Despite circumstances that are forcing most business conferences to be held virtually – those both larger and smaller than a Pipeline workshop™ – it is a measure of persistence and resolve that Pipeline Workshop™ No. 14 will occur, as scheduled, live and in-person, this week, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.

It is also a testament to our sponsors.  We are fortunate to have Specitup and Simpson Strong-Tie as Pipeline Workshop™ sponsors, because not only do they stand for us under difficult circumstances in support of the teaching of Pipeline principles and disciplines, they also apply these principles and disciplines in their own operations and on behalf of their licensees and users.  And – they now do it together, as Simpson recently acquired Specitup.

Because they are implementors, not just proponents, Specitup and Simpson are particularly qualified to participate in the discussions, contribute to the RB Builders: Lessons from the Pipeline© business case exercises, and help to facilitate the Velocity Accelerators®.

They enhance the learning.

 

Specitup is an award-winning software solution for home builders to get homes to market faster with accurate and profitable selling prices.  Not an estimating or production program, Specitup is a new breed of software that includes plan/options/spec’ing management combined with comprehensive financial analysis.

Any builder that wants to shorten time to market, get deeper insight into profitability, and grow their business needs Specitup.

Specitup’s capabilities allow builder/users to create 7,000 options in seconds, spec the same plan differently by community, option up plans in hours, and analyze competitor offerings.

“If I can’t compete, Specitup has told me that ahead of time, and I wouldn’t have even bought the lot.”  (D Logan, Owner, Logan Homes)

“With Specitup I can add a new plan in a matter of hours. And now we don’t have to engage estimating until the house is actually sold.”  (Dan Kent, Owner Kent Homes)

To learn more, visit specitup.net.

 

 Simpson Strong-Tie uses technology to help builders see deeper into every element of the building process, so they can better achieve operational efficiencies, cost savings and customer satisfaction.

Since 2000, Simpson Strong-Tie has focused exclusively on residential construction and how technology can help manage every aspect of the building and home-sales process.  That focus has enriched the Simpson team with a deep knowledge of the business of building homes, and they are eager to put that learning to work for your organization.

To learn more about the technology solutions, customer support, and training Simpson offers, visit strongtie.com/solutions/builder

 

Come.  Participate.  Learn.

Next time.

The next Pipeline workshop™ will be held in March 2021, at a date to be announced.  As always, it will be held at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.  Watch here for further details, or contact us:  flgroves@saiconsulting.com

Delivered by SAI Consulting.

Sponsored by Specitup and Simpson Strong-Tie.

Details:  www.buildervelocity.com

 

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At every Pipeline workshop™ we have ever done, one of the most important takeaways, one realized by practically every homebuilding company executive in attendance, is simply this:  something has to be done with the notoriously fragmented value stream that defines their industry, if they are going to have any hope of managing their 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;  thus, every homebuilding company has its own value stream;  it owns that specific set of actions.

Nevertheless, it would be a challenge to cite any other 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 performed entirely by separate entities, as is the case with homebuilding.

Look at the value stream of almost any homebuilding enterprise, and you will find a combination of separate, independently-owned, non-proprietary, non-exclusive, unaffiliated businesses, each with their own goals, often at-odds with each other.

We have a descriptive phrase for a completely outsourced building model like this.  We call it “strip-mining the value stream”.

Technology – specifically, offsite manufacturing processes – will improve quality, reduce waste and variation, reduce cycle times, increase productivity.  By all means, consider its application.  But, by definition, manufacturing off-site doesn’t unify the value stream, unless you own or joint venture the facility.

In her final comments to the team at RB Builders, before she left them the first time (The Pipeline: A Picture of Homebuilding Production©, Second Edition), the intrepid, results-based consultant reviewed the components of RB Builders’ production management system – the RB-IPS – and said this, in part:

“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 part of the answer?  We have been suggesting, for almost 20 years, that builders at least consider that possibility, that they find a way to shut-down the strip-mining operation.  That suggestion usually falls on deaf ears, or is dismissed as a radical, undoable notion.

Which is where opportunity always lies, in radical, undoable notions.

