Archive for June, 2021

Pipeline Workshops™: Finding TrueNorth

Posted June 25, 2021 By Fletcher Groves

Scott Sedam is President of TrueNorth Development, Inc., and is the homebuilding industry’s foremost Lean Production practitioner.  A well-known, well-respected Lean Building purist, Scott is a Bill Pulte protégé, with roots that go back to W. Edwards Deming and TQM.

He is a friend and longtime fellow consultant.

 TrueNorth Development©

In 2013, after the first edition of The Pipeline: A Picture of Homebuilding Production© was published, and as I was planning the first-ever Pipeline workshop™, I suggested that Scott attend as SAI’s guest, so that he could judge the merits of pipeline-thinking for himself.

I wanted his opinion of the workshop, but I also wanted him to share with those first-time-ever attendees his thoughts on applying Lean Thinking to both sides of the DuPont identity (the most insightful method of calculating Return on Assets), his thoughts on applying Lean Thinking as much to the velocity side of economic return as to the margin side.

Scott graciously came to that first workshop in March 2014, functioned just like any attending builder in the discussions and in the Pipeline games™, and he and I co-presented our thoughts on blending improvement methodologies towards solutions that work best for homebuilding.

Afterwards, this is what Scott wrote in a discussion on the BUILDER group on LinkedIn:

“If you are ready to challenge your brain, get out of your well-sealed ‘Builder Box’ and make a huge leap forward in understanding schedule and its impact, come to this workshop and bring a few of your better thinkers.

“The roots of [this] workshop are in Goldratt’s Theory of Constraints, which is at first-blush exceedingly simple, but you can spend years studying the intricacies.  Fletcher puts it all in builder language and forces you to go deep into the impact of our most common builder practices.

“If all builders learned and followed the principles [taught in a Pipeline workshop™], our industry would take a huge leap forward.  The winners would not be the builders alone, but also homeowners and especially our suppliers and trade contractors.  Fletcher does not know I am writing this, but I strongly recommend his Pipeline workshop™ to everyone who has the will to change for the better.”

Come.  Participate.  Learn.

 

The next Pipeline workshop™ will be held October 14-15, 2021, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.  Attendance is limited to only 30 attendees.  The cost is $895.00 per person;  the cost during early registration, open through July 30, 2021, is $750.00.  For team pricing, inquire here (flgroves@saiconsulting.com).

Delivered by SAI Consulting.  Sponsored by Simpson Strong-Tie.

For more details:  www.buildervelocity.com

 

Pipeline Workshops™: Come. Participate. Learn.

Posted June 20, 2021 By Fletcher Groves

Pipeline workshop™ No. 16 is October 14-15, 2021.  During the weeks leading up, we explain to attendees what they are going to experience.  We describe the management tools that they will have to learn to use, the nature of the business case they will have to confront.

We forecast the take-aways, the knowledge, the enhanced capabilities.  We explain the challenging, disruptive, competitive nature of the learning they will experience – the degree of interaction, the level of intensity.

At a Pipeline workshop™, it is learn-by-doing, applying production principles and disciplines to production simulation, and measuring the resulting operating performance and economic return.  We communicate our expectation that builders come prepared to learn that way, that there is no place to hide, that they need to check their sense of entitlement at the door.

Nevertheless, most attendees admit afterward they should have studied more, prepared harder, in advance of the workshop.

We make no apologies for the extraordinarily demanding nature of a Pipeline workshop™.  It is intended to not just inform your thinking, but also to reform – and to re-form – that thinking.  It is designed to challenge your paradigms, to change the way you see production.  Pipeline workshops™ are intended to test your understanding of how homebuilding production systems work and how daily operating decisions drive business outcomes.

We constantly remind builders: there is a big difference – a big difference – between being in the home building business, and being in the business of building homes.

You have to come to a Pipeline workshop™ prepared for what is going to be thrown at you.

For example, the RB Builders: Lessons from the Pipeline© business case, rewritten every year, requires the use of financial tools like Breakeven Analysis (using variable costing, CVP Analysis), the DuPont identity (for determining ROA), and the Cost of Variation.  It requires an understanding of production physics, including Little’s Law* and the Law of Variability Buffering.  It requires the application of a combination of improvement methodologies (TQM, TOC, Lean Production, Six Sigma).

As a start, you can read the book.  The Pipeline: A Picture of Homebuilding Production, Second Edition© is always carried in stock on amazon.com;  it is also available (print-on-demand) directly from the publisher’s bookstore (virtualbookworm.com).

If you want it all handed to you, don’t bother to attend.  If all you care about is binder material you can underline, put on your bookshelf, and check the box, don’t waste your time.  If you aren’t willing to own what you take away from it, a Pipeline workshop™ is not for you.  If you believe improving the margin side of Return on Assets is the only game in town, a Pipeline workshop™ is about a different game.

On the other hand, if you are determined to create sustainable competitive separation, by learning to thrive on the velocity side of Return on Assets®, by learning to excel at a discipline that other builders find too difficult, too rigorous, too daunting, then a Pipeline workshop™ is precisely the right place for you to be.

Come.  Participate.  Learn.

 

The next Pipeline workshop™ will be held October 14-15, 2021, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.  Attendance is limited to only 30 attendees.  The cost is $895.00 per person;  the cost during early registration, open through July 30, 2021, is $750.00.  For team pricing, inquire here (flgroves@saiconsulting.com).

