Here below is a sharp illustration one of home building’s biggest dilemmas for 2019.
Cyclical forces, economic convulsions, global trade and political unrest notwithstanding, one of home building’s biggest dilemmas transcends the cycle, the cloudy economic climate, and political upheaval altogether.
It’s a single predicament, but its challenge splits into four inseparable, equally profound, equally time-sensitive questions for builders as they stare down the barrel of 2019 and beyond.
The quandary is this, and it has all the deadpan freight Clint Eastwood’s Dirty Harry had when he bid his perps ask themselves, “am I feeling lucky?”
The question builders—tiny, small, medium-sized, and big—need to ask themselves while 2019 has yet--amid all the signs of gravity--to pronounce itself as either a good, bad, or indifferent year is this.
“Do I change or not?”
The four interlinked questions that tie to this one are these.
- Can we improve construction productivity performance to bend—favorably--market-rate building’s cost curve?
- Can we elevate what a home buyer expects of us, and truly excite her or him or them?
- Can we expand the new-home buyer pie, rather than simply slice a shrinking pie differently?
- Can we attract young, brilliant, digital native knowledge workers to our ranks in time to accomplish the prior three challenges?
One might better ask oneself, “am I feeling lucky?” Or, because cyclical market forces are more adverse, does that reduce the odds of a disruptive innovator coming along who’ll both take business from incumbents and, very likely, expand the universe of potential home buying customers?
Here’s one answer to both the macro predicament every builder faces right now as the ground of fundamental demand shifts and buckles under our feet.
The answer is, no matter what the cycle tells you to do, structural business and operational model change is also not an option. While things were running strong on the demand front across all—but mostly higher-end—new home customer segments, the innovation word could be heard often in the corridors and the general session keynote ballrooms.
Now, most of what you’re hearing is “it’s back to basics,” an inference that the time for innovation and change has come and gone, and now it’s time to don the “big-boy pants,” grab one’s heels, and get good and ready for a battering ahead.
That would be a mistake, a misstep, a miscalculation, and a missed opportunity. A big one. An existential—life or death—one for many.
If builders don’t come out of the recent up-cycle and head into an eventual downturn investing in retooling, remapping their construction models, and transforming how to design, engineer, pre-build, build, and assemble homes on sites, the vicious-circle of constraint will shrink the buyer pie even further the next recovery cycle. Rinse. Repeat.
Surviving builders, in that case, will compete for an ever smaller universe of buyers since there would be no gains in the war on costs--for labor, for lots, for materials, and for the cost of finance--except those that would result from distress and failed deals. Again.
There are ways to deal with both course-correcting for the headwinds of the present and doing what's necessary to change self-canceling, counter-productive, self-destructive behaviors into a pathway to succeed tomorrow.
Fortunately, for thousands of builders convening in Las Vegas this week to learn about products, processes, and technology that can both fire up desire among potential buyers, speed up and improve quality in installations and assembly, and provide aesthetic and resiliency value over time, there's a single place you can come that puts it all together. Inspiration, motivation, and education on how to improve productivity, elevate buyers' expectations, expand the buyer universe, and attract a next generation of talent through the integration of design, technology, and community making for the future.
Now, normally construction gets a big bad rap for one of the root cause reasons for its laggard performance among other business and industry sectors for productivity, the fact that so little investment goes into research and development. Here's how that comparison looks.
KB Home's ProjeKt is open source learning, discovery, design, and integration, and the Builders Show is an opportunity for everybody in the business to engage with a project that, for this week, opens up the research and development process for the benefit of the business community. Inasmuch as BUILDER joins with a home builder annually in a multi-million-dollar. Concept Home venture that--in each case--pushes the bounds of current design, functionality, and performance, the project has become one of home building's most significant research and development investments, year-in and year-out.
When it comes down to it, the millions of dollars of money, manufactured products, materials, bandwidth, software and hardware integration work, and skilled labor invested during the 18-month journey of KB Home ProjeKt from concept to completion--with many alterations, course-corrections, and new ideas accepted along the way--literally change how this home builder will produce homes at its $406,000 average selling price in the months ahead.
