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Lean Home Building


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Lean may not be the savior but from the description Scott Sedam, President of TrueNorth Development and Todd Hallett, AIA, President of TK Design & Associates, Inc. gave in the podcast, Lean Homebuilding = Better Product, Greater Return, it may be a great place to start. This is a transcription of the 55 minute long podcast.

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Lean Home Building

  1. 1. Business901 Podcast TranscriptionImplementing Lean Marketing Systems Lean Homebuilding Guests were Scott Sedam and Todd Hallett Sponsored by Related Podcast: Lean Homebuilding = Better Product, Greater Return Lean Homebuilding = Better Product, Greater Return Copyright Business901
  2. 2. Business901 Podcast TranscriptionImplementing Lean Marketing Systems Scott Sedam is President of TrueNorth Development, an internationally-known consulting and training firm focused exclusively on the building industry. Now in its fifteenth year with a staff of 6 field consultants, TrueNorth conducts consulting projects and training workshops with more than 200 builder, supplier & trade clients in the U.S., Canada, Australia and Mexico. During therecent industry downturn, TrueNorth’s LeanBuilding™ processeshave saved clients more than $200 million, demonstrating clearlyhow to improve product, process and profit without compromisingbuilder, supplier and trade relationships. Scott Sedam’spresentations are a popular feature at industry conferences andcompany meetings and he has published a monthly article in theindustry for more than 15 years. Scott serves as contributingeditor for Professional Builder Magazine and writes the weekly“Lean Building” blog on Todd Hallett, AIA, President of TK Design & Associates, Inc. ( has been designing award winning homes for over 20 years. He spent 15 of those years working for a $50 million production building company. Todd designed all of their homes but also worked in every other aspect of the company including purchasing,development, land acquisition, product development, andoperations, and was President of the company for three years.Equipped with his vast building experience and fueled by his lovefor architecture he left to form an architecture firm that is secondto none in working cohesively with Builders. Todd specializes inLean Design and works, alongside Scott Sedam of TrueNorthDevelopment, in the trenches with builders, suppliers, and tradecontractors. His Lean Design blog appears weekly Lean Homebuilding = Better Product, Greater Return Copyright Business901
  3. 3. Business901 Podcast TranscriptionImplementing Lean Marketing Systems Transcription of PodcastJoe Dager: Welcome, everyone. This is Joe Dager, the host ofthe Business901 podcast. With me today is Scott Sedam andTodd Hallett of True North Development. They are the leadingfirm in introducing and implementing Lean to the home buildingsector.Scott was at the forefront of total quality implementation in theconstruction industry in the 90s, and started True NorthDevelopment over 15 years ago. Todd, meanwhile, developed theskills as an architect with Ron Mayotte, and later, his firm, TKDesign, and is recognized by a very impressive list of accoladesthat are simply too many to list.I would like to welcome the both of you. Could one of you startout by giving us the elevator speech about True North, and howthe two of you work together?Scott Sedam: Hi, and thanks for having us, Joe. This is Scott,and the first thing I should say, there are really two companieshere. True North Development, that I founded about 15 and ahalf years ago, after I left Pulte Homes, and then TK Design,which is Todds company.Todd is an architect, and his background was very interesting.After being a sought-after architect, he went to work full-time fora company really well-known in this area called Delcor, which wasa big production builder and the first builder in the United Statesto be ISO 9000 certified. So, very process oriented.Todd, in addition to doing all their design work, also ranconstruction there, eventually became COO then CEO. WhenDelcor sold out in 2005, he went back to architecture full-time.We think hes the only practicing architect in America, whos Lean Homebuilding = Better Product, Greater Return Copyright Business901
  4. 4. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsdeeply involved and responsible for purchasing and constructionin a production builder, which makes Todd really unique.We started working with Todd about two and a half years agowhere; at True North, we had been implementing the Leanprocess across the country. We were desperately looking for anarchitect who "got it" when it came to Lean. Just to set the stage,I guess, we should say that our simplest definition of Lean is therelentless pursuit, identification, and removal of waste in productprocess and plans.In doing that, having a lot of success with that around thecountry, we were looking for an architect to help us get muchdeeper with the plan part of it. As we looked at architects aroundthe country, we saw that a lot of them who would say they gotLean, but it would take only a very cursory look at their plans torealize that they didnt understand. Wed see so much wasteinherent in their plans.Finally, through a mutual friend, I met Todd, and it was like,"Wow; this is the guy." The rest is history; we have worked on aton of projects since. He has his four design guys, and we haveour guys. There are a total of six of us around the country. We doprojects together called Lean Plan Workout, Lean Weight.Therere different variations of them.What we have done in the home building industry is put a verystructured process around the concepts of Lean to take it intoday-to-day home building to eliminate waste in the productprocess plans. We were like all the other Lean consultants inthinking, we had to teach everyone about the seven waste oreight waste, depending on which school you belong to and all theclassic definitions of Lean and the Japanese management, theToyota way, which is all very important.What we realized pretty quickly, because we started doing thisportion of it at the depth of the house recession, was that a Lean Homebuilding = Better Product, Greater Return Copyright Business901
