BRAVE NEW WORLD!

BRAVE NEW WORLD!

Judith Miller, Seattle WA

NARI - Monterey ChapterAugust 12, 2009

NARI – San Jose/SF ChaptersAugust 19, 2009

It's a Brave New World - or is it?Slide 2 of 37Judith F. [email protected]

INTRODUCTION

WHO I AM AND WHY I AM HERE

1. I want to initiate an important debate about what we in the remodeling industry can build after this recession is behind us.

• Will it be more of the same, at a reduced scale perhaps; or

• Will it be significantly different?2. Next, I want to introduce you to some books which might

engage you more deeply into the subjects we’re going to touch on tonight.

What do you think? What does the Brave New World look like to you?


BOOK #1

From Changing Minds: the Art and Science of Changing OurOwn and Other People’s Minds, by Howard Gardner

Gardner emphasizes 2 primary concepts in his study:

1. The 80/20 rule which states that 80% of the results come from 20% of the inputs. Our job as leaders/owners/people is to determine which 20% drives the result.

2. 7 levers of changing minds: reason, research, resonance, redescription, resources and rewards, real world events and resistance.

“To change minds effectively, leaders make particular use of twotools: the stories they tell and the lives that they lead.”


FRAME THE DEBATE: The Question

"The definition of stupidity is doing the same thing over andover again and expecting differentresults."

Albert Einstein

• Yesterday (pre-recession), with the benefit of 20/20 hindsight, we can see the errors of our ways.

• Yet tomorrow (post-recession), barring cataclysmic events, we’re liable to act and react exactly as we did before.

• What will we do differently?


JUST THE FACTS: Remodeling

Since 1995, the Joint Center for Housing Studies has been conducting a comprehensive studyof the factors influencing the growth and changing characteristics of housing renovation and repair activity in the United States. With remodeling activity approaching the level of new homeconstruction, it also represents a critical investment in maintaining the nation's housing stock. Thestudy has produced six major reports: Improving America's Housing, Remodeling Homes for Changing Households, Measuring the Benefits of Home Remodeling,The Changing Structure of theHome Remodeling Industry, Foundations for Future Growth in the Remodeling Industry, and TheRemodeling Market in Transition.

The current phase of the study examines:• Variations in remodeling activity across metropolitan areas and

neighborhoods and how to address the need for more home improvement in declining areas.

• Financing of home improvement activity and whether access to financing influences levels of remodeling activity.

• Remodeling by minority households: levels of home improvement activity, expenditure levels, and types of improvements undertaken.

SOURCE: Joint Center for Housing Studies, Harvard University


JUST THE FACTS: The Economy

Leo Tolstoy famously said, “Happy families are all alike. Every unhappy family is unhappy in its own way.” So it is with downturns. Unlike most postwar recessions, this one stemmed from anasset market correction that destroyed savings and froze the credit system. The result has beenmore severe than a typical recession, as the following charts show.

Four things to look for in this update:

1. Financial markets have dramatically improved, but from an extremely low base. Rather than pricing in disaster, they anticipate tough times ahead. For example, the charts on the spread for AAA and BAA bonds show the credit market moving from unprecedented panic to a level of fear that is merely in keeping with the worst experiences since 1945.

2. Real economy indicators show signs of stabilization. See in particular the charts on manufacturing sentiment, non-farm payrolls, oil prices, and car sales. Nonetheless, many of these indicators remain worse than anything hitherto experienced in the postwar period.

3. The collapse in the federal government’s finances is unprecedented, raising questions about how the government deficit will be brought under control.

4. By most measures, the current recession is far milder than the Great Depression. But the appendix shows that house prices have recently fallen much more sharply than in the 1930s.

SOURCE: Council on Foreign Relations, Quarterly Update, June 2009 by Paul Schwartz


JUST THE FACTS: Unemployment


JUST THE FACTS: Home Prices


JUST THE FACTS: The LIRA


JUST THE FACTS: The Future

HIRI (Home Improvement Research Institute) cites 3 factors in predicting consumer spending in this area:

1. Demographics• Single family households• Hispanic populations• Aging baby-boomers

2. Information on Demand3. Stronger personal connections


JUST THE FACTS: The Future

“What we shouldn’t expect, though, is a return to the high-flying days of the

last few years, which included types of work and a level of investment that wasunusually high. Instead, the strong fundamentals of the market should lead to moresteady growth like we saw from 1995 to 2000, Baker says.“Those fundamentalsinclude an aging housing stock and a growing population. By 2018, the average homewill be more than 35 years old and about a third will be more than 50 years old. Notsurprisingly, spending on home improvement rises as a home ages and essential systems such as roofing, HVAC and plumbing begin to fail or requireupgrades for modern life.”

