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Podcast Transcription Implementing Lean Marketing Systems

Lean Homebuilding Guests were Scott Sedam and Todd Hallett

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Podcast Transcription Implementing Lean Marketing Systems Scott Sedam is President of TrueNorth Development, an internationallyknown 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 the recent industry downturn, TrueNorth’s LeanBuilding™ processes have saved clients more than $200 million, demonstrating clearly how to improve product, process and profit without compromising builder, supplier and trade relationships. Scott Sedam’s presentations are a popular feature at industry conferences and company meetings and he has published a monthly article in the industry for more than 15 years. Scott serves as contributing editor for Professional Builder Magazine and writes the weekly “Lean Building” blog on www.HousingZone.com.

Todd Hallett, AIA, President of TK Design & Associates, Inc. (tkhomedesign.com) 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, and operations, and was President of the company for three years. Equipped with his vast building experience and fueled by his love for architecture he left to form an architecture firm that is second to none in working cohesively with Builders. Todd specializes in Lean Design and works, alongside Scott Sedam of TrueNorth Development, in the trenches with builders, suppliers, and trade contractors. His Lean Design blog appears weekly at Housingzone.com.

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Podcast Transcription Implementing Lean Marketing Systems Transcription of Podcast Joe Dager: Welcome, everyone. This is Joe Dager, the host of the Business901 podcast.

With me today is Scott Sedam and Todd Hallett of True North Development. They are the leading firm in introducing and implementing Lean to the home building sector.

Scott was at the forefront of total quality implementation in the construction industry in the '90s, and started True North Development over 15 years ago. Todd, meanwhile, developed the skills as an architect with Ron Mayotte, and later, his firm, TK Design, and is recognized by a very impressive list of accolades that are simply too many to list.

I would like to welcome the both of you. Could one of you start out by giving us the elevator speech about True North, and how the 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 companies here. True North Development, that I founded about 15 and a half years ago, after I left Pulte Homes, and then TK Design, which is Todd's company.

Todd is an architect, and his background was very interesting. After being a sought-after architect, he went to work full-time for a company really well-known in this area called Delcor, which was a big production builder and the first builder in the United States to be ISO 9000 certified. So, very process oriented.

Todd, in addition to doing all their design work, also ran construction there, eventually became COO then CEO. When Delcor sold out in 2005, he went back to architecture Lean Homebuilding = Better Product, Greater Return Copyright Business901

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Podcast Transcription Implementing Lean Marketing Systems full-time. We think he's the only practicing architect in America, who's deeply involved and responsible for purchasing and construction in a production builder, which makes Todd really unique.

We started working with Todd about two and a half years ago where; at True North, we had been implementing the Lean process across the country. We were desperately looking for an architect 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 the relentless pursuit, identification, and removal of waste in product process and plans.

In doing that, having a lot of success with that around the country, we were looking for an architect to help us get much deeper with the plan part of it. As we looked at architects around the country, we saw that a lot of them who would say they got Lean, but it would take only a very cursory look at their plans to realize that they didn't understand. We'd see so much waste inherent 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 a ton of projects since. He has his four design guys, and we have our guys. There are a total of six of us around the country. We do projects together called Lean Plan Workout, Lean Weight. There're different variations of them.

What we have done in the home building industry is put a very structured process around the concepts of Lean to take it into day-to-day home building to eliminate waste in the product process plans. We were like all the other Lean consultants in thinking, we had to teach everyone about the seven waste or eight waste, depending on which school you Lean Homebuilding = Better Product, Greater Return Copyright Business901

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Podcast Transcription Implementing Lean Marketing Systems belong to and all the classic definitions of Lean and the Japanese management, the Toyota way, which is all very important.

What we realized pretty quickly, because we started doing this portion of it at the depth of the house recession, was that a builder wouldn't take the time or couldn't take the time where they would pay for really deep training in it. What we had to do is come up with a process that worked in a week that said, "In a week, we'll show you the money."

By the way, we had it set up that if they don't see a multiple of what our fee is that they don't pay us. A little risky at first, but we found that very quickly there's so much waste in existence out there that it was no problem at all getting paid. We took very structured processes, and we interpreted all the Lean methodology into the home-building world into their language.

With our suppliers in trade, we've had over 2,200 of them now participate in the 103 Lean projects we've done with about 75 builders. When these 2,200 companies participated, 4 or five people from each company-, we're looking at more than 10,000 people, they don't learn the seven wastes, like waste in production, waste in inventory, waste in over-processing.

What they do is answer the questions that do relate to those, and that saves a lot of time in that process. That's what we've done to be successful, and I'll turn it over to Todd to talk a little more about his role.