"I view this as our research and development lab," says Matt Mandino, chief operating officer at KB Home. "As a builder, we don't normally have the opportunity to hit pause, focus on a single home, and see what's possible well beyond what we're currently doing. ProjeKt is just that for us, and there are learnings--particularly on the fully integrated offsite construction dimension--that we've been able to capture and will be transferring in the near-term into production."
Some of those learnings, especially on the factory assembly front, won't only benefit KB Home, but will provide other builders an opportunity to gain scalability faster, and eventually bring down learning-curve costs.
"We've all been able to see the potential of off-site, but doing it for a single community it becomes a challenge to leverage the benefits of the facilities, and do all you need to do to gain scale and efficiency," says Mandino. "It's when there are multiple builders fully leveraging the factory capability that we'll all be able to magnify the productivity and impact our costs.
"What are the lessons learned?" continues Mandino. "Really, it's that we can change if we leverage the power of collaboration. Understanding that getting everybody around the table and starting with a blank sheet can be daunting. It's understanding the work and achievements of those before you in the process, and at the same time, recognizing the ways those downstream can benefit. That's what's really gratifying, and my hat's off to this team and our partners for what we pulled off. I've had the opportunity multiple times to tour people through the home, and I love watching people smile as they experience the technology, and the flex space, and the feeling you get in this home."
Among the more special aspects of the research and development process for ProjeKt started with the ambition to make it a first of its kind in demonstrating the convergence of IoT environmental data and technologies with the bio-data of residents. This is the future, and this project's baby-steps show a way forward on the learning curve.
"We dialed-in the right partners to push the experience well beyond what people are seeing and doing in their homes right now, and this will be a goldmine of discovery for where smart home technologies need to evolve," says Jacob Atalla, vp of sustainability at KB Home, and a primary driver of the project execution and ambition-level. "This could not have happened without full collaboration in the development from our smart healthy home partner Delos, from Google, from Carrier, our lighting systems and manufacturers, even the flooring. The level we're hitting here, and what we can measure in terms of customers' experience of the value is beyond our expectation."
What's to see and learn from in the home--including the Delos Darwin system and how it maps in a seamless way with the way people experience well-being in their home--is the extent to which 250 separately connected IoT devices and systems are not out to solve singular, isolated problems for those living there, but engages holistically, learns habits, offers benefits, but remains low-maintenance and turnkey.
Another game-changer in the construction and floor-planning is the real-time nimbleness of the space, thanks to moving-wall flexibility, which can excite both prospective home buyers and those living there with the way space can adapt to changing needs.
"Some of the sense of well-being in the home comes from its ability to morph, to flex, to easily and seamlessly change, and at the same time, offers a place to stay in place and grow older with all the adaptability one can imagine," Dan Bridleman, senior vp of sustainability, technology and strategic sourcing at KB Home. "That resonates, because consumers experience this place as easier, healthier, happier. That's meaningful."
So, going back to the essential dilemma this story posed at its start, comes the question for builders now as they try to make careful decisions that will, in some cases, mean whether they'll be around for the next time the market starts on an upward trajectory.
"Do I change or not?"
Before you make your decision, have a look at this home, this week in Las Vegas. It may make you think twice as to whether you declare the time-period ahead, with all its questions, uncertainty, and doubt, a time for "back to basics."
This is a refrain we've been hearing. That's not what's going on at KB Home ProjeKt. Anything but.
"Personally, I feel a lot of pride in the accomplishment of the Las Vegas KB Home team and the leadership right from the top down, from Jacob and Dan," says Brian Kunec, president of the Las Vegas KB Home division. "Was it daunting? Absolutely, and there were times--given that this is more or less a custom home project, which we're not accustomed to building--where I felt we'd be challenged to get it done. But it was a great experience for the team, and all of the sponsors, contributors, and partners involved showed they could come together and make it happen."