  5. 5. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsbuilder wouldnt take the time or couldnt take the time wherethey would pay for really deep training in it. What we had to do iscome up with a process that worked in a week that said, "In aweek, well show you the money."By the way, we had it set up that if they dont see a multiple ofwhat our fee is that they dont pay us. A little risky at first, butwe found that very quickly theres so much waste in existence outthere that it was no problem at all getting paid. We took verystructured processes, and we interpreted all the Leanmethodology into the home-building world into their language.With our suppliers in trade, weve had over 2,200 of them nowparticipate in the 103 Lean projects weve done with about 75builders. When these 2,200 companies participated, 4 or fivepeople from each company-, were looking at more than 10,000people, they dont learn the seven wastes, like waste inproduction, waste in inventory, waste in over-processing.What they do is answer the questions that do relate to those, andthat saves a lot of time in that process. Thats what weve done tobe successful, and Ill turn it over to Todd to talk a little moreabout his role.Todd Hallett: Joe, what Ive been involved in is the Lean designpart of it. What shocked me when I first got together with Scottwas the amount of waste. Not only waste but how that wastetranslates into dollars and what those dollars mean per unit ofeach house.While I was working with a home-builder, and I was the presidentof the home-building company, what I thought designing Lean atthat time, where we took a strong count in the cost and we triedto make sure that what we put out in the field made sense andthe dimensions were right, and theyre well put-together. Lean Homebuilding = Better Product, Greater Return Copyright Business901
  6. 6. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsWhat I didnt realize then, and I do now, since I got involved withScott and his company, is that the collaborative approachbetween the builder, the sales team, and the trades can all worktogether to save thousands of dollars per house. Before, when Iwas working with Delcor, it would be a struggle to try to figureout how to save $150, $200 a house.When I started into this process, the savings were unbelievable,and that was really one of the things that shocked me the most.Scott: Yeah, we are actually in at least 103 implementationsnow. Were averaging right about $9,000 a house in savingsidentified. We know its actually just scratching the surface. Forexample, we have a tremendous database here now. Rememberthat weve had 2,200 trade companies, along with 75 builders.Were about 30 states and four countries now.One of the things that we know beyond a shadow of a doubt isthat there is at least a conservative average of $10,000 perhouse, sitting there, buried or wasted in otherwise unnecessarytrips to building sites. That is, if everything was scheduled right,everything was done the right the first time; we could save$10,000 a house in wasted trips.Builders are having a hard time believing that until they gothrough one of our Lean processes. They have different names,Lean Building Blitz, Lean Plan Workout. Well just call them theLean processes. Once they go through, they start to see it, butyou take your average builder and tell them, "Theres $10,000alone in wasted trips for each one of your houses," theyreshaking their head and theyre going, "Thats not possible."After they go through a lean process, its not just possible; itmakes them crazy when they see it. To say were finding anaverage of about $9,000 a house, yeah, that sounds impressive,but we know therere a 1,000 more than that simply in wastedtrips, so weve got a long, long way to go. Theres so much there. Lean Homebuilding = Better Product, Greater Return Copyright Business901
  7. 7. Business901 Podcast TranscriptionImplementing Lean Marketing Systems$20,000 to $25,000 a house would be a very conservativeaverage of what we know is out there.By the way, if you look at other industries -- automotive,electronics -- its even starting to turn up in health care. Whatalmost all these industries see, if they get really serious aboutmeasuring everything thats waste in their products andprocesses, it usually looks like a number around 35 percent.If we take your home price...Average home price right now isprobably, 100 and a half? You take 30 percent of that. Thats a$45,000 potential. Of course, thats pushing back upstream intoyour suppliers, too. Some of that is hidden from the builders. Butthen if you look at where...I know you know about these things, Joe. Automotive isnow...The Lean guys who work for Ford, GM, Chrysler, Toyota,Nissan, theyre spending the majority of their time working backupstream at the suppliers now. Theyve got those plans prettywell dialed in and wrung out. Thats kind of the future, down theroad for us.Right now, to say to a builder, any house youve got, we know wecan pinpoint five to ten thousand dollars’ worth of savings in anyhouse. Thats just a given. Its not even particularly a challengeany more to do that.Joe: I want to ask you, how much of it, though, is just commonsense? How much of it is really having Lean applied. Whats thedifference there?Scott: Ill give you a quote from the best professor I ever had inmy life. His name is Dr. Douglas. He used to...When people sayits common sense, hed say, "Id call it uncommon sense. If itwas common, there would be a hell of a lot more going on aroundhere." There are things...I like to tell the story of my dear grannywho died just a few years ago at age 103, in Columbus, Indiana. Lean Homebuilding = Better Product, Greater Return Copyright Business901
