Lean HomeBuilding

7/29/2019 Lean HomeBuilding

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Business901 Podcast TranscriptionImplementing Lean Marketing Systems

Lean Homebuilding = Better Product, Greater Return

Copyright Business901

Lean HomebuildingGuests were Scott Sedam and Todd Hallett

Sponsored by

Related Podcast:

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Scott Sedam is President of TrueNorthDevelopment, an internationally-known consultingand training firm focused exclusively on thebuilding industry. Now in its fifteenth year with astaff of 6 field consultants, TrueNorth conductsconsulting projects and training workshops withmore than 200 builder, supplier & trade clients inthe U.S., Canada, Australia and Mexico. During the

recent industry downturn, TrueNorths LeanBuilding processeshave saved clients more than $200 million, demonstrating clearly

how to improve product, process and profit without compromisingbuilder, supplier and trade relationships. Scott Sedamspresentations are a popular feature at industry conferences andcompany meetings and he has published a monthly article in theindustry for more than 15 years. Scott serves as contributingeditor for Professional Builder Magazine and writes the weeklyLean Building blog on www.HousingZone.com.

Todd Hallett, AIA, President of TK Design &Associates, Inc. (tkhomedesign.com) has beendesigning award winning homes for over 20 years.He spent 15 of those years working for a $50million production building company. Todd designedall of their homes but also worked in every otheraspect of the company including purchasing,

development, land acquisition, product development, andoperations, and was President of the company for three years.Equipped with his vast building experience and fueled by his lovefor architecture he left to form an architecture firm that is secondto none in working cohesively with Builders. Todd specializes inLean Design and works, alongside Scott Sedam of TrueNorthDevelopment, in the trenches with builders, suppliers, and tradecontractors. His Lean Design blog appears weekly atHousingzone.com.


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Transcription of Podcast

Joe Dager: Welcome, everyone. This is Joe Dager, the host ofthe Business901 podcast. With me today is Scott Sedam andTodd Hallett of True North Development. They are the leadingfirm in introducing and implementing Lean to the home buildingsector.

Scott was at the forefront of total quality implementation in theconstruction industry in the '90s, and started True North

Development over 15 years ago. Todd, meanwhile, developed theskills as an architect with Ron Mayotte, and later, his firm, TKDesign, and is recognized by a very impressive list of accoladesthat are simply too many to list.

I would like to welcome the both of you. Could one of you startout by giving us the elevator speech about True North, and howthe 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 companieshere. True North Development, that I founded about 15 and ahalf 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 fora company really well-known in this area called Delcor, which wasa 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 ranconstruction there, eventually became COO then CEO. WhenDelcor sold out in 2005, he went back to architecture full-time.We think he's the only practicing architect in America, who's


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deeply involved and responsible for purchasing and constructionin a production builder, which makes Todd really unique.

We started working with Todd about two and a half years agowhere; at True North, we had been implementing the Leanprocess across the country. We were desperately looking for anarchitect 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 therelentless pursuit, identification, and removal of waste in productprocess and plans.

In doing that, having a lot of success with that around thecountry, we were looking for an architect to help us get muchdeeper with the plan part of it. As we looked at architects aroundthe country, we saw that a lot of them who would say they gotLean, but it would take only a very cursory look at their plans torealize that they didn't understand. We'd see so much wasteinherent 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 aton of projects since. He has his four design guys, and we haveour guys. There are a total of six of us around the country. We doprojects 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 verystructured process around the concepts of Lean to take it intoday-to-day home building to eliminate waste in the productprocess plans. We were like all the other Lean consultants in

thinking, we had to teach everyone about the seven waste oreight waste, depending on which school you belong to and all theclassic definitions of Lean and the Japanese management, theToyota way, which is all very important.

What we realized pretty quickly, because we started doing thisportion of it at the depth of the house recession, was that a


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builder wouldn't take the time or couldn't take the time wherethey would pay for really deep training in it. What we had to do iscome up with a process that worked in a week that said, "In aweek, we'll show you the money."

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

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

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

Todd Hallett: Joe, what I've been involved in is the Lean designpart of it. What shocked me when I first got together with Scottwas the amount of waste. Not only waste but how that wastetranslates into dollars and what those dollars mean per unit ofeach house.

