Agility in home building isn’t just an ability, it’s a mindset. For home builders, that’s (hopefully) a welcome message because it means they may actually be able to control their company’s future.
Having an agility mindset means you can better confront and manage labor shortages, higher insurance costs, supply chain disruptions, and cash flow challenges. It also enables you to better address document management issues in capital-intensive delivery cycles that can go on for months or years depending on the size of the project.
Costs for construction rose dramatically in 2022 and commercial real estate services and investments firm CBRE forecasts a continued rise in 2023, so having an agility-based mindset is more critical than ever.
- Agility: Your Business's Antidote to Chaos, Part 1
- Business Measurement Fails—Why Is It So Hard to Get the Numbers Right?
- Data-Driven Builders Leave the Guesswork Behind
The good news is that agility in your business is an attainable necessity—not a luxury—that will help you move confidently and swiftly to make decisions both big and small in today’s constantly shifting, volatile environment. Agility is key to creating stability in your business.
Ask These Questions to Achieve Stability for Your Business
You could counter that your business already feels agile because you’re regularly changing your objectives to suit a new situation. But that’s confusing agility with chaos management. Agility isn’t shifting objectives; it’s shifting your approach to achieve stable objectives and keep sight of your core values.
If you think that’s empowering, it is—as long as you commit to asking questions about the fundamentals:
- Can I “see” the opportunity in the gap between what I am doing compared with what I should be doing to meet my objectives?
- Do I have the courage to make decisions fast? Where can I find the courage?
- What does the execution look like? What’s the correct next step?
Your best tool to answer those questions is—and always will be—reliable data.
Data Is King, but Business Intelligence Is Better
There’s no shortage of data and analytics available to home builders about the industry, the broader economy, or the price of steel halfway around the world. We are awash in data. For that reason, we place a higher premium on business intelligence, which is information gleaned from raw data points. But the truth is that most businesses—including home builders—don’t know how to transform data points into intelligence and action. Data is also useless unless you do something with it.
A rigid approach will fail in the new normal of our industry challenges.
Here’s an example: Cycle times are determined by supply chain failures, soft markets, the cost reductions that often define affordability, and shortages that can pinch home builders. If you can control your cycle times, then you can control your fate.
Agility, as it happens, is the antidote to chaotic cycle times. Controlling your data creates information that improves agility and helps you learn, discover, and propagate best practices. Information helps you prioritize tasks and maintain stability in your business and execute and continuously take the right next step to deliver homes to market and realize profitability.
The Next Step for Encouraging Agility in Your Business
Home builders often seek a quick solution to challenges in all areas of the operation, including sales, operations, and production. But more often than not, “quick solutions” only address the symptoms and not the underlying cause.
Instead, seeing the symptoms should trigger a back-to-basics conversation to deal with the cause of the problem, rather than the signs of the problem. A plan to deal with causes is a step toward that crucial agile mindset.
The first step in dealing with the root cause is to analyze your workflow. Break down each segment of your business into focus areas (for example, marketing, sales, purchasing, estimating, production) and analyze the people, processes, and systems for each area. Contrast where you are against where you should be, and identify the opportunity (or gap) for each.
Once you identify the opportunities, the next step is to grade each opportunity based on a three-tier system.
- Critical: Is this improvement needed on a critical level? Will I either go out of business or really struggle to hit margin targets if I don’t make this change?
- Stable: Is this an area of business that builders typically have solved? Do those builders that make my target margins deal with this?
- Scalable: If I don’t make this improvement, will I have to address growth by adding more resources? Will this opportunity hurt my ability to grow?
Realistically, the chances of you addressing all of the critical opportunities in the coming weeks is unlikely. But you can start by focusing on the most important critical opportunities, selecting up to three, and focusing on those—any more, and you’ll dilute the effort.
As you solve the root issue, bake agility into the solution. A rigid approach will fail in the new normal of our industry challenges. Use data, plan in advance for volatility, and predetermine what “done” looks like. You can then move onto the next opportunity. Agility will be your key to creating stability in today’s tumultuous world.
Matt Collins is the managing member of The Mainspring Group, a specialty firm focused on helping private regional home builders identify and take the right steps on their own journey toward agility and operational excellence.