  8. 8. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsShe was a great southern Indiana lady. She was doing her owncheckbook, longhand division in her head, up until she was 102.She was a sharp kid. She would, every once in a while...Shedalways call me Scotty. Shed say, "Now, Scotty, tell me againwhat it is you do for a living." We called her Mimi. Id say, "Mimi,to boil it down to its very simplest, what we do in a structuredway, is to get the builders to listen to their suppliers and trades."Shed look at me and shed shake her head and shed say, "Youmean they didnt always do it that way?" In her southern Indiana,straightforward view of the world, sure thats how you dobusiness. You listen to the suppliers and trades, the people youdepend on to do the business. But you and I know that’s not whathappens out there.Does that mean its just common sense? If you look at all thestuff, we do, which all the structure, and weve got formats.Weve developed this Lean filter with the guys at TK Design thatwe now have 765 questions that have to be asked to wring outand dial in any house plan.Now, its broken up into 18 areas. You have your heating and airconditioning. You have your electric. You have your framing. Youhave your flooring and your foundation, but 765 questions. Thatsounds big, and complicated, and intimidating. Now we do a lot ofthings to simplify it. You could reasonably ask that question.Everyone you look at, "Well, isnt it just common sense to look atthese things?"I guess Id say yes, but it becomes so complex when youve got aproduct that, depending on how you count it, 20, 000; 30,000parts or more typically, at least 35 or 45 companies participate inthe building of it, and several hundred different people participatein the building of it. This very simple thing called a house doesget really complex. On one level, I agree its just common sense,but it sure is uncommonly done. Lean Homebuilding = Better Product, Greater Return Copyright Business901
  9. 9. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsJoe: When you first introduce Lean to the homebuilders andstuff, whats the pushback? A lot of people will say, "Its amanufacturing thing, and different industries." Has there been apushback in the homebuilding industry that youve noticed,something that you had to overcome?Todd: From the design end, there has been for sure. What Itypically get when we first go and do an implementation with thebuilders is they think that Lean means were going to strip thehouse of its amenities and take all the sizzle out of the house sowhat theyll end up with is a stripped-down version of a housethat, sure it costs less, but its not very marketable.A lot of folks equate Lean design with value engineering. Valueengineering, of course, has got itself a very bad name over thepast 15 years because of a lot of folks did just that. Instead oftruly value engineering, theyve stripped the homes of all theirdetail all their amenities and ended up with homes that didntsell.Scott: It was really just cost engineering, not value engineering,is what they were doing.Todd: Exactly. As we go through the process, what they begin torealize real quick is that this has nothing to do with stripping thehome of amenities or making...In fact, it has everything to dowith making the house more marketable. Many times wellfind...Lets say we find $8,000 on a given house. The builder maychoose to put 2,000 of that into the home to increase theiramenities, to add additional amenities, or they may not. It justdepends. The concept is never to strip the houses down.Scott: Thats the assumptions, and there have been somebuilders, especially a couple of national builders who are...theLean term theyve thrown it around, and what theyve done isalmost nothing to do with Lean. It was simply a matter of another Lean Homebuilding = Better Product, Greater Return Copyright Business901
  10. 10. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsround of beating down the suppliers and trade and was pure costmanagement.Value look at how values defined; you look at the benefitover cost, and those are some famous ratios there. Therereactually five different ways you can increase that benefit overcost ratio. What most of the builders did was look at purely cost,werent looking at the benefit.Other obstacles that we encounter are, one is that, "Well; wealready do this." Probably, a huge percentage, three-quarter ofour clients initially the response, "Well, we do this. Were all thetime looking how to take cost out." Again, theyre looking purelyat a cost from a very narrow bid price. Theres a real differencebetween bid price and total cost, which is a critical element.Some of that resistance that, "Weve already done this. Whywould we have someone from the outside come in and do it?"Theres also a fear factor that we run into, and itsunderstandable in some organizations where you have a lets saya director or VP of construction or purchasing that might look at itand go, "Well, wait a minute.If these guys and their processes come in and reveal $8,000,$10,000 a house, thats going to make me look bad. The boss isgoing to look at me and go, "Hey, Todd, how come you didnt seethis stuff?"Joe: What have you been doing?Scott: Yeah, and its a genuine fear depending on...We reallyhave a heart-to-heart talk with the presidents of these companiesto make sure that they talk to their guys and say, "Look, whatsgoing on the last five or six years." These guys have all beenworking 60, 70, 80 hours a week running their butt off. Theresnot a builder out there that has excess people. Lean Homebuilding = Better Product, Greater Return Copyright Business901
  11. 11. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsTheyre all just working themselves to the bone and everyonesheld off on hiring. Theres an incredible latent hiring demand inthis industry that everybodys holding off on until were absolutelysure the turnaround is here, and then its going to come out ingangbusters.I personally think that the 7.8, 7.9 unemployment rate isoverstated, in reality, because as soon as things settle downhere, everybody gets over the election. It doesnt to me matterwho wins. Were going to get over all the hesitation and thetrepidation, and people are going to start hiring, and youre goingto see it in droves in the construction industry.Overcoming that fear factor that people have, to piggyback onsomething Todd said, we will not do one of our Lean processes,unless we have somebody, and often two people, really goodfrom sales and marketing involved in a process. If they have adesign center that probably half the builders do now, we wantthat design center manager there, too.Because those of us who are kind of construction oriented, we getall excited about, "We can change this and this. We can do this,"and we think, "The customer will never notice. The customerwont care." Were probably right 90 percent of the time. Butonce in a while, the salesperson will come along and raise theirhand and say, "Wait a minute, time out guys.I know that steep gable we have here with the little window in it,or the fake gable seems like a total waste of 650 bucks a houseto you guys, but look at what our competitors have across thestreet and down the street. If we just take those out of there,thats going to hurt us. So thats helping us with sales. I want tokeep it."Now, maybe, well say lets see if we can figure out a way to do itmore efficiently but we run into that. Now, surprisingly, about asoften as we run into salespeople wanting to fight to keep Lean Homebuilding = Better Product, Greater Return Copyright Business901
