This month’s issue includes stories about three unfilled market niches that are significant opportunities for builders: culturally aware housing, live-work housing, and Missing Middle Housing.
One of the most interesting aspects of the recent mega-merger between Lennar and U.S. Home is the new title of former USH president Isaac Heimbinder -- executive vice president of e-commerce initiatives.
|Isaac Heimbinder's goal is to establish "inclusive" web sites, used by all home builders.|
One of the most interesting aspects of the recent mega-merger between Lennar and U.S. Home is the new title of former USH president Isaac Heimbinder -- executive vice president of e-commerce initiatives. Until the merger closed, that meant Heimbinder was spending about a quarter of his time contemplating how big builders fit into the New Economy.
Now that the deal is real, it means Heimbinder is at it full-time, and has many millions of Lennar's dollars to invest in the combined company's new Internet strategy. That will include both business-to-business e-commerce and websites to convert home buyers into "customers for life" by selling them everything from window treatments and furniture to telephone, cable TV and home maintenance services. But here's the surprise: Heimbinder wants home builders large and small to be part of his new ventures. Senior editors Patrick O'Toole and Bill Lurz interviewed Heimbinder just as the merger closed in early May.
PROFESSIONAL BUILDER: What's up with these new e-commerce initiatives?
ISAAC HEIMBINDER: When we sell a house, we develop a relationship of trust with the buyer. It's the largest and most valuable product that person ever buys. And those buyers see us as experts on construction and maintenance of their homes. These relationships have value. Why should we bid them goodbye until seven years later, when they're ready to buy again?
The Internet provides the opportunity to open an electronic dialogue with the buyer during the sales process, and continue it with updates on the progress of construction right up to closing. Why not continue it into the warranty period with advice on maintaining the home? From there, it's a small leap to offering discount deals on furnishings, phone service, home insurance and cable TV. We want to use the Internet to find better ways to sell homes, but also to create customers for life.
Aren't you also taking the lead in a lot of business-to-business e-commerce?
Yes. That's an effort to create a more efficient business model. There's just a huge opportunity to communicate, in ways we never have done before, with trades and vendors, as well as customers. BuildNet has an interesting model, and we've invested in that initiative. They already have the back-office software in place, and they're saying they can interface it with subcontractors, distributors, suppliers, etc. The issue for us is this: Who is going to pay for what? Who is going to get what? And who owns what? At the end of the day, I don't want to be working for BuildNet.
Between the two -- customers for life and business-to-business -- which has the greatest profit potential?
It's pretty clear that there's more immediate profit opportunity for a builder in improving how we purchase products and build houses. Most of it relates to eliminating long-time inefficiencies in inventory management and logistics. Just-in-time deliveries would help both builders and distributors.
Right now, a lot of inventory has to be maintained to accommodate choices made late in the process. The distributor has to have 72 different kinds of toilets available for the plumber, because the plumber doesn't call until two days before he needs the toilets. If all orders were placed well in advance and everyone in the supply chain was kept up to date on the progress of each house under construction, the whole system could operate with much lower levels of inventory, and much greater accuracy in getting materials and labor to the job.
Aren't trades the weak link in that chain of communication?
Yes, but the Internet changes everything. Anyone with a PC can get on-line and into a website. Putting together computer networks has always been an option, but the logistics among diverse systems and software were overwhelming. It's now so easy that, if a trade doesn't have a PC, we can afford to give him one, and pay for it in the savings realized by having him log onto our website to schedule electronically.
You've been working with other large home builders on many of these initiatives. Why?
The software component of such systems is really expensive to create and maintain. It's important for builders, manufacturers and suppliers to all cooperate. Across an industry, it becomes affordable. We're large -- 21,000 units a year. But the industry is 1.4 million units. We would realize savings if we did these things on our own. The question is: Are we missing an opportunity for even greater savings from cooperating with other builders to create electronic marketplaces, software programs and new opportunities to deal with customers?
How are you proceeding?
We've got a number of initiatives underway. We're working with BuildNet on their builder software. We're also working on an electronic interchange. We're talking to other people about their proposed business models. We're talking to our suppliers. We're working with ten other large builders on a new website that will be available not only to Lennar and the other large builders who are organizing it, but to all builders.
Somebody had to invest to get this started. These initiatives don't come cheap.
Why is it so important for builders to cooperate and approach the Internet opportunities as an industry?
In my time in this industry, we've always viewed ourselves as competitors, and we competed on everything. Now, we are beginning to realize that there are many areas where we can cooperate without surrendering any competitive advantage, and actually gain big advantages from it.
For instance, sales trainers have always told us that our biggest competition in selling houses is existing homes. Cooperating to sell the advantages of buying new is in everyone's best interest.
On the customers-for-life side, we can have a site that buyers go back to for purchases of home maintenance services, furnishings, insurance, remodeling work, appraisals, etc. Individual builders could register their customers and receive a percentage of all their customers' purchases on that site.
What role do you play in this?
We're a facilitator. We have money to invest. All of the large builders now realize that no one, individually, can get this done. The more inclusive our initiatives are, the better. I have a lot of visibility because (Lennar president) Stuart Miller created a full-time position for me to do this. I only worry that there will not be enough time for me to do it all.