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


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What I didn't realize then, and I do now, since I got involved withScott and his company, is that the collaborative approachbetween the builder, the sales team, and the trades can all worktogether to save thousands of dollars per house. Before, when Iwas working with Delcor, it would be a struggle to try to figureout 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 savingsidentified. We know it's actually just scratching the surface. Forexample, we have a tremendous database here now. Rememberthat 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 isthat there is at least a conservative average of $10,000 perhouse, sitting there, buried or wasted in otherwise unnecessarytrips 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 gothrough one of our Lean processes. They have different names,Lean Building Blitz, Lean Plan Workout. We'll just call them theLean processes. Once they go through, they start to see it, butyou take your average builder and tell them, "There's $10,000alone 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; itmakes them crazy when they see it. To say we're finding anaverage of about $9,000 a house, yeah, that sounds impressive,but we know there're a 1,000 more than that simply in wastedtrips, so we've got a long, long way to go. There's so much there.


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$20,000 to $25,000 a house would be a very conservativeaverage 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. Whatalmost all these industries see, if they get really serious aboutmeasuring everything that's waste in their products andprocesses, it usually looks like a number around 35 percent.

If we take your home price...Average home price right now isprobably, 100 and a half? You take 30 percent of that. That's a

$45,000 potential. Of course, that's pushing back upstream intoyour suppliers, too. Some of that is hidden from the builders. Butthen if you look at where...

I know you know about these things, Joe. Automotive isnow...The Lean guys who work for Ford, GM, Chrysler, Toyota,Nissan, they're spending the majority of their time working backupstream at the suppliers now. They've got those plans prettywell dialed in and wrung out. That's kind of the future, down theroad for us.

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

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

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


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She was a great southern Indiana lady. She was doing her owncheckbook, longhand division in her head, up until she was 102.She was a sharp kid. She would, every once in a while...She'dalways call me Scotty. She'd say, "Now, Scotty, tell me againwhat 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 structuredway, is to get the builders to listen to their suppliers and trades."

She'd look at me and she'd shake her head and she'd say, "Youmean 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 youdepend on to do the business. But you and I know thats not whathappens out there.

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

Now, it's broken up into 18 areas. You have your heating and airconditioning. You have your electric. You have your framing. Youhave your flooring and your foundation, but 765 questions. Thatsounds big, and complicated, and intimidating. Now we do a lot ofthings to simplify it. You could reasonably ask that question.Everyone you look at, "Well, isn't it just common sense to look atthese 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; 30,000parts or more typically, at least 35 or 45 companies participate inthe building of it, and several hundred different people participatein the building of it. This very simple thing called a house doesget really complex. On one level, I agree it's just common sense,but it sure is uncommonly done.


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

Todd: From the design end, there has been for sure. What Itypically get when we first go and do an implementation with thebuilders is they think that Lean means we're going to strip thehouse of its amenities and take all the sizzle out of the house sowhat 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. Valueengineering, of course, has got itself a very bad name over thepast 15 years because of a lot of folks did just that. Instead oftruly value engineering, they've stripped the homes of all theirdetail all their amenities and ended up with homes that didn'tsell.

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 torealize real quick is that this has nothing to do with stripping thehome of amenities or making...In fact, it has everything to dowith making the house more marketable. Many times we'llfind...Let's say we find $8,000 on a given house. The builder maychoose to put 2,000 of that into the home to increase theiramenities, 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 somebuilders, especially a couple of national builders who are...theLean term they've thrown it around, and what they've done isalmost nothing to do with Lean. It was simply a matter of another


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round of beating down the suppliers and trade and was pure costmanagement.

Value is...you look at how value's defined; you look at the benefitover cost, and those are some famous ratios there. There'reactually five different ways you can increase that benefit overcost 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; wealready do this." Probably, a huge percentage, three-quarter of

our clients initially the response, "Well, we do this. We're all thetime looking how to take cost out." Again, they're looking purelyat a cost from a very narrow bid price. There's a real differencebetween bid price and total cost, which is a critical element.

Some of that resistance that, "We've already done this. Whywould we have someone from the outside come in and do it?"There's also a fear factor that we run into, and it'sunderstandable in some organizations where you have a let's saya director or VP of construction or purchasing that might look at itand 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 isgoing to look at me and go, "Hey, Todd, how come you didn't seethis stuff?"

Joe: What have you been doing?

Scott: Yeah, and it's a genuine fear depending on...We reallyhave a heart-to-heart talk with the presidents of these companiesto make sure that they talk to their guys and say, "Look, what'sgoing on the last five or six years." These guys have all beenworking 60, 70, 80 hours a week running their butt off. There'snot a builder out there that has excess people.


