Builders, many of them, look at business growth and innovation as separate and distinct.
Labor constraint, for instance, can impact business growth. However, since business growth and performance are perceived as unrelated, uncorrelated, and not cause-and-effect tied to investment in innovation, strategists focus on the wrong problem--the lack of skilled laborers entering the building workforce--rather than the one that could solve the more fundamental issue of improving construction productivity.
Innovation is one of those terms that reflexively set off a BS-detector in many smart home building leaders' minds. Business growth and performance can come from doing the same things better, so why introduce a new set of things you don't know whether or not will achieve the goal of spending as little as possible in capital, land, materials, labor, and sales cost, in return for as much as possible in terms of a margin on that particular unit of inventory?
But, in fact, innovation and business growth are related.
Innovation is not about fringe ideas and pet initiatives that enhance reputations and gain favor only when there's capital and time to spare on non-essential activity. It is about attacking current business and operational models in search of--because they're there--disruptive new models to profitably serve customers ... and drive business growth.
When it comes to tying innovation and its impact on business growth and performance, this Harvard Business Review analysis from three Accenture execs--Omar Abbosh, Vedrana Savic, and Michael Moore--offers two keys to success.
One of them is this: Aim high. Abbosh, Savic, and Moore write:
The effective innovators focused on solving big problems. They saw innovation as a means to an end, not the end goal. In contrast, less effective innovators focused their innovation investments on incremental improvements to existing products and services.
Two practices stood out. By a margin of 16 percentage points relative to the other companies sampled, the effective innovators put greater emphasis on developing unique technological advances with the potential to create entirely new markets. They also deliberately target consumers’ “higher needs” — such as autonomy, happiness, and social connections — at a higher rate (a gap of 22 percentage points relative to the other companies sampled).
The other key, the HBR article authors say, is a single, strategic architecture for innovation. In other words, directly integrated and one with business growth planning.
Where the money, time, and strategic focus go in innovation, and the extent to which every associate in the company becomes a fully-engaged stakeholder in it, is in driving growth even while disrupting current models to achieve it.
When judges sat down early last month--during the Winter Innovation Summit hosted by the Sorensen Impact Center at the David Eccles School of Business at the University of Utah--to pare down a list of 25 noteworthy candidates for the first annual Ivory Prize for Housing Affordability, their focus closely followed those two keys to innovation success.
Aiming high and making innovation investment a core to an organization's DNA seem to be common denominators among the 10 initiatives that have made the final cut for consideration for the $200,000 prize, which will be announced during a press briefing at the National Press Club in Washington, DC, on April 10.
“In many ways, our finalists are making a tangible impact on housing affordability and inspiring innovation. I’m excited to see them advance. Getting to know more about our nominees and their level of commitment to making a difference has been a tremendous experience,” said Clark Ivory, CEO of Ivory Homes and benefactor to the Ivory Prize. “We are extremely grateful for all of our nominees and know they will continue to make a notable impact on housing affordability.”
Ivory uses the word "impact" twice here in his comments above. And 10 finalist entrants--of more than 125 original nominees and 25 semi-finalist programs, inventions, and initiatives have stood the test of judges for three characteristics.
- How innovative?
- How impactful?
- How sustainable?
Over the next couple of weeks, leading to the April 10 revelation of the winner, we will take a look, more in depth at the 10 "finalist" programs. Awards judges looked for those three characteristics in programs that fit roughly under three areas of influence over expanding Americans' access to affordable housing in their communities: design and construction, finance, and policy and regulatory reform.
Our first spotlight shines on a case of the latter, a recently introduced initiative in Austin, TX, that has pulled the levers both of effective regulatory and policy change as well as product design to set up what could be a game-changing expansion of Austin's attainable housing inventory. Not only that, homeowner participants in the program would then have a new revenue stream to help them manage property costs. Benefits extend to both the property owner and the occupant of the new auxilliary dwelling unit.
Here's an overview of the program:
The Alley Flat Initiative (TAFI) is a collaboration between the University of Texas Center for Sustainable Development (UTCSD) and the Austin Community Design and Development Center (ACDDC) that employs innovative ADU policy with a number of underutilized alleys to create additional dwelling units by tucking small, single-family homes on existing lots. By creating a ‘one-stop shop’ for income-qualified homeowners, TAFI provides personalized support throughout the development process, which includes green design, financial education and pre-qualification, financial assistance, property management training, and construction guidance.
Here's how Ivory Prize judges summed up the merits of the Alley Flat Initiative as they looked at the entry materials.
The Alley Flat Initiative is a program of the Austin Community Design and Development Center (ACDDC), a 501(c)3 nonprofit design and planning organization working with residents, public institutions, and service providers to identify resource gaps and build collaborative relationships to address them.
The Alley Flat initiative advanced as a finalist thanks to their innovative efforts in policy advocacy and public financing that led to a changed policy framework and adoption for Accessory Dwelling Units in Austin, Texas and potential to serve as a model for other metro areas to encourage adoption of ADUs.