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Podcast Transcription Implementing Lean Marketing Systems Todd Hallett: Joe, what I've been involved in is the Lean design part of it. What shocked me when I first got together with Scott was the amount of waste. Not only waste but how that waste translates into dollars and what those dollars mean per unit of each house.

While I was working with a home-builder, and I was the president of the home-building company, what I thought designing Lean at that time, where we took a strong count in the cost and we tried to make sure that what we put out in the field made sense and the dimensions were right, and they're well put-together.

What I didn't realize then, and I do now, since I got involved with Scott and his company, is that the collaborative approach between the builder, the sales team, and the trades can all work together to save thousands of dollars per house. Before, when I was working with Delcor, it would be a struggle to try to figure out 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 implementations now. We're averaging right about $9,000 a house in savings identified. We know it's actually just scratching the surface. For example, we have a tremendous database here now. Remember that we've had 2,200 trade companies, along with 75 builders. We're about 30 states and four countries now.

One of the things that we know beyond a shadow of a doubt is that there is at least a conservative average of $10,000 per house, sitting there, buried or wasted in otherwise Lean Homebuilding = Better Product, Greater Return Copyright Business901

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Podcast Transcription Implementing Lean Marketing Systems unnecessary trips 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 go through one of our Lean processes. They have different names, Lean Building Blitz, Lean Plan Workout. We'll just call them the Lean processes. Once they go through, they start to see it, but you take your average builder and tell them, "There's $10,000 alone in wasted trips for each one of your houses," they're shaking their head and they're going, "That's not possible."

After they go through a lean process, it's not just possible; it makes them crazy when they see it. To say we're finding an average of about $9,000 a house, yeah, that sounds impressive, but we know there're a 1,000 more than that simply in wasted trips, so we've got a long, long way to go. There's so much there. $20,000 to $25,000 a house would be a very conservative average of what we know is out there.

By the way, if you look at other industries -- automotive, electronics -- it's even starting to turn up in health care. What almost all these industries see, if they get really serious about measuring everything that's waste in their products and processes, it usually looks like a number around 35 percent.

If we take your home price...Average home price right now is probably, 100 and a half?

You take 30 percent of that. That's a $45,000 potential. Of course, that's pushing back upstream into your suppliers, too. Some of that is hidden from the builders. But then if you look at where...

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Podcast Transcription Implementing Lean Marketing Systems I know you know about these things, Joe. Automotive is now...The Lean guys who work for Ford, GM, Chrysler, Toyota, Nissan, they're spending the majority of their time working back upstream at the suppliers now. They've got those plans pretty well dialed in and wrung out. That's kind of the future, down the road for us.

Right now, to say to a builder, any house you've got, we know we can pinpoint five to ten thousand dollars’ worth of savings in any house. That's just a given. It's not even particularly a challenge any more to do that.

Joe: I want to ask you, how much of it, though, is just common sense? How much of it is really having Lean applied. What's the difference there?

Scott: I'll give you a quote from the best professor I ever had in my life. His name is Dr. Douglas. He used to...When people say it's common sense, he'd say, "I'd call it uncommon sense. If it was common, there would be a hell of a lot more going on around here." There are things...I like to tell the story of my dear granny who died just a few years ago at age 103, in Columbus, Indiana.

She was a great southern Indiana lady. She was doing her own checkbook, longhand division in her head, up until she was 102. She was a sharp kid. She would, every once in a while...She'd always call me Scotty. She'd say, "Now, Scotty, tell me again what it is you do for a living." We called her Mimi. I'd say, "Mimi, to boil it down to its very simplest, what we do in a structured way, is to get the builders to listen to their suppliers and trades."

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Podcast Transcription Implementing Lean Marketing Systems She'd look at me and she'd shake her head and she'd say, "You mean they didn't always do it that way?" In her southern Indiana, straightforward view of the world, sure that's how you do business. You listen to the suppliers and trades, the people you depend on to do the business. But you and I know that’s not what happens out there.

Does that mean it's just common sense? If you look at all the stuff, we do, which all the structure, and we've got formats. We've developed this Lean filter with the guys at TK Design that we now have 765 questions that have to be asked to wring out and dial in any house plan.

Now, it's broken up into 18 areas. You have your heating and air conditioning. You have your electric. You have your framing. You have your flooring and your foundation, but 765 questions. That sounds big, and complicated, and intimidating. Now we do a lot of things to simplify it. You could reasonably ask that question. Everyone you look at, "Well, isn't it just common sense to look at these things?"

I guess I'd say yes, but it becomes so complex when you've got a product that, depending on how you count it, 20, 000; 30,000 parts or more typically, at least 35 or 45 companies participate in the building of it, and several hundred different people participate in the building of it. This very simple thing called a house does get really complex. On one level, I agree it's just common sense, but it sure is uncommonly done.

