The Home Building Technology Revolution, Part III: The Missing Link

Has the technology revolution finally planted its flag in the largely virgin territory known as home building? From the articles, blogs, and YouTube videos touting new technology as the answer to nearly every problem in our industry, you’d think so.

Yet results of the April 2020 survey of home builders of all types nationwide by Home Innovation Research Labs in collaboration with Pro Builder tells a different story: Just 7% of respondents believe off-site construction, including panelization and modular, is the best long-term solution to reduce the impact of the skilled construction labor shortage. Meanwhile, 73%—nearly 10 times as many—see recruiting and training the next generation of skilled construction workers as the answer. Combine that with the commonly cited statistic that just 3% of U.S. homes built in 2019 used modular or panelized framing systems, and you’ll have genuine doubts about technology’s impact on home building to date. And that’s just on the construction (that is, product) side.

Now consider the software side, which deals with the home building process—anything from back-office accounting, purchase orders (POs) and variance purchase orders (VPOs), options and selections management, sales management, scheduling, warranty management, and BIM (building information modeling), etc.

People don’t leave their comfort zone without a highly compelling reason, and when it comes to technology, we have failed to convincingly provide that reason.

As I have detailed in several recent columns, the key concerns software programs are designed to solve—cycle time, scheduling, cost reduction, and variance, in addition to the obvious need to get folks paid and to keep track of the money—are all worse than before the big downturn a decade back, which affected 90% of our industry. My TrueNorth colleagues and I began running our intense, “Lean Building Blitz” and “Lean Plan Workout” sessions in 2007 and continue to do so to this day. We collect data on these indicators and, with more than 200 cases, report with certainty that as an industry, we are now doing worse, not better, despite the incredible growth and capability of the available software.

All of this technology for both product and process and yet we’ve regressed. How can this be?

Cars, Yes ... But Why Not Homes?

Let’s compare this record to another industry claiming a revolution-in-progress. Thirteen years ago, plug-in electric vehicles were largely a novelty, with Tesla just launching its all-electric Roadster, although a few hybrid electrics, such as Toyota’s Prius and Ford’s Escape, had been around for some years prior. Total sales of electric vehicles (EVs) of all types in the U.S., however, were a fraction of 1%. Over time, the hype over EVs increased, as did the technology hype in home building.

Today, electric vehicles—hybrid and plug-in combined—make up around 3% (a familiar number?) of U.S. automotive sales. There are almost limitless plans and predictions out there, but a sea-change is clearly in the making in automotive.

Tesla built 500,000 cars in 2020. GM, believed to have battery technology now superior to Tesla, has 12 electric vehicles today and plans to launch 30 EVs by 2025 around the world, with more than two-thirds available in the U.S. GM predicts its vehicles will be virtually 100% electric by 2035. Ford has debuted a hybrid-electric model of its F-150 truck, the best-selling vehicle in the U.S. for more than four decades, and plans a plug-in electric by 2023.

In Norway, which has the highest EV use of any country, 54% of new car sales in 2020 were electric, and by 2025, non-EV car sales will be banned completely. So, what’s the EV (electric vehicle) market look like in the U.S.? A 2020 Consumer Reports survey to gauge consumer interest and knowledge of electric vehicles found that “71% of drivers have at least some interest in getting an EV, with 31% saying they would consider getting, or would definitely get, an EV the next time they purchase a vehicle.”

On the process and production side in automotive, the technology revolution took hold more than 25 years ago. So, is the auto industry at roughly the same level of technology adoption as home building? Hardly. Compared with the auto industry, home building is positively Neanderthal.

What’s Impeding Progress?

Before going further, there are a couple of things to remember—and these get to the heart of the problem. Firstly, when people don’t truly understand something, it’s difficult to turn them into buyers (perhaps politics aside). Do builders fully understand how home building technology—either in construction or software applications—works and how to use technology to solve and prevent problems? Do we truly understand the “true total cost” of off-site vs. on-site methods? My experience says no. So why not?

In my Pro Builder column, “The Home Building Technology Revolution, Part II: Understanding the Obstacles,” we began to explore what impedes our progress in this well-documented, century-long endeavor stretching all the way back to the Sears packaged homes, 70,000 of which were sold from 1908 to 1940. I grew up in one of those homes in Southern Indiana, built in the early 1930s—still standing and looking quite good, I might add. I quoted heavily from three of the many letters I received in response to my first column in this series. Two of those letters came from the supplier/trade side of the business. The first one cited three primary obstacles:

1. Inadequate training

2. Too many software packages for vendors to learn, use, and stay up to date with

3. Confusion caused by varied implementation, as even those builders that use the same software package implement it differently.