SOURCE: Professional Remodeler, May 2009

Investors predict the technology alone for high-tech homes will approach$5 billion/year by 2011. “..a belief that the typical house will undergo atransformation much as offices did a decade ago.”

SOURCE: Wall Street Journal, 7/22/2009


FRAME THE DEBATE: Where Are You?

In order to know how you’re going to adapt, youhave to understand where your company is

currently on the growth ladder.

Selected reading:• 5 stages of growth, developed from “The Five Stages of Small

Business Growth” by Neil Churchill and Virginia Lewis in Harvard Business Review, May 1983.

• Article in Remodeling Magazine, July 2009 based on the above.


5 Stages and 2 Phases

Stage 1: owner does it allStage 2: owner begins to delegateStage 3: owner delegates everything except salesStage 4: owner delegates everythingStage 5: owner handles strategy

1

2

3

4

5


5 Stages and 2 Phases, cont.

Each stage consists of 2 phases:1. Evolutionary - systems are developed to manage

effectively at that stage2. Revolutionary - systems become insufficient for

current level of activity

Evolutionary Phase

Revolutionary PhaseCurrent Stage

Next Stage


FRAME THE DEBATE: Where Are You Going?

There are 3 company models:1. Craftsman

• Owner develops successful ‘practice’• Stays at stages 1 or 2• Develops retirement income from careful investments

and personal financial control2. Chamber of commerce

• Owner grows company to stages 3 through 5• Office outside the home• Greater overhead• Develops retirement income from potentially greater

net profit dollars3. National brand

• Company is in stage 5


Book #2

From Construction Contractors’ Survival Guide by Thomas C. Schleifer

Schleifer identifies 10 reasons contractors fail; if you want to grow yourcompany successfully, read this book. Any one reason is dangerous, twotaken together will put the company in the “ICU” and three at one time isnearly always fatal!

Here are some of the most important:• Increase (or decrease) in project size• Unfamiliarity with new geographic areas• Moving into new types of construction• Changing accounting systems• Replacing key personnel


FRAME THE DEBATE: Seek Diversity

• Diverse opinions are essential to success – whether in writing documents which change world politics, such as the Constitution, or in day to day management of a company.

• Seek, hire, train and retain different personality types, different skill sets, different beliefs. Focus on character first.

• Develop a leadership style which first ask questions and then investigates solutions.

• There are terms for the wide variations in though:• Alpha and omega• Ying and Yang• A to Z


Book #3

From The Wisdom of Crowds by James Surowiecki

The author, who also writes “The Financial Page” in The New Yorker, argues that “Large groups of people are smarter than an elite few, no matter how brilliant --- better at solving problems, fostering innovation, coming to wise decisions, even predicting the future.”

This concept has relevance in the BRAVE NEW WORLD: only by pulling ideas from a variety of places, from a variety of people with differing viewpoints and experience, can the best decisions be made.

This could have an impact in how you manage the sales process: allowing and encouraging significant time for decisions during design means you’ve got to have a lot more projects in various stages to maintain necessary gross profit margin coverage.


BRIEF INTERVIEWS with FAMOUS MEN

From Mark Pearsall, VP at Truitt & White, the premier prolumber yard in Berkeley:

• Buyers will change what the sellers sell.• The face to face relationship we’ve got with people is diminishing

in importance – it’s becoming less frequent, it’s becoming less powerful because the homeowner can do much of that at their kitchen table.

• It is CRITICAL to have younger people coming up in management who understand the psychology of young buyers.

• History can’t be a good indicator of what the future looks like. The only lesson from history that makes any sense: react to the customers’ need as quickly and efficiently as you can.

• How do you maintain flexibility? You have to be out in front of your clients, asking questions and listening to the answers.



From Paul Winans, past president of NARI, RemodelersAdvantage facilitator and past co-owner of Winans Construction:

• Marketing is useless – what works is real relationships with real people!

