The AI Revolution is Here: The Implications For Homebuilders

[Photo credit: Sara Hertwig]

We don’t know how fast AI and automation will transform the global economy. Still, we do know that homebuilding companies that commit to and invest – period – in technology could have a leg up on the competition in the years ahead. 

Making the right investments would give them an even greater competitive advantage.

Technology can automate mundane tasks, improve operational efficiency, enhance the consumer experience, and lead to more conversions in a market plagued by a dwindling pool of buyers. 

However, before investing in the more flashy, trendy systems that make the headlines, companies need first to lay a strong foundation. After all, technology can’t fix a lousy work culture or a poorly run operation. As David Price, Founder of New Home Star, put it:

Technology isn’t a magic wand. It’s an enabler.”

Those were some of the main takeaways from the Business Systems Innovation panel during last week’s Focus on Excellence summit in Denver. What follows is an analysis of how technology can benefit homebuilders, based on that panel discussion, with verbatim quotations from the session. 

Empowering Customers Through Optionality

During COVID, Taylor Morrison initiated a platform that allowed customers to configure a home online. The tool will enable consumers to choose a lot and a floor plan, and to customize the interior and exterior of the house — all while providing complete pricing transparency. 

The platform does much of the heavy lifting for the sales team, as buyers often know precisely what they want before entering a community. 

It also gives consumers a choice — either customize your new home from your own living room without talking to a sales rep directly, or go the traditional route and visit a sales center in person. Buyers are free to speak to a salesperson when they feel ready. 

I think the builders that provide optionality to engage how it feels natural and authentic for [customers] is where those builders will gain share, and we've seen that through technology,” said Stephanie McCarty, CMO at Taylor Morrison. 

Many buyers are intimidated by the home-buying process. Giving them the option to engage in that process as they see fit —whether in person, online, or through a hybrid model —is a sound strategy. As McCarty put it: 

The model that has been around is that the builder holds all the cards, and the consumer comes in and already feels threatened from minute one. What an awful experience.”

In McCarty’s words, consumers who have options “come to the table feeling empowered.”

Leveraging data can also enable builders to send tailored messages at the right time and in the right channel to each consumer, rather than a generic one-size-fits-all approach to thousands of customers — each with their own unique pain points, obstacles, and experiences. 

McCarty laid out the following scenario to illustrate this tailored approach. 

Someone goes through that process. They're experimenting. They're learning. They're educating themselves. Maybe they haven't bought a new home before, and they abandoned more than they completed. Still, now that they've abandoned [the process], I know so much about what that person was putting together that my next message to them is the most relevant communication they're going to get from me.”

Linda Mamet, CMO and Executive VP at Tri Pointe Homes, added that the focus on conversion is critical in a market with a shortage of buyers and a host of competing builders. 

When there is a smaller pool of buyers in the market, the most valuable thing you can do is improve your conversion. Don't try to increase the pool of buyers that's swimming upstream. Focus on how you can take away the obstacles and the pain points and move people through the process,” Mamet advised. 

The Lesson:

Optionality is crucial. Allowing consumers to engage in the homebuying process on their own terms —whether online or in person —while also sending tailored messages to each buyer can improve conversion rates. 

Building a Strong Foundation of Operational Efficiency

Brookfield Residential CIO Brandon Sharp, an accountant by training, advised that builders should build a strong foundation of operational efficiency before expanding into more trendy forms of technology. 

As Sharp put it, there are still a lot of builders that “can't accurately measure the change in the direction that’s occurred over the last 12 months, by plan, by elevation, by cost type within their costing structure — the fundamentals that make our company operate.”

All the customer-facing stuff is cool and exciting, and it's sexy and it's the sizzle, but if the foundational layers of your data ecosystem are not allowing the business to operate and understand the daily grind of the business through real data, all that other stuff is aspirational but impossible to execute,” Sharp explained. 

Urmila Menon, CIO at Tri Pointe Homes, explained that investing in an ERP system that unifies data can be a solid starting point. 

One key strategy is really aggregating and unifying the data across these different fragmented sources into a centralized kind of model, which is called the data warehouse model. That enables and lays the foundation, like Brandon was saying, for accurate data, putting data governance in place, and enabling accurate analytics and insights, and reporting,” Menon said. 

The Lesson:

Technology isn’t a magic bullet for a poorly run business. Before investing in the shiny new technology, consider focusing on building a positive work culture and strengthening the fundamentals that keep a business running smoothly. 

