(excerpted from The Pipeline: A Picture of Homebuilding Production, Second Edition©, initially posted on Escape from Averageness® in January 2011, re-posted in May 2018 as part of a series, abridged and re-posted here, now, during what will certainly become a COVID-19 pandemic-induced recession)

The intrepid, results-based consultant turned back to the CEO.  “You know, it is possible to fail, without being the least bit cynical about its prospects.”  Turning back to everyone else in the room, she continued, “Whether you are cynical or not, change is up to you.  Whether any of this works or not, is up to each of you individually, all of you collectively.

“If I didn’t believe RB Builders would make it work, I wouldn’t be here, my firm wouldn’t accept you as a client.  We would not waste our time with you.  After all – by virtue of how we are being compensated – my firm and I have a bigger dog in this fight than anyone else.

“When we started out on this little adventure, I told you that my consulting firm would be compensated on the same performance basis as everyone else”, she reminded them.  “I told you that there was no limit to the time and effort that my firm – and I personally – would expend to achieve the outcomes we targeted together.  I told you that I would work hand-in-hand with you, and do whatever it takes to achieve those goals.

“I assured you that I would do whatever it took to foster the willingness and the capacity for change, create a sustainable capability for implementing the things that would continuously improve operating performance and business outcomes, increase innovation and learning, and make you less dependent on all of your consultants.  I told you, from the standpoint of how credit was attributed, that I was content to remain in the background.

“Those were the assurances I gave you”, she said.  “In return, I sought and received assurances from you.

“You agreed that this was a true client-consultant partnership, and that – because my firm’s compensation was completely results-based, of finite duration, and self-funding – my firm was assuming the higher level of risk.  You agreed that this new, results-focused consulting arrangement we were undertaking provided ample incentive to everyone for taking action, making changes, and improving operating performance and business outcomes.

“I told you that I was as serious as a heart attack about getting results.  I made it clear that I had no intention of wasting my firm’s time and effort.  I told you that you did not have to do everything I told you, but that you did have to come to terms with me, take action, make needed changes, and do whatever it took to achieve the targeted results.  Although I have grown rather fond of you – most of you – I made it clear that, if there was no action, no change, no results, then – out of principle alone – heads needed to roll.

“Trust me, no one outside of RB Builders cares whether you succeed or not.  No one else cares whether you separate yourselves from your competition.  No one else cares whether you keep your jobs.  Nobody else cares about your livelihood or your future.  Nothing new in that revelation.  Back in the Age of Homebuilder Entitlement, nobody cared, either.  It was just never an issue, because being good enough was good enough.  Success is no longer such a foregone conclusion.

“No one cares, and no one is going to blame you.

“But – that doesn’t change the outcome.

“I can just hear it now”, said the intrepid, results-based consultant.  “Poor things.  What a great company RB Builders could have been.  It was just too much for them to handle, housing’s version of The Apocalypse.  It’s not their fault.

“Nope.  Nobody’s going to blame you, if you go out of business.  But, that is just what you will be – out of business.

“Failure is not an option.  Not for me.  Not for any of you.  We are not giving ourselves that choice.”

 

Be the first to comment
      

The title to this post is the exact question posed in the first-ever post on Escape from Averageness®, in April 2009.  We have stated it in different ways, more recently, “Does the world really need another average homebuilding company?”

La Brea Tar Pits

It’s a question we have raised for more than a dozen years, from before the start of the economic downturn known as the Great Recession.  Although the logical answer may be clear, it is hardly a rhetorical question.  What the question points to is a more important question:  How do you create an alternative to averageness?  How do you achieve sustainable competitive separation?

Sustainable (permanent).  Competitive (dominant).  Separation (advantage).

Settling for average is the road to extinction.

Consider the plight of RB Builders, the mythical homebuilding company portrayed in The Pipeline: A Picture of Homebuilding Production©, facing the world following the end of the halcyon period known as 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, a building company with a middle-of-the-road approach to delivering the value its homebuyers demanded.  

The previous 10 years had been good for RB Builders.  But, it was becoming a dangerous approach to business, because – as the saying goes – “the only thing in the middle of the road are yellow lines and dead armadillos”.  

It was becoming a 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 all looked the same, sounded the same, and priced the same.  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 average-ness.

 

We are SAI Consulting.

Our consulting firm is engaged exclusively in the residential construction vertical, on behalf of clients intent on improving operating performance, profitability, and economic return.  We are uniquely qualified to serve our clients’ interests, because we have solved problems and implemented solutions as the senior managers in enterprises just like theirs.

Our knowledge and experience within a specific industry – combined with the depth of our consulting methodology and the choice of approaches we offer in how that consulting is delivered – sets us apart from any and all other consulting firms.

