Builder

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I

nnovation is a word you associate with technology, medical

science, even fi nance. It’s not a word you typically associate with

the housing industry.

Is that fair?

It is at least a fair question. In an attempt to answer it, consider drywall.

Introduced in the early 20 th century, drywall really was an innovative

product. As a substitute for plaster, it reduced installation time by 60% to

80% and dramatically cut costs as well. Nonetheless, it wasn’t until the

post-WWII housing boom that drywall became the industry standard.

In other words, it took 50 years, half a century. That seems to suggest that

the housing industry, like an immovable object, effectively resists even

strong irresistible forces, allowing inertia to take hold.

I recently talked to Stuart Miller, CEO of Lennar, about this at

HIVE, a Hanley Wood conference focused on housing innovation in

business management, marketing to millennials and aging boomers,

building product development, and acquisition of land and labor. Miller

delivered a keynote address about innovation and business manage-

ment and spelled out how he’s pushed everybody who works for Lennar

to adjust to and even embrace digital disruption in almost every part of

the business from fi nancial management to sales and marketing.

He made a compelling case for change, but when I asked him if he

thought most builders would jump on the digital bandwagon, he said no.

Why? “Well,” he said, “these are pretty good times and nobody wants to

rock the boat. And when times turn bad, most builders turn cautious.”

HOUSING

REMAINS,

AMONG THE

NATION’S

LARGE

INDUSTRIES,

SINGULARLY

FRAGMENTED

AND

COMPLICATED.

FRANK TALK /

IS HOUSING INNOVATIVE?

The structure of the housing industry breeds caution over innovation

BY FRANK ANTON

Frank Anton

Vice Chairman

Emeritus,

Hanley Wood

That sounded like the defi nition of a bad

case of inertia to me, but the more I thought

about this seeming aversion to innovation I

found myself better able to understand it. In

fact, it made sense for two reasons:

One, almost no other business involves as

much risk as housing. Even the best ideas can

be sabotaged by too much or too little leverage,

a poor decision about land and location, a pric-

ing mistake, a dip in consumer confi dence, a

spike in mortgage rates, neighborhood opposi-

tion, overzealous local offi cials, or unexpected

competition. Things can go from very good to

very bad very quickly, and almost by necessity

that breeds caution when it comes to trying

something new. So a reluctance to layer risk

around innovation on top of normal business

risk begins to seem, well, sensible.

The second reason ties to the structure of

the industry. Housing remains, among the

nation’s large industries, singularly fragmented

and complicated. There are not only 50 , 000 or

so active builders (compare that to the 10 or

so major auto manufacturers who produce 70

million cars worldwide), but there are also

tens of thousands of dealers, distributors,

architects, planners, code offi cials, brokers,

and developers, not to mention hundreds of

thousands of tradespeople. And in many cas-

es an innovation has to work its way through

this complicated maze before it can really

take hold.

That means that even the best new ideas—

like drywall—can take a long time to catch on.

That’s just the way it is and the way it will

continue to be unless the housing industry

takes on a shape like most other industries

where a relatively small number of big players

control the game, can roll with punches, and

have the resources to fi gure out new and better

ways to get the job done. B

DECEMBER 2016

DATA DIVE

Industry Standard

To meet market demand in the U.S.

and Canada, more than 20 billion

square feet of gypsum board is

manufactured annually.

Source: Gypsum.org

Stuart Miller

speaks at the

inaugural HIVE

conference in

September.