The second letter also focused on training, pointing out that most training on either software or construction technology only consists of on-the-job training. The author was dumbfounded by the fact that so many of his builders’ personnel couldn’t even identify POs and VPOs when queried. The upshot: Builders have the systems, but no one knows how to use them.

Do builders fully understand home building technology—either in construction or software applications—how it works and how to use technology to solve and prevent problems?

That letter writer also lamented builders’ lack of discipline, contrasting their spotty efforts with the training and skills upkeep pilots require to fly airplanes. In aviation, you either learn these skills and keep them current, or you die. He noted the low accident and fatality rate in commercial aviation, where intense and ongoing training and significant experience is mandated by governments worldwide, compared with private aviation, where accident and fatality rates haven’t decreased despite technology improvements.

Finally, I cited a letter from an engineer pointing out the basic problem of plan and specification inadequacies and the lack of understanding among builder personnel as a primary obstacle to adopting new technology.

The Sticking Points to Tech Adoption for Home Builders

I continued to receive email in response to that column. What follows is a cross-section of feedback on technology adoption and what gets in our way in both product/construction and process. (Editor’s note: Letters have been edited for length and clarity.)

From Tim O’Brien, Tim O’Brien Homes, Pewaukee, Wis.

First, if the technology does not perform exactly how you want, then “it doesn’t work.” We must be more adaptable to the technology versus waiting for the technology to adapt to us.

Second, it takes time to implement a system, and builders fail to devote the needed resources. “Just get it up and running and we can circle back on the rest of the items later.”

Third, we don’t train on how to use it, so they screw it up and we call it a “people problem.”

Fourth is accountability, requiring both staff and trades to use the system, which requires culture change.

Finally, all of it requires trust. If you blow the implementation, it will take a long time to regain trade confidence.

Regarding construction technology ... currently in Milwaukee, the numbers just don’t make sense: Our contract homes are financed by the customers, so interest saving is no help. Panelization here is $7K to $10K more and it may save two weeks. If suppliers can lower the cost of components, it starts to make more sense, but currently it cuts gross margin by 2% to 3%.

From Jim Leiferman, View Homes, El Paso, Texas

Garbage in, garbage out. Humans get in the way and bring the technology gains to their knees. Lack of discipline, process, and training negate the advantages of the technology introduced. Panels are awesome, for example, but not if the foundation guy can’t/won’t deliver a foundation to spec.

From Terry Nosan, Nosan Signature Homes, Farmington Hills, Mich.

Perhaps we need to start with a “Technology Czar,” whether in-house or a third party, showing the benefits, training the employees to use it properly, and monitoring progress. Once the employees are experts, bringing the vendors along may be doable. I’d bet if you ask the vendor, they’d tell you we are utilizing more of the program and have more transactions than most of their clients. We have had a “tool” for about six years now, though, and have barely scratched the surface of what it can do.

From Todd Booze, program director, National Housing Quality Award

So many builders lack the discipline to get it all correct on paper first—plans, POs, etc.—always in a rush to get stuff to the field with the attitude “they’ll figure it out.” Too many times I have heard, “We can’t get it perfect, so let’s just get it out there at 90%.” Add up 10% incomplete plans and POs, among other details, and that’s a huge number of “defects” for supers, suppliers, and trades to handle in the field.

Software won’t solve that. Add to this the problem that few in the back office understand what goes on in the field. On the production side, suppliers and trades are reluctant to give up work by making it simpler and faster. They don’t trust houses will continue to be there in front of them if they get the jobs done faster. They fear more downtime and being asked to cut price. What’s their payback?

From George Casey, Stockbridge Associates, Freeport, Maine

Our industry structure must change. Today we are nearly 100% outsourced in terms of production. This creates huge coordination and resource allocation issues that technology can only partially solve. Maybe the answer is to bring some or all of the work back in-house. A recent McKinsey article addressed this issue and concluded that for many industries, in-sourcing instead of outsourcing can lead to significant increases in productivity. I think of the DiVosta machine and Levitt back when most of the work was done with in-house labor. I look at NVR and its return on assets being 3X more than most of the other public builders, and its PE ratio being 2X to 3X; that just has some of the work done in-house at the factory. Bottom line: This is the paradigm shift we must confront.

From Conor Sedam, Nosan Signature Homes, Farmington Hills, Mich.

Builders buy these systems and expect them to act as an autopilot for their business. Someone must tend to the system, similar to how a pilot observes and tweaks an airplane on autopilot and knows exactly what to do when the whole thing goes sideways.

Another analogy is the unfortunate, sometimes fatal, accidents we are seeing with Tesla autopilot systems. People think they can hop in and take a nap in their car. Works great until it doesn’t! You can’t just throw all of your processes online with a computer program and walk away. In my previous position with a national builder that had spent millions on such software, so many saw the systems as a magic “black box” solution to their problems. It was never that simple.

