registration and hotel reservation links.

The site also provides information about the workshop, provides reviews from builders who have attended previous workshops, and provides a downloadable Adobe PDF file with detailed information about the venue, agenda, and schedule.

The cost is $895.00 per person;  the cost during early registration (July 8, 2019 through August 9, 2019) is $750.00;  for team pricing, inquire here:  (flgroves@saiconsulting.com).

 

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What to Change? What to Change to? How to Make the Change?

Posted June 2, 2019 By Fletcher Groves

(a version previously posted on Escape from Averageness® in November 2015, titled “A Preoccupation With Internal Perspectives”)

As a management consultant, the best, most actionable points of advice I can offer my clients are:  (1) build a commonly-held, commonly-shared sense of urgency towards results;  and (2) evidence that sense of urgency with a plan for implementing a focused process of continuous improvement – a prioritized series of initiatives, performed in a specific, consecutive order, that achieves targeted, defined, measurable achievements towards those results.

Points of advice that should beg these logical questions:  a sense of urgency towards what?  What kind of targeted, defined, measurable results should we be talking about?  A process of continuous improvement . . . focused on what?

The idea of continuous improvement implies a need to address issues, to solve problems;  if it was not a manifest weakness, or a threat, or a constraint, or a gap, or an inadequacy, or a problem, there would be no reason or need to improve it.

The nature of every accepted improvement methodology – be it Total Quality Management, Business Process Improvement, Lean Production, Six Sigma, Lean Six Sigma, Theory of Constraints – is to focus internally, on resolving operational issues, on solving problems, on dealing with quality issues;  done the right way, continuous improvement addresses the root causes of problems (not the symptoms);  done more comprehensively, it establishes the operational drivers of business outcomes.

There are certain realizations, realizations that become requirements.

One of the realizations of a process of continuous improvement is this:  operational planning (where continuous improvement lives) has to exist within the larger, more important context of strategic planning that establishes prerequisites and necessary conditions.  If that context does not exist, or if the existing context has not been updated, validated, confirmed – is no longer current, is no longer relevant – then there is no direction.

Another realization is this:  we live in a world of systems, which informs how we should think about and act upon continuous improvement;  “systems-thinking” is a way of reasoning, rooted in an understanding of cause-and-effect relationships, rooted in the interdependent nature of a system’s parts, rooted in ordered behavior, rooted in the way problems are solved.

Systems are not some loosely-connected set of independent and unrelated parts – a collection of processes, departments, systems, resources, policies, and other isolated pieces of a whole;  systems-thinking is about improving the performance of the system, not its pieces or parts – not any of the parts, not some of the parts, not even all of the parts, independent of one another.

Failing those realizations, you get one or more of the following occurrences:  (1) things can get improved that have no correlation with where your enterprise needs to go, with what it wants to be;  (2) it becomes reasonable to improve anything and everything you can, without regard to order, priority, or timing;  (3) continuous improvement becomes a burdensome effort of too many initiatives, often at cross-purposes to each other;  (4) what gets improved can be disconnected from – can have little to do with – the value homebuyers expect you to create for them.

Pardon the stranded prepositions, but before it is worth being good at something, you have to know what it is important to be good at.  And, before you decide to improve something, you have to know what you will get the most improvement from.  The question becomes, what do you have to do to get there?

Eli Goldratt had it right:  What to change?  What to change to?  How to make the change?

When you know what to do, you can figure out how to do it.

 

      

Opportunity Lost

Posted May 26, 2019 By Fletcher Groves

(first posted on Escape from Averageness® in October 2010;  reposted here, unchanged from ten years earlier, as perspective on matters of collaboration, franchising, mergers and acquisition, systems, and return on technology investment)

About a year ago, I commented to two homebuilding clients – somewhat offhandedly, first to one, then to the other – that they ought to find a way to collaborate with one another.

At the time, that recommendation was not the intended outcome of any of the work I was doing.  It just seemed to be a suggestion that made sense, particularly under the circumstances, and with the two companies involved.

They are both strong companies, with good business models, well-versed in starting and supporting geographically-dispersed homebuilding operations.  The principals are respectful friends.  The two enterprises share some geography, but do not directly compete.  They are very different, but that was what made it work.

Their attributes complemented one another – remarkably so, really – and those attributes offset whatever deficiencies there were.  In collaborating, neither enterprise had to give up anything that was worth keeping.