• It takes 3 meetings to truly connect with someone – include a meal in one of those meetings.

• People still have money, people still want to remodel their houses – that isn’t going to change.

• Read “Selling the Invisible” by Henry Beckwith to really understand how difficult it is to sell “service” as opposed to “product”. He makes a huge deal about the distinctions between selling a product that can be seen and touched, and a selling a service that is bought "touch, taste, feel, smell, and sight unseen." Coming to understanding the subtle dynamics of how a person buys a service can be a stunning reality check for those who provide (or sell) services.



From Sal Alfano, Executive Editor of Remodeling Magazineand Replacement Contractor:

• Energy efficiency is going to drive greater regulation: someone who sells their house after doing an energy audit is going to want and need verification and documentation.

• There is 5 billion dollars of weatherization money going out the door from the Department of Energy. It will go to non-profits to manage but they’re going to have to subcontract like crazy to get this done. They certainly can’t do it with the people they’ve got.

• In Atlanta, they have 150 million to spend next year on weatherization – up from a normal budget of 18 million. How on earth are they going to spend 10 times their budget from one year to the next?

• This is just the first wave!



From Paul Deffanbaugh, current editor of ProfessionalRemodeler, former editor of Remodeling Magazine:

• Home building is about designing and building a product. Remodeling is the delivery of a service. That means the margins you’re familiar with are nonexistent. The 20 to 25% gross margin you’re used to working with? Not in remodeling. Think 45% gross. If you price the same as you do for home building, you’ll lose money even faster than if you didn’t work at all.

• And, in order to charge that much, you’ve got to deliver the goods. I don’t care if your team of supervisors and trades can build a house that’s perfect down to the tightest miter joint. If they’re unrepentant louts who curse, smoke, and listen to loud music on site you’ll not only lose your shirt on that remodeling project but also lose the 10 referrals it could have engendered. That’s a quick way to go out of business.


WHAT MATTERS NOW

WHO YOU ARE • “The best predictor for future behavior is past

behavior.” • Personality profiles: DISC, Myers-Briggs

WHO YOU KNOW & HOW YOU’RE KNOWN• Professional and personal relationships• Six degrees of separation (networking)

WHAT YOU HAVE• Net worth – both company and personal• Cash flow – both company and personal


Book #4

From The One Thing You Need to Know… About Great Managing, Great Leading and Sustained Individual Successby Marcus Buckingham.

Buckingham, who worked for 17 years with Gallup, is a goodwriter who “speaks with surpassing common sense, yet reachesprofoundly uncommon conclusions,” according to Tom Peters.

Buckingham concludes that:• Great managers help people succeed beyond their wildest dreams;• Great leaders place the flag, the vision, clearly in front of their

people and help them get there;• Individual success is about doing what you love and delegating the

rest!


WHAT MATTERS NOW: Who You Are

DISC personality assessmentThe assessment classifies four aspects of behavior by testing aperson’s preferences in word associations (compare with MyersBriggs Type Indicator).

DISC is an acronym for:• Dominance - relating to control, power and assertiveness • Influence - relating to social situations and communication • Steadiness (submission in Marston's time) - relating to patience,

persistence, and thoughtfulness • Conscientiousness (or caution, compliance in Marston's time) -

relating to structure and organization

SOURCE: Wikipedia


WHAT MATTERS NOW: Who You Are

These four dimensions can be grouped in a grid with D and I sharing the top row and representingextroverted aspects of the personality, and C and S below representing introverted aspects.

• Dominance: People who score high in the intensity of the "D" styles factor are very active in dealing with problems and challenges, while low "D" scores are people who want to do more research before committing to a decision. High "D" people are described as demanding, forceful, egocentric, strong willed, driving, determined, ambitious, aggressive, and pioneering. Low D scores describe those who are conservative, low keyed, cooperative, calculating, undemanding, cautious, mild, agreeable, modest and peaceful.

• Influence: People with high "I" scores influence others through talking and activity and tend to be emotional. They are described as convincing, magnetic, political, enthusiastic, persuasive, warm, demonstrative, trusting, and optimistic. Those with low "I" scores influence more by data and facts, and not with feelings. They are described as reflective, factual, calculating, skeptical, logical, suspicious, matter of fact, pessimistic, and critical.

