Updated: Jun 25, 2020
Photo by Dorota Dylka on Unsplash
For decades, new construction technology companies have launched with a mission framed to fix or save the industry. This began with Construction Management software in the early 00’s. Procore is one example, founded in 2003 and recently valued at $5B. But there are others, and construction is still pretty much the same. The librarians of our industry, the CSI folks, have their opinions, but so do the Blockchain Advocates, the Lifestyle innovators and the Transformers.
Though divergent in their methods, their solutions propose to address a very real problem: the productivity issue.
Traditionally, the housing industry’s business models have focused on reducing the cost of labor and selling as many products as possible to achieve economies of scale. Some of you might associate these ideas with the ‘Feast or Famine’ mentality - you’ve either got too much work or not enough. Let’s just say, the industry has struggled to manage growth.
That’s not necessarily the fault of the builders. Our industry is directly impacted by major forces outside of our control: the fluctuations of politics and regulations within public works, the volatility of the housing market, and an informal job market, to name a few.
These external dynamics have shaped our extractive business models, which inherently prevent us from preserving or protecting, let alone resorting or regenerating the markets in which we operate. Rather than grow, embrace technology, and evolve new careers for our building trades, everyone is just stuck.
The Contech and PropTech movements have given us some cause for hope. In addition to grabbing market share, these startups and initiatives want to solve real world problems: productivity in building, the housing crisis, the skilled labor shortage, and the destructive impact our industry has had on the environment.
But new products, alone, aren’t the answer. Rather, they are tools we should embrace. But first, we must acknowledge the limitations of our Feast or Famine mentality. We can do so much better than just selling more jobs/homes or reducing the cost of production.
The majority of construction companies are SME brick and mortar construction companies that employ traditional tradespeople. So despite the ambitions of ConTech and PropTech, their biggest impact on the industry is not their ability to change it, but their ability to influence market preferences so that traditional SME brick and mortars can evolve and continue building.
Traditional builders aren’t going anywhere. But they do need to change their approach.
Here are a few options your housing or construction company might consider at your next business strategy brainstorming session:
Option 1: Create Recurring Income Offerings
Option 2: Evolve Your People Management Regime to Stimulate Home-Grown Entrepreneurship
Option 3: Orient Your Ecosystem To Leverage Collaboration Over Competition
Recurring Income Offerings
Makes sense. The homes we live in aren’t built to care for themselves - they need attention and skilled oversight to ensure optimal performance. The best custom home builders know this. Ask one of your superintendents how many of their previous clients pay them on the side to look after their amazing home. If you doubt this, think again.
Why not turn this $1T opportunity into an offering and build some resiliency into your company? In other words, transcend ‘Feast or Famine’ and be proactive about protecting your company from the next market shock.
There are many ways to develop and implement a quality home services division within your home construction company. Keep it simple, at first. Make it routine so it pencils out. Remember that infrastructure maintenance is an “essential service,” but building custom homes is not. Include the “Service Program” as a line item in your custom build contracts, and make it a requirement. The value-add for clients is “peace of mind,” and for construction companies it’s “clients for life.”
Startups have already laid the groundwork. Thumbtack and TaskRabbit have been around for more than a decade. ANGI Home Services, today a top leader in the market, started as Angie’s List more than 20 years ago!
Startups (and their investors) are good at thinking about the lifecycle of their operation. Most plan their exit when they found their company. Some home service startups were founded just to be acquired by housing’s older siblings - insurance and mortgage companies. In 2018, AAA bought Glasshouse and then Hippo bought Sheltr a year later. It’s not short-term thinking when you plan something and then make it happen. Conventional construction companies can learn a lot from planning and thinking about the industries that overlap ours.
Do you see what PropTech did here? They reframed home services as Risk Mitigation for insurance companies. Not bad!
We can learn a lot from the PropTech startup movement. But more importantly, we can fill the gaps - what they lack is real construction knowledge.
These lessons translate to ConTech, as well. These firms are known for vertical integration - design, engineering, manufacturing, logistics, labor - all in-house. They’ve taken the conflict and headache out of the fragmented supply chain. Learn from them... and help them.