The two operating systems were a reflection of the business models and temperaments of the two enterprises, a reflection of the different natures of the homebuilding the two enterprises did, and a reflection of the differences inherent between the long-time licensed use of third-party software, and the long-term development of proprietary software.

In that last regard, it was a revealing comparison between a system that made very effective use of purchased components, and a system that was purpose-built.  It was a picture of functional, workable-but-forced integration versus elegance-at-a-cost.

The systems comparison is almost a story, in and to itself.

The larger story is about two homebuilding companies, so complementary in their attributes, that, in my estimation, they could not possibly have been better served maintaining separate platforms at the expense of remaining smaller, more vulnerable enterprises.  Two completely compatible companies, confronting realities that this arrangement would have addressed, with no discernable negative consequences.

Two companies that, nonetheless, chose not to move on the opportunity.

Opportunity Lost.

Not for lack of thought or consideration.  There were meetings.  There were systems overviews. There was a recommendation.  There were broader discussions.  It just never went anywhere.  That, however, does not change the validity of the thinking behind what would have made it work so well, which went as follows:

In helping them with the systems analysis, I was struck by the amount of resources these two separate systems consumed, and the amount of energy required to run them.  I wondered whether either company was getting out of their systems anything close to the benefit they should have been getting.

I wondered what the “energy/benefit ratio” was, wondered about the relationship between the amount of energy expended on a system, versus the benefit derived from having expended it.

Energy Expended v. Benefit Derived.

I wondered about the resulting Return on Investment.

I wondered about scale.

Neither of these systems was being leveraged to the extent they could or should have been.  The economic conditions and state of the housing market that had atrophied these two companies clearly had a lot to do with the extent to which the systems were being under-leveraged.  Those conditions have not abated [remember, this was in 2009].  But – it is also fair to say that, historically, the respective investments have never, ever been exploited the way that they could have been.

These systems were capable of supporting more users, more building operations, more business.  The systems had unused capacity.  Since they both had unused capacity, it was also pointlessly redundant.  The unused and redundant capacity was muda.  It was pure waste.  In a way, it characterizes the waste and redundancy associated with working within the fragmented value stream and supply chain that is the homebuilding industry.  More than anything else, unused, redundant, unmanageable capacity distinguishes this value stream.

The waste – the muda – existed in both companies, but consider just one example:

The licensed use of third-party software incurred fees.  Not an issue with a proprietary system, but the fee-only cost to the client with the non-proprietary system amounted to about $250,000 per year, despite the fact that the fees had been cut to the bone, in terms of extra seats, etc.  That cost would certainly increase in future years.  At a three percent (3%) franchise fee, that $250,000 in fixed overhead cost represented more than $8.3 million in franchisee sales revenue that had to be generated, just to pay the licensing fees.

All systems require attention.  At some point, that attention becomes a distraction.  At some point, attention and effort is distracted from other areas.  The under-utilization of the system is waste that creates the added waste of being distracted from other, more important areas.  My two clients – my two friends – needed to be asking themselves how much this distraction was worth, and whether it would have been a better decision to leverage the burden between their two enterprises.

I pointed out, as emphatically as I was allowed to, that both of these enterprises should have been looking for opportunities to leverage the investment they had in their systems, and that they could certainly have done with utilizing a single platform, in terms of an operating and information/technology system that would have met both their needs.

But – it was more important than that.  My contention was that these two enterprises would actually have been far better operations for having done so.

I made a business point to my two clients – my two friends – whom I have always held in deep respect, for their business judgment.

I pointed out, as significant as it was, that leverage was about more than the investment of capital or the expenditure of overhead.  It was also about the aggregate distraction caused by the attention to two separate, under-utilized systems that impacted both companies, and that kept them from getting to where they both wanted their enterprises to go.

I pointed out, that what was at stake was the far greater opportunity to create and benefit from a larger, stronger, heavier footprint.

Opportunity Lost.

 

      

It is time to wake up.  It is time to change – time to reform and re-form – your thinking regarding the type of workflow that homebuilding is and how it can be best managed with the technology you provide.



In the lead-up to every open, sponsored Pipeline workshop®, we make the same point to builders, for the purpose of explaining the production principles and disciplines the workshop espouses.

We state it in these terms:

The nature of the workflow in homebuilding production is project portfolio management, managing what can be large amounts of work-in-process, managing what can be a large number of construction jobs, which clearly meet the definition of projects.

Yes, there is workflow performed in processes, but those processes are a different type of workflow, and they are generally embedded in, and enabling and supporting of, the larger, more primary scheme of managing a project portfolio.

