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Bigger Isn't Necessarily Better
Lessons from the Harvard Home Builder Study
Frederick Abernathy; Kent Colton; Kermit Baker and David Weil
Bigger Isn’t Necessarily Better
examines the performance and operation of the US homebuilding sector based on a detailed survey of large home builders conducted by the authors in the period of the great building boom of the 2000s. In contrast to the many books that have focused on the financial side of the housing sector prior to the Great Recession, the book examines the operational side of the industry and what did, and, more importantly, what did not, happen during the period of unprecedented growth. Despite the rise of very large, national homebuilders during the boom years from 1999 to 2005 and the consolidation of the industry that accompanied it, the authors find that major homebuilders often did not adopt innovations in areas ranging from information technology, supply chain practices, and work site management, nor improve their operational performance. Given this, the book discusses what homebuilders can learn from other industries as they face a challenging future.
978-0-7391-7288-9 • Hardback • December 2011 •
978-0-7391-7289-6 • Paperback • November 2011 •
978-0-7391-7290-2 • eBook • December 2011 •
Business & Economics / Real Estate
Political Science / Public Policy / City Planning & Urban Development
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is Gordon McKay Research Professor of Mechanical Engineering and Abbott and James Lawrence Research Professor of Engineering in Harvard University’s School of Engineering and Applied Sciences.
is senior research fellow at Harvard University’s Joint Center for Housing Studies.
Kent W. Colton
is president of The Colton Housing Group and senior fellow at Harvard University’s Joint Center for Housing Studies.
is professor of economics and Everett W. Lord Distinguished Faculty Scholar at Boston University School of Management.
Chapter 1 Home Building—Is Bigger Better?
The Home Building Boom
The Seeds of Consolidation
The Growing Dominance of Big Builders
Conventional Wisdom about Scale
The Virtuous Circle Hypothesis
Organization of the Book
Chapter 2 Studying the Home Building Industry
Building the Machine for Living
Focus on Entry-Level Homes
Measuring Local Market Competition
Survey Coverage and Content
Structure of the Survey
Chapter 3 Big Builders at the Corporate Level
Builder Performance during the Boom
Securing Capital for Expansion
Land Assembly Strategies
Corporate Branding and Customer Satisfaction
Chapter 4 Labor and Subcontracting Practices
The Construction Manager Model
Benefits and Costs of Improved Coordination
Coordinating On-Site Activities
Performance at the Construction Site
Chapter 5 Advanced Operational Practices
Emergence of the Third Supply Channel
Shifting Builder Priorities
Implementation of Advanced Practices
The Role of Local Market Conditions
Market Characteristics and Builder Performance
Chapter 6 Information and Communication Technology
Communicating with Customers
Home Builders and Technology Use in the Back Office
Home Builders and Technology Use on the Site
Using Technology to Estimate Costs
Using Technology to Coordinate with Subcontractors and Suppliers
The Importance of Sharing
Factors Discouraging Greater Use of Technology
Chapter 7 Lessons about Builder Scale and Performance
Challenges of Improving Operational Performance
The Importance of Local Markets Revisited
Disentangling the Effects of Size and Location
Can Bigger Get Better?
Chapter 8 Gaining Advantage from Scale
Improve Subcontractor Coordination and Workforce Quality
Increase Standardization and Preassembly of Components
Leverage the Power of Information Technology
Streamline Supply Chain Management and Logistics
Managing Risk in the Twenty-First Century
Appendix A Joint Center Advisory Panel for the Harvard Home Builder Study
Appendix B Survey Responses to ICT Questions
In these challenging times, in order to be successful, a home builder needs to excel at land assembly, marketing, on-site operations and customer satisfaction. The Harvard home builder study lays out very clearly what national builders have done well, and where they could benefit from improvements. This book provides a roadmap to improve competitiveness in today’s demanding economic environment while increasing productivity as the market recovers.
Dan Fulton, President and CEO of Weyerhaeuser Company
This book is filled with descriptive institutional detail and analytical insight. It looks at the industry from a range of perspectives, and it is ultimately positive in its outlook. It is hard to find this kind of balance today.
Karl E. Case, Professor of Economics Emeritus at Wellesley College
The implosion in home building is a wakeup call to modernize this important industry. The authors make a persuasive case that home builders have much to learn from other industries that have successfully balanced innovation and scale leading to greater efficiencies.
Nicolas P. Retsinas, Senior Lecturer in Real Estate at the Harvard Business School and former Assistant Secretary for Housing-Federal Housing Commissioner at the United States Department of Housing and Urban Development
Scale offers significant opportunities in the homebuilding business. However, as in any business, execution is the key.
Bigger Isn't Necessarily Better
provides a thorough analysis of where home builders have been able to leverage their competitive advantages, where they have not, and therefore how they can become more efficient as market conditions dictate. This is a landmark study of the industry on an important topic.
Eric S. Belsky, Managing Director of the Joint Center for Housing Studies of Harvard University
Bigger Isn’t Necessarily Better: Lessons Learned from the Harvard Home Builder Study
analyzes the eponymous study of the practices of big (more than 50,000 houses/year) home builders that came into being through consolidation and acquisition of smaller companies....As the book cover illustrates, the authors hit the nail on the head with their analysis. The study and its presentation flow nicely and avoid the propensity of this type of tome to sink into the gravity of its material. The authors deliver on the promise in their book’s title: through a lucid, well-ordered presentation of graphics and prose, they discern, explain, and share the lessons learned from the workings of the large home builders during of the last housing boom. Now it’s our turn—to study and apply these lessons so that we can do our share within the building industry to contribute to softer landings for all during future market downturns.
Today I had the chance to sit in on a conference call with the authors of
Bigger Isn't Necessarily Better
(Lexington Books, November 30, 2011) a book based on the
Harvard Builder Study
comparing the performance and operations of mid- to large US homebuilders during the great building boom of the early 2000s. The book examines the operational side of the industry instead of financial performance, and provides a revealing look at how little progress mid- to large homebuilders made in improving their jobsite coordination and control, despite the rise of hugely profitable national companies, the kind you would expect to implement the most advanced operational systems, like automakers and large retailers have. To facilitate useful comparisons the authors narrowed their analysis to entry-level home divisions, avoiding comparisons between various price points.
You can feel the touch of four different hands in the presentation of the material through nuances of style and emphasis. This is a good thing for this work, as the four different kinds of expertise are unified into one theory: it adds texture and personality to the narrative. The authors also offer a generous spread of graphic materials to help the reader grasp the large amount of data presented in the book. ... As the book cover illustrates, the authors hit the nail on the head with their analysis. The study and its presentation flow nicely and avoid the propensity of this type of tome to sink into the gravity of its material. The authors deliver on the promise in their book’s title: through a lucid, well-ordered presentation of graphics and prose, they discern, explain, and share the lessons learned from the workings of the large home builders during of the last housing boom. Now it’s our turn—to study and apply these lessons so that we can do our share within the building industry to contribute to softer landings for all during future market downturns.
Explores industry trends in residential construction during the late 1990s and early 2000s and their relationship to the housing boom and bust, based on data from the Harvard Home Builder Survey.
Journal of Economic Literature
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