Joe: When you first introduce Lean to the homebuilders and stuff, what's the pushback? A lot of people will say, "It's a manufacturing thing, and different industries." Has there been a pushback in the homebuilding industry that you've noticed, something that you had to overcome?

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Podcast Transcription Implementing Lean Marketing Systems Todd: From the design end, there has been for sure. What I typically get when we first go and do an implementation with the builders is they think that Lean means we're going to strip the house of its amenities and take all the sizzle out of the house so what they'll end up with is a stripped-down version of a house that, sure it costs less, but it's not very marketable.

A lot of folks equate Lean design with value engineering. Value engineering, of course, has got itself a very bad name over the past 15 years because of a lot of folks did just that.

Instead of truly value engineering, they've stripped the homes of all their detail all their amenities and ended up with homes that didn't sell.

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 to realize real quick is that this has nothing to do with stripping the home of amenities or making...In fact, it has everything to do with making the house more marketable. Many times we'll find...Let's say we find $8,000 on a given house. The builder may choose to put 2,000 of that into the home to increase their amenities, to add additional amenities, or they may not. It just depends. The concept is never to strip the houses down.

Scott: That's the assumptions, and there have been some builders, especially a couple of national builders who are...the Lean term they've thrown it around, and what they've done is almost nothing to do with Lean. It was simply a matter of another round of beating down the suppliers and trade and was pure cost management.

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Podcast Transcription Implementing Lean Marketing Systems Value is...you look at how value's defined; you look at the benefit over cost, and those are some famous ratios there. There're actually five different ways you can increase that benefit over cost ratio. What most of the builders did was look at purely cost, weren't looking at the benefit.

Other obstacles that we encounter are, one is that, "Well; we already do this." Probably, a huge percentage, three-quarter of our clients initially the response, "Well, we do this.

We're all the time looking how to take cost out." Again, they're looking purely at a cost from a very narrow bid price. There's a real difference between bid price and total cost, which is a critical element.

Some of that resistance that, "We've already done this. Why would we have someone from the outside come in and do it?" There's also a fear factor that we run into, and it's understandable in some organizations where you have a let's say a director or VP of construction or purchasing that might look at it and go, "Well, wait a minute.

If these guys and their processes come in and reveal $8,000, $10,000 a house, that's going to make me look bad. The boss is going to look at me and go, "Hey, Todd, how come you didn't see this stuff?"

Joe: What have you been doing?

Scott: Yeah, and it's a genuine fear depending on...We really have a heart-to-heart talk with the presidents of these companies to make sure that they talk to their guys and say, "Look, what's going on the last five or six years." These guys have all been working 60, 70, Lean Homebuilding = Better Product, Greater Return Copyright Business901

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Podcast Transcription Implementing Lean Marketing Systems 80 hours a week running their butt off. There's not a builder out there that has excess people.

They're all just working themselves to the bone and everyone's held off on hiring. There's an incredible latent hiring demand in this industry that everybody's holding off on until we're absolutely sure the turnaround is here, and then it's going to come out in gangbusters.

I personally think that the 7.8, 7.9 unemployment rate is overstated, in reality, because as soon as things settle down here, everybody gets over the election. It doesn't to me matter who wins. We're going to get over all the hesitation and the trepidation, and people are going to start hiring, and you're going to see it in droves in the construction industry.

Overcoming that fear factor that people have, to piggyback on something Todd said, we will not do one of our Lean processes, unless we have somebody, and often two people, really good from sales and marketing involved in a process. If they have a design center that probably half the builders do now, we want that design center manager there, too.

Because those of us who are kind of construction oriented, we get all excited about, "We can change this and this. We can do this," and we think, "The customer will never notice.

The customer won't care." We're probably right 90 percent of the time. But once in a while, the salesperson will come along and raise their hand 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 house to you guys, but look at what our competitors have Lean Homebuilding = Better Product, Greater Return Copyright Business901

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Podcast Transcription Implementing Lean Marketing Systems across the street and down the street. If we just take those out of there, that's going to hurt us. So that's helping us with sales. I want to keep it."

Now, maybe, we'll say let's see if we can figure out a way to do it more efficiently but we run into that. Now, surprisingly, about as often as we run into salespeople wanting to fight to keep something, they will tell us that there’s something that we've been doing. This happened recently where they had a 12-inch wide archway built between a kitchen and a big walk-in a pantry entry.

We looked at the wood that went into it, and taking it down to a six-inch with the savings on the drywall and everything was literally going to save 50, 60 bucks a house. Maybe that doesn't sound a lot, but this company was building 600 homes. Let's just say it was 50 bucks times 600; that's a $30,000 bill. I mean that's real money. That's a good chunk of a head count, and if we could take it to a six-inch.