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They're all just working themselves to the bone and everyone'sheld off on hiring. There's an incredible latent hiring demand inthis industry that everybody's holding off on until we're absolutelysure the turnaround is here, and then it's going to come out ingangbusters.

I personally think that the 7.8, 7.9 unemployment rate isoverstated, in reality, because as soon as things settle downhere, everybody gets over the election. It doesn't to me matterwho wins. We're going to get over all the hesitation and thetrepidation, 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 onsomething Todd said, we will not do one of our Lean processes,unless we have somebody, and often two people, really goodfrom sales and marketing involved in a process. If they have adesign center that probably half the builders do now, we wantthat design center manager there, too.

Because those of us who are kind of construction oriented, we getall excited about, "We can change this and this. We can do this,"and we think, "The customer will never notice. The customerwon't care." We're probably right 90 percent of the time. Butonce in a while, the salesperson will come along and raise theirhand 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 houseto you guys, but look at what our competitors have 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 tokeep it."

Now, maybe, we'll say let's see if we can figure out a way to do itmore efficiently but we run into that. Now, surprisingly, about asoften as we run into salespeople wanting to fight to keep


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something, they will tell us that theres something that we'vebeen doing. This happened recently where they had a 12-inchwide archway built between a kitchen and a big walk-in a pantryentry.

We looked at the wood that went into it, and taking it down to asix-inch with the savings on the drywall and everything wasliterally going to save 50, 60 bucks a house. Maybe that doesn'tsound a lot, but this company was building 600 homes. Let's justsay it was 50 bucks times 600; that's a $30,000 bill. I meanthat'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 thesalespeople to have a fit and the sales manager looked at said,"You can take that out tomorrow as far as I'm concerned," andconstruction 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 arounddumbfounded. They thought they were doing it because it's whatsales wanted.

This pulls the whole organization together when you do Lean, andyou get all the constituents involved, all your suppliers involved ina process, and the understanding level goes up exponentially. It'sreally a remarkable process.

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

Scott: I don't know if you can see the logo. I'll let Todd tell youin more detail. I don't know if you can see the logo on it where Itook one of my great old pairs of Johnston Murphy wingtip shoes,


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which I've had for 30 years, but I rarely wear them anymore. ButI took them. They were the old classic consultant shoes.

I covered them in mud and laid a hammer across them and did alittle experimenting, and everybody understood as soon as theysaw the picture, which is to say who we are is a consultingcompany. 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 MuddyShoes Charrette. There are a lot of big named companies outthere, architectural firms that do design charrettes, and theycharge a lot of money. We'll ask the builders, and we found outthese guys never go out and get their shoes dirty. They never goout in the field and really talk and see what the capabilities of thetrade are, what's wanted in the field.

As a result, you get some designs that, there're a couple of citiesin America, I guess I should be nice and not name them -- butthere's a couple big metro areas which I think have the mostatrocious design anywhere in America. It's just gotten completelyout of control, because what you have is this guy sitting back in aroom never getting out in the field adding on things to houses,fake keystones, and fake dormers, and extra shutters, and doublelintels, and coins, and add on, add on, add on, until you have noidea what the style or design is.

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

Todd: What typically happens in the building company, at leasta midsize building company is that the owner, the boss, or a


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president will look around for product, and they'll be the onesthat'll brainstorm what's coming down the pike in product. Theymight be looking through a magazine, or they might drive andlook at models.

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

What we do is entirely different with the Charrette. First, we startout 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 tradesto analyze what's working and what's not working with theirexisting plans. That means methodology of construction. It alsomeans what's happening on the sales end in terms ofacceptability and marketability.

We'll spend the entire week with them going through trade bytrade -- not all at the same time -- but trade by trade. As Scottmentioned earlier we have this process where there's over 700questions, and each one's broken up into a trade. After we'vedone 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 andhold what we call a Charrette where we'll have everyone from thebuilding team, including the sales people, and oftentimes realtorsif they have independent realtors, and have them in a room, andgo through and describe to us. There's a process we do, what it isthat they're looking for in new home development.

