Thursday, October 16, 2014

Modular Home Builder Interview - Andy Gianino, The Home Store

Andy Gianino’s title is President of The Home Store.  He earned a PhD in developmental and clinical psychology from the University of Massachusetts.  (He was trained as a child therapist.)  Andy completed a clinical doctoral internship at Albert Einstein Medical Center, NY, NY and a Harvard Post-Doctoral Fellowship at McLean Hospital, Belmont, MA.  He also was the research director of a NIMH grant on mother-infant social interaction at the University of Massachusetts.  He’s been in the modular home industry since 1986, 28 years.  In 2005 he wrote The Modular Home for consumers.

Modcoach: Andy, why do you think the modular home industry is stuck at 3% of the total new home market?

Andy: It’s partly because customers don’t know about modular homes.  But it’s even more because customers are unconvinced of their value.  They especially have doubts about the quality and cost savings of modular homes. 

Consider how our image as modular home builders gets framed compared to stick builders.  People in general don’t think of the problems with stick homes in terms of the type of construction as much as in terms of the quality of the builders.  But they think of problems with modular homes in terms of the type of construction, regardless of the manufacturer or builder. 

I realize there’s a push to have the manufacturers do more advertising.  But I don’t believe a marketing campaign will change the opinions of those people who are prejudiced against modular homes.  If we have this kind of problem with our image, we must change this perception with more than marketing.  And we must do this together – as an industry. 

The best way to deal with this is to become better – not a little better, but significantly better.  In my opinion, we aren’t better than stick builder by enough of a margin.  This includes those things we’re definitely better at than stick builders (quality, price, time).  Being 10% or even 20% better is enough in most matters to tip the balance.  But not when you’re working against pre-existing prejudices. 

To overcome the negative impressions some consumers have about modular homes, we need to become so good that word of mouth endorsements overwhelm the negativity.  We need to impress our customers so completely that they want to make converts of family, friends, and acquaintances.  This will only happen when we exceed their expectations.  For that to happen, we need to improve what we do.

Modcoach: Are modular home builders getting what they need from their manufacturers?

Andy: Not enough of what they need most. 

With regard to quality, there are still too many things that need to be fixed in the field by either the builder or the manufacturer. 

With regard to time, it takes too long to order and turnkey a modular home.  First, it takes a few months to complete all the required steps that bring the customer from the first sales meeting to their modular delivery.  One problem is that many of the steps done by the manufacturer are repeated by the builder and vice-a-versa – for multiple revisions.  This is especially true for drawings, custom specifications, and pricing.  A competent stick builder can break ground in half the time.

After the home is built, it takes too long to complete the mechanical hookups and carpentry button-up on anything but a simple ranch.  I would like to see manufacturers do more at the factory to reduce the builder’s time in the field. 

Manufacturers also need to work with builders to reduce costs.  Simply put, we’re not as affordable as we should be.  In fact, we seem to have accepted that modular homes are only a little less expensive than stick homes and that most of the savings is due to speed of construction.  I would have thought we’d be able to drive down the cost using lean procedures and automated systems.  Virtually every other industry in the US has improved its productivity more than residential construction.

What’s standing in the way of lowering the total cost to manufacture, sell, and turnkey a modular home?  One factor is weak product innovation.  Another problem is that there are too many inefficiencies requiring redundant overhead with sales administration.  As I already mentioned, these include drawings, specifications, and pricing.  Inadequate quality control also drives up the price. 

Modcoach: What could Manufacturers do to help builders?

Andy: They could create a Customer Relationship Management (CRM) program that integrates the factory and builder’s sales, turnkey, and service systems.  I did this for my own company as soon as I realized how many details I needed to identify and track for each customer and how many steps I needed to complete in a timely fashion for each customer.  Once our volume grew, our company couldn’t handle this complexity efficiently and accurately without help from an automated system.  Our system tracks the following functions.
  • Customer Leads
  • Modular Pricing
  • Contractor Pricing
  • Sales Administration
  • Contractor Administration
  • Delivery and Set
  • Warranty Service
  • Profit and Loss
All of the eight functions in our CRM network are interconnected with the others.  This means information only needs to be entered and updated once.  Since a lot of the information flows back and forth between The Home Store and our manufacturers, the complete benefit requires that each function in our CRM network connects to a corresponding function in our manufacturer’s CRM network.  Unfortunately I’m not able to do this with either of our manufacturers.  But this is a function that a manufacturer could and should create to help its builders.  (I explain my CRM system in more detail in my presentation.)