  • We are not a solution in search of a problem.  We focus a distinctive, systems-oriented, constraints-management problem-solving methodology at addressing an individual client’s specific set of operational circumstances.
  • We will work with clients under either a conventional, fee-based consulting approach, or under a results-based consulting approach.  Under a results-based approach, we are compensated exactly like our clients’ owners, teammates, and financial statements — solely as a share of the results that our consulting enables clients to achieve, solely as a share of the value we help to generate, measured in terms of the actual improvements to financial outcomes.  So – if you happen to be looking for a consulting firm willing to be your business partner, you should consider doing business with us.
  • Pipeline workshops™ and Pipeline seminars™, conducted in various channels, feature the type of learning that occurs in a production situation constructed to replicate the competitive, fast-paced, rapidly-changing, uncertain, risk-laden, variation-filled operating and business environment in which our clients must operate.  Visit the Pipeline Workshop™ website:  buildervelocity.com

Our clients engage us because:

  1. We have a firm grasp of the operational performance issues they face, and we structure our work in ways they understand;
  2. We focus the effort to improve operational performance directly on a specific sequence of solutions that rapidly translate into increased profitability and higher economic return;
  3. We are the leading experts in our chosen areas of consulting, including business workflow, team-based performance compensation, and production management;
  4. We synthesize a broad range of widely-accepted management tools into customized business solutions;
  5. We are committed to a type of consulting and client-consultant relationship defined by economic value, business results, and shared benefits, one that is fully-conscious of the existing capacity and capability for implementing change, and fully-intent on producing learning that increases internal capacity/capability and lessens dependence on us.

 

      

Channels: The Presence of Pipeline Workshops™

Posted May 3, 2020 By Fletcher Groves

(the different channels under which Pipeline workshops™ have been conducted was first laid out on Escape from Averageness® in April 2016, in a post titled “Channels: The Ever-Expanding Presence of Pipeline Workshops™”;  updated and re-posted here)

The principles and disciplines that apply to homebuilding production grew out of decades of work by SAI Consulting on behalf of individual homebuilder clients, designing their production and business systems, mapping their business processes, measuring performance, assessing capabilities, and implementing team-based performance compensation.

In turn, that client work led to the publication in 2013 of The Pipeline: A Picture of Homebuilding Production©, which integrated all of the “pipeline-thinking”.

The publication of the first edition of that book led to the ongoing series of open Pipeline workshops™ that began in 2014 (variously sponsored by sponsored by BUILDER, BuilderMT/MiTek, Continuum Advisory Group, Constellation HB Systems, and most recently by Specitup and Simpson Strong-Tie), as well as the in-depth sharing of pipeline-thinking at Housing Leadership Summits, BuilderMT User Conferences, Epcon Annual Franchise Meetings, CertainTeed Builder Advisory Groups, the NAHB International Builders Show, and NAHB’s Builder 20 Groups.

The first of the series of Pipeline workshops™ revealed the need for a second, expanded edition of The Pipeline – published in 2016 – to codify the enhancements to the Pipeline game™.

It has now come full circle.

In the skull sessions that occurred in 2016 between SAI, its partners, and its sponsors, the concept of workshop “channels” emerged – the idea of Pipeline workshops™ developed to meet the specific needs of diverse participants in the value stream.

Initially, we identified five distinct channels:

(1)  the original, open, sponsored Pipeline workshops™, held each March and October;  Pipeline Workshop™ No. 14 will be October 21-22, 2020, as always, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida;

(2)  Pipeline workshops™ conducted privately for builders large enough to justify bringing the workshop in-house;

(3)  private Pipeline workshops™ sponsored by manufacturers, distributors, and suppliers (like CertainTeed) for the benefit of their builder customers;

(4)  open, non-sponsored Pipeline workshops™ for the benefit of manufacturers, distributors, and suppliers, to give them insight into the current production operations of their builder customers and the direction of the homebuilding industry towards solutions;  and

(5)  private Pipeline workshops™ sponsored by builders for the benefit of their suppliers and subcontractors.

Simply stated, Pipeline workshops™ are the most intense, demanding, interactive, and challenging homebuilding production management learning experience on the planet.

The two-day Pipeline workshops™ and the one-day Pipeline seminars™ are designed to transfer in-depth knowledge and create an intuitive, instinctive understanding of production principles and disciplines specifically related to homebuilding production management;  Pipeline workshops™ are intended to not just inform builders’ thinking, but to reform it, and to re-form it;  they challenge and test builders’ understandings of how their production systems work, and how daily operating decisions drive business outcomes.

Using exercises from the RB Builders: Lessons from the Pipeline© business case study, the progressive series of production scenarios and business games known as the Pipeline game™, and the deep-dive discussion groups known as Velocity Accelerators, Pipeline workshops™ and Pipeline seminars™ simulate homebuilding production in the real business world, in an environment of variation and uncertainty, where operating decisions produce economic results.