  12. 12. Business901 Podcast TranscriptionImplementing Lean Marketing Systemssomething, they will tell us that there’s something that wevebeen doing. This happened recently where they had a 12-inchwide archway built between a kitchen and a big walk-in a pantryentry.We looked at the wood that went into it, and taking it down to asix-inch with the savings on the drywall and everything wasliterally going to save 50, 60 bucks a house. Maybe that doesntsound a lot, but this company was building 600 homes. Lets justsay it was 50 bucks times 600; thats a $30,000 bill. I meanthats real money. Thats a good chunk of a head count, and if wecould take it to a six-inch.In the session that came up kind of delicately waiting for thesalespeople to have a fit and the sales manager looked at said,"You can take that out tomorrow as far as Im concerned," andconstruction looks over and says, "What are you talking about?We only do that because its what you want?"She says, "Thats so 90s. Those things have been out forever.You could even make it a 4-inch - inch if you want. I dont care."Rick, the construction purchasing team just sat arounddumbfounded. They thought they were doing it because its whatsales wanted.This pulls the whole organization together when you do Lean, andyou get all the constituents involved, all your suppliers involved ina process, and the understanding level goes up exponentially. Itsreally a remarkable process.Joe: What is the Muddy Shoes Lean Design Charrette? I sawthat and that name just caught me. Could one of you explainthat?Scott: I dont know if you can see the logo. Ill let Todd tell youin more detail. I dont know if you can see the logo on it where Itook one of my great old pairs of Johnston Murphy wingtip shoes, Lean Homebuilding = Better Product, Greater Return Copyright Business901
  13. 13. Business901 Podcast TranscriptionImplementing Lean Marketing Systemswhich Ive had for 30 years, but I rarely wear them anymore. ButI took them. They were the old classic consultant shoes.I covered them in mud and laid a hammer across them and did alittle experimenting, and everybody understood as soon as theysaw the picture, which is to say who we are is a consultingcompany. Its extremely rare youre ever going to find a tie on us.We are guys who are out there in the field with field reality.Thats all we do. Were out there every week, walking houses,looking at houses, looking at designs.When we finally found the architect who understood this stuff,which was T.K. Design and Todd here, I liked his idea of MuddyShoes Charrette. There are a lot of big named companies outthere, architectural firms that do design charrettes, and theycharge a lot of money. Well ask the builders, and we found outthese guys never go out and get their shoes dirty. They never goout in the field and really talk and see what the capabilities of thetrade are, whats wanted in the field.As a result, you get some designs that, therere a couple of citiesin America, I guess I should be nice and not name them -- buttheres a couple big metro areas which I think have the mostatrocious design anywhere in America. Its just gotten completelyout of control, because what you have is this guy sitting back in aroom never getting out in the field adding on things to houses,fake keystones, and fake dormers, and extra shutters, and doublelintels, and coins, and add on, add on, add on, until you have noidea what the style or design is.20, 30 roofline breaks on a house, just crazy stuff to build, andthen, it doesnt even look good. We position ourselves as muddyshoes guys, meaning that we got our feet on the ground in themud. Were out there, and thats our perspective.Todd: What typically happens in the building company, at leasta midsize building company is that the owner, the boss, or a Lean Homebuilding = Better Product, Greater Return Copyright Business901
  14. 14. Business901 Podcast TranscriptionImplementing Lean Marketing Systemspresident will look around for product, and theyll be the onesthatll brainstorm whats coming down the pike in product. Theymight be looking through a magazine, or they might drive andlook at models.Theyll get together with their architect, and theyll develop aproduct and new houses, and then theyll go to market.What we do is entirely different with the Charrette. First, we startout with the Lean process. Well spend a week with the builder.Well spend the week with the builder and the building team andthe sales department going through with each one of their tradesto analyze whats working and whats not working with theirexisting plans. That means methodology of construction. It alsomeans whats happening on the sales end in terms ofacceptability and marketability.Well spend the entire week with them going through trade bytrade -- not all at the same time -- but trade by trade. As Scottmentioned earlier we have this process where theres over 700questions, and each ones broken up into a trade. After wevedone that process, then what well do is well take some of it...Well leverage some of that information that weve learned andhold what we call a Charrette where well have everyone from thebuilding team, including the sales people, and oftentimes realtorsif they have independent realtors, and have them in a room, andgo through and describe to us. Theres a process we do, what it isthat theyre looking for in new home development.Well take all that information in, and now we have across-section of every important aspect in the company, plus theleveraging the information that we picked up earlier with thetrade and suppliers. Now, we have a real basis from which todevelop new homes and new designs. Lean Homebuilding = Better Product, Greater Return Copyright Business901
