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Tech-Savvy Builders Expected to Lead in Housing Upturn
At a time when the housing market is slow, home builders need to be taking a hard look at how effectively they are using technology to run their business or risk being woefully unprepared for the marketplace that is shaping up on the other side of the downturn, according to panelists at an International Builders’ Show educational program in Orlando last month.
The convention speakers emphasized that good software systems can add significantly to profits by cutting administrative and construction costs and coordinating the sales and building process more effectively with their customers. Cutting costs, they said, will be crucial during the recovery when prospective buyers will be taking a hard look at prices and may therefore confine their shopping to the existing home market unless builders can offer them something that’s new and also affordable. And they said that good Web sites will emerge as an essential component of successful sales and marketing once the current downturn ends.
“The market will look nothing like what we had in the heyday,” predicted Jerome Gray, of Comstock Home Building Companies in Reston, Va. “It will still be a buyer’s market, and they will dictate what they want in a home and what they’re willing to pay.”
Gray said that builders should expect to be dealing a lot with younger, computer-savvy buyers. “The relocation market will be based almost entirely on the Internet,” he said, “and not on driving around with Realtors®.”
Another sizable market force, Gray said, will be baby boomers selling their existing homes to be close to their grandchildren and creating a “huge” resale market in the process that will require builders to reduce their costs and offer things that aren’t available in resale in order to stay competitive.
Finding It on the Internet
Gray said that technology has been key for his company in planning for the change he expects in buyers and demographics. “Customers will be using technology to find out what’s available,” he said, and that’s why it’s important that they can access selection sheets online even before they stop into the sales office.
With an effective Web site, he said, not as many sales people are needed. He recommended using technology as a “sales advocate.” Sales people who are tech-savvy can send text messages to buyers who are tech-savvy.
“We have been retraining sales people who were scared to death to go into their office and turn on their computer,” Gray said. “If you’re not training and implementing these things today, you’re preparing to fail in 2009 and 2010 when the market flies.”
“Our buyers aren’t looking at brochures,” he added. “If they can’t find it on the Internet, they’re moving on.” And if they find that using a particular Web site is cumbersome, then they also won’t stay. “You have to have an outstanding, interactive Web site that is quick and concise in providing information. They want a response now.”
Making More Money
By adopting or improving information technology, builders have the opportunity to increase their bottom line by as much as 50% to 100%, said J. Kevin Ogle, president of Dynami Solutions in Edwardsville, Ill.
Noting that he did not “grow up” in home building but spent his efforts on using technology for “transformative change” in other industries, Ogle predicted that when the new market does arrive “winners will be those who have the right information in the right place at the right time to guide decision making. They will own the market.”
Gaining a reputation by word of mouth will be insufficient, he said, now that technology allows builders to reach beyond that capacity. “You can use technology to expand your brand beyond your own market,” he said.
“When you decide you want to put a new floor plan in a community, how much time and effort goes into it?” he asked. Using technology, the entire process, down to pricing and selling, can be streamlined and reduced to as little as 10 minutes of work.
“You can use technology to reduce time and motion,” Ogle said. “Taking nine steps out of the distribution center can take it from not being profitable to being profitable. Efficiencies will make money for you.”
Ogle also reminded builders that the conditions that created the housing boom leading up to the current downturn “won’t be tenable during the recovery.” This makes it all the more important for builders to adopt a deliberate strategy to manage their profit line, a process that can be “hugely enabled” through the application of technology, starting out with determining where the money is being made — on the house, on land or wherever.
Through technology, builders can interrogate the data flowing into their business by applying tools that put them in touch with their business as it is happening. “A financial report is not much help in correcting sales or departmental problems happening now,” he said.
Conceding that the culture of the home building business has hampered the adoption of technologies that have been of great benefit to other businesses for a decade or more, Ogle said that a builder might be more receptive to a $100,000 investment in software if he knew that it would put $1.7 million on the bottom line of an investment of less than $1 million.
Having Information When It’s Needed
Amitesch Sinha, president and CIO of iConnect Group in Reston, Va., said that builders are still living in the 1980s when it comes to technology and it is ironic that they are not using it because the biggest challenge for the typical builder is not having the information they need at the right time. About 85% of small to medium-sized builders have Internet access, he said, but of those, 65% have slow dial-up access. And most builders don’t check their E-mails often enough, he added.
“Sixty percent of new homes are built by companies with fewer than 10 employees,” he said. “They need a simple application that ensures data goes to the right places and people.” Also, “your office needs enough broadband so that everybody gets the information.
It is up to the senior management or president of a company to understand the value of technology, Sinha said. “If they don’t buy into it, nobody else will."
With business at a lull, builders have the luxury of being able to learn how to use technology at their own pace, according to David Parker, legal counsel for The Langtree Group LLC in Mooresville, N.C.
“Make the IT people slow down if you don’t understand them,” he advised.
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