I also think that manufacturers should adopt Building Information Modeling software.  BIM is the most powerful tool invented for the construction industry.  If the modular industry could adopt this software as its preferred drawing program, it would totally set us apart from all but the largest builders. 

Manufacturers should also help builders with turnkey project management.  Specifically they should provide:
  • House specific instructions and drawings for the set crew and button-up crew to complete their tasks
  • A manual of contractor best practices
  • Project scheduling integrated with Modular Pricing and Contractor Pricing

As your blog has often noted, manufacturers should help with training their builders (as well as their sales reps).  When starting out, few builders have all four of the skills needed to be successful.  These include marketing, sales, contracting, and business skills.  Yet no manufacturer has a comprehensive training program.  One-day, once a year training sessions, popular with manufacturers, are good as refresher courses.  But they almost never foster lasting learning of new material.
With regard to sales training I have three suggestions:
  • On-Line and In-Factory Classes and Webinars
  • A manual of Modular Sales Best Practices
  • Videos and Podcasts of Sales Best Practices
With regard to turnkey training I have five suggestions:
  • On-Line and In-Factory Classes and Webinars
  • A manual of Contractor Best Practices
  • Videos and Podcasts of Contractor Best Practices
  • A manual of Troubleshooting Best Practices
  • Videos and Podcasts of Troubleshooting Best Practices
I’d also like to suggest that manufacturers could significantly help builders if they were to stop selling to dealers who disregard their responsibilities to homebuyers.  I’m talking about dealers who, first, fail to educate their homebuyers about their responsibilities, especially the scope of work needed to complete a turnkey, and second, ignore their homebuyers when they have warranty problems.  These dealers seriously undermine consumer confidence and interest in modular homes.  They also directly erode builders’ profits, since they compete mostly by selling on price.

Modcoach: How does the relationship between builders and manufacturers need to improve?

Andy: I believe that the changes I’m advocating are more likely to happen if a stronger, committed, and more mutually dependent relationship between manufacturers and their builders is forged.  Manufacturers need to invest substantially in their builders.  Builders need to commit strongly to a manufacturer.

There are a lot of reasons for this, as I explain in my presentation.  In short, manufacturers and builders need the same thing.  Integrated systems and tools that help both of them build modular homes faster, with better quality, for less money – so they can be more successful.
If this is to happen, it makes sense for each manufacturer to create its own system and tools for its builders.  If a manufacturer creates its own system and all of its many builders create their own unique systems, there won’t be a realistic path to integration.  Also, builders can’t easily afford or justify the expense.  I can personally vouch for that.

So how might a closer relationship work?  A manufacturer that has created the systems and tools for its builders could offer these without requiring any reciprocal obligations from the builder.  Or, it could require the builder to buy a certain number of homes a year without preventing the builder from buying homes from another manufacturer.  Or, it could limit the builder to only buying its homes.  It could require either of the last two options to be accompanied by a formal contract between the manufacturer and builder.  This could be in the form of a licensing or franchise agreement.

Even if a manufacturer required a contractual relationship in exchange for offering its systems, tools, and best prices, it wouldn’t need to require every builder to make this commitment.  Those builders who didn’t commit would still benefit because of the better systems, faster delivery, and lower prices.  They just wouldn’t get the advantage of the manufacturer’s state-of-the-art systems and tools.

Andy, thank you for sharing with modular home builders and their factories your thoughts on how to improve our industry.

1 comment:

Unknown said...

I have really worked to change the perception of prefab housing with my books showing gorgeous houses in this country and around the world. My books can be bought in bulk at a reasonable cost by builders to use as proof of the quality and beauty of prefab. Unfortunately only a small amount of builders take advantage of this opportunity.