  15. 15. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsJoe: I think its very interesting your approach at applying Lean,because its not about, "Here are these Lean tools. We need toapply 5S. We need to have a Kaizen." You seem to take it intothe specific homebuilding sector and apply Lean and apply it intheir language.Scott: This has been a pet peeve of mine. You get the LeanSensei, and therere a lot of great ones out there, but theyreincredibly expensive. Theyll come in. Its kind of a badge ofhonor for these guys to tell one of their clients, "Well, if..."I actually heard one of them say once to a president of acompany, "If you expect results any sooner than a year, then youarent serious." Im going like, "Go try to sell that to ahomebuilder, especially in the housing recession." The idea thatweve got to put everybody through the training, three days oftraining, then were going to have 20 green belts that take 15, 20days of training, then weve got to have five black belts to take allthe certification.Thats great that you can have a lot of it. But theres aninteresting thing, a negative that can happen in a lot of thesecompanies. Then the Lean work -it was very similar to the qualitymovement in the 70s, 80s, and 90s -- becomes theresponsibility and the ownership is in all these specialists.Where I saw a long time ago, and I go back before I got to PulteHomes, I was at U.S. Steel way back in production, and thenMotorola and where we did precursors to what it is we call Leannow. Then did the consulting work with a lot of great companieslike Caterpillar and John Deere and Cummins Engine areexamples.At Pulte, applying this in homebuilding, what I saw was that therewas actually as many negatives in terms of having a specialistfocus on this within your company as there were positives. Whenyou make it the responsibility of everyone as part of what they Lean Homebuilding = Better Product, Greater Return Copyright Business901
  16. 16. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsdo, then its part of their job. It could be harder for them to focusand concentrate on all the parameters and negatives of that, buton the whole, we think you come out ahead.Youve got to be a pretty big organization in my mind to justifyhaving a fulltime staff on this. As you look at most of the buildersin America, after you get past the top 25 or so, its rare that anyof them has more than a couple hundred employees, andprobably still the 80/20 rule, 80 percent of the homes are beingbuilt by 20 percent of the companies that will probablyhave...well, itll actually be a little higher percentage than that.The point is companies with 100, 115 people or less are probablybuilding the percentage of homes in America still. Its differentthan being a Ford or Chrysler or somewhere like that.Our idea is to get these people to understand how to do thisthemselves as part of their job and see it as, "This is a way tomake my job easier and get what I want to get done," not as,"Ive got to use this special tool here or there, and Ive got tomake sure I call it the right thing in order to get this done."Were not averse at all to using things like 5S or a Gemba Walk orsomething like that, but we dont stress it at all. Even in ourorientation sessions when we do our Leans, I used to try to teachthe seven wastes, and I quit doing that, because I realized it waspretty well going in one ear and out the other.Until these guys actually did it hands-on, it just didnt registerwith them. But after they do a hands-on then they get reallyinterested in learning. We think the building industry is justgetting to where there might be some appetite for the moreformal official training in Lean, and were ready to do that. Butthats just coming along as its coming out of the recession here.Joe: I think its a total immersion approach? Lean Homebuilding = Better Product, Greater Return Copyright Business901
  17. 17. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsScott: I would say were putting them in and actually showingthem how this relentless pursuit of waste its in their interest. Wetry to make it so its not an event, this one time event. Theyunderstand pretty quickly, "Wow; we could make this companywork better every day."There is one company in our industry that is probably the bestimplementer that Ive ever seen, and thats Hearth and HomeTechnologies. They make Heat & Glow and Heatilator products. Iknow them extremely well, and you go in their plants and 350people in each plant. They know they owe their jobs to Lean.Those plants are in Iowa and Minnesota. They would have beenmoved to Mexico or even the Philippines 12, 14 years ago if ithadnt been what they tucked under and taken during Lean.They totally get it. They know it inside and out. When I think of acompany thats immersed in it; I think of a company like that.We do have a couple of our clients that come to mind that aregetting there. Theres a great...The last two builders of the year,a matter of fact before the most recent was announced just thisweek, the last two before that was; last year was a companycalled DSLD outside of Baton Rouge, Louisiana, a company thatgrew from 0 to about 800 units in three years.In their fourth year this year, theyre going to hit over 1,000.Fifth year, theyll do something like 12, 14 hundred. Its anastounding growth rate. Ill add, these were experienced people,by the way, who had sold out a few years before and thendecided to come back in. They werent rookies starting fromscratch.These guys and their president, a young guy named SaunSullivan; they live Lean every day. They push it and stress it andevery single day at working with their suppliers and trades. Theirwhole notion is if they can get their suppliers and trades toimprove and get better, then they know they get better, too. Lean Homebuilding = Better Product, Greater Return Copyright Business901