The program's founders--Nicole Joslin and Marla Torrado--have operated the Alley Flat initiative now for a decade under the operating aegis of The Austin Community Design & Development Center (ACDDC). They've been behind over 1,200 units of affordable housing and green school retrofits. Here's their pitch on hitting the three primary targets of the Ivory Prize criteria.
Innovation: TAFI illustrates its innovative characteristics through its “one-stop shop” process for constructing and financing an ADU. TAFI offers nine-floor plans that range from 350 square feet to 950 square feet. The program works with the Austin Housing Finance Corporation, an instrumentality of the City of Austin, to design a program that unlocks incentives and financing tools commonly available to large-scale developers, making them available to low-income households. While this program is still under development, it is designed to offer a second-lien financing structure to decrease development costs, while providing technical assistance throughout the development process.
Scalability: Since 2005, 10 Alley Flats have been completed, 4 are under construction, and 4 are in development. TAFI has been able to approve ADUs for multiple different zoning requirements. In order for this project to increase its scale, there needs to be additional funding in place. This project, with respect to the construction of ADUs, can be implemented and scaled in any municipality that has ADU laws in place.
Sustainability: TAFI must use public and community‐based financing tools to achieve its greatest impact. A major issue for TAFI is construction financing for the units, where estimations range from $85,000 to $120,000 a unit. A lack of control over construction costs can be detrimental to funding requests from various organizations. One strong financing and development program through the City of Austin is the SMART Housing policy and development review initiative. SMART (Safe, Mixed-Income, Accessible, Reasonably‐Priced and Transit‐Oriented) Housing is a preliminary step to access expedited processing and fee waivers if a developer meets certain affordable housing criteria.
Business model, capital finance, and policy innovations are each going to play a necessary role in bending the curve on housing affordability in the United States. Programs like Alley Flat blend design of a highly iterative ADU that can drop onto each property with a fundamental change in local zoning, permitting, and taxation laws that permit owners to create new revenue units on their property, which benefit both the homeowner and a potential renter.
A second policy-centric initiative--in Buncombe County, N.C.--also focuses on zoning and land-use, allowing developers, both private and non-profit developers to access capital to develop housing affordable to essential workers and low income households. Ivory Prize judges called out the program, launched in 2004, with the following notes of praise.
Buncombe County is working to assist private and non-profit developers in providing housing for low to moderate-income families. Their efforts create more affordable housing through unique zoning and density bonuses for developments that include affordable or workforce housing units.
While many large metro areas are making inroads to impact housing affordability, few entities have had as comprehensive as an approach as Buncombe County. The totality of their efforts, as well as the application of proven strategies - often only used in more urban and larger settings - advanced them as a finalist.
Here's the economic backdrop of the Buncombe County initiative:
There is a limited supply of overall housing in Buncombe County. The median-priced home sold for $275,000 in 2017. The AMI for a family of four (4) was $61,300, and would only support the purchase of a house costing $183,900. Additionally, renters in the County are also cost burdened. The median rent in 2017 was $1,449. The 2017 fair market rent in the County was $713 for a one-bedroom unit and $1,194 for a three-bedroom unit. The AMI for a family of two in 2017 was $44,172, which would support a monthly rent payment of only $1,215.
Buncombe County has leveraged a three-pronged strategy--Affordable Housing Services Program (AHSP); Zoning law changes; and Community Oriented Development (COD)--to both create new viable development finance stacks and permit and zoning allowances to change the landscape of affordable and workforce housing development.
Here's their own take on how the initiative meets the innovation, impact, and sustainability criteria for Ivory Prize honors:
Innovation: While many of the zoning practices in effect in Buncombe County and parts the AHSP are in effect in other states and counties, the holistic approach to solve the issues of housing affordability in a county are innovative. The COD initiative is also an innovative approach to incentivize both public and private developers to maintain low costs of housing and to build in sustainable ways.
Scalability: We see three main opportunities for scaling the work done in Buncombe County:
- Replication by other county governments- County governments in other states and locations could adopt a model similar to that of the work done in Buncombe County in order to impact housing affordability on a county-by-county basis.
- Secure Funding- In order to scale the projects (specifically AHSP) currently in Buncombe County, additional funding is needed. This capital may be secured from either an outside source or from the state on a regular basis.
- Expand COD- Currently, only two projects have benefitted from the COD incentives. This program requires little to no county funding in order to operate providing the most potential for growth.
Sustainability: Funding is currently provided by the state government. However, the management team mentioned that none of the funding is secured on a yearly basis. This is a major risk to AHSP projects. The COD initiative, however, requires minimal funding and is more sustainable over the long term.
These, and the eight other Ivory Prize for Housing Affordability finalists we'll be looking at in the coming weeks prove one thing.
Innovation and business growth can be one and the same thing. And, for many whose businesses are about to rock and roll through another cyclical shift in the next couple of years, the two should fit together as a survival plan.