In the session that came up kind of delicately waiting for the salespeople to have a fit and the sales manager looked at said, "You can take that out tomorrow as far as I'm concerned," and construction looks over and says, "What are you talking about? We only do that because it's what you want?"

She says, "That's so '90s. Those things have been out forever. You could even make it a 4-inch - inch if you want. I don't care." Rick, the construction purchasing team just sat around dumbfounded. They thought they were doing it because it's what sales wanted.

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Podcast Transcription Implementing Lean Marketing Systems This pulls the whole organization together when you do Lean, and you get all the constituents involved, all your suppliers involved in a process, and the understanding level goes up exponentially. It's really a remarkable process.

Joe: What is the Muddy Shoes Lean Design Charrette? I saw that and that name just caught me. Could one of you explain that?

Scott: I don't know if you can see the logo. I'll let Todd tell you in more detail. I don't know if you can see the logo on it where I took one of my great old pairs of Johnston Murphy wingtip shoes, which I've had for 30 years, but I rarely wear them anymore. But I took them. They were the old classic consultant shoes.

I covered them in mud and laid a hammer across them and did a little experimenting, and everybody understood as soon as they saw the picture, which is to say who we are is a consulting company. It's extremely rare you're ever going to find a tie on us. We are guys who are out there in the field with field reality. That's all we do. We're 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 Muddy Shoes Charrette. There are a lot of big named companies out there, architectural firms that do design charrettes, and they charge a lot of money. We'll ask the builders, and we found out these guys never go out and get their shoes dirty. They never go out in the field and really talk and see what the capabilities of the trade are, what's wanted in the field.

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Podcast Transcription Implementing Lean Marketing Systems As a result, you get some designs that, there're a couple of cities in America, I guess I should be nice and not name them -- but there's a couple big metro areas which I think have the most atrocious design anywhere in America. It's just gotten completely out of control, because what you have is this guy sitting back in a room never getting out in the field adding on things to houses, fake keystones, and fake dormers, and extra shutters, and double lintels, and coins, and add on, add on, add on, until you have no idea what the style or design is.

20, 30 roofline breaks on a house, just crazy stuff to build, and then, it doesn't even look good. We position ourselves as muddy shoes guys, meaning that we got our feet on the ground in the mud. We're out there, and that's our perspective.

Todd: What typically happens in the building company, at least a midsize building company is that the owner, the boss, or a president will look around for product, and they'll be the ones that'll brainstorm what's coming down the pike in product. They might be looking through a magazine, or they might drive and look at models.

They'll get together with their architect, and they'll develop a product and new houses, and then they'll go to market.

What we do is entirely different with the Charrette. First, we start out with the Lean process. We'll spend a week with the builder. We'll spend the week with the builder and the building team and the sales department going through with each one of their trades to analyze what's working and what's not working with their existing plans. That means methodology of construction. It also means what's happening on the sales end in terms of acceptability and marketability.

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Podcast Transcription Implementing Lean Marketing Systems We'll spend the entire week with them going through trade by trade -- not all at the same time -- but trade by trade. As Scott mentioned earlier we have this process where there's over 700 questions, and each one's broken up into a trade. After we've done that process, then what we'll do is we'll take some of it...

We'll leverage some of that information that we've learned and hold what we call a Charrette where we'll have everyone from the building team, including the sales people, and oftentimes realtors if they have independent realtors, and have them in a room, and go through and describe to us. There's a process we do, what it is that they're looking for in new home development.

We'll take all that information in, and now we have a cross-section of every important aspect in the company, plus the leveraging the information that we picked up earlier with the trade and suppliers. Now, we have a real basis from which to develop new homes and new designs.

Joe: I think it's very interesting your approach at applying Lean, because it's not about, "Here are these Lean tools. We need to apply 5S. We need to have a Kaizen." You seem to take it into the specific homebuilding sector and apply Lean and apply it in their language.

Scott: This has been a pet peeve of mine. You get the Lean Sensei, and there're a lot of great ones out there, but they're incredibly expensive. They'll come in. It's kind of a badge of honor for these guys to tell one of their clients, "Well, if..."

I actually heard one of them say once to a president of a company, "If you expect results any sooner than a year, then you aren't serious." I'm going like, "Go try to sell that to a Lean Homebuilding = Better Product, Greater Return Copyright Business901

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Podcast Transcription Implementing Lean Marketing Systems homebuilder, especially in the housing recession." The idea that we've got to put everybody through the training, three days of training, then we're going to have 20 green belts that take 15, 20 days of training, then we've got to have five black belts to take all the certification.