Whether vertical integration has a meaningful strategic role to play in the homebuilding industry going forward remains to be seen.  At recent Pipeline workshops™, the contrast between outsourced and integrated building models has been portrayed in one of the Pipeline games™;  it is an area that we have begun to cover in the Lessons from the Pipeline© business case;  and, it was added as its own section in the second edition of The Pipeline: A Picture of Homebuilding Production© (published in 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 Velocity Accelerators® (along with Business Process Improvement, Critical Chain Project Management, and Open-Book Management and Team-Based Performance Compensation) that will be addressed at the next Pipeline workshop™, October 21-22, 2020, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.

The cost is $895.00 per person;  for team pricing, inquire here (flgroves@saiconsulting.com).

Delivered by SAI Consulting.

Sponsored by Specitup and Simpson Strong-Tie.

Details:  www.buildervelocity.com

 

      

Pipeline workshops™ do not stop at the “what” and the ‘how-to”;  they also address the “why” and the “want-to”.

There has always been an underlying context – an underlying business logic – to everything we expound in a Pipeline workshop™.  Understandably, the focus is on the principles and disciplines of homebuilding production themselves, but we also give that underlying context – that underlying business logic – the attention it critically deserves.

So – one of the Velocity Accelerators® we do at a Pipeline workshop™ is a deeper-dive into that context and business logic, into two crucial, inseparable disciplines that must work together:  Open-Book Management and Team-Based Performance Compensation.

The efforts of a homebuilding company to improve operating performance and business outcomes will fail, if it does not succeed first in creating a homebuilding team that works toward commonly-held and commonly understood business goals.  This type of team – one that is savvy, motivated, and mutuallyaccountable – stands in stark contrast to what is simply a collection of individuals working toward their own, separate goals.

With most teams, what you would likely first find missing is the business logic that forms the context necessary for understanding everything else.  Understanding the homebuilding business is necessary, but it is not sufficient.  In order to compete in the business world, everyone on the team also has to learn the business of homebuilding.  They have to understand their individual responsibilities as part of the overall team, and they have to understand what is at stake, individually and collectively.

Instilling savviness to the team is the role of Open-Book Management.

But – not just understand the business outcome that is at stake for the company;  they also must each have a personal stake in that business outcome;  they must own the outcome, for the company, and for themselves.  They must have a stake . . . in what is at stake.

Instilling motivation and mutual accountability to the team is the role of Team-Based Performance Compensation.

Open Book Management flows from the work Jack Stack did in the 1980s as CEO at Springfield Remanufacturing Corporation to rescue that former International Harvester (Navistar) division from almost certain bankruptcy.  Following a 99% leveraged employee buyout, he instilled transparent responsibility, by opening the company’s books and making it everyone’s business to improve performance.

Stack recounted that effort in two books (The Great Game of Business and A Stake in the Outcome);  Inc. Magazine’s John Case expanded on open-book thinking in other industries and companies, in two other books (Open Book Management and The Open Book Experience).

And, in Open Book Management, Case described how Steve Wilson developed the basics of OBM-inspired team-based performance compensation at Mid-States Technical Staffing Services (now part of Modis);  Wilson subsequently described this work in a publication, titled The Bucket Bonus Plan.

We take a very specific approach in our application of the principles of Open Book Management and Team-Based Performance Compensation.

We advise our clients to be transparent (open).  We urge them to demonstrate candor (the courage to tell and hear the truth) in the constant internal disclosure of operating and financial data, whether in meetings, or through dashboards and heads-up displays.

We advise our clients to impart business literacy (knowledge and understanding) to teammates, so that those teammates don’t just understand the homebuilding business, they also understand the business of homebuilding, through the teaching of business and production principles.

We advise our clients to adopt a teambased approach to performance compensation, by way of a progressively-weighted milestone plan, centered on achieving targeted performance above a baseline in a specific business outcome, impacted by the actions of every single teammate.

We urge an approach that is simple, easy to understand;  that is visible, transparent, compelling;  that rewards success rapidly and frequently;  that is selffunding, that is paid from income the company would never have otherwise generated, from economic return they would have never otherwise achieved.

In terms of compensation – we urge our clients to make it significant, make it meaningful.  In terms of participation, we urge them to make it allinclusive.

