Characteristics of Innovative Production Home Builders

Abstract

The findings of this study advance our understanding of building technology innovation among production builders in particular and conceptually for the homebuilding industry at large. The key findings are that:
 

• ƒ Size matters. Larger national production home builders are more innovative than smaller production builders.
• ƒ Organization matters.  Decentralization contributes to innovation at regional and local operational levels, where decisions on innovative products and materials are often made—assisted by technology support from national offices.  Influence over innovation spans across purchasing, marketing, and construction.  The opportunities for building technology innovation, then, are negotiated throughout these companies.  
• ƒ Purchasing matters. While numerous departments within a production builder’s organization can influence technology adoption, purchasing departments across the company play a large role in influencing and making decisions on new products and materials for production builders. The corporate head of purchasing was identified by 93% of the corporate respondents and 54% of the operations respondents as having significant influence over decisions to adopt a new building product, material, or process; regional and local purchasing directors were also identified as having significant influence.
• ƒ Vision matters. Most production builders believe building technology innovation involves serious risks but also that innovation can contribute to higher quality and performance. Large production builders agreed with smaller builders that innovative products and materials cost more than those they replace and subcontractors are resistant to using new products. Production builders with aggressive growth plans included building technology innovation as one element in their plans to increase market share and profitability.
• ƒ Information sources matter. To keep up-to-date on building and construction products, materials, and practices, production builders rely on local offices within the company, subcontractors, manufacturers, and wholesalers and suppliers. They also appear to use technology transfer programs to a greater extent than small builders, though both sectors mostly rely on established manufacturers and suppliers that stand behind their products.
• ƒ Focus matters. Production builders were most likely to invest in innovations that reduce construction defects and call-backs, improving subcontractor dependability, and improving the style and attractiveness of the homes they build, followed by investment in cost reduction and reduced cycle times. Less than half of the production respondents rated investments in building technology as a means to improve market share as very likely, and a slightly smaller group rated creation of formal R&D as very likely to affect share. However, one-fifth to one-half of the respondents included core aspects of building technology as part of their business strategies, and three-fourths of the companies identified research and technology development as part of their corporate strategy.  So, technology can be an important part of production builders’ business models—but only one of many.
• ƒ Barriers matter. Production builders are more prone than small builders to think that building codes impede innovation, that new building products increase risks of callbacks, and that their own construction workers are resistant to innovation.
• ƒ Opportunities matter. Beyond the reasons for initially investing in technology, builders see many opportunities for reaping benefits once the technologies have been implemented.  Production builders rated increased quality as the highest benefit from building technology innovation, followed by meeting customers’ expectations, increased competitiveness, creating an image as an innovative builder, and reducing call-backs. The opportunities for building technology innovation could increase significantly in the coming years, as the survey respondents identified trends in energy costs, land costs and availability, labor, and competition from large national builders as likely to influence building technology innovation over the next 10 to 20 years.