Narrow your focus

“In many ways, RB Builders was . . . just another homebuilding company . . . with a middle-of-the-road approach to delivering the value its homebuyers demanded . . . locked into an operating model – into organizational structures, management systems, processes, cultures, and employees – that could not deliver extraordinary levels of distinctive value . . . indistinguishable from other builders, and unable to create any type of competitive advantage . . . ”

There are two sets of questions that lie at the heart of what a homebuilding company does, and therefore, what a homebuilding company is. The first set of questions is about the value buyers want. What band of the value spectrum do your buyers really want, and want so much they are willing to pay for it? Upon what combination of price, product attribute, and personal attention will they base their buying decision?

The second set of questions is about how the homebuilding company that you own, manage, or work for delivers that value. Can your company deliver extraordinary and distinctive levels of that specific value with its current operating model? By operating model, I mean processes, organizational structure, management systems, even the type of employees you have, and the culture you promote.

You can make it as complicated as you choose, but, fundamentally, there are only three value propositions you can offer homebuyers on which they will base their buying decision. You can promise them the best comparable price (“Best Price”). You can promise them the best location, best design, or best quality, regardless of price (“Best Product”). Or, you can promise to meet their individual and particular (sometimes unique) requirements for both product and homebuying experience (“Best Solution”).

Value is defined by homebuyers. While most of their decisions are a combination of all three factors, they do not assign them equal value. One of the factors tends to be the most influential and it trumps all of the others in the buying decision. Homebuyers do not demand equal levels of price, product attribute, and service. Yes, they would like to have extraordinary levels of value in all three, but they will demand – they will choose – to have extraordinary levels of value in one component over the other two.

On the other hand, that value is produced by you. Most homebuilders tend to see themselves from two perspectives, neither of which enable them to provide the extraordinary level of distinctive value their buyers require. First, they see themselves as “all things to all people”, capable of meeting different bands of the value spectrum equally well. Second, they also tend to see the capabilities of their own operating model as no better than the average homebuilder.

Selecting the value at which to excel is a strategic decision. It requires focus, and that focus requires a choice about the component of value. The offer of value must choose one component over the other two. At the same time, the offer of the chosen component of value cannot ignore the threshold requirements that must be met for the components of value that were not chosen. It is a question of emphasis, not exclusion. The offer cannot focus on one component to the complete exclusion of the other components. If the value delivered in the other two components falls below the threshold, the customer will reject it and go somewhere else.

The choice of a value proposition – and the choice of an operating model that delivers it – breaks out on both geographic market and product segments. You can slice it any way you choose, but, at the end of the day, within every market and product segment, there is only room for two or three homebuilders to effectively compete. The rest are superfluous, irrelevant, unnecessary – and unable to compete.

So – you better narrow your focus.