That's great that you can have a lot of it. But there's an interesting thing, a negative that can happen in a lot of these companies. Then the Lean work -it was very similar to the quality movement in the '70s, '80s, and '90s -- becomes the responsibility and the ownership is in all these specialists.

Where I saw a long time ago, and I go back before I got to Pulte Homes, I was at U.S. Steel way back in production, and then Motorola and where we did precursors to what it is we call Lean now. Then did the consulting work with a lot of great companies like Caterpillar and John Deere and Cummins Engine are examples.

At Pulte, applying this in homebuilding, what I saw was that there was actually as many negatives in terms of having a specialist focus on this within your company as there were positives. When you make it the responsibility of everyone as part of what they do, then its part of their job. It could be harder for them to focus and concentrate on all the parameters and negatives of that, but on the whole, we think you come out ahead.

You've got to be a pretty big organization in my mind to justify having a fulltime staff on this. As you look at most of the builders in America, after you get past the top 25 or so, it's rare that any of them has more than a couple hundred employees, and probably still the 80/20 rule, 80 percent of the homes are being built by 20 percent of the companies that will probably have...well, it'll actually be a little higher percentage than that.

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Podcast Transcription Implementing Lean Marketing Systems The point is companies with 100, 115 people or less are probably building the percentage of homes in America still. It's different than being a Ford or Chrysler or somewhere like that.

Our idea is to get these people to understand how to do this themselves as part of their job and see it as, "This is a way to make my job easier and get what I want to get done," not as, "I've got to use this special tool here or there, and I've got to make sure I call it the right thing in order to get this done."

We're not averse at all to using things like 5S or a Gemba Walk or something like that, but we don't stress it at all. Even in our orientation sessions when we do our Leans, I used to try to teach the seven wastes, and I quit doing that, because I realized it was pretty well going in one ear and out the other.

Until these guys actually did it hands-on, it just didn't register with them. But after they do a hands-on then they get really interested in learning. We think the building industry is just getting to where there might be some appetite for the more formal official training in Lean, and we're ready to do that. But that's just coming along as it's coming out of the recession here.

Joe: I think it's a total immersion approach?

Scott: I would say we're putting them in and actually showing them how this relentless pursuit of waste it's in their interest. We try to make it so it's not an event, this one time event. They understand pretty quickly, "Wow; we could make this company work better every day."

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Podcast Transcription Implementing Lean Marketing Systems There is one company in our industry that is probably the best implementer that I've ever seen, and that's Hearth and Home Technologies. They make Heat & Glow and Heatilator products. I know them extremely well, and you go in their plants and 350 people in each plant. They know they owe their jobs to Lean. Those plants are in Iowa and Minnesota.

They would have been moved to Mexico or even the Philippines 12, 14 years ago if it hadn't been what they tucked under and taken during Lean.

They totally get it. They know it inside and out. When I think of a company that's immersed in it; I think of a company like that.

We do have a couple of our clients that come to mind that are getting there. There's a great...The last two builders of the year, a matter of fact before the most recent was announced just this week, the last two before that was; last year was a company called DSLD outside of Baton Rouge, Louisiana, a company that grew from 0 to about 800 units in three years.

In their fourth year this year, they're going to hit over 1,000. Fifth year, they'll do something like 12, 14 hundred. It's an astounding growth rate. I'll add, these were experienced people, by the way, who had sold out a few years before and then decided to come back in. They weren't rookies starting from scratch.

These guys and their president, a young guy named Saun Sullivan; they live Lean every day. They push it and stress it and every single day at working with their suppliers and trades. Their whole notion is if they can get their suppliers and trades to improve and get better, then they know they get better, too.

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Podcast Transcription Implementing Lean Marketing Systems A year before that, a builder by the name of Jagoe Homes, that company's been around for four generations, and there's a fifth one coming along. Most companies that have that tend to get pretty sick by the third generation. But the Jagoes are the exception. They're remarkable people. They build in four different cities in Kentucky.

A little bit under the radar, but I'll tell you what. I visit these guys, and they just blew my mind. They talk Lean every day. It's not a separate thing they do on the side. It's just what they do. There are those builders who are getting there. We do try to, though...We kick them off with an immersion.

It's interesting. We've had some local builders say, well, couldn't they do...rather than this five-day with us, could they do a day a week for five weeks? We tried that once. It just didn't have the same impact. We even a couple times split it, two days one week, three days the next week, you know, and it worked, but it wasn't as good as pulling this team out and has five long days with them.

We work them hard and wear them out. But at the end of that week they're exhausted but exhilarated because they see what it is they found.