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


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

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

I actually heard one of them say once to a president of acompany, "If you expect results any sooner than a year, then youaren't serious." I'm going like, "Go try to sell that to ahomebuilder, especially in the housing recession." The idea thatwe've got to put everybody through the training, three days oftraining, then we're going to have 20 green belts that take 15, 20days of training, then we've got to have five black belts to take allthe certification.

That's great that you can have a lot of it. But there's aninteresting thing, a negative that can happen in a lot of thesecompanies. Then the Lean work -it was very similar to the qualitymovement in the '70s, '80s, and '90s -- becomes theresponsibility and the ownership is in all these specialists.

Where I saw a long time ago, and I go back before I got to PulteHomes, I was at U.S. Steel way back in production, and thenMotorola and where we did precursors to what it is we call Leannow. Then did the consulting work with a lot of great companies

like Caterpillar and John Deere and Cummins Engine areexamples.

At Pulte, applying this in homebuilding, what I saw was that therewas actually as many negatives in terms of having a specialistfocus on this within your company as there were positives. Whenyou make it the responsibility of everyone as part of what they


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do, then its part of their job. It could be harder for them to focusand concentrate on all the parameters and negatives of that, buton the whole, we think you come out ahead.

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

The point is companies with 100, 115 people or less are probablybuilding the percentage of homes in America still. It's differentthan being a Ford or Chrysler or somewhere like that.

Our idea is to get these people to understand how to do thisthemselves as part of their job and see it as, "This is a way tomake 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 tomake 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 orsomething like that, but we don't stress it at all. Even in ourorientation sessions when we do our Leans, I used to try to teachthe seven wastes, and I quit doing that, because I realized it waspretty well going in one ear and out the other.

Until these guys actually did it hands-on, it just didn't registerwith them. But after they do a hands-on then they get really

interested in learning. We think the building industry is justgetting to where there might be some appetite for the moreformal official training in Lean, and we're ready to do that. Butthat's just coming along as it's coming out of the recession here.

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


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Scott: I would say we're putting them in and actually showingthem how this relentless pursuit of waste it's in their interest. Wetry to make it so it's not an event, this one time event. Theyunderstand pretty quickly, "Wow; we could make this companywork better every day."

There is one company in our industry that is probably the bestimplementer that I've ever seen, and that's Hearth and HomeTechnologies. They make Heat & Glow and Heatilator products. Iknow them extremely well, and you go in their plants and 350people in each plant. They know they owe their jobs to Lean.

Those plants are in Iowa and Minnesota. They would have beenmoved to Mexico or even the Philippines 12, 14 years ago if ithadn't been what they tucked under and taken during Lean.

They totally get it. They know it inside and out. When I think of acompany 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 aregetting there. There's a great...The last two builders of the year,a matter of fact before the most recent was announced just thisweek, the last two before that was; last year was a companycalled DSLD outside of Baton Rouge, Louisiana, a company thatgrew 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 anastounding growth rate. I'll add, these were experienced people,by the way, who had sold out a few years before and thendecided to come back in. They weren't rookies starting from

scratch.

These guys and their president, a young guy named SaunSullivan; they live Lean every day. They push it and stress it andevery single day at working with their suppliers and trades. Theirwhole notion is if they can get their suppliers and trades toimprove and get better, then they know they get better, too.


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A year before that, a builder by the name of Jagoe Homes, thatcompany's been around for four generations, and there's a fifthone coming along. Most companies that have that tend to getpretty sick by the third generation. But the Jagoes are theexception. They're remarkable people. They build in four differentcities in Kentucky.

A little bit under the radar, but I'll tell you what. I visit theseguys, and they just blew my mind. They talk Lean every day. It'snot 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'tthey do...rather than this five-day with us, could they do a day aweek for five weeks? We tried that once. It just didn't have thesame 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'tas good as pulling this team out and has five long days withthem.

We work them hard and wear them out. But at the end of thatweek they're exhausted but exhilarated because they see what itis they found.

In these workshops, we usually identify an average; I work withthe suppliers and trades, an average of 150 specificimprovements that we get dollar values on, difficulty ofimplementation ratings, and what the benefits are. Then theyhave them all on a spreadsheet, tracking forms, and they take off

with them. They get about the task of getting it done.

What's really interesting, I'll anticipate another objection youmight ask about that we hear a lot of. "Well, isn't this going totake our guy? We're going to find all this stuff. We're going to getoverwhelmed." Some of the really intuitive builders will realizeabout halfway through the week. They'll say, "Everything we're


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putting up on the walls here, there's not one thing we'veidentified that didn't already exist."