• Steadiness: People with high "S" styles scores want a steady pace, security, and do not like sudden change. High "S" individuals are calm, relaxed, patient, possessive, predictable, deliberate, stable, consistent, and tend to be unemotional and poker faced. Low "S" intensity scores are those who like change and variety. People with low "S" scores are described as restless, demonstrative, impatient, eager, or even impulsive.

• Conscientious: People with high "C" styles adhere to rules, regulations, and structure. They like to do quality work and do it right the first time. High "C" people are careful, cautious, exacting, neat, systematic, diplomatic, accurate, and tactful. Those with low "C" scores challenge the rules and want independence and are described as self-willed, stubborn, opinionated, unsystematic, arbitrary, and careless with details. SOURCE: Wikipedia

DC

IS


WHAT MATTERS NOW: Who You Know

Around the country standard marketing is not working –how about here?

What is working:• Networking: • Developing gatekeepers• Becoming an expert• Leading the pack


WHAT MATTERS NOW: How You’re Known

8 Branding Truths:1. Focused brands are more powerful than diffused brands – therefore do a few things

very well and focus marketing on those few.2. The first brand in a category has a huge advantage – first in the mind, not necessarily

in the market.3. Keep it simple: one big idea is best (Mark Twain said: “I’m sorry I didn’t write you a

shorter letter - I didn’t have time.”)4. Don’t neglect PR – it’s a great way to build a brand.

• Landscaper:• Hand out shovels in your neighborhood and take over the landscaping on a parking median

in the neighborhoods where you want to work• Remodeler:

• In the summer develop a “let’s build” summer program for kids – 4 weeks every Saturday build a doghouse or something like it. Every weekend a different carpenter handles the project.

• In the fall: seminar in the office on winterizing your home• In the winter: seminar in the office on lowered energy costs• In the spring: spring cleaning – provide a dumpster in front of one of your best clients for a

week in the spring and pay for it5. Be consistent and patient; building a strong brand takes time. 6. Avoid sub brands at all cost.7. Quality is important, but not as critical as the perception of quality. 8. Somehow, someway, you must be different.


Book #5

From The Influencer: the Power to Change Anything byPatterson, Grenny, Maxfield, McMillan and Switzler

• Quoting from Edward Deming: “it is not enough to do your best; you must know what to do and THEN do your best.”

• The authors say “a few behaviors can drive a lot of change.”• They also identify the importance of stories in modifying behavior

because, as Gardner indicated, stories create resonance.• “So, when trying to help people view the world in a more complete

and accurate way, couple your stories of the harsh realities you’re facing with equally concrete and vivid plans that offer hope. Tell the whole story. Provide hope!” (page 67)


WHAT MATTERS NOW: What You Have

1. TIME• Plan 3 – 5

years, then• Focus on 1

initiative per quarter!

• Stay healthy!• Take care of

your people!

2. MONEY• Get your

numbers right!• SNIPPY• Backlog• Cash

• Track changes in net worth!

3. DECISION MAKING• Make major

decisions with care

• Make minor decisions rapidly


I PREDICT: Where You’ll Be!

Where you’ll be in 5 to 10 years depends on 4 factorsparticular to you and to your company:

1. Geography: California coast will maintain above-average per capita income

2. Products: California will maintain above average interest in new products and methods

3. Brand: Californians run in large packs4. Delta Force: Your ability to deal with the speed of

change will determine whether you sink or swim!


I PREDICT #1: 2009 – 2012

• We’re on the transitionary curve of a U-shaped recovery

• Failure of 40% of current remodeling companies by 1/1/2011

• More leads, smaller job size, greater competition

• Client focus on needs, not wants

• More self-financed projects, greater importance of cost factor


Book #6

From How The Mighty Fall by Jim Collins

Jim Collins also wrote Good to Great and co-authored Built to Last, both national best sellers on the subject of building good companies.

This book focuses on why companies fail and how. He cites 5 stages, each as definitive as the 5 stages of growth mentioned previously. They are:

1. Hubris born of success2. Undisciplined pursuit of more3. Denial and risk and peril4. Grasping for salvation5. Capitulation to irrelevance or death


I PREDICT #2: 2013 - 2016

Successful companies are those which remainfocused on:

• Developing ‘niche’ specialties:• Green building, green remodeling• Home performance: energy, water, home as food

source• Home repair and maintenance

• Embracing technology • Becoming product driven• Mixing up team members:

• More youth• Greater diversity


I PREDICT #3: 2017 - 2019

10 years from now:• Shared resources among vendors: imagine an office

space where 2 remodelers, 3 designers, an HVAC, plumber and electrician share space, dues and subscriptions, computer systems and management personnel

• Spanish/English from top down in California• Team remodeling between generals and subs who

will design the solutions together• Pricing becomes transparent: paid for your time and

expertise – not for products• More self-financed projects


MY BRAVE NEW WORLD: 2050!