In these workshops, we usually identify an average; I work with the suppliers and trades, an average of 150 specific improvements that we get dollar values on, difficulty of implementation ratings, and what the benefits are. Then they have them all on a spreadsheet, tracking forms, and they take off with them. They get about the task of getting it done.

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Podcast Transcription Implementing Lean Marketing Systems What's really interesting, I'll anticipate another objection you might ask about that we hear a lot of. "Well, isn't this going to take our guy? We're going to find all this stuff. We're going to get overwhelmed." Some of the really intuitive builders will realize about halfway through the week. They'll say, "Everything we're putting up on the walls here, there's not one thing we've identified that didn't already exist."

We didn't create any of this. It was there. We just didn't identify it. A lot of them, we had identified, we didn't have our arms around it all, and we didn't understand it from the supplier/trade point of view. Sometimes, we look at this in a different way than we did before.

This immersion is what pulls all that out, and it's more effective. I never did anything in my life that worked the first time and worked 10 times in a row. Well, this process worked the first time, and now it's worked 103 times in a row.

Joe: I want to ask Todd. It's something just a little off of Lean, but are we getting to a point in home design that we need the sophistication of something like BIM, which is Business Information Modeling software? Is that starting to happen?

Todd: It is more and more now than it was before. We actually just got involved about a year ago with BIM with a company called VisionREZ. It's a tool, right? Once you have that tool and apply it properly, you can go a long way towards this Lean process. It's just like having a great CAD program. If what you're putting into it is incorrect, or it hasn't been fully flushed out, then you're not really creating any benefit.

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Podcast Transcription Implementing Lean Marketing Systems But with it, it can be a very powerful tool, mostly in terms of creating these anti-collision aspects of home building. Typically, that's been left to commercial building where now you'd put it in BIM, and you'd make sure that the heating and ventilation doesn't run into the plumbing. It doesn't cross paths with electrical. Home owners have always just figured that out in the field.

They'd build a model, and whoever got there first, usually it was the HVAC guy, would carve out his base and put his tin in there, then along would come the plumber. Of course, he would have trouble getting through because now there was something right in his way.

He'd figure it out a different way. Then the next time they build a house, well, whoever got there first, it's the same thing repeatedly.

With BIM now what we can do is we can identify that working collaboratively in a Lean process with the trades to identify what these bays are and how can we avoid collisions?

Not only can you put them in there, but you see them now in 3D, and then from that, you can create a take-off list, which is really effective in terms of cross-management.

Scott: There's another critical aspect that Todd touched on with this. We had a long conference call yesterday with a client, and the light bulb went on in his head. They were in the process just getting started in a big BIM conversion, so taking all of their plans and running them through, and getting them converted over to a BIM system.

About halfway through our conference call, he said, "I was thinking about telling you guys that we're going to have to wait until we're done with this BIM conversion, because it's taken so much of our time and effort, but then looking at doing the same with Lean with you guys in the spring."

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Podcast Transcription Implementing Lean Marketing Systems He said, "But it's occurred to me halfway through this that if we do the Lean process first, everything we do in this BIM conversion is going to get a lot easier, because what we're going to do is clean things up before we try to automate it and make it more sophisticated." One of the biggest lessons of software, as Todd mentioned, you never automate a bad system. You never do something electronically that doesn't make any sense manually.

He was asking us, "Are you saying if we go through this process, look at our plans, we're going to clean up all this waste in our plans first?" I said, "That's exactly right." "Wouldn't it be better to do that before we go about all this work to put them through a BIM system?" I said, "One of the big companies..."

A couple of guys from VisionREZ, there are four of five of them out there, VisionRez, and there're others, but one of the ones from VisionREZ said, "In the ideal world, they'd have all their clients go through one of our lean plan workout processes first. Then start running them through BIM, because it would save them, a lot of brain damage and a lot of the trouble and extra work, and it'd save them time and money, too."

Joe: I think the old ERP principle, or they called it the USA principle; it was always, "Understand, simplify, then automate." You're saying, "Use the lean to understand and simplify, then use the other part to automate."

Scott: Yeah, that's really well-said. That's a perfect application.

Joe: Now, you normally introduce Lean through a workshop. Is that really the best option for someone to get started, for a home builder to get started?

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Podcast Transcription Implementing Lean Marketing Systems Scott: Well, here's why we think it is. It comes down to the old line, "Show me the money." I was asked recently to write an article, I had gotten an article due in a week for a professional builder. I've got three or four started and haven't finished any of them yet, and I've got to get on that.

One of them was I was asked to do was write something on leadership and how do you get to leaders of these companies? Whether you want them to do a BIM process, a Lean process, you've got one of the new sales management programs, a CRM program, whatever it is. How do you get to them, because they tend to get a little detached from the day-to-day?

