United we stand, divided we fall. This aphorism has been used by, and often mistakenly attributed to, Benjamin Franklin, Patrick Henry, Abraham Lincoln and various others. It actually traces back to the 6th-Century B.C. fable-ist Aesop and remains true to this day, particularly in the home building industry.

At every Pipeline workshop™ we have ever done, one of the most important takeaways, one realized by virtually every home-building company executive in attendance, is that something has to be done with the notoriously fragmented value stream that defines this industry, or there will be no hope of managing production as a system.

In their landmark 1996 book, Lean Thinking, Jim Womack and Dan Jones defined a value streamas “the set of all the specific actions required to bring a specific product through the three critical management tasks of any business.” They went on to describe a set of processes, which they termed tasks: a problem-solving task, an information management task, and a physical transformation task.

By definition, a value stream does not belong to an industry; it is enterprise-specific, meaning every value stream belongs to its enterprise; thus, every home building company has its own value stream.

It owns it.

It may own it, but it would be a challenge to cite any other industry, in which the sequence of tasks in the most common versions of that industry’s core-critical process (start-to-completion, i.e., the physical transformation task) is performed entirely by separate entities, as is the case with home building.

Look at the value stream of almost any home building enterprise, and you will find a combination of independently-owned, non-proprietary, non-exclusive, unaffiliated businesses, each with their own goals, often at-odds with each other.

We have a descriptive phrase for that phenomenon: “strip-mining the value stream”.

Technology – specifically, offsite manufacturing processes – will improve quality, reduce waste and variation, reduce cycle times, increase productivity. By all means, consider it. But, by definition, manufacturing off-site doesn’t unify the value stream, unless you own or joint venture the facility.

In her final comments[1]to the team at RB Builders, before she first left them, the intrepid, results-based consultant reviewed the components of RB Builders’ production management system – the RB-IPS – and said this:

“It is a production management system that specifies the means by which RB Builders fosters epic relationships of mutual interestwith its building partners and supply partners. The RB-IPS provides both the processand the programfor progressively transforming subcontractors and suppliers into true partners, into trusted allies, joined by shared, mutual interests.”

Builders attending Pipeline workshops™ consistently emphasize the need for stronger trade-partnering, better coordination, more cohesiveness, a more unified approach to managing the trade side of production.

They acknowledge the obvious: they do not have the internal resources necessary to perform “the set of all specific actions” required to bring houses through the start-to-completion process, and they are completely dependent and reliant on skilled construction resources that are in short supply.

They understand that they can no longer dictate the terms.

Is vertical integration part of the answer? We have been suggesting, for 20 years, that builders at least consider that possibility, that they find a way to discontinue the strip-mining operation. That suggestion usually falls on deaf ears, or is dismissed as a radical, undoable notion.

Which is where opportunity always – always – lies, in radical, undoable notions.

The future strategic role vertical integration has to play in the home building industry remains to be seen. In a Pipeline workshop™, it is portrayed in one of the Pipeline games™; it is an area that is covered in the Lessons from the Pipeline©business case; it was added as a section in the second edition of The Pipeline: A Picture of Home building Production©, released in 2016.

But, the outcome of the vertical integration question doesn’t change the underlying imperative.

Success in unifying the effort of even the existing fragmented value stream has profound ramifications, on the margin component of Return on Assets, on the velocity component of ROA, on creating sustainable competitive separation.

It will require Epic Partnering™.

This was the seventh installment of a nine-part series on getting home builders to address – to deal with – the skilled labor shortage in residential building, by changing the way they do business.

Part I looked at building the internal understanding, desire, and resolve to deal with what is an external problem; it looked at Open-Book Management and Team-Based Performance Compensation, and how to build the type of savvy, motivated, mutually-accountable home building team required to address the skilled construction labor shortage.

Part II looked at restoring elegance and allusion to architectural design, in order to make homes faster, easier, and less expensive to build, while making them more livable, more distinctive, more storied, and more desirable; it looked at what happens to productivity when builders waste time, energy, and money building senseless, overdone, exaggerated illusions of architectural style.

Part III looked at how costs behave in relationship to what caused them to be incurred, and how to manage those costs in a way that diminishes the conflict that exacerbates the shortage of skilled construction labor.

Part IV looked – through the eyes, and in the words, of six industry experts – at how the process of planning, designing, fabricating, and assembling components at a location other than their final assembly-installation point partially answers the shortage of skilled construction labor.

Part V was skipped, because Jennifer Castenson's builderonline.com article about Building Information Modeling (BIM) said everything that needed to be said.

Part VI looked at why Business Process Improvement is central to how builders create more value – benefit in excess of cost – for their stakeholders, first among which are their buyers.

This installment (Part VII) looked at Epic Partnering™, the program and process of creating and building strong trade partnerships.

Next: Part VIII: Critical Chain: Reducing Cycle Time and Raising Productivity with Critical Chain Project Management

[1]The Pipeline: A Picture of Home building Production©, Second Edition