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

This immersion is what pulls all that out, and it's more effective. Inever did anything in my life that worked the first time and

worked 10 times in a row. Well, this process worked the firsttime, 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 thesophistication of something like BIM, which is BusinessInformation Modeling software? Is that starting to happen?

Todd: It is more and more now than it was before. We actuallyjust got involved about a year ago with BIM with a company

called VisionREZ. It's a tool, right? Once you have that tool andapply it properly, you can go a long way towards this Leanprocess. It's just like having a great CAD program. If what you'reputting into it is incorrect, or it hasn't been fully flushed out, thenyou're not really creating any benefit.

But with it, it can be a very powerful tool, mostly in terms ofcreating 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 ventilationdoesn't run into the plumbing. It doesn't cross paths withelectrical. Home owners have always just figured that out in thefield.

They'd build a model, and whoever got there first, usually it wasthe HVAC guy, would carve out his base and put his tin in there,


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then along would come the plumber. Of course, he would havetrouble getting through because now there was something rightin his way. He'd figure it out a different way. Then the next timethey build a house, well, whoever got there first, it's the samething repeatedly.

With BIM now what we can do is we can identify that workingcollaboratively in a Lean process with the trades to identify whatthese bays are and how can we avoid collisions? Not only can youput them in there, but you see them now in 3D, and then fromthat, 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 withthis. We had a long conference call yesterday with a client, andthe light bulb went on in his head. They were in the process justgetting started in a big BIM conversion, so taking all of their plansand running them through, and getting them converted over to aBIM system.

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

He said, "But it's occurred to me halfway through this that if wedo the Lean process first, everything we do in this BIM conversionis going to get a lot easier, because what we're going to do isclean things up before we try to automate it and make it more

sophisticated." One of the biggest lessons of software, as Toddmentioned, you never automate a bad system. You never dosomething 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 ourplans first?" I said, "That's exactly right." "Wouldn't it be better to


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do that before we go about all this work to put them through aBIM system?" I said, "One of the big companies..."

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

Joe: I think the old ERP principle, or they called it the USAprinciple; it was always, "Understand, simplify, then automate."You're saying, "Use the lean to understand and simplify, then usethe 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. Isthat really the best option for someone to get started, for a homebuilder to get started?

Scott: Well, here's why we think it is. It comes down to the oldline, "Show me the money." I was asked recently to write anarticle, I had gotten an article due in a week for a professionalbuilder. I've got three or four started and haven't finished any ofthem yet, and I've got to get on that.

One of them was I was asked to do was write something onleadership 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 CRMprogram, whatever it is. How do you get to them, because theytend to get a little detached from the day-to-day?

They aren't living the pain of dealing with, for example, a designcenter who has 27 front door options on a little town home, which


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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 nowthat I just turned 60, but I've been doing this stuff a long time. Ireally think that with rare exceptions, and there are some outthere. That Tom Sullivan I talked to you about was one, Bill andScott, Brad Jagoe. But rare exceptions, you don't get seniormanagement attention unless you can put a firm dollar value onsomething.

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

Well, what we learned out of desperation during the big crash, ifyou said to the builder, "We're going to show you the money inone week, show you so much money that you're going to bethrilled to pay our fee, which is a teeny-tiny amount in relationto 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 andon how great it was." They'll say, "But you're selling this allwrong." I said, "Well, what do you mean?"

He says, "Well, you come in and you emphasize how muchmoney you can save us, but the money's fantastic. But theimpact it's having on our people, the impact on our culture. The

way we're working with our suppliers and trades, we've evenseen improvements, of how we're working with the localinspectors, and it's remarkable. That's what you should beselling."

I said, "Let me ask you this. If I had come to visit you or calledyou and said I want to show you this thing, and what it's about is


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doing these things you just mentioned. It's going to build betterrelationships with your suppliers and trades. It's going to helpyou work with the cities and communities better. It's going toimprove your internal culture. Would you have bought it?" I nevermention the money. "Would you have bought it?"

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

That's a long answer saying, "Yeah, I think it is the best waybecause there aren't too many conceptual buyers out there,especially in the building world. Who's attracted to building? Ithink an awful lot of us were guys who played with the ErectorSets if you're in my generation. But in Todd's generation, was itLegos?