They aren't living the pain of dealing with, for example, a design center who has 27 front door options on a little town home, which is completely insane. But we see that kind of stuff all the time. How do you get senior's management's attention?

I don't want to sound like I'm getting old and curmudgeonly now that I just turned 60, but I've been doing this stuff a long time. I really think that with rare exceptions, and there are some out there. That Tom Sullivan I talked to you about was one, Bill and Scott, Brad Jagoe. But rare exceptions, you don't get senior management attention unless you can put a firm dollar value on something.

You've got to be able to show them the money. As a guy I worked with used to say, "What is it that we're about to do is going to help us build one more house to a satisfied customer at a profit? Everything we do have to stand up to that test."

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Podcast Transcription Implementing Lean Marketing Systems Well, what we learned out of desperation during the big crash, if you said to the builder, "We're going to show you the money in one week, show you so much money that you're going to be thrilled to pay our fee, which is a teeny-tiny amount in relation to the savings," then they get really excited and they'll listen.

I've had a couple of builders over the years call me and say, "Hey, Scott," after the fact, "This was fantastic." They'll go on and on how great it was." They'll say, "But you're selling this all wrong." I said, "Well, what do you mean?"

He says, "Well, you come in and you emphasize how much money you can save us, but the money's fantastic. But the impact it's having on our people, the impact on our culture. The way we're working with our suppliers and trades, we've even seen improvements, of how we're working with the local inspectors, and it's remarkable. That's what you should be selling."

I said, "Let me ask you this. If I had come to visit you or called you and said I want to show you this thing, and what it's about is doing these things you just mentioned. It's going to build better relationships with your suppliers and trades. It's going to help you work with the cities and communities better. It's going to improve your internal culture.

Would you have bought it?" I never mention the money. "Would you have bought it?"

They always say, "Well, no. Probably not." It's like we sell them on the fact that it's going to give them a very huge, quick financial return, and then they start to discover it has all of these other benefits that would have been worth paying for. But it sure is nice that they just come with it and you get the money.

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Podcast Transcription Implementing Lean Marketing Systems That's a long answer saying, "Yeah, I think it is the best way because there aren't too many conceptual buyers out there, especially in the building world. Who's attracted to building? I think an awful lot of us were guys who played with the Erector Sets if you're in my generation. But in Todd's generation, was it Legos?

Scott: Now, they're probably building Sim stuff on the computer. But I still like Legos.

We're people that we're hands-on. We like to build stuff, and we like to see stuff. We like to be able to drive our family through and point to it. "See what I built? See what we did?"

They tend to be big conceptual buyers, so we show them the goods. That's the whole point of the Muddy Shoes.

Joe: I think that's a great statement, and it's very interesting because you give Lean an ROI, which so many others try to solve something different than that. I don't think there's anything wrong with that. I think it's a...

Scott: With the Lean purest, the sensitive types, it's almost like talking about the money is verboten or something, like it's dirty or a bad word. I look at the money as a route to getting the companies where we really want to get them, and it's the money that can justify that. I feel like we own that. If we can't show them, the money, why should they be doing it?

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Podcast Transcription Implementing Lean Marketing Systems Now, when we have really good times again, and they can afford to think three-year, five-year paybacks and stuff, well, OK, but we aren't there yet, and it's been a lot of years since we've been there.

Joe: What's something you might want to add, either of you, that maybe I didn't ask?

Scott: I think that one of the things in Todd's area...I'll tell you, again, I mentioned I just turned 60. I started working with Todd on these Lean design workshops a little over two years ago. Pretty quickly, I had some of our other field guys complaining because I was hogging them all.

The reason why was, I was learning so much. I'd come back from these sessions...I'd be so excited. I mean I've been out there a long time and I could become one of those guys who said, "Yeah, been there, done that, seen that." After working on the plan and design process it just opened up a whole world to me. I'd done it before, but never with anybody who understood it at the level Todd did and also had the knack for working with the suppliers and trades.

So to see those guys come in and working and sitting down next to Todd...we have a whole system for this of a color-coding system. The trades get the color. They get to take highlighters and markers and mark up the plans. We give them permission to tell the builder the baby's ugly, and they have at it.

You saw pictures of some of these plans when they get marked up. It just blows your mind. They have Post-It notes, and colored makers, and they really get into it. As a result for every plan, we'll typically end up with an average of 100 improvements.

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Podcast Transcription Implementing Lean Marketing Systems I would say opening up people's eyes to the fact, I don't care how good you think your plans are; we have never, - we've worked with so many people on this and a lot of really good builders, -- seen a plan that working in a structured process with your suppliers and trades, you could not find significant improvement dollars, and without hurting the plan, and without doing collateral damage on your suppliers and trades.