Delivered by SAI Consulting.  Sponsored by Simpson Strong-Tie.

For more details:  www.buildervelocity.com

We will entice you a bit with Little’s Law.  Consider this scenario:  C/T=120 days;  WIP=80;  Closings=240.  Little’s Law says:  CT = (WIP ÷ C) x 360;  WIP = (CT x C) ÷ 360;  C = (WIP ÷ CT) x 360.  Therefore:  CT = (80 ÷ 240) x 360 = 120 days;  WIP = (120 x 240) ÷ 360 = 80 units;  C = (80 ÷ 120) x 360 = 240 closings.

 

Pipeline Workshop™ No. 16: Save the Date

Posted June 11, 2021 By Fletcher Groves

Pipeline Workshop™ No. 16 will be held October 14-15, 2021, at the Ponte Vedra Inn and Club in Ponte Vedra Beach, Florida.

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

“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)

Pipeline workshops™ are now in their eighth consecutive year, and we have worked constantly to enhance and improve it.  Over the years, we have:

(1) improved the best production simulator and business game in the industry (the Pipeline Game™), made it faster to play, easier to understand;

(2) introduced an operating statement format to the game that mirrors the particular characteristics of homebuilding operations;

(3) found ways to transfer the learning faster, to make the connection between operating decisions and business outcomes clearer, quicker, more direct;

(4) started to examine areas of disruptive innovation (for example, outsourced building models that become integrated building models);

(5) introduced an MBA-level business case (RB Builders: Lessons from the Pipeline©);

(6) emphasized important and emerging areas we call Velocity Accelerators®.

Pipeline workshops™ are unique, completely unlike any other homebuilding conference (and, under current COVID-19 restrictions, they are the industry’s only significant event that is conducted live, not virtually).

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 rigorously test attendees’ correct understanding of production management principles and disciplines, 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 being in the homebuilding business, and simply being in the business of building homes.

Our venue, the Ponte Vedra Inn and Club, is a terrific AAA Five Diamond oceanfront golf and tennis resort dating back to 1928;  we provide a relaxing and enjoyable reception on the Historic Inn’s putting green at the end of the first day;  we offer recommendations on outstanding local dining;  there are abundant opportunities 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, hopefully doing more with less;  dealing with variation;  managing homebuilding production as the type of workflow that it really is – multi-project management with surrounding, supporting, and embedded-processes;  placing the emphasis on 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. 16 opens June 21, 2021.  The attendance fee is $895.00.

Sponsored by Simpson Strong-Tie.

Come.  Participate.  Learn.

 

Here is the permanent link to the workshop 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 full attendance fee is $895.00;  the early registration attendance fee (June 21, 2021 through July 30, 2021) is $750.00;  for team pricing, inquire here:  (flgroves@saiconsulting.com).

 

One Homebuilder’s Stress Test: Why We Map Processes

Posted June 5, 2021 By Fletcher Groves

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

There is a good reason why so many of our consulting engagements have involved structuring an enterprise around its critical business processes:  The only way an enterprise makes money is by creating value;  the only way it creates value is through the work that it performs;  and it performs much of that work in processes.

As valuable as that proposition is, it does not do it justice.  Process mapping is far more than documenting, analyzing, measuring, understanding, then redesigning and improving workflow;  mapping processes 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 it, others do not.

In 2006, at the height of the Age of Homebuilder Entitlement®, we were engaged by a previous winner of the National Housing Quality Award to map its business processes;  understand, in order to be awarded this distinction, the company’s processes had to have been previously vetted and judged as part of the NHQ examination.

There were troubling indicators, right from the start.

As the work unfolded, we pointed out discrepancies between supposed operating performance and supposed economic returns.  We explained the associated 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 completely 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 – 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;  it classified almost 30% of them as completely non-value-added.  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 turn that was being asserted.

We stressed the need to establish a set of operating and business measures as the performance requirements for the new process designs, yet the team 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 a Return on Assets of only 4.7% in 2005;  in that era, 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 laying-off 40 teammates.  We made our point very clear that the real situation on economic return was certainly much worse than they were saying, that the measly 4.7% ROA they were asserting overstated the company’s true performance, because a Net Income Margin of less than one-percent (that is correct, .9%) was being masked by the impossible-to-achieve 5.2x asset turn.

We told this client that we had worked with many other builders, of all shapes, sizes, rationales, and arguments, and that their processes were not just badly-designed;  they were also 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 team that velocity was a lot of what this effort 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-without-more” 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 what happens with both components of Return on Assets;  it likely needed to be about achieving both higher margin and higher velocity.

We said to 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 intent or reputation, but they were significantly below-average, in terms of performance.  We told them, as John Kotter says, that their situation required a sense of urgency.  We warned them of the consequences of failing to brutally confront reality.

We completed the documentation, analysis, and redesign of their processes.  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 in 2006;  in 2008, they filed Chapter 11.

 

(originally published on EFA® in August 2010 under the same title;  re-edged and republished in June 2013, as part of our initial retrospective “Above Average: The Best of Escape from Averageness®, 2009-2012”;  updated and re-posted in April 2020, as a reflection on two other builders’ more recent, self-inflicted struggles with their business processes;  updated and re-posted here, as part of our second retrospective, “Still Above Average: The Best from Escape from Averageness®, 2009-2021”)