  18. 18. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsA year before that, a builder by the name of Jagoe Homes, thatcompanys been around for four generations, and theres a fifthone coming along. Most companies that have that tend to getpretty sick by the third generation. But the Jagoes are theexception. Theyre remarkable people. They build in four differentcities in Kentucky.A little bit under the radar, but Ill tell you what. I visit theseguys, and they just blew my mind. They talk Lean every day. Itsnot a separate thing they do on the side. Its just what they do.There are those builders who are getting there. We do try to,though...We kick them off with an immersion.Its interesting. Weve had some local builders say, well, couldntthey do...rather than this five-day with us, could they do a day aweek for five weeks? We tried that once. It just didnt have thesame impact. We even a couple times split it, two days one week,three days the next week, you know, and it worked, but it wasntas good as pulling this team out and has five long days withthem.We work them hard and wear them out. But at the end of thatweek theyre exhausted but exhilarated because they see what itis they found.In these workshops, we usually identify an average; I work withthe suppliers and trades, an average of 150 specificimprovements that we get dollar values on, difficulty ofimplementation ratings, and what the benefits are. Then theyhave them all on a spreadsheet, tracking forms, and they take offwith them. They get about the task of getting it done.Whats really interesting, Ill anticipate another objection youmight ask about that we hear a lot of. "Well, isnt this going totake our guy? Were going to find all this stuff. Were going to getoverwhelmed." Some of the really intuitive builders will realizeabout halfway through the week. Theyll say, "Everything were Lean Homebuilding = Better Product, Greater Return Copyright Business901
  19. 19. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsputting up on the walls here, theres not one thing weveidentified that didnt already exist."We didnt create any of this. It was there. We just didnt identifyit. A lot of them, we had identified, we didnt have our armsaround it all, and we didnt understand it from the supplier/tradepoint of view. Sometimes, we look at this in a different way thanwe did before.This immersion is what pulls all that out, and its more effective. Inever did anything in my life that worked the first time andworked 10 times in a row. Well, this process worked the firsttime, and now its worked 103 times in a row.Joe: I want to ask Todd. Its something just a little off of Lean,but are we getting to a point in home design that we need thesophistication of something like BIM, which is BusinessInformation Modeling software? Is that starting to happen?Todd: It is more and more now than it was before. We actuallyjust got involved about a year ago with BIM with a companycalled VisionREZ. Its a tool, right? Once you have that tool andapply it properly, you can go a long way towards this Leanprocess. Its just like having a great CAD program. If what youreputting into it is incorrect, or it hasnt been fully flushed out, thenyoure not really creating any benefit.But with it, it can be a very powerful tool, mostly in terms ofcreating these anti-collision aspects of home building. Typically,thats been left to commercial building where now youd put it inBIM, and youd make sure that the heating and ventilationdoesnt run into the plumbing. It doesnt cross paths withelectrical. Home owners have always just figured that out in thefield.Theyd build a model, and whoever got there first, usually it wasthe HVAC guy, would carve out his base and put his tin in there, Lean Homebuilding = Better Product, Greater Return Copyright Business901
  20. 20. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsthen along would come the plumber. Of course, he would havetrouble getting through because now there was something rightin his way. Hed figure it out a different way. Then the next timethey build a house, well, whoever got there first, its the samething repeatedly.With BIM now what we can do is we can identify that workingcollaboratively in a Lean process with the trades to identify whatthese bays are and how can we avoid collisions? Not only can youput them in there, but you see them now in 3D, and then fromthat, you can create a take-off list, which is really effective interms of cross-management.Scott: Theres another critical aspect that Todd touched on withthis. We had a long conference call yesterday with a client, andthe light bulb went on in his head. They were in the process justgetting started in a big BIM conversion, so taking all of their plansand running them through, and getting them converted over to aBIM system.About halfway through our conference call, he said, "I wasthinking about telling you guys that were going to have to waituntil were done with this BIM conversion, because its taken somuch of our time and effort, but then looking at doing the samewith Lean with you guys in the spring."He said, "But its occurred to me halfway through this that if wedo the Lean process first, everything we do in this BIM conversionis going to get a lot easier, because what were going to do isclean things up before we try to automate it and make it moresophisticated." One of the biggest lessons of software, as Toddmentioned, you never automate a bad system. You never dosomething electronically that doesnt make any sense manually.He was asking us, "Are you saying if we go through this process,look at our plans, were going to clean up all this waste in ourplans first?" I said, "Thats exactly right." "Wouldnt it be better to Lean Homebuilding = Better Product, Greater Return Copyright Business901
  21. 21. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsdo that before we go about all this work to put them through aBIM system?" I said, "One of the big companies..."A couple of guys from VisionREZ, there are four of five of themout there, VisionRez, and therere others, but one of the onesfrom VisionREZ said, "In the ideal world, theyd have all theirclients go through one of our lean plan workout processes first.Then start running them through BIM, because it would savethem, a lot of brain damage and a lot of the trouble and extrawork, and itd save them time and money, too."Joe: I think the old ERP principle, or they called it the USAprinciple; it was always, "Understand, simplify, then automate."Youre saying, "Use the lean to understand and simplify, then usethe other part to automate."Scott: Yeah, thats really well-said. Thats a perfect application.Joe: Now, you normally introduce Lean through a workshop. Isthat really the best option for someone to get started, for a homebuilder to get started?Scott: Well, heres why we think it is. It comes down to the oldline, "Show me the money." I was asked recently to write anarticle, I had gotten an article due in a week for a professionalbuilder. Ive got three or four started and havent finished any ofthem yet, and Ive got to get on that.One of them was I was asked to do was write something onleadership and how do you get to leaders of these companies?Whether you want them to do a BIM process, a Lean process,youve got one of the new sales management programs, a CRMprogram, whatever it is. How do you get to them, because theytend to get a little detached from the day-to-day?They arent living the pain of dealing with, for example, a designcenter who has 27 front door options on a little town home, which Lean Homebuilding = Better Product, Greater Return Copyright Business901
