Clayton Homes and Clayton Properties Group

In Clayton Properties' acquisition of Gallatin, Tenn.-based Goodall Homes, we see a disruptive innovation strategy playing out, two parts Clayton Christensen, and one unmistakably potent part Warren Buffett.

The most important strategic dimension of the play--which blends Clayton Homes manufactured home pedigree with local home builders who've got a somewhat exclusive footprint and land asset pipeline in second, third, and fourth-tier markets offering entry-level pricing--is a Buffett- and Berkshire Hathaway-fueled sense of timing that the moment is right for a big play in response to a woefully unmet need.

So, the Warren Buffett component of the strategic architecture is the timing, combined with a solid foundation of trust and conviction in the company operators his Clayton Properties unit is buying into. Goodall is not just an operator with a proven track record; it's a progressive organization with a constant-improvement DNA.

Now, for the disruption dimension. Clayton Christensen maps disruption not to the failure of incumbent, established players in a market arena, but to their success. It's market leaders' well-oiled machinery of winning that makes them vulnerable to disruption, usually from below the reach of the radar waves that detect competitive threat.

Now, part of the reason nobody much thinks about factory-based home assembly companies as a credible threat to site building, is that era after era, smart people have been profoundly in error about the real promise and real viability of modular construction as an alternative to ancestrally-practiced site home building.

But, what better time than in the throes of an energy glut that has driven down shipping and transportation costs, and, even more importantly, in the warp-speed improvement of automated technologies, 3D printing, robotic assembly, and precision construction in the factory vs. on a job site, might be the moment to reality-check at least a hybrid of site-built and factory built homes?

Speed with accuracy and profitability is perhaps the only counter-force home builders can bring to a market that layers virtually every new home offering with thick quilts of tax, fee, delay, and a host of associated costs. These costs, we're afraid to say, aren't likely to subside. Profitability, then, on a gross margin improvement scale, can only come from doing more with less.

That's where the Warren Buffett Clayton Properties strategic system becomes compelling. By combining the "best-of" factory-built with site built, the low-end home in the lower-tier markets may truly be a starter home variety that promises its buyers an escape hatch from renting they still crave.

What's more, Clayton's strategy introduces a new strategic acquisition player to a line-up of home builders who may be looking for improved lot assets for a competitive price.

The long-vaunted disruptive impact of modular, factory-assembled homes and components of homes is well underway.