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2018 Macro Trends for Builders

2018 Macro Trends for Builders
As you emerge from your 2018 budget planning, it's time to gut-check your strategy, align your team, and prepare your culture and business model for another go at creating value in a VUCA world.

Timely, as always, Harvard Business Review contributors Paul Leinwand and Matthias Baumler from PwC's strategy consulting business offer "8 Tough Questions to Ask About Your Company's Strategy." Notice the emphasis they put on clarity and culture as critical linkages between strategy and the ability to execute.

As you answer that first question, "Are we clear about how we choose to create value in the marketplace?" we at BUILDER offer the following 18 "swimming lanes" that we hope will help you become even clearer. Of course, we'd love to hear your comments and commentary on any or all of them, so that we ourselves can do what we're suggesting you do: become clear and mission-driven, and live what we say. So, please feel free to use the comments box below and have at this list, add to it, or tear it apart as you see fit.

Tech's Pivot Point: Residential construction has reached a critical inflection point in how technology—offsite and onsite—is currently transforming workflows, business models, and returns on invested capital, both how production occurs, and its price and profitability. Be skeptical at your own risk.

Innovation brightspots: Despite conventional wisdom that home building is little more than a 200-year-old manufacturing, distribution, and marketing business unimpeded by progress, real innovation is going on. Innovation and learning centers, research labs, technology teams, chiefs of innovation and transformation, game-changers and ground-breakers among manufacturers, distribution hubs, and even builders themselves are generating fresh, bold, new outcomes to improve and transform the process. Be changed by the future or take part in making it.

The Envelope, Please: As Title 24 in California sets a Zero Net Energy performance goal-line for all new residential construction by 2020, a benchmark code and compliance will likely follow suit in places nationwide. Construction, design, and engineering experts say that most of the energy performance improvement in homes will come by virtue of better building envelopes, rather than expensive new systems to convert solar into energy, store it, and operate homes. Where are you and your teams on the air, moisture, and thermal barrier spectrum?

Waste Not, Want Not: Builders, developers, planners, investors all aim to reduce wasted resources--money, land, time, and talent--to add to the universe we call "a market" of home buyers for new communities. Productivity loss is a No. 1 pain point in residential construction projects, surfacing as skilled labor capacity shortages, variances on purchase orders, costly delays, unforeseen land mitigation, etc. 2018 will be a turning point year at productivity gain and improved waste management.

The Rise of the New Nuclear Household: Fewer than 1 in 5 households in America is a married-with-children nuclear family household. As household composition continues to evolve, the household’s role as America’s primary economic engine does too. We'll look at how Americans want to live today … beyond apartment rental, ownership, into co-living, single-family rental, and more. How do these housing type preferences impact residential construction business models? We see the emergence of single-family detached for-rent—both new and existing—as a permanent new part of the housing spectrum. From multigenerational, to tiny houses, to mixed-age neighborhoods, the moving target of non-traditional households is moving ever faster.

Algorithms and Insight Predictive, evaluative, and on-the-ground data points add precision and perspectives to support smart residential real estate investment decision-making, consumer marketing, and other measures that best hold operators to KPIs that meet stakeholders’ expectations. The new role of data clears a new pathway out of an environment where data simply abounds, toward a new ground where it can be levered intentionally in the value-making process.

Most-Popular House Plans: Three-season indoor-outdoor, flex space, Fonzi flats, and applied brilliance in storage and organization are all the interior rage, as contemporary farmhouse, transitional, and steel, concrete, and glass contemporaries define design's vernacular. The whys and wherefores of each plan’s appeal, and which markets work best for each adds a sleuth-like note of fun to this most noble of businesses.

Making a Place a Place: As infrastructure, transportation, home-life, and workplaces continue to evolve, new households are redefining the “non-negotiables” of new communities, be they urban, suburban, or rural. Economics, natural conditions and events, and expectations about how we value and use time figure into the new calculus of lots and land strategy, as do increasing awareness and insistence on health and well-being. In this context, what might property value look like in 2025?

A Material Difference: What conditions account for the most frequently encountered building materials failures in residential construction? Faulty installation? Changing weather conditions? Tighter building envelopes? Unproven building chemistry for durability, or physics for strength? In an era of higher standards for code, are we asking building science to perform feats its not capable to perform? Materials' ability to adapt to dynamically changing conditions ... materially important.

Health Vs. Safety Despite an initial impression that health and safety are one and the same, in residential construction, they’re not. How can and do these issues clash? Also, where do privacy, security, well-being, and comfort intersect with preventative measures and code for structural failure, toxicity and particulates, off-gassing, mold and moisture, etc.? Builders need to carefully navigate the tricky channels of building science and advanced materials analysis to recognize and solve for where safety ends and health begins, and where they diverge from one another. Balance or perish.

Home Building & Construction’s New Jobs, 2018 Vs. 2025 How does the data compare on what people say now are imeasures of their current job satisfaction, and how might that contrast with what skillsets, proficiencies, opportunities, and challenges might look like seven years from now? Is housing construction's challenge a skilled labor problem or, rather, is it a human talent problem?

Strategic Scale: What’ will fuel M&A, strategic partnering, and further consolidation of new, for-sale residential construction's decentralized nodes into fewer and fewer, larger and larger players. Capital, land, and human talent resources are all finite compared with the demand for each. As technology and machine learning advance production capability and other aspects of the value-creation stream, how will the home building landscape really look in the next seven years? Is there a sustainable profitable model in the spectrum for small-medium sized builders who offer neither bespoke homes nor high-volume efficiencies? Smart is the new good.

2018: Climate’s New Demands Future-proofing for resilience, both inside the box and for vital resources outside the confines of a home unit, is an urgent area of focus, whichever direction one’s ideology or scientific beliefs lean. Resilience means planning as much as it does construction and engineering. It means securing backup systems as well as ensuring primary access to critical resources in times of adverse conditions and disasters. Housing’s role in expecting, accepting, and maintaining baseline access to life-sustaining resources is an opportunity to explore innovators, data sources, and the future of communities. Does global warming sound better to you without the global?

Home Building’s Leadership: As data and technology fuel exponential change in home building business and operations models, people, processes, and product development change dramatically as well. Preparing a firm—large or small—to be resilient in the face of not one, but a rapid wave set of many, previously unforeseen challenges, is the new mandate of leadership. How can BUILDER help with that?

Building’s Best Learning Organizations: Adaptability is the new deep pockets. Companies large and small in home building and residential development need to be close to and compelling among consumers, local policy decision-makers, and their respective partner/stakeholders—internal and external. Some companies excel at “learning how to learn,” taking cues from their own and others’ mistakes, new solutions occurring at the fringes of the business, and bringing non-conventional perspectives into planning processes, and, in short, investing in necessary discovery. Are you one of those companies? You'd better be.

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