The Pipeline: Why read it?

(The Pipeline: A Picture of Homebuilding Production© is available on all of the bookseller websites (amazon.com, barnesandnoble.com, and booksamillion.com), and the publisher website (virtualbookworm.com)

Pipeline Book Cover

The Pipeline: A Picture of Homebuilding Production© is a business book.  It is about the principles and disciplines of production management, as they relate to – and as they are applied toward – the specific conditions, requirements, and parameters found in the homebuilding industry.

I am told that the Introductions written for business books typically answer two questions, first-and-foremost:  Why should you purchase this book?

In the case of The Pipeline©, I would say it’s because improving performance on the velocity side of the ROA equation is the best path – perhaps the only path – to achieving sustainable competitive separation.

The issue is not whether the margin side of ROA is less important than the velocity side of ROA;  margin is neither unimportant nor less important.  Gross Income derived from increasing how much you make on each house you build (margin) has the same contributory value, dollar-for-dollar, as the Gross Income derived from building more houses with a finite and controlled amount of inventory and capacity (velocity).

Nor is it necessarily a choice.  Sometimes the circumstances favor one or the other, but we don’t necessarily have to choose between efforts to increase Return on Sales and efforts to increase Asset Turn;  margin and velocity are driven by different aspects of the business, and they generally don’t react to, or adversely affect, each other.

It is, simply, that higher margin, while as desirable, beneficial, and important as higher velocity, is not a strategy for creating a lasting competitive advantage;  between higher margin and higher velocity, higher margin is the easier, more common strategy.

The same is even more true of the opposite to higher velocity, which is higher capacity.  Adding production capacity (and the inventory for it to work on) is a “more-for-more” proposition.  It’s the easy, well-traveled road;  anyone can resort to adding production capacity, but don’t expect it to set you apart.

As a business strategy, higher margin and more capacity can be co-opted.  True, sustainable, competitive separation comes more from doing what your competition will not or cannot do.  It is the hard, demanding stuff.  It doesn’t come from being satisfied with adopting other builders’ “best practices”;  it doesn’t come from contentedness with being good, no-better-but-no-worse than your competition, or from taking a middle-of-the-road approach to delivering the value your buyers demand.  

The world doesn’t need any more average homebuilding companies;  it already has enough of them.

 

The Pipeline: A Picture of Homebuilding Production© has led to the Pipeline workshop, a series of public workshops sponsored by Hanley Wood and Continuum Advisory Group;  the next Pipeline workshop™ will be held October 14th and 15th, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.

More information:  www.buildervelocity.com