Pipeline Workshops™: Velocity Accelerators®

If you had to choose one word to associate with a Pipeline Workshop™, it would be velocity – a vector measure defined as speed made good in a purposeful direction.

We want to elevate velocity to an equal standing with margin, because margin and velocity are the co-equal components of economic return, and the two conditions necessary for achieving sustainable competitive separation.  Which is why, at every Pipeline workshop™, we select specific areas of production management for a deeper dive – for more discussion, the use of pointed, challenging RB Builders: Lessons for the Pipeline© business case exercises, etc.

These areas are known as the Velocity Accelerators®.

Velocity Accelerators® tend to be important areas that never receive sufficient attention;  in fact, beyond a passing understanding, Velocity Accelerator® sessions are often the first meaningful exposure builders attending a Pipeline workshop™ have had to these areas.

For the upcoming workshop (Pipeline Workshop™ No. 13, March 25-26, 2020, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida), we are highlighting three areas:

Business Process Improvement (BPI):  The most basic, most fundamental proposition in the business of building homes is this:  the reason a builder exists is to make money;  the way a builder makes money is by delivering value – benefit in excess of cost – to its homebuyers and other stakeholders;  that value is mostly delivered through the work that the building enterprise performs;  value-delivering work has to be performed in some manner of workflow, which includes work performed in processes.

Make money . . . by delivering extraordinary value . . . through the work a builder performs . . . in processes.

BPI is the front-end of a process of continuous improvement, one that fundamentally changes the perspective of workflow, and becomes the driving component of the operating model that forms a builder’s strategic value discipline.

BPI improves both the margin and velocity sides of economic return.

Critical Chain Project Management (CCPM):  Developed more than sixty years old, the scheduling algorithm known as the Critical Path Method (CPM) was never intended to function in the environment of homebuilding production, which is essentially project portfolio management with surrounding, supporting, and embedded processes.

CPM was never designed to function in environments in which velocity is important, where faster cycle time and higher inventory turns are critical drivers of business outcomes.  Moreover, CPM is oblivious to the effect variation has on the scheduling of a production system.

Yet, Critical Path is the scheduling algorithm used in every ERP system designed for homebuilders.

CCPM is the leading edge – the future – of project scheduling for homebuilding;  it promises significant improvements in the management of homebuilding production – faster cycle times, faster inventory turns;  managing variation;  enabling homebuilders to generate more Revenue, more Gross Income, with a planned, finite, and controlled amount of work-in-process and production capacity.

Critical Chain is about improvement on the velocity side of Return on Assets.

One of our sponsors, Specitup, is coming out with their own CCPM app, and they will be sharing that information.

Open-Book Management and Team-Based Performance Compensation:  The efforts of a homebuilding company to improve operating performance and business outcomes will become far more difficult – it will likely fail – if it does not succeed first in creating a homebuilding team that works toward commonly-held and commonly understood business goals, as opposed to being a collective of so-called teammates working toward individual goals.

What would be missing, is an underlying business logic that forms the necessary context for understanding everything else.

To become the kind of savvy, motivated, mutually-accountable homebuilding team required to compete effectively today in the business world, everyone on the team 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.

That is the role of Open-Book Management.

But, it is not enough that teammates understand the business outcome that is at stake;  they must each have a personal stake in that business outcome.

That is the role of performance compensation.

Open-Book Management and Team-Based Performance Compensation affect both the margin and velocity sides of economic return.

 

The reason we are only highlighting these three Velocity Accelerators® at this workshop, instead of the five or so we have highlighted in previous workshops, is to give these three areas sufficient emphasis.  We still intend to touch briefly on two other Velocity Accelerators®:

Epic Partnering™:  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 of engagement.

Developing the business relationships that unify a builder’s value stream is both a program and a process, consisting of milestones, rewards, education, features, and rewards.

Epic Partnering™ is transformative, and it has implications on both the margin and velocity sides of economic return.

Building Information Modeling (BIM):  Building Information Modeling (BIM) explores building design in a 3D model of the three spatial dimensions of width, height, and depth (some would also say time and cost), and links to multiple databases with information on costs, schedules, specifications, engineering data, and more.

BIM integrates, consolidates, and links information;  it makes data more accurate, useful, and manageable.

As with Epic Partnering™, Open-Book Management, and Business Process Improvement, BIM has implications for both sides of economic return, for both the margin side and the velocity side of Return on Assets:  better, more collaborative designs with fewer design errors, more accurate job cost books, job budgets, and purchase orders (margin);  plans that are easier to build, with more dependable job schedules, shorter cycle times, faster inventory turns (velocity).

By some estimates, BIM can make product 35% faster and 25% less costly to build, with a more satisfying homebuying experience and a higher quality product.

Yet, for all its promise to transform the homebuilding industry, BIM has historically had a shallow adoption curve, largely because implementing BIM requires a lot of money, huge amounts of determination and resolve, a different mental model, and a willingness to abandon past practices.

Which is where opportunity often lives.

One of our sponsors, Simpson Strong-Tie, will be sharing information on their BIM Pipeline and Quickstart Toolkit apps.

 

We like the balance between the three selected Velocity Accelerators®:  a blend of immediate and long-range initiatives that accelerate velocity, but also improve margins.

Come.  Participate.  Learn.

 

The next Pipeline workshop™ will be held March 25-26, 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