America's really good companies operate in at least three time zones.

The past contributes DNA and the original dynamic motivation that lies beneath the way a company exchanges value with its customer. The present is about performance--operational excellence that ensures results, and those results speak of value to customers, the company, and the organization's ecosystem of stakeholders.

For an exceptional American company, the third time zone--the future--also exists in the present. It’s where an organization learns in the present what it needs to do, and what it wants to be next.

Stuart Miller, Lennar.
Stuart Miller, Lennar.

This week, Lennar executives unveiled a leadership succession plan that reflects an organization steeped and still brewing in those three separate but equally critical time zones. Executive management—deciding that now is the moment to pivot structurally from being a company that had navigated well through early post-Recession recovery to the moment where last year it became America’s No. 1 home builder, toward the company that five or 10 years from now could be among America’s leading corporations—strengthened its embrace of a future that may be every bit as much about intellectual property--data, consumer experience, and building technologies--as it is real estate.

What does this mean?

In passing the mantle of strategic accountability to newly-named Chief Executive Officer Rick Beckwitt and promoting Jon Jaffe to president, Lennar’s executive chairman Stuart Miller is acknowledging in action a message he’s been stating for some time.

The message is that the brilliance and the ingenuity and the painstaking team effort that accounts for why Lennar today is a highly-profitable $20 billion a year, 38-division, 49 market, 21-state, 250,000-lot enterprise won’t guarantee Lennar a future.

“With success,” Miller has said, “comes complacency. We must disrupt ourselves to make sure complacency doesn’t become a roadblock to our future. We have to be able to keep our vehicle racing around the track at the highest velocity possible--that's the measure of our performance, and at the same time change out the engine and other parts to make it even faster and more durable and capable of higher performance--all without stopping."

Miller, Beckwitt, Jaffe, Bruce Gross, and Diane Bessette and the Lennar brain trust are focused on four initiative areas that will hasten Lennar's path to becoming a "pure-play" home builder, which may or may not be close to what most of us conjure up when we look at that term.

  • Fully integrate CalAtlantic into Lennar, availing of Lennar's potent Everything's Include business model to unlock greater value in every one of the acquired lots;
  • Fully leverage the "local market scale" opportunity gained from that integration--across purchasing and procurement, trade contracts, land deals, supervisory and operations process, and, of course, access to home buying customers.
  • Simultaneously spin off "non-core" real estate investment and brain drain; and
  • Invest in new, adjacent, machine-learning enabled technology to close the still very wide gap that separates the moment of consumer engagement about homeownership from what a home builder can deliver.

“One of the skills that has set Lennar apart up to now from many other big builders is the company’s ability to be a consummate ‘cycle-timer,’” says Carl E. Reichardt Jr., managing director for equity research, covering home building and building products at investment strategist BTIG. “Lennar’s longstanding ability to find and acquire assets in difficult times and monetize them in good times has been a critical capability. The CalAtlantic deal signals both a nod to the vital importance of local market scale, and Lennar’s ability to be great at more than cycle-timing, but at manufacturing itself. It’s not just about buying land well, but about building a house well."

And leveraging all that local clout to unlock scale opportunity, simplify and streamline floorplans, and improve the vertical construction process is an important milestone for a Lennar becoming what it wants to become when it says it aims for the "pure-play."

Ultimately, it's about taking out of the real estate and development and design and construction process every dollar that does not directly map to value in a consumer's mind, because that's where consumers--particularly millennials--want their great companies to go these days.

Michelangelo Buonarroti once said of his most famous work of art, his rendering of biblical figure David, “The sculpture is already complete within the marble block, before I start my work. It is already there, I just have to chisel away the superfluous material.”

That suggests that the Lennar "pure-play" strategy is about more than vertical operations excellence. It's more about intellectual property that will enhance both the consumer delight and satisfaction with their new home and at the same time becomes a real-time, cyclical and counter-cyclical, business model for the ages.

Talk to Stuart Miller today, and he'll tell you he's more excited about working at Lennar now than just about any time since he joined the company his father started.

He's excited by what he calls Lennar's focus on "adjacent" possibilities, the tech-inspired businesses that put consumers at the very top of the value chain and work back from there to an operations model. The "adjacent possible" where first-order combinations and inventions create meaning, entirely new experience scenarios, and potentially outsized value opportunity is where Miller is focusing his excitement and time, all toward Lennar's future in the time-zone continuum.

We're honored to have the opportunity to talk with Stuart Miller, live, in person, one-to-one, about his thinking about Lennar's and home building's challenges and opportunities at the upcoming Housing Leadership Summit, May 14-16, at the Ritz Carlton Laguna Niguel. You can register for one of the remaining places at the conference by clicking here.