  22. 22. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsis completely insane. But we see that kind of stuff all the time.How do you get seniors managements attention?I dont want to sound like Im getting old and curmudgeonly nowthat I just turned 60, but Ive been doing this stuff a long time. Ireally think that with rare exceptions, and there are some outthere. That Tom Sullivan I talked to you about was one, Bill andScott, Brad Jagoe. But rare exceptions, you dont get seniormanagement attention unless you can put a firm dollar value onsomething.Youve got to be able to show them the money. As a guy Iworked with used to say, "What is it that were about to do isgoing to help us build one more house to a satisfied customer ata profit? Everything we do have to stand up to that test."Well, what we learned out of desperation during the big crash, ifyou said to the builder, "Were going to show you the money inone week, show you so much money that youre going to bethrilled to pay our fee, which is a teeny-tiny amount in relationto the savings," then they get really excited and theyll listen.Ive had a couple of builders over the years call me and say,"Hey, Scott," after the fact, "This was fantastic." Theyll go on andon how great it was." Theyll say, "But youre selling this allwrong." I said, "Well, what do you mean?"He says, "Well, you come in and you emphasize how muchmoney you can save us, but the moneys fantastic. But theimpact its having on our people, the impact on our culture. Theway were working with our suppliers and trades, weve evenseen improvements, of how were working with the localinspectors, and its remarkable. Thats what you should beselling."I said, "Let me ask you this. If I had come to visit you or calledyou and said I want to show you this thing, and what its about is Lean Homebuilding = Better Product, Greater Return Copyright Business901
  23. 23. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsdoing these things you just mentioned. Its going to build betterrelationships with your suppliers and trades. Its going to helpyou work with the cities and communities better. Its going toimprove your internal culture. Would you have bought it?" I nevermention the money. "Would you have bought it?"They always say, "Well, no. Probably not." Its like we sell themon the fact that its going to give them a very huge, quickfinancial return, and then they start to discover it has all of theseother benefits that would have been worth paying for. But it sureis nice that they just come with it and you get the money.Thats a long answer saying, "Yeah, I think it is the best waybecause there arent too many conceptual buyers out there,especially in the building world. Whos attracted to building? Ithink an awful lot of us were guys who played with the ErectorSets if youre in my generation. But in Todds generation, was itLegos?Scott: Now, theyre probably building Sim stuff on the computer.But I still like Legos. Were people that were hands-on. We like tobuild stuff, and we like to see stuff. We like to be able to driveour family through and point to it. "See what I built? See what wedid?" They tend to be big conceptual buyers, so we show themthe goods. Thats the whole point of the Muddy Shoes.Joe: I think thats a great statement, and its very interestingbecause you give Lean an ROI, which so many others try to solvesomething different than that. I dont think theres anythingwrong with that. I think its a... Lean Homebuilding = Better Product, Greater Return Copyright Business901
  24. 24. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsScott: With the Lean purest, the sensitive types, its almost liketalking about the money is verboten or something, like its dirtyor a bad word. I look at the money as a route to getting thecompanies where we really want to get them, and its the moneythat can justify that. I feel like we own that. If we cant showthem, the money, why should they be doing it?Now, when we have really good times again, and they can affordto think three-year, five-year paybacks and stuff, well, OK, butwe arent there yet, and its been a lot of years since weve beenthere.Joe: Whats something you might want to add, either of you,that maybe I didnt ask?Scott: I think that one of the things in Todds area...Ill tell you,again, I mentioned I just turned 60. I started working with Toddon these Lean design workshops a little over two years ago.Pretty quickly, I had some of our other field guys complainingbecause I was hogging them all.The reason why was, I was learning so much. Id come back fromthese sessions...Id be so excited. I mean Ive been out there along time and I could become one of those guys who said, "Yeah,been there, done that, seen that." After working on the plan anddesign process it just opened up a whole world to me. Id done itbefore, but never with anybody who understood it at the levelTodd did and also had the knack for working with the suppliersand trades.So to see those guys come in and working and sitting down nextto Todd...we have a whole system for this of a color-codingsystem. The trades get the color. They get to take highlightersand markers and mark up the plans. We give them permission totell the builder the babys ugly, and they have at it. Lean Homebuilding = Better Product, Greater Return Copyright Business901
