by Clark Ellis, Senior Avid Advisor
Business innovation isn’t rocket science—it’s really just a creative new way of thinking about how to accomplish a goal. But truly innovative home builders are nearly as rare as people who have walked on the moon.
Builders who know how to innovate can reap big rewards. For instance after a Chapter 11 filing in the 1990’s, NVR, Inc. re-engineered its business processes, focused its business and adopted innovative practices like optioning rather than buying land, making it the most consistently profitable public builder in the time since, and preventing it from losing money during the Great Recession. Today, it’s the leader in several housing markets.
Although companies like this are often viewed as risk-takers, they actually spend a lot of time creating bulletproof systems that keep risk at a minimum. There’s nothing mysterious about these systems, and any successful builder can create them. The most important ones organize three critical areas: Collaboration, Customer Value and Focus.
Everyone knows that Thomas Edison invented the light bulb, but few realize that he also invented collaborative innovation. In the 1870’s Edison founded what’s considered the world’s first innovation lab in Menlo Park, NJ. It was staffed with research and development teams that are credited with more than 400 electrical patents during its 10 years of operation.
The point is that while we like to imagine geniuses like Edison, Marie Curie or George Washington Carver as creative loners, the truth is that they relied on teams of people that collaborated to bring their ideas to fruition.
Measurable benefits can flow from even the most basic type of collaboration, like the trade council. One builder I worked with was having trouble getting the trades to its sites on time, so we set up a trade council. During the first meeting it became clear that sites often weren’t ready when the builder called the trade contractors. The trades never knew when the builder was “crying wolf” and as a result they became less responsive. Once the builder and its trades put their heads together, the problem became clear to everyone and was quickly solved.
Collaboration is even more essential to a large innovation effort. Take the case of Building Information Modeling (BIM), a subject I have written about in this column.
For BIM to deliver its full value, management has to realize that it’s not an architecture initiative but a transformative business platform with the power to transform every part of the business including marketing, sales, selections, purchasing, estimating, structural engineering, construction, customer experience, warranty and even how the homeowner manages their home. But a collaborative company culture is a prerequisite to that transformation. Just one example: BIM’s automated material takeoffs can save costs by reducing waste and eliminating variance purchase orders, but those savings require collaboration between the purchasing and estimating departments.
A second key to a successful innovation effort is thinking it through from the customer’s perspective. Take the obvious example of how prospects experience your product online. Chances are you will get better foot traffic to your models if the online experience is highly visual and interactive, but to make that happen you need a systematic way of getting customer feedback on how well that online experience is working and how you can improve it.
You also need a system for encouraging people to leave positive reviews about their experience with your company. Like it or not, your prospective customers are going to Yelp, Facebook, Pinterest, Twitter and other applications to find out what your current and past customers are saying about your company. What they find will have a big impact on whether they ultimately decide to contact you.
You can encourage those current and past customers to sing your praises online by providing an outstanding customer experience. A good start would be a “customer concierge”: someone who is responsible for interacting with the customer and who is available whenever the customer has a question or concern. The “concierge” can also be trained to get customer feedback on your innovation ideas, feedback customers should be happy to give if they see you making a real effort to make their experience of building a home a great one.
If you don’t believe this is important just Google “Customer Experience Links to Profit.” You will see stories from Harvard Business Review, Forbes Magazine and dozens of other publishers, researchers and experts. All the research clearly bears out the link.
Even if an idea won’t have a direct impact on customers, in this hyper-competitive business the customer experience is an important lens that should be used to evaluate it.
Although every successful innovation requires focused effort, that can be a huge challenge for some people. A Microsoft 2015 study on the attention span of smartphone and internet users (in other words, everyone) found an attention span among the average Canadian adult of eight seconds. A goldfish’s is nine seconds. Do I have your attention? Good.
Focus means staying committed to your innovation effort until it has been fully implemented, rather than dropping it halfway through and going on to something else. It also means going all in on that commitment.
This is where a lot companies hesitate. For instance one of my colleagues recently completed a consulting assignment. Although the CEO agreed with my colleague’s recommendations his response was something like this: “Let’s start a small team off to the side of the core business to implement the new policy and see how it goes. Then we’ll decide what to do after we see how it’s working.” My colleague’s brilliant response was “you dabble, you die.”
Of course we always test innovations with pilot projects, but once the pilot has proven the concept it’s time to either dive into the pool or walk away. After all, the criteria for something to be innovative is that it must actually be implemented and deliver results. And while the CEO’s response may sound reasoned and rational, my colleague knew from experience that results of merely putting a toe in the water would be nil. The company would never implement the changes he suggested, the problems they asked us to help them with would never be solved.
Collaborate, consider the customer, and focus on the effort until it has been implemented. This isn’t a complete list of how to innovate but these three elements will take you a long way in the right direction!
Clark Ellis is a Senior Avid Advisor for Avid Ratings, a leading provider of customer loyalty research and consulting to the homebuilding industry. Through the Avid system, industry-leading clients improve referrals, reduce warranty costs, and strengthen their brand. He can be reached at firstname.lastname@example.org.
*This article was originally published on BuilderOnline in August, 2017.