We tell them that their Team-Based Performance Compensation Plan should provide only for winners or losers, not winners at the expense of losers.  It should give the right to lead and to demand results;  it should give the desire to be lead, not managed.

Savvy.  Motivated.  Mutually-Accountable.  Team.

 

Come.  Participate.  Learn.

Open-Book Management and Team-Based Performance Compensation is one of the three, perhaps four, Velocity Accelerators® highlighted (together with Critical Chain Project Management, Business Process Improvement, and Epic Partnering®) at the next Pipeline workshop™, October 21-22, 2020, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.

Cost is $895.00;  for team pricing, inquire here (flgroves@saiconsulting.com).

Delivered by SAI Consulting.

Sponsored by Specitup and Simpson Strong-Tie.

Details:  www.buildervelocity.com

 

      

Velocity Accelerators®: Critical Chain Project Management

Posted September 27, 2020 By Fletcher Groves

One of the areas we always single-out for deeper discussion in a Pipeline workshop™ – areas we call Velocity Accelerators® – deals with the unrealized, under-appreciated benefit that would come from replacing the current method of scheduling houses under construction.

The nature of the workflow in homebuilding production is project portfolio management;  it is about managing what can be large amounts of work-in-process, about managing what can be a large number of houses under construction.  Yes, there is workflow performed in processes, but those processes are a different type of workflow, and they are generally embedded in, or enabling and supporting of, the larger, more primary function of managing a project portfolio.

The process of building a home – what we call the Start-to-Completion process – 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 method of project scheduling is a reference to its algorithm, known as the Critical Path Method (CPM), which evolved from the Program Evaluation and Review Technique (PERT) in the 1950s;  Critical Path has been in existence for almost 70 years;  nevertheless, it is the algorithm, thus, the method, used in every homebuilding ERP.

PERT and CPM were designed for one-off programs with large, complex structures (think, 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, Critical Path offers only a buffer of additional time – individual task durations lengthened to protect the completion date of each task, but not necessarily insuring the completion date of the project.

And – what is the cost of that added safety?  What is the cost of specifying (supposedly) highly-reliable (95%) probabilities of completion over average (50%) probabilities of completion?

Statistically, this supposed solution 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 behavior then conspire to waste.

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 purposely available.

For an already profitable builder, it is Gross Income that would have clearly become Net Income, and ultimately, Net Profit.

And, it’s a lot of money.

Moreover, while CPM considers task dependency (the predecessor-successor relationships of tasks) in its work breakdown structure, 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 homebuilders.

Critical Path was never designed to contend with the production environment homebuilding presents.  It is not the problem (the problem is variation and resource conflict), but CPM 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 overall 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 this excerpt from one of the exercises in the RB Builders: Lessons from the Pipeline© business case being used in the upcoming 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 Critical Path builds into task durations.  It installs a release mechanism that “pulls” starts into the system and keeps work-in-process at the levels required to produce faster cycle times.

It implements simple, visual tools to manage production.

Builders can put a number of these practices into place without changing the scheduling algorithms from Critical Path to Critical Chain.  They can use add-on applications that convert existing CPM scheduling applications to CCPM.  They can implement standalone CCPM software applications.  However – Critical Chain will not be a complete, integrated solution for the homebuilding industry until its management technology providers wake up and address it.

It all starts with obtaining the knowledge necessary to insist on that change.

Come.  Participate.  Learn.

 

Critical Chain Project Management is one of three Velocity Accelerators® (along with Business Process Improvement, and Open-Book Management and Team-Based Performance Compensation) that will be explored in depth at the next Pipeline workshop™, October 21-22, 2020, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.

Delivered by SAI Consulting.

Sponsored by Specitup and Simpson Strong-Tie (Specitup is currently in the process of developing its own CCPM application;  come hear what they have to say about it).

Cost is $895.00 per person;  for team pricing, inquire here (flgroves@saiconsulting.com).

Details:  www.buildervelocity.com

 

      

Velocity Accelerators®: Business Process Improvement

Posted September 19, 2020 By Fletcher Groves

The majority of SAI Consulting’s work, both in and out of homebuilding, has been about enabling clients to organize and structure themselves around their core-critical business processes;  Business Process Improvement is the area of our practice for which we are most recognized.

