In the late ’90s, many builders intent on improving their customer service looked to Lexus for inspiration. More recently, companies that wanted to produce earth-shakingly new green homes seized on the Prius as an outside model. I don’t think there’s any doubt what company builders need to be emulating today—Apple. Apple works as a metaphor for home building companies in many ways. The first is that the company never stops reinventing itself and its products. That’s what home builders need to do during the early years of the housing recovery. It will be marked by extreme margin compression and brutal competition from existing homes, many of them barely used.
The happy ending that results from Apple’s relentless innovation is the rollout of a product such as the new iPhone 4. Each year Apple unveils a beautiful new phone that’s cooler and sexier than the last. This latest iteration edits video, enables video calls, and allows you to watch movies from Netflix directly on your phone.
If you own last year’s model, the problem is that you can’t do these things on your existing phone. You have to buy a new one. Moreover, these new apps are so compelling that people who have been waiting for improvements will finally jump in and buy an iPhone. All the buzz created by happy iPhone users juices sales as well.
Imagine if builders innovated with their home design like this every year. What if each year they introduced demonstrably better designs that enabled lifestyle features buyers just had to have? And what if it happened with each new phase in a master plan? That would solve a lot of problems with demand for homes in that last phase.
But Apple doesn’t just concern itself with design details; it improves the chassis as well. The latest iPhone is thinner, gets better reception, and has a longer-lasting battery. There are plenty of practical reasons to buy a new one as well. That’s music to the ears of a younger generation of buyers that expects continuous improvement.
Builders could do the same. They could track the energy performance of each model series. Each year they could market homes that consume 20 percent less, making last year’s model obsolete. They could measure and improve their use of recycled material. They could ratchet down on waste in construction.
Some builders do manage to raise the design bar with each model introduction, though because they don’t have the national footprint that Apple does, and the benefit of bountiful national publicity, no one outside their local market ever learns about it. Though rare, some companies even manage to reinvent whole new product categories, like Apple did with its iPad. The builder equivalent would be new lines of modular or zero-energy homes.
But very few home building companies innovate in both design and construction like a high-tech company. They tend to behave more like large-scale manufacturers. They find a system that works, a house that they can build repeatedly with as little liability as possible. They stick with the home and the process until it breaks.
Apple likes to fix things that aren’t broken. Steve Jobs has created a culture that harnesses creativity in people, stimulates new ideas, and provides a framework for launching innovations. Jobs likes to quote Wayne Gretzky: “I skate where the puck is going to be. Not where it has been.”
Future success in home building will depend on continuous innovation. Already, new companies have entered the business with dramatically different operating models and improved products. Old-line builders need to reinvent themselves; they can’t afford to continue doing business as usual. That’s a recipe for extinction.