When Are Builders Going to Narrow Home Buyer Choices?
Home builders need to learn from a quick-serve restaurant and a vanguard builder if they want to build a sustainable and profitable business.
Innovative new business solutions often come from outside an industry. This article suggests such an opportunity exists for housing, based on of all things, the profoundly successful Chipotle business model for fast food.
By all metrics, Chipotle is an industry leader including sales-per-store and overall revenue growth while having a paltry advertising budget compared to other fast-food businesses. One of the keys to their success is their product design. The Chipotle formula is based on a simple menu that doesn’t overwhelm, limited core ingredients, toppings to meet each buyer’s taste, and edgy architectural design relative to other fast-food restaurants.
This simple formula offers:
- Extensive customization opportunities.
- Optimum use of assets.
- Minimum waste.
- High margins with a fair price.
- Outstanding customer satisfaction.
Now, compare this with production builders. The menu of choices and stock plans they offer couldn’t be more complex. Some large national builders have thousands of plans. Moreover, the core ingredients don’t reflect a strong builder commitment to quality, health, and durability:
- Construction assemblies and windows are not selected for maximum thermal and moisture protection. Many builders still don’t talk about their specific product specs, instead generically claiming their houses have “dozens of energy-efficient features”
- Materials are not carefully selected to minimize dangerous chemicals, and most builder websites don’t mention indoor air quality at all.
- HVAC systems are based on lowest cost rather than engineered for optimum comfort.
- Base-level hardware, appliances, lighting, and trim are usually minimum quality.
In addition, customization relies on a variety of plan configurations and options that entail significant costs. The resulting product doesn’t leverage assets, has too much waste, imposes routine upselling, and leaves buyers frustrated with an overwhelming process and price point far above that advertised.
Production home building should be more like Chipotle. By example, a highly innovative builder did just that in the Chicago market. StreetScape USA (now Digibilt ) built an infill project called School Street in Libertyville. It was completed during the housing crisis and still sold out in just a few weeks at a premium price-point.
The company’s “simple menu” featured a space-efficient but highly comfortable core plan for narrow lots. The “limited core ingredients” leveraged an optimized bundle of room modules constructed with advanced building science, quality details, and engineered comfort systems.
As the construction crews built these modules over and over, Streetscape measured productivity and worked with its subcontractors to ensure minimum waste and defects. Last, a curated palette of “choice toppings” for customizing the exterior and interior included bold colors, lighting, architectural trim, and details.
Even with this much more efficient design strategy, Streetscape asked each buyer: “How Do You Live?” and provided a highly customized product. The images below show the architectural variety possible with this much more cost-efficient “mass customization” design strategy. Currently, StreetScape is creating a new neighborhood in Skokie, an inner-ring suburb of Chicago and another in Nashotah, Wisc. It plans to scale its business by creating joint venture partnerships with other forward-thinking builders to leverage its innovative project delivery approach.
Today, Digibilt uses technology to track everything about the home building process, reduce material waste, increase labor productivity, and optimize staff time. It is tackling issues such as the fact that one of its customers had 1,200 SKUs, two million pieces of material, and 40-plus suppliers.
Check out how this builder exceeds expectations for the community partners it works with and its home-buying customers. Then consider how to apply this design innovation to your company.
Want to learn more? Join my ongoing Housing 2.0 Program, a roadmap for the future that empowers building professionals to design and construct higher performance, healthier, more sustainable homes at a fraction of the cost.