There is a good and simple reason why SAI focuses so much effort on documenting, redesigning, reengineering, improving, and managing business processes:

The most basic, most fundamental premise in business is this:  the existence of a business enterprise depends on its ability to make money;  the way enterprises make money is by delivering extraordinary levels of distinctive value to their customers and other stakeholders;  that value is delivered through the work that enterprises perform;  that work has to be performed in some manner of workflow;  the most common form of that workflow is work performed in processes.

Make money . . . by delivering value . . . through the work you perform . . . in processes.

From a business standpoint, processes are critically, centrally important;  processes exist – processes matter – whether homebuilders are intentional about them or not.

We constantly make the point that Pipeline workshops™ are about thriving on the velocity side of Return on Assets®, but better process workflow pays off on both sides of economic return;  it drives both higher margins and higher velocity, drives higher Return on Sales and higher Asset Turns.

Consider:

Start-to-Completion (the sub-process within the Prospect-to-Closing process that is the aorta of workflow in a homebuilding enterprise) is not, at its core, process management;  the workflow in Start-to-Completion is multi-project management;  it is project portfolio management, with embedded, supporting, and surrounding processes;  it is also workflow in which all of the non-supervisory work is performed by external resources (trades and suppliers).

Start-to-Completion is not managed like a process, so we don’t treat it as a process;  we don’t map it like a process;  we don’t document it as a process;  except for its embedded processes, we exclude Start-to-Completion from process management.

All of which should make this next point particularly startling:  even with Start-to-Completion workflow excluded, the results from dozens of process mapping engagements SAI has performed, over decades, suggest that 25% of all the process work a homebuilding company does perform – the work that consumes a building company’s overhead – is completely non-value-adding.

Ponder that revelation for a moment.

Here is the bottom-line:

If your Operating Expense represents – consumes is more to the point – eight percent (8%) of Revenue, it means you are throwing away $20,000 of every $1,000,000 in Revenue you generate.  And, if your true Gross Margin is 18%, it also means you are throwing away $20,000 of every $180,000 in Revenue you would actually get to keep.

The most visible element of BPI (and BPM) is the mapping of process workflows, but process mapping involves far more than documenting – and confirming, accepting as-is – the current state of that workflow;  it includes redesigning those workflows in ways that improve them, an effort which invariably reveals other issues – the core, root causes of problems – that affect profitability and economic return.

Which makes understanding and improving workflow the means to a much more important end.

Business Process Improvement is the tip of the spear, the front-end of a continuous improvement methodology in which the activities and elements of workflow that add value are preserved, the activities and elements that add no value are eliminated, and the remaining activities and elements that enable value are refined to make the workflow more clear, more consistent, more streamlined, more connected, more succinct, more fit for its intended, defined purpose.

In the language of a Pipeline workshop™, we want a shorter, straighter pipe.

Because it is so foundational, it is impossible to overstate the importance of understanding and improving the way work is performed, before starting down the long road on other improvement initiatives, before the process of continuous improvement moves anywhere else.

In addition to being the means to a more important end – and the front-end of a process of continuous improvement – BPI ushers in a new perspective.

It shifts the organizational view away from the internal structure of work performed in functions, and towards the flow of work performed in value-adding processes;  BPI shifts the perspective from vertical to horizontal;  it turns a homebuilding enterprise 90 degrees from vertical, lays the enterprise on its side, and aligns its workflow with the value it seeks to create.

Business Process Improvement is about getting horizontal.

The relevance goes beyond the processes themselves.  Processes are the centric element of the business operating model that forms any strategic value discipline that serves to deliver exceptional levels of the specific, distinctive value demanded by a narrowly-defined segment of homebuyers.

Come.  Participate.  Learn.

 

Business Process Improvement is one of three Velocity Accelerators® (along with Critical Chain Project Management, and Open-Book Management and Team-Based Performance Compensation) that will be explored in depth at the next Pipeline workshop™, October 21-22, 2020, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.

The cost is $895.00 per person;  for team pricing, inquire here (flgroves@saiconsulting.com).

Delivered by SAI Consulting.

Sponsored by Specitup and Simpson Strong-Tie.

Details:  www.buildervelocity.com