  25. 25. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsYou saw pictures of some of these plans when they get markedup. It just blows your mind. They have Post-It notes, and coloredmakers, and they really get into it. As a result for every plan,well typically end up with an average of 100 improvements.I would say opening up peoples eyes to the fact, I dont care howgood you think your plans are; we have never, - weve workedwith so many people on this and a lot of really goodbuilders, -- seen a plan that working in a structured process withyour suppliers and trades, you could not find significantimprovement dollars, and without hurting the plan, and withoutdoing collateral damage on your suppliers and trades.To have them excited, to have them see that theyre going tomake more money, too. That sounds like an impossible dream,but its absolutely real. The suppliers and trades do better, thebuilders do better, the homeowner does better, and thats justbecause theres so much opportunity out there.Todd: From my end, Joe, the thing I find, again, most striking isthe amount of money per unit available on every single houseyou build, you can make these improvements, but theseimprovements are invisible to the customer. In other words,weve done a lot of different things in terms of advanced framingand methodology to teach builders how to build things a little bitdifferently to save thousands of dollars.And that was what the big shock was to me was that you can dothis. Its invisible to the client. Its not something that detractsfrom what youre building, but it actually improves it, and the factthat it is available and readily attained was the biggest thing tome that Id like to put out there.Scott: Well, you know, on top of that, Joe; we have also had toidentify a couple engineering firm to work with, and I always sayarchitecture never trained in cost, so a lot of times you have tohold harmlessly and say they didnt get training in that. Theyre Lean Homebuilding = Better Product, Greater Return Copyright Business901
  26. 26. Business901 Podcast TranscriptionImplementing Lean Marketing Systemstaught to design really cool stuff, and we love cool stuff. We say,"Cool and cost efficient. Thats even better than cool."When you go to engineers, and what I find a lot of them knowabout the cost, but they dont deal with it and dont want to dealwith it. The engineering attitude is often, "I get this thing sealedand stamped, and if theyve got 20 percent more wood,engineered wood in the floor system than they need, well, thatjust protects me even more. Why should I tell them?" Thats, ineffect, even if its not done brazenly like that, thats whathappens.We have found a couple of engineering firms that are fantasticand who really get it, and we bring them in on a consultant onthese projects and get them to look at how everything is laid inthe house -- the framing, the foundation, the engineered wood,truss, or even if its still stick built roofs -- and they always findbig money where the house is just as good as it was before,sometimes even better, but costs quite a bit less.Were quick to point out when we look at things, when we getinto codes; we say its not just enough to meet the building code.Of course, we have to meet the building code, but you also haveto meet the customer code.If someone goes pulling a lot of wood out of a master bedroomfloor on a second story and the customer, every time they walkacross that bedroom once they get it loaded up with a bed andfurniture, it bounces every time theyre walking back, you lost.You may have completely met that code, but you lost, becausethe customers going to be unhappy, and theyre liable to tell awhole lot of other people.Its not just simply; lets figure out the minimum way to meet thecode. Lets figure out a way that we can meet or beat that codeand keep the customer happy at the lowest possible cost. Theres Lean Homebuilding = Better Product, Greater Return Copyright Business901
  27. 27. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsvery few that understand how to do it. Were very, very fortunateto have found a couple to work with.Joe: Whats the best way for someone to contact you?Scott: Well, we have...our website is truen, short for True North,, and Im simply Todd, theyre in theprocess of building their new website, but I think its still on, isntit?Todd: Our existing website is, and, ofcourse, you can reach me directly through there. It has an areawhere you can just type in and Ill get your emails. The otherthing Scott and I do just about each week is were You can see that we write blogs each weekabout Lean.Scott: And thats the blogs or the electronic space forProfessional Builder magazine, also Professional Remodeler isthere, so You can just put in Hallett or Sedamand well come up there. Often, they have us featured on that.We do have a huge event coming up this year at IBS,International Builders Show, in Vegas in January. They onlyapprove three full-day workshops, and we have one of them onLean design. Well be running a full day really hands-on workshopon Lean building and Lean design, so if anyones going to IBS thisyear and usually theres a...Well, we arent quite back to those great days when we wererunning 125,000 people at that show, but I think it might belooking back up to 50 or 60 or 70 this year. But thats going to bea tremendous experience so that would be a great way to do it.Also, every month, I have an article in Professional Buildermagazine, and we have PDFs of our different article series. Forexample, there was a three-article series on BIM. There was a Lean Homebuilding = Better Product, Greater Return Copyright Business901
  28. 28. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsfive articles on quality management, so if anybody contacts me orgoes on the website, were happy to send them those PDFs ofarticles weve done.Joe: Well, Id like to thank the both of you very much. Thispodcast will be available on the Business901 iTunes store and theBusiness901 blog site, so thanks, Scott and Todd. It was adelight.Todd: Thank you very much.Scott: Thank you, Joe. I appreciate the opportunity. Lean Homebuilding = Better Product, Greater Return Copyright Business901
  29. 29. Business901 Podcast TranscriptionImplementing Lean Marketing Systems Joseph T. Dager Business901 Phone: 260-918-0438 Skype: Biz901 Fax: 260-818-2022 Email: Website: Twitter: @business901Joe Dager is president of Business901, a firm specializing inbringing the continuous improvement process to the sales andmarketing arena. He takes his process thinking of over thirtyyears in marketing within a wide variety of industries and appliesit through Lean Marketing and Lean Service Design.Visit the Lean Marketing Lab: Being part of this community willallow you to interact with like-minded individuals andorganizations, purchase related tools, use some free ones andreceive feedback from your peers. Marketing with Lean Book Series included in membership Lean Sales and Marketing Workshop Lean Service Design Workshop Lean Homebuilding = Better Product, Greater Return Copyright Business901