The process of building a home – what we call Start-to-Completion – is actually the management of multiple projects that share resources.  It is the structuring and the management of a portfolio of job schedules, with interdependencies and interactions of tasks and resources.

At its core, homebuilding is multi-project management.

The current, accepted method of project scheduling is the Critical Path Method (CPM), which evolved from the Program Evaluation and Review Technique (PERT) in the 1950s;  CPM has been in existence for almost 70 years, and it is the method used in every homebuilding ERP.

PERT and CPM were designed for one-off programs with large, complex structures (Polaris weapons system, the Manhattan Project), but the Critical Path Method has become the de facto standard for scheduling all types of projects:  aerospace/defense, software development, product development, research, and – yes – construction.

The problem with CPM is that it was not designed for managing a portfolio of projects, and it was not designed to function in environments where velocity is important, where faster cycle time and higher inventory turns are critical drivers of business outcomes.

Where it must contend with variation and uncertainty, CPM offers only a buffer of additional time – individual task durations lengthened to protect the completion date of each task, not the completion date of the project.

And – what is the cost of that added safety?  What is the cost of specifying 95% probabilities of on-time completion over the mean (50%) probability?

Statistically, insisting on that amount of task safety lengthens the job schedule by a factor of 1.64.  Which is how 90-day job schedules become 150-day job schedules.  Built-in safety that three well-known, yet typically un-checked, types of human behavior then conspire to waste, which is why jobs never finish early, are almost always late, despite all of the purported safety.

For the most part, builders are oblivious to the effects of variation on their production system.  Yet, the cost of that variation is apparent and simple to calculate;  it is the Gross Income lost from all of the closings that never occurred, from houses that were never built with the capacity that was available.  For a profitable builder – a builder operating above breakeven – it is even worse;  it is Gross Income that would have become Net Income, and ultimately, Net Profit.

It’s a lot of money.

Moreover, CPM considers task dependency (the predecessor-successor relationships of tasks) in its work breakdown structure, but it does nothing to resolve resource contention;  it does not consider situations in which tasks of different projects/jobs depend on the availability of resources that do not have sufficient capacity to meet the demand being placed upon them.

These two factors – dealing with variation and resolving resource conflict – should be anathema to builders.

CPM was never designed to contend with the production environment homebuilding presents.  CPM is not the problem (the problem is variation and resource conflict), but it is benign to the solution.  ProChain Solutions’ Rob Newbold (Project Management in the Fast Lane) told me that he would go further, saying:  “CPM supports values that perpetuate the problems of homebuilders.”

Which brings us to Critical Chain Project Management.

Developed in 1997, Critical Chain addresses both task dependency and resource contention, and it replaces the padded durations intended to protect the completion date of every task with a smaller project buffer that is fully-capable of protecting the completion date of the project/job;  in the process, CCPM becomes much more aware of system capacity and constraints.

Understand what this different, changed approach means:  it means that Critical Chain substantially reduces the duration of projects – the cycle time of houses under construction – without impacting the reliability of their completion dates.

Consider the explanation of an exercise excerpted from the RB Builders: Lessons from the Pipeline© business case study used in a recent Pipeline workshop™:

“RB Builders’ newly-acquired division has a construction schedule of 120 calendar days, but its calculated cycle time is actually 180 calendar days.  It is widely agreed that the division should be able to build its homes in far-less than the 120 days called for by the schedule, because that duration reflects ‘highly certain’ task durations.

“Switching from CPM to CCPM would immediately reduce the schedule from 120 days to 97 days, cutting the schedule by almost 20% with no diminution of confidence;  it would reduce the actual 180 day cycle time by almost half (46%).”

Critical Chain Project Management does more than just reduce the length of construction schedules.  It also specifies a set of rules preventing behaviors that consume (and waste) the safety CPM builds into task durations and CCPM builds into its project buffer.  CCPM installs a release mechanism that “pulls” starts into the system and keeps work-in-process at the levels required to produce faster cycle times.

CCPM implements simple, visual tools to manage production.

Builders can put a number of these practices into place without necessarily changing the scheduling algorithms from Critical Path to Critical Chain.  They can use add-on applications that convert existing scheduling applications from CPM to CCPM.  Or, they can implement standalone CCPM software applications.

But – Critical Chain will not be a complete, integrated solution for the homebuilding industry until its management technology providers wake up and address it.