Katerra spent the last year sending their journeyman carpenters to train on tool safety at their factory in Arizona. While tool safety and starting with fundamentals to ensure consistency is smart, there may have been a better way to spend that money. Seattle-based, Dow Built (formerly Schuchart/Dow) is only a 4.5 hour drive from Katerra’s Spokane-based, Apprenticeship Program. That would have been a great opportunity for both organizations to learn from each other, and Dow Built could have created a consulting offering for ConTech firms.
Ultimately, the opportunities are endless when you recognize the power of knowledge within your company.
Stimulate Home-Grown Entrepreneurship
As owners, it’s our job to cultivate leadership within our organizations. Too often, we assume that some people can’t be leaders, and that they belong doing the same job year after year because they are good at it. As our companies succeed and grow, we tend to look outside our organization to bring in better talent. We might think we need to hire someone new to come and “shake things up.” Rather, we need to shake up our own org chart.
Maybe we wouldn’t decry the skilled labor shortage as much as we do if we were more willing to mentor our own people, or put more effort and creativity into training.
Here are some steps you might take to turn your dedicated “individual contributors” into superstar performers:
Step 1: Take a look at your company’s org chart and answer the following questions: Is there a clear growth path from the entry level to the executive level? Are skills transferable across divisions so folks can move laterally if they want to change career paths? Can mid-level and top management staff take a week-long vacation by posting their “coverage plan” the night before they leave town without everything coming crashing down the next day?
Step 2: If you can answer yes to the following questions, move to Step 3. If you can’t, it’s time to rethink your people management regime. Ask your staff to list their job duties, and then ask them to categorize each as duties that:
Can be temporarily passed off to others with little training needed
Can be temporarily passed off to others with a lot of training needed
Can’t be passed off at all
Put some metrics on this. Something like a requirement to have 60% in category 1, 30% in category 2 and no more than 10% in category 3.
Step 3: Give employees the opportunity to impact your product design. Involve them in discussions, engage them in design and leadership strategy sessions. If you don’t have one, create a Client Feedback platform that employees can access at any time to see how the public views their services. Then create an Employee Feedback platform to see how the company views themselves: service, processes, culture, etc.
Step 4: Align company and individual growth plans monthly, quarterly and yearly. Categorize by 2 or 3 parameters. For example, if your goal categories are Client Experience, Performance and Culture, you might align them like this:
Company - 5.0 Stars on Client Feedback Surveys
Carpenter - Daily reports submitted to office by 4:30pm everyday, no misses
Company - Month-over-Month Revenue
Superintendent - 5 Process Improvement Suggestions at each production meeting
Company - New Market Openings
Operations Manager - All teams at capacity, hiring targets hit monthly
Our people know our product, give them some space and resources to shine. Startups tell their staff that the “sky’s the limit.” There’s no reason that staff at brick and mortar companies shouldn’t be hearing the same thing. In fact, the brick and mortar companies, and their people, will be the ones that “Save” Construction.
Eliminate Competition by Collaborating With Them
Though, this final option does exclusively look within, it asks you to look at things differently. Whether you are a boutique custom home builder averaging 10 homes a year or a subdivision giant averaging 10,000, it’s possible you feel that your “solution” is special. And it is! To you.
You’ve got the best crews, the best subcontractors, and the best suppliers. You won’t share these ideas or resources because you believe your network is unique, crafted like one of your homes over years of struggle, and you’re afraid to lose them to someone else.
Whatever the case may be, it’s important to acknowledge that the market dynamics mentioned at the beginning of this article have guided all of us to where we are today. From that perspective, none of our companies are that unique at all!
Have you ever considered thinking beyond the market, or rather, in opposition to typical market rules? The market tells us to compete against each other through crafty bidding and other coercive means but what would happen if we collaborated?
What if we shared our:
How would this impact your company? Would you lose all your clients? Or would you have access to more?
How might this change impact building departments and government infrastructure incentives? Might these programs be streamlined, or made more accessible due to a consistency in the market?
There’s a lot to explore with this last one, so much so, that we should dedicate an entire article to it. Until next time!