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3 Simple Steps A Small Home Builder Used To 'Datafy' His Business

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In 2009, Jason Adams wasn’t sure what he was going to do. The thirtysomething entrepreneur based in Bend, Oregon had built up a successful land development business. Real estate was in his blood. His mother had been a real estate agent for nearly 35 years, and his stepfather had spent the greater part of his life working in property management. After a meteoric rise in home values in the retirement and recreation community situated in central Oregon, Bend was hit hard when the housing market crashed in 2008. It experienced some of the fastest depreciating property values in the country.

Leslie Renaud

Under these tough circumstances, Adams watched 90-95% of his fellow real estate speculators leave the market. Many of them declared bankruptcy, some fled the country to escape their creditors, and a few, sadly, even chose to take their own lives. As he stared at his own heavy debts, Adams knew what his attorney would recommend—declare bankruptcy and move on. However, Adams felt a strong commitment to his hometown and felt duty bound to pay back his loans.

After buying and selling foreclosures to stay afloat, in 2010, he noticed there were only one or two builders still left to serve the local residential market in Bend. After he was asked to build a new home that year, he was pleasantly surprised when he built three more houses the next year and then 11 more homes the following year. Before he knew it, he had unintentionally become a home builder, the CEO of Arbor Builders. As a relative newcomer to this industry, he met with other builders to learn from their experiences and hear their frustrations. Adams realized, “I was just beginning to feel some of the same pain, and I knew it was only going to get worse as I added more zeroes.” He knew the longer he waited to address the problems--such as margin management, cashflow planning, construction scheduling, and so on--the harder they would be to fix. Adams decided to turn to a new building tool—data—and it quickly gave him a competitive advantage.

Creating a data-driven construction business

For decades, the home building industry has operated the same way—highly inefficiently and based on a lot of guesswork. Adams found many seasoned builders were resistant to new approaches and ideas, especially involving technology and data. When the housing market is booming, it is easy to mask efficiency issues. However, as the housing industry becomes increasingly expensive—both in terms of inputs (materials, land) and outputs (housing prices)—mistakes are going to prove more costly. Adams felt strongly that builders who became more efficient would stay in business, those who don’t won’t survive.

Facing this industry-wide efficiency challenge, Adams had a “pure need and hunger to do something different.” When he looked at his smartphone, he was able to see all of his sports and news information in one place. He could get all kinds of insights into what was going on in the world, but he couldn’t do the same for his own business. If he could get the latest college football scores on his phone, why couldn’t he check his phone for the status of various housing projects? To achieve this goal, Adams was determined to “datafy” everything within his construction business by following three key steps.

Step 1 – Centralize intelligence

When Adams looked at his 12 different systems for accounting, purchasing, scheduling, sales and so on, the data was fragmented. Each system had its own reports and separate login, which meant he was lucky if he accessed each system more than once a month or quarter. He quickly recognized the need to have a mobile-friendly, cloud-based platform where he could aggregate all of his data in one place (Domo). After hiring a friend with more technical expertise, Adams was able to get a robust, strategic data foundation in place. They were also able to fill annoying data gaps across the various data systems. In multiple instances, Adams found they could add supplemental data directly into his cloud-based data platform in a more agile manner than routing it through his existing business applications. For example, his purchasing tool vendor took 15 months to address a feature request for a simple checkbox. Rather than waiting for slow-moving vendors, his agile technical team has built out more than 200 Box connectors to provide a more comprehensive view of business performance.

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Step 2 – Dissect key processes

Most people believe home building is about materials and labor, but as Adams notes, “It’s really about the timing of building homes.” While time never shows up on a P&L statement, it’s a home builder’s single biggest challenge. Building houses is a long cycle, spanning several months. From breaking ground on a new house to getting paid, it can be a six-month or longer process. In addition, the time from buying a house lot to breaking ground can add another 2-3 months to as long as a year. As a result, Adams wanted to get a better handle on the lost time before, during and after each construction project.

One of the first time-based challenges Adams decided to tackle was the constant struggle to get houses started on time. His company had lot of job opportunities with buyers, subcontractors and paying customers lined up, but he couldn’t start houses fast enough. Before any job can start, a home builder must jump through various reviews and permit approvals. Adams also wanted to start each job with a complete set of accurate drawings that wouldn’t change during the project. It wasn’t uncommon for builders to start with the wrong set of drawings and then have to make changes, which would lead to further delays.

Adams and his team spent time mapping out the entire job approval and review process, which consisted of the following steps:

  1. Internal review of floorplan and elevation
  2. Internal review of construction drawings
  3. External review with architectural review committee (required by 1/3 of communities)
  4. External review with engineering for roofs, flooring and overall structure
  5. External review by the city for final permit approval

At any one of these steps, the documents could be susceptible to mistakes, changes and delays. In the past, Adams’ team had long and frequent meetings to determine where each project was in the process. In addition, they often failed to re-use plans and drawings, which further decreased their efficiency. After mapping out their entire process in detail, Adams knew he was sitting on a huge opportunity. By enhancing his company’s efficiency in this one area, he would be able to build faster and more accurately than any of his competitors.

Esther Watson

Step 3 – Visualize & automate

With a detailed understanding of the approval and review process, Adams created a visual project schedule in his data platform. Now, his entire company could see the current status of every project—what they have completed and what’s outstanding. It was also designed to be prescriptive for the employees with specific instructions at each stage in the process (approve, upload or submit). Essentially, the data platform tells employees exactly what they need to do and constantly re-prioritizes what they need to work on. By automating the design and permitting process, Arbor Builders has been able to increase the number of city submittals by 450% with a massive decrease in time wasted on meetings. Adams has applied this same three-step process to other aspects of his business such as financing and warranty service to make it highly efficient and organized.

If you ask Adams’ direct competitors when a particular house will be done, they don’t know. If you ask them about specific features of the house, they’re not sure. Armed with data, Arbor Builders’ employees can not only tell you exactly when the house will be completed but also the full details of what will be inside. Adams readily admits his team is not perfect, but he believes his company can pivot more quickly to fix mistakes when they have data at their fingertips. “Analytics gives us the visibility to create the plan," he explains, "but also helps us understand that the plan is being followed.”

Adams’ passion for data has led him to launch another venture, Build Intelligence, to help other production home builders achieve similar data-driven results. He predicts, “The pinnacle of success will be empowering more builders with a forward-looking view. Having the insight to know when to speed up, slow down or stop based upon rapidly changing market conditions will be critical to the next generation of successful home builders. And cutting down the cost of time will deliver more affordable homes to the market.” Adams strongly believes the future of home building will be built on data, and he’s prepared to lead this critical transformation.

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