When to Start Investing in AI

Marc Minor, Co-Founder and CEO at Higharc, an integrated software platform for homebuilding, said that waiting to invest in AI is a mistake. Many homebuilders are pulling back on spending across the board, even on technology, to protect their margins.

However, Minor warned that deferring technology investments can leave homebuilders lagging behind the competition. He also advised managers to be flexible regarding ROI on technology investments. Sometimes, having a set ROI figure can be limiting – being open to finding your own way is crucial. 

You might have a hypothesis about what the ROI is upfront, and we can all make spreadsheets where we show numbers…but as with anything complex, the reality kind of emerges from activity,” Minor said. 

Once companies leverage technology, they can become more efficient by automating more of the mundane, busy work that needs to get done. By automating these tasks, homebuilders can scale up more quickly—and more efficiently. 

As Mamet put it:

We're going to be able to grow our community count without adding the head count, because the technology enables us to do more with less.” 

The Lesson:

Don’t wait to invest in AI and new technology. At the same time, homebuilders shouldn’t necessarily go in with a set ROI figure and should be open about where the changes may lead. 

Getting People to Buy In

A recent Pew survey found that more than half of American workers are worried about the use of AI in the workplace. Many people are concerned that AI and technology will make their jobs obsolete —a lesson Taylor Morrison learned the hard way after rolling out its online home customization platform during COVID. 

Taylor Morrison saw the platform as a volume play that empowered salespeople by removing the hard sell from the equation. However, many sales representatives wouldn’t call prospective buyers who came through the online platform, because they feared Taylor Morrison was trying to replace them. 

Executives at Taylor Morrison learned the hard way that educating their people on their role in the technology revolution and how it will free up their time to be more productive and creative is essential. 

I think with any digital transformation, the people often get overlooked, and I'd say at Taylor Morrison, it's happened within our own organization. Because you get so excited about the possibility, you forget that the people are the ones who will either make it happen or sabotage its success. So bringing people along, educating them on the why, how it impacts their job, and their role – if you've got a comms or a PR background, you spin it to make it their idea and that always works,” McCarty explained. 

Sales representatives who embraced the new system are more successful and sell more than their peers who don’t use it. In a recent LinkedIn post, McCarty noted that Taylor Morrison’s digital experience didn’t replace in-person interactions — it only enhanced them. Customers who began online and finished in person closed 40% faster and spent 23% more. 

The lesson

People are a core asset. Before investing in AI and new technology systems, fully explaining the benefits to employees – and their role in the process – could generate more buy-in. 

Practical Steps Homebuilders Can Take

Each business has its own unique challenges and needs, so there is no one-size-fits-all approach to integrating new technology. But where should homebuilders start?

Minor recommended starting with operational efficiency, such as reducing cycle times or focusing on estimating and purchasing. 

Sharp said many builders could improve their purchasing optimization, while McCarty highlighted the benefits of reducing friction and enhancing optionality for homebuyers.

Menon recommended focusing on an application modernization, cloud-first strategy. This strategy includes upgrading to newer platforms that will enable the automation of manual, repetitive tasks. 

Start small

Once a homebuilder lays a strong foundation, executives should focus next on improving the organization’s main weaknesses. 

Mamet advised that builders can start with relatively small investments.

Maybe start in small, bite-sized pieces; whatever's right for your business. We started on the CRM side, because that's where we had more accurate data. We employed one person in business intelligence. We built our own data warehouse. We started giving visibility to the data because when people can see it, they can improve it. So if you take small, incremental pieces, it’s more manageable,” Mamet said. 

The panelists also recommended that homebuilders have an individual employee, or multiple team members, who focus on the technology side of the business. This could mean having employees who are dedicated entirely to AI, or having team members who spend a certain percentage of their time on tech. 

One takeaway: don't wait

Some homebuilders aren’t prioritizing investments in technology and business systems as companies scale back spending to protect shrinking margins. However, businesses that do not make the right technology investments now can fall behind the competition and miss out on greater efficiency. Starting with small investments is a sound strategy. 

Each homebuilding company is different, so there isn’t a single path that every company should follow. However, shoring up weaknesses and laying a strong foundation of operational efficiency is a prudent start. As Sharp put it:

If you can't see the business live by the minute, if you can’t see your long-term forecast evolve by the hour as you sell homes or close homes or raise prices or take a cost reduction or increase cycle times…dial it back for a second on some of these more aspirational things, and think about your foundation.”

Technology can improve operational efficiency and enhance the consumer experience, but it can only contribute to a business if employees buy into the changes. Communicating upfront about how AI and other technologies can improve employee performance, backed by real-world data and examples, can help ease the transition.