The imperative behind Pipeline workshops™ and Pipeline seminars™ is simple:  a builder that generates a Gross Margin of 24% and turns its inventory twice a year will be outperformed – by better than a two-to-one margin – by a builder that generates a Gross Margin of 18%, but turns its inventory four times a year.  It will be outperformed in terms of Net Income;  outperformed in terms of Net Income Margin;  outperformed in terms of Return on Assets.

That is the comparative performance picture of two builders – one with cycle time of 180 days, one with cycle time of 90 days – that are exactly the same size, when the real measure of size is the amount of work-in-process each has to carry.

These two builders have exactly the same resource overhead, exactly the same working capital requirements, and exactly the same risk profile.

Come.  Participate.  Learn.

More:  www.buildervelocity.com

 

      

One Homebuilder’s Stress Test: Why We Map Processes

Posted April 26, 2020 By Fletcher Groves

(originally published on Escape from Averageness® in August 2010 under the same title;  re-edged and republished in June 2013, as part of our retrospective Above Average:  The Best of Escape from Averageness®, 2009-2012;  updated and re-posted here, as a reflection on the more recent, self-induced struggles of two other builders with their own business processes)

Business Process Improvement – the documentation, analysis, measurement, design and redesign, improvement, and management of operating and business processes – is the area for which SAI is most recognized.  We have done more pure work with processes – and done it longer – than anyone in the homebuilding industry.

Almost every consulting engagement we have ever accepted has involved structuring an enterprise (both in and out of the homebuilding industry) around its critical business processes.  There is a reason for the centrality of process workflow:  the only way an enterprise makes money is by creating value;  the only way it creates that value is through the work that it performs;  and the way that it performs most of this work is in processes.

Every other component of an enterprise’s operating model – it’s systems, its organizational structure, even its culture – needs to be subordinated to the processes that produce stakeholder value.

But, even that proposition and prioritization does not do it justice.  Process mapping is far more than documenting, analyzing, measuring, redesigning, and improving workflow;  it serves to connect work to operating performance, and operating performance to business outcomes.

In that sense, process mapping administers something of a stress test;  some pass the test, others don’t.

In 2006, we were engaged by a previous winner of the National Housing Quality (NHQ) award to map its business processes;  bear in mind, in order to be awarded this distinction, the company’s processes had been previously vetted and judged as part of the NHQ examination.

From the start, there were troubling indicators.

As the work unfolded, we pointed out discrepancies between stated operating performance and stated economic returns.  We explained the production physics, and questioned whether the stated performance could have possibly occurred.  We highlighted the declines in operating performance and business outcomes, to which they seemed oblivious.

From a process standpoint, we observed that this company had “a very iterative product design process exposed to an impulsive/compulsive design mentality”, that this was a process with 132 discrete process activities/steps – involving 33 handoffs, 19 reviews, eight approvals, 14 sections of activities where the work of one person or department was subsequently revised.  The project team was unwilling to self-classify a single one of these 132 activities as value-adding, but it classified almost 30% of them as completely non-value-adding.  This was a process that took upwards of 12 months to design a new plan.

New Plan Design was the poster-child for poor process design, but it was not a sclerotic aortal mess.  That would be their Start-to-Closing process, where we calculated cycle time at 279 days, and demonstrated that this process could not possibly be achieving the 5.2x asset turnover they asserted it was.

We stressed the need to establish a set of operating and business measures as the performance requirements for the new process designs, yet they failed to produce a comprehensive, connected set of operating and business outcomes.  The need for (or importance of) performance requirements did not strike a chord with either the executive group or the process teams.  Given the existing level of operating and business performance, we told them that we found “the level of disinterest – the lack of resolve – disturbing”.

This was a builder that had produced an ROA of only 4.7% in 2005;  in the Era of Homebuilder Entitlement, economic return should have been eight-times that level.  Moreover, this was an enterprise that six weeks earlier had been forced to take the gut-wrenching action of terminating the employment of 40 teammates.  We pointed out that the real situation was certainly much worse, that the indicated economic return of 4.7% overstated the company’s true performance, because a .9% Net Income Margin was being masked by the impossible-to-achieve 5.2x asset turn.

We told this homebuilding company that we had worked with builders of all shapes, sizes, rationales, and arguments, and that processes like theirs were not just badly-designed processes;  they were the outcome of flawed thinking on how to best understand and satisfy the requirements and expectations of their chosen market segment, and craft a solution that satisfies the requirements of all of their stakeholders.

We told this company that velocity was a lot of what this project was about.  It was about finding ways to design better, more productive processes, in order to increase productivity and reduce cycle time.  We told them that processes were the logical starting point, the first step in the quest toward a “more-for-less” mentality – more output, more revenue, for the same investment in WIP and production capacity.  We told them that – given their distressed condition – this project likely needed to be about both margin and velocity.

