Do you really expect to win this fight with one hand tied behind your back?

(initially published as a post on Escape from Averageness® in December 2014, under the title “Pipeline Workshops™: Learning Beyond The Builder 20 Club Level”, updated, slightly abridged, and republished here, on the challenging nature of thriving on the velocity side of economic return)

Does the world really need any more average homebuilding companies?

In order to achieve sustainable, enduring competitive separation, a builder has to thrive on both the margin and velocity side of Return on Assets;  make more on every house;  build more houses without increasing inventory and overhead.  As we have noted on countless consulting engagements, margin and velocity are essential components of ROA.

State it this way:  Viewed as extremities, do you really expect to win the fight with one hand tied behind your back?

SAI Consulting has benefited from its long involvement in the homebuilding industry, so we make a point of giving back.  For many years, we have been presenters at IBS and the Housing Leadership Summit (now the BUILDER 100);  when we have been asked to speak at NAHB Builder 20 Club meetings, our policy is always to waive the fee portion of our work.

In 2014, I was asked to make an eight-hour presentation on how to improve cycle time at one of the Builder 20 Club Fall meetings.  Since cycle time improvement is not really an eight-hour topic at this level of detail, I thought it would benefit this B-20 Team’s members more if I presented a contextual view of cycle time, using the production principles and disciplines we teach in Pipeline workshops™, which would also allow us to include the production simulations and business games we use in the workshop.

Following the presentation, I told John Lingerfelt (the then-NAHB networking groups facilitator for this Builder 20 Club) that, in retrospect, B-20 Club Team gatherings were not well-suited for an eight-hour presentation on this kind of topic, if the same learning objectives used in a Pipeline workshop™ are applied.

Among other things, I told him the meeting agenda was distractingly full.  I told him it is not possible to craft material that will apply uniformly to each or every club member’s circumstances, business environment, or operating model.

I told him, that if I had been aware of the B-20 mindset concerning learning objectives – that members preferred to receive information they can take home and quickly implement in their businesses – I would have been clearer to the group at the beginning of the session about how difficult and challenging the material is, that they can dismiss the notion that they are going back to their shops with a few easy-to-implement solutions.

I would have told the group, more emphatically, that improving performance on the velocity side of Return on Assets is extraordinarily hard work, that it requires an extraordinary amount of resolve and persistence to do it.  I would have told them how unsettled the solution is in homebuilding, given the unique attributes of production in this industry.

Several club members approached me afterward to share what they felt they had learned, what they thought had been worthwhile about the presentation;  there was agreement on the importance, the relevance, of the material.  It was just not what members wanted – they said the discussion was “a bit too focused on the academic concept and not focused on its practical usage”.  And, one of the club members said, “Our members understood the general concept of increased velocity and how it can improve the bottom line.”

Fine.  I think those are honest observations.  I can deal with it.  In subsequent B-20 Club meetings I have conducted, I have bulleted easy-action items and made it a three-hour presentation.  It was not a waste of time to make this particular presentation, but it does point to the need for production workshops dedicated to deeper learning.

To both points, I would say (1) before something can be utilized, it must be understood, and (2) the mere comprehension of a general concept is not sufficient.  There is a big gap between understanding the general concept of increased velocity, and possessing the deep, instinctive understanding of velocity that enables you to create sustainable competitive separation by implementing the principles within an enterprise-specific set of circumstances.

Pipeline workshops™ propose significant changes in the thinking about production and business management that needs to occur in the homebuilding industry, constituting a 180° change in perspective and understanding.  Escherian is not the right term, but these changes represent paradigm shifts of a scale that bring to mind the “Two Women” illustration (above) that the late Stephen Covey used in The 7 Habits of Highly Effective People.

What do you see?  Yes, it’s a picture of a woman.  Is she a young woman?  Is she an old woman?  Which direction is she facing?    

Or, the shape published by Louis Albert Necker, his so-called “Necker Cube”.   

What do you see?  Is the blue panel at the front of the cube, or is it at the back of the cube?  Does the angle of the cube project upward to the left, or does it project downward to the right?

Learning how to thrive on the velocity side of Return on Assets presents these questions:  What do you see?  Do you understand what you are seeing?  The implication is that there is more to it than what you see, and you may not be seeing what is really there.

Learning to see requires a different perspective – a different set of mental models – regarding the same set of facts.  You have to understand the principles and disciplines that apply to homebuilding production before anything else;  before you try to manage it, before you try to make changes, before you try to improve performance.

We say that a homebuilding production system is a pipeline.  How big is the pipe?  What is its capacity?  How long is it?  What does it cost?  We say that operating decisions drive business outcomes.  How do you connect them?  What connects them?  What do the measures of operating performance and economic return hold in common?

Paradigms are cognitive frameworks containing basic assumptions, perceptions, beliefs, ways of thinking, methodologies that are commonly accepted by members of a group.  What’s the general paradigm builders hold about size?  About growth?  About capacity?  About productivity?  About costs?  About production balance?

Is even-flow a mechanism or is it an outcome?

In a particular production system, what is its Necessary WIP – the range of Inventory/WIP required to efficiently and effectively operate the system?  What is its Maximum WIP – the amount above which is excessive?  What is its Minimum WIP – the amount below which is insufficient?

When do you choose to measure cycle time, and when do you choose to calculate it?  What do the two methods mean?  What are their different uses?

When you schedule the system, do you start jobs at a pre-determined rate, or do you start jobs according to the condition of a pacesetting resource?

What do you see?  Do you understand it?

We say homebuilding production is a system.  How do you improve the performance of that system?  How do you determine its capacity?  What restricts its capacity?  What is the nature of the workflow?  Is it process management?  Is it project portfolio management?  Regardless of what type of workflow it is, how do you schedule it?  What do you schedule?

How does the system handle the conundrum posed by a predictable reaction to variation?  What does variation really cost a homebuilding operation?

What do you see?

How do you reduce the duration of a job, and still protect its completion date?  What is it about a job schedule that you actually manage?  How do you deal with both task dependency and resource contention?

What do you see?