From Lou Mac, business technology analyst

Many believe in technology like children believe in Santa; something magical that will give them what they want. When they discover that all of the real work still needs to be done; all of the training, skill, and education is still necessary, they become, at best, disappointed. Technology is only a tool. If the human using it does not have the basic knowledge of the issues the technology is supposed to solve, the technology will just as likely make things worse, not better.

From Owen Brandli, Perennial Builders, Central California

If the organization is not running smoothly before new technology is introduced, implementing a new software package will not deliver the promised results. Technology will not address issues and problems stemming from:

• Decision-making based solely upon financial analysis

• Lack of a cohesive, positive culture with strong values

• The shortage of quality trades

• Inadequate training and mentorship

• Incomplete plans, scopes of work, specifications, and communication to the field and subs

• Failures in relationship building and communication amongst all participants, including employees, subcontractors, suppliers, consultants, and customers.

From Terry Bradbury, AIA, architect, Indianapolis

In the early ’70s, I took a construction technology class taught by Walter Lewis, one of the principal authors of the seminal text, Construction: Principles, Materials, and Methods, used worldwide by architecture and engineering schools. Lewis taught at the University of Illinois for more than 50 years. One of the major themes of the class was how the construction industry was so slow to adopt the new technologies and methods many other industries were adopting. Not much has changed.

This selection of responses provides a good cross section of large builders, small builders, and—if you include the responses in my previous articles—feedback from other key players in the industry: architects, engineers, technology analysts, and suppliers and trades.

Here are 10 key factors I gleaned from their feedback.

10 Obstacles to Technology Adoption

1. Training: Insufficient training at all levels, which results in poor understanding of the system

2. Discipline: Lack of discipline in implementing and keeping systems current

3. Software selection: Too many software systems for vendors to learn, interface with, and stay current on

4. Consistency: Even with a single package, there’s no consistency because the same system is implemented differently by each builder

5. Documentation: Plan and specification inadequacy compounds issues

6. Culture: A culture that cannot support or adapt to change

7. Leadership: The builder’s leadership is not up to the challenge of leading and managing change

8. Process: Trying to implement technology in organizations where systems and processes are in disarray

9. Subcontractors: The current industry structure of subcontracted work isn’t conducive to technology

10. Quality: Garbage in, garbage out and not enough will to stop the inbound trash

The Missing Link?

These are all key elements of the problem, and any builder would do well to challenge themselves on each of the 10 for any technology implementation, whether product/construction or process. Yet, as I have thought about this continually over the past few years, a key observation keeps nagging at me. Consider other industries that have successfully adopted technology at a rate that dwarfs—you could even say embarrasses—the home building industry. From automotive to health care to banking, from agriculture to transportation to manufacturing of all kinds, these other industries have left home building in the dust. Now go back over those 10 factors above and ask yourself: Didn’t these other—far more successful (in terms of technology)—industries face these same issues? Other than a bit of hesitation on No. 9 (subcontracted work), the answer is a resounding, Absolutely. And even on No. 9, the number of subcontracted parts and the amount of labor in most industries has grown tremendously over the past few decades.

Thus, the obvious question is: How did all of these other industries overcome the obstacles while home building continues to struggle with them? You may look to the problem pointed out in a previous column of not enough big players or limited outside competition, but I’m not buying it. Health care, for example, is an incredibly fragmented industry and has, to date, no meaningful outside competition, foreign or domestic. Yet the health care industry is a true pioneer of new tech applications.

But there is one factor where home building has done a particularly horrendous job, and that’s the accurate measurement of true total cost of technology adoption and implementation. Readers of my column in Pro Builder won’t be surprised by this, as I have written about it extensively in the past. (Those columns will be included in the PDF collection of my entire series on the technology issue you can request below.)

I can say this because I have seen it firsthand many times over the years. Most adoption of technology is attempted with only limited understanding of the impacts, both positive and negative. This requires a deep understanding of costs, based on detailed calculations on both your present system and the new technology in question. Over and over again, we find essential factors omitted from the calculations, with many examples cited in my previous columns. It is indeed a lot of work to get it right, especially when you bring in the hard-to-measure factors of impact on customers, suppliers, trades, and your own people. When people do understand true, total cost of both old and new, they can make sound decisions with confidence. Without that knowledge, it’s mere guesswork and, faced with that, most will simply stick with what they have and what they know. People don’t leave their comfort zone without a highly compelling reason, and when it comes to technology, we have failed to convincingly provide that reason.

If you were expecting a more monumental revelation, I’m sorry to disappoint. Yet the solution to much of the problem is right in front of us, if both builders and technology purveyors would just do the hard work to solve it. Until then, technology adoption in home building will continue to remain elusive.

For a free PDF of “The Home Building Technology Revolution—Where Are the Results?” email your request to [email protected].