We told them “there is a long road ahead . . . the start of an effort that never really ends;  the process of continuous improvement means just that: a continuous process of improvement”.  We asked them the same questions we ask every other builder with whom we work:  “Does the world really need one more average homebuilding company?  Will ‘average’ performance – operating, business, or otherwise – be sufficient to sustain a homebuilding company in the future?”

We told them that they were not an average homebuilding company, in either intent or reputation, but they were significantly below-average, in terms of performance.  We told them, as John Kotter phrases it, that their situation required a sense of urgency.  We warned them of the consequences of failing to confront the root causes of the problem.

We told them this was only a start.  Whether it was a good start – whether it would be sustained, whether it would produce the results it was intended to produce – was up to them.

That was 2006.  By 2008, they had filed Chapter 11.

 

      

“Risen”

Posted April 12, 2020 By Fletcher Groves

(updated and reposted on Escape from Averageness® every year, on Easter morning)

The intrepid, results-based consultant reclined into the natural seat, at the back edge of one of the dry-eddy pools, where the beach, largely empty of people mandated in response to the COVID-19 pandemic, resumed its slope more steeply, toward the upper dunes.

Easter 2020, Ponte Vedra Beach, Florida

She dug the soles of her topsiders into the sand, still damp from the past night’s high tide.  It always felt good, unfailingly restorative, she thought.  Resting her arms on her knees, she gazed eastward into the grayness of the rain clouds on the horizon to the broken clouds and blue sky above.  The sun had finally made its first appearance above the rain clouds, on what would become a warm mid-April morning in northeast Florida.

She was totally in her element.  A seventh-generation Floridian, she loved the waters and land of her native state.  She wished she could have seen for herself, more of the Florida her father loves to talk about – the mid-twentieth century Florida of his youth, the Florida he loved, the Florida before air conditioning, interstate highways, and theme parks.

This was her routine, every year, on Easter morning.

She reflected on the words of John Eldredge and Brent Curtis, describing the silence, solitude, meditation, and simplicity of what they referred to as desert communion:  “We have come to the shores of heaven together, to the border of the region where our Christianity begins to move from a focus on doing, to one of communion with Christ.”

She reached over and removed her 35mm SLR from its backpack, and waited.  At the right time, she switched the mode to manual, adjusted the aperture and exposure, partially depressed the shutter and studied the image in her viewfinder.

She released the shutter, studied the image, and then set the camera aside.

The intrepid, results-based consultant turned her thoughts back more than two thousand years, to the pre-dawn darkness of the first Easter morning, as she tried to reconstruct what the now disillusioned and despairing friends and followers of Jesus of Nazareth must have been thinking and feeling for the better part of the past two days.

Prophecies notwithstanding, when they went to the grave site on the morning of the third day, what did they really expect to find?  By every rational explanation and every shred of evidence, this man of so much promise, in whom they had placed so much hope, was dead.

They had been eyewitnesses to His death, and the effects of the torture and humiliation that preceded it;  the term excruciating, she reminded herself, came from the Latin ex crucis, meaning literally, “out of the cross”;  Roman crucifixions left nothing to the imagination.

They had been witnesses to his burial, as well, and the unusually intense security of his tomb.

For the friends and followers of Jesus, this was certainly more than the physical death of one man;  for them, it was the death of all Hope.

Her thoughts eventually moved to another time not far removed from the darkness of the days following the death of Jesus, as Peter, and others, asserted, for everyone to hear, that not only had they witnessed His torture, crucifixion, and burial, but they had also been the eye-witnesses to His resurrection.

Rather than abandoning their faith and succumbing to hopelessness, Peter and the other apostles were now stating, publicly, for everyone to hear, that they were willing to live their lives – and to give their lives – for the lives of others, and for the Faith and the Hope that Jesus’ crucifixion, death and resurrection gave all of them.

In the words of the apostle Paul, penned later to the churches of Galatia, they were all saying, in essence, “I have been crucified with Christ.  It is no longer I who live, but Christ who lives in me.  And, the life I now live in the flesh, I live by faith in the Son of God, who loved me and gave Himself for me.”

That has been the experience of every Christian, ever since, she among them.

She smiled, and whispered.

“Risen”.

 

“God’s Kingdom had come, not at the end of time, but within time – and that had changed the texture of both time and history.  History continued, but those shaped by the Easter Effect became the people who knew how history was going to turn out.  Because of that, they could live differently.  The Easter Effect impelled them to bring a new standard of equality into the world and to embrace death – as martyrs, if necessary – because they knew, now, that death did not have the final word in the human story.”  (“The Easter Effect and How It Changed the World”, The Wall Street Journal, March 31, 2018)

Everything else – past, present, or future – either points toward, or proceeds from, the fact of the death and resurrection of Jesus Christ that we rejoice and celebrate every Easter.