To have them excited, to have them see that they're going to make more money, too. That sounds like an impossible dream, but it's absolutely real. The suppliers and trades do better, the builders do better, the homeowner does better, and that's just because there's so much opportunity out there.

Todd: From my end, Joe, the thing I find, again, most striking is the amount of money per unit available on every single house you build, you can make these improvements, but these improvements are invisible to the customer. In other words, we've done a lot of different things in terms of advanced framing and methodology to teach builders how to build things a little bit differently to save thousands of dollars.

And that was what the big shock was to me was that you can do this. It's invisible to the client. It's not something that detracts from what you're building, but it actually improves it, and the fact that it is available and readily attained was the biggest thing to me that I'd like to put out there.

Scott: Well, you know, on top of that, Joe; we have also had to identify a couple engineering firm to work with, and I always say architecture never trained in cost, so a lot of times you have to hold harmlessly and say they didn't get training in that. They're Lean Homebuilding = Better Product, Greater Return Copyright Business901

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Podcast Transcription Implementing Lean Marketing Systems taught to design really cool stuff, and we love cool stuff. We say, "Cool and cost efficient.

That's even better than cool."

When you go to engineers, and what I find a lot of them know about the cost, but they don't deal with it and don't want to deal with it. The engineering attitude is often, "I get this thing sealed and stamped, and if they've got 20 percent more wood, engineered wood in the floor system than they need, well, that just protects me even more. Why should I tell them?" That's, in effect, even if it's not done brazenly like that, that's what happens.

We have found a couple of engineering firms that are fantastic and who really get it, and we bring them in on a consultant on these projects and get them to look at how everything is laid in the house -- the framing, the foundation, the engineered wood, truss, or even if it's still stick built roofs -- and they always find big money where the house is just as good as it was before, sometimes even better, but costs quite a bit less.

We're quick to point out when we look at things, when we get into codes; we say it's not just enough to meet the building code. Of course, we have to meet the building code, but you also have to meet the customer code.

If someone goes pulling a lot of wood out of a master bedroom floor on a second story and the customer, every time they walk across that bedroom once they get it loaded up with a bed and furniture, it bounces every time they're walking back, you lost. You may have completely met that code, but you lost, because the customer's going to be unhappy, and they're liable to tell a whole lot of other people.

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Podcast Transcription Implementing Lean Marketing Systems It's not just simply; let's figure out the minimum way to meet the code. Let's figure out a way that we can meet or beat that code and keep the customer happy at the lowest possible cost. There's very few that understand how to do it. We're very, very fortunate to have found a couple to work with.

Joe: What's the best way for someone to contact you?

Scott: Well, we have...our website is truen, short for True North, truen.com, and I'm simply Scott@truen.com. Todd, they're in the process of building their new website, but I think it's still on, isn't it?

Todd: Our existing website is tkhomedesign.com, and, of course, you can reach me directly through there. It has an area where you can just type in and I'll get your emails.

The other thing Scott and I do just about each week is we're on housingzone.com. You can see that we write blogs each week about Lean.

Scott: And that's the blogs or the electronic space for Professional Builder magazine, also Professional Remodeler is there, so housingzone.com. You can just put in Hallett or Sedam and we'll 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 only approve three full-day workshops, and we have one of them on Lean design. We'll be running a full day really hands-on workshop on Lean building and Lean design, so if anyone's going to IBS this year and usually there's a...

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Podcast Transcription Implementing Lean Marketing Systems Well, we aren't quite back to those great days when we were running 125,000 people at that show, but I think it might be looking back up to 50 or 60 or 70 this year. But that's going to be a tremendous experience so that would be a great way to do it.

Also, every month, I have an article in Professional Builder magazine, and we have PDFs of our different article series. For example, there was a three-article series on BIM. There was a five articles on quality management, so if anybody contacts me or goes on the website, we're happy to send them those PDFs of articles we've done.

Joe: Well, I'd like to thank the both of you very much. This podcast will be available on the Business901 iTunes store and the Business901 blog site, so thanks, Scott and Todd. It was a delight.

Todd: Thank you very much.

Scott: Thank you, Joe. I appreciate the opportunity.

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Podcast Transcription Implementing Lean Marketing Systems Joseph T. Dager Business901 Phone: 260-918-0438 Skype: Biz901 Fax: 260-818-2022 Email: jtdager@business901.com Website: http://www.business901.com Twitter: @business901

Joe Dager is president of Business901, a firm specializing in bringing the continuous improvement process to the sales and marketing arena. He takes his process thinking of over thirty years in marketing within a wide variety of industries and applies it through Lean Marketing and Lean Service Design.

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