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 tobuild stuff, and we like to see stuff. We like to be able to driveour family through and point to it. "See what I built? See what wedid?" They tend to be big conceptual buyers, so we show themthe goods. That's the whole point of the Muddy Shoes.

Joe: I think that's a great statement, and it's very interestingbecause you give Lean an ROI, which so many others try to solvesomething different than that. I don't think there's anythingwrong with that. I think it's a...


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

Now, when we have really good times again, and they can affordto think three-year, five-year paybacks and stuff, well, OK, butwe aren't there yet, and it's been a lot of years since we've beenthere.

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 Toddon these Lean design workshops a little over two years ago.Pretty quickly, I had some of our other field guys complainingbecause I was hogging them all.

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

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


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

I would say opening up people's eyes to the fact, I don't care howgood you think your plans are; we have never, - we've workedwith so many people on this and a lot of really goodbuilders, -- seen a plan that working in a structured process withyour suppliers and trades, you could not find significantimprovement 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 tomake more money, too. That sounds like an impossible dream,but it's absolutely real. The suppliers and trades do better, thebuilders do better, the homeowner does better, and that's justbecause there's so much opportunity out there.

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

And that was what the big shock was to me was that you can dothis. It's invisible to the client. It's not something that detractsfrom what you're building, but it actually improves it, and the fact

that it is available and readily attained was the biggest thing tome that I'd like to put out there.

Scott: Well, you know, on top of that, Joe; we have also had toidentify a couple engineering firm to work with, and I always sayarchitecture never trained in cost, so a lot of times you have tohold harmlessly and say they didn't get training in that. They're


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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 knowabout the cost, but they don't deal with it and don't want to dealwith it. The engineering attitude is often, "I get this thing sealedand stamped, and if they've got 20 percent more wood,engineered wood in the floor system than they need, well, thatjust protects me even more. Why should I tell them?" That's, ineffect, even if it's not done brazenly like that, that's whathappens.

We have found a couple of engineering firms that are fantasticand who really get it, and we bring them in on a consultant onthese projects and get them to look at how everything is laid inthe house -- the framing, the foundation, the engineered wood,truss, or even if it's still stick built roofs -- and they always findbig 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 getinto 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 haveto meet the customer code.

If someone goes pulling a lot of wood out of a master bedroomfloor on a second story and the customer, every time they walkacross that bedroom once they get it loaded up with a bed andfurniture, 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 awhole lot of other people.

It's not just simply; let's figure out the minimum way to meet thecode. Let's figure out a way that we can meet or beat that codeand keep the customer happy at the lowest possible cost. There's


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very few that understand how to do it. We're very, very fortunateto 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 [email protected]. Todd, they're in theprocess of building their new website, but I think it's still on, isn'tit?

Todd: Our existing website is tkhomedesign.com, and, ofcourse, you can reach me directly through there. It has an areawhere you can just type in and I'll get your emails. The otherthing Scott and I do just about each week is we're onhousingzone.com. You can see that we write blogs each weekabout Lean.

Scott: And that's the blogs or the electronic space forProfessional Builder magazine, also Professional Remodeler isthere, so housingzone.com. You can just put in Hallett or Sedamand 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 onlyapprove three full-day workshops, and we have one of them onLean design. We'll be running a full day really hands-on workshopon Lean building and Lean design, so if anyone's going to IBS thisyear and usually there's a...

Well, we aren't quite back to those great days when we wererunning 125,000 people at that show, but I think it might belooking back up to 50 or 60 or 70 this year. But that's going to bea tremendous experience so that would be a great way to do it.

Also, every month, I have an article in Professional Buildermagazine, and we have PDFs of our different article series. Forexample, there was a three-article series on BIM. There was a


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five articles on quality management, so if anybody contacts me orgoes on the website, we're happy to send them those PDFs ofarticles we've done.

Joe: Well, I'd like to thank the both of you very much. Thispodcast will be available on the Business901 iTunes store and theBusiness901 blog site, so thanks, Scott and Todd. It was adelight.

Todd: Thank you very much.

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


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Joseph T. Dager

Business901

Phone: 260-918-0438

Skype: Biz901

Fax: 260-818-2022

Email:[email protected]

Website:http://www.business901.com

Twitter:@business901

Joe Dager is president of Business901, a firm specializing inbringing the continuous improvement process to the sales andmarketing arena. He takes his process thinking of over thirtyyears in marketing within a wide variety of industries and appliesit through Lean Marketing and Lean Service Design.

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