Communities will form aroundcentral core which contains the energy, financial and civicinfrastructure

We’ll ride small bullet trains into the core whenever we want orneed its services.

Citizens will be more self-sufficient the further they livefrom the core.

The size of the community will be dependent only upon theability of technology to deliverinstantaneous information alongall spokes of the wheel.

What does remodeling look like in this future?


CONCLUSION

1. Micro level: self preservation now requires focused attention on:

• Customer satisfaction + net profit (Benchmark Sept 2005)

• Backlog (Benchmark November 2005)• Cash conservation ( September 2009)

2. Macro level: future success requires personal and company engagement in the BRAVE NEW WORLD of the future.

What are you doing to protect your company now and to preserve it for the future?


BIBLIOGRAPHY

• 3 Strategies for Positioning the Remodeling Firm by Doug Dwyer, Professional Remodeler, Sept. 2008 http://www.housingzone.com/proremodeler/article/CA6593253.html

• Joint Center for Housing Studies Researchhttp://www.jchs.harvard.edu/research/remodeling.html

• Home Improvement Research Institute http://www.hiri.org/research.asp?id=152

• Bureau of Labor Statisticshttp://www.bls.gov/

• Companies Chase the Promise of High Tech Homes, Wall Street Journal, July 22, 2009http://online.wsj.com/article/SB124822152368570387.html

• The Future of Remodeling in 2018, Professional Remodeler, May 2009http://www.housingzone.com/proremodeler/article/CA6558033.html

• 10 Truths about Leadership by Pete Luongohttp://dayton.bizjournals.com/dayton/stories/2008/05/26/smallb2.html

• DISC Assessmenthttp://en.wikipedia.org/wiki/DISC_assessment

• Selling the Invisible by Henry Beckwithhttp://www.newfangled.com/selling_the_invisible

• Is Remodeling Right for Home Builders by Paul Deffenbaugh, Professional Builder, Feb. 2009http://www.housingzone.com/probuilder/blog/1310000331/post/1420040142.html

http://www.housingzone.com/proremodeler/article/CA6593253.html

http://www.jchs.harvard.edu/research/remodeling.html

http://www.jchs.harvard.edu/research/remodeling.html

http://www.hiri.org/research.asp?id=152



http://www.bls.gov/

http://www.bls.gov/

http://www.bls.gov/


BIBLIOGRAPHY

• Growing Concern by Stacey Freed, Remodeling Magazine, July 2009http://www.remodeling.hw.net/owner-issues/growing-concern.aspx

• Five Stages of Small Business Growth by Neil C. Churchill and Virginia L. Lewishttp://harvardbusiness.org/product/five-stages-of-small-business-growth/an/83301-PDF-ENG

• Changing Minds: the Art and Science of Changing Our Own and Other People’s Minds by Howard GardnerAmazon: http://tinyurl.com/mm3fn8

• Construction Contractors’ Survival Guide by Thomas C. SchleiferAmazon: http://tinyurl.com/nnfplz

• The One Thing You Need to Know… About Great Managing, Great Leading and Sustained Individual Success by Marcus BuckinghamAmazon: http://tinyurl.com/nzsvm3

• The Influencer: the Power to Change Anything by Patterson, Grenny, Maxfield, McMillan and SwitzlerAmazon: http://tinyurl.com/lubyxu

• How the Mighty Fall by Jim Collins Amazon: http://tinyurl.com/rbkp5g• The Wisdom of Crowds by James Surowiecki

Amazon: http://tinyurl.com/npsk7m


THANK YOU

Thank you for attending.

Please let me know how I can help you.

Judith F. [email protected] Fremont Avenue North, No. 546 Seattle, WA 98103Verizon (510) 847-6053AT&T (206) 658-3954 website: http://www.remodelservices.com blog: http://www.remodelservices.wordpress.com

mailto:[email protected]

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