Leadership

The Role Of Feeback Loops In Homebuilding Today Is Hard To Overstate

"All of this is a coordinated program of taking steps at a time to improve the ingestion of data, to use the data more constructively and then to bring it to its next level where we're actually driving productivity gains within our business." -- Stuart Miller, executive chairman, Lennar

Leadership

The Role Of Feeback Loops In Homebuilding Today Is Hard To Overstate

"All of this is a coordinated program of taking steps at a time to improve the ingestion of data, to use the data more constructively and then to bring it to its next level where we're actually driving productivity gains within our business." -- Stuart Miller, executive chairman, Lennar

June 20th, 2023
The Role Of Feeback Loops In Homebuilding Today Is Hard To Overstate
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Listen. Respond. Listen. Respond.

And on and on.

In remarks this past week about strategic cog wheels Lennar top executives credit their ability to outperform market peers and their confidence in continuing to do so, executive chairman Stuart Miller dropped a new Lennar team member's name and role.

The machine that we described that we are engaging is really a data-driven approach to so many components of our business. We've done a tremendous amount of work. If you look at our digital marketing program, you look at our dynamic pricing model, both of them, we've talked about for many, many quarters for years. And these are data-driven approaches to the way that we're engaging the customer acquisition componentry of our business.
It's a very integrated set of systems that is dependent on feedback loops. And any time that you find a process that becomes data-driven and the data improves to the point that it's actually relevant, at some point, there are large learning models that can be helpful in enhancing productivity.
These are the areas where we are leaning in. I mentioned that we brought on a strategic Chief Technology Officer in Scott Spradley. And all of this is a coordinated program of taking steps at a time to improve the ingestion of data, to use the data more constructively and then to bring it to its next level where we're actually driving productivity gains within our business."

Scott Spradley joined Lennar in March, as announced by Drew Holler, Lennar chief human resources officer. Earlier, Spradley served as EVP and chief technology and automation officer at Tyson Foods. The executive joined Tyson in 2017 following leadership stints at Hewlett-Packard, Chevron and Intel.

Expectations of Spradley at Lennar, well yes, there are those, as the company notes in its heady description of his role at the company:

He is accountable for transforming the company through technology, establishing and driving strategies which ultimately will digitally transform Lennar and integrate world class technologies into all aspects of our business."

Lennar's Miller, says, as he introduces Spradley's names to institutional investment analysts on the company's Q2 earning's call:

Welcome aboard, Scott. Let's get to work."

No pressure there, eh? Still, if you unpack the fancy jargon describing what's expected of Spradley, it's essentially this:

Listen. Respond.

Know what to do, as Miller puts it, and execute. Repeat. Learn. Adjust. Listen. Respond.

This is a critical leadership and strategy issue for homebuilders of all sizes right now. Scales of volatility, rates of change, prices, costs, cycle time-frames, absorption pace, qualified buyer pools, mortgage rates, confidence indexes, etc. pass in fast-motion in and out of clouds of uncertainty and doubt, exuberance and confidence.

And then into that dynamic along come soaring expectations around the capacity for generative A.I. to make what's complicated, intricate, and painstaking just plain simpler and faster.

The feedback loops Lennar's Miller refers to are granular, behavioral, operational, real-world, and real-time. They're linkages of the sum of parts produced in value and its ability to turn as inventory. In other words, they don't rely so much on surveys and reports so much as they derive from "a process that can become data-driven." This is a discrete operation or action – each of whose endgame is a paying, satisfied customer – that sensors or some other "listening" mechanism ingests and stores in its own metadata bin for analysis, comparison, learning, and ultimately, a response.

Listen. Respond.

HelpScout describes "the why" and "the what" of business feedback loops here, and this is critical to recognize as a possible shield to distress if consumer households pivot in behavior due to unappreciated shocks that could come in the months ahead.

What modern consumers care most about is a positive customer experience. In fact, 86% of consumers will actually pay more for a better customer experience.
One of the best ways to put your customer first is by implementing a customer feedback loop...
What is a customer feedback loop?
A customer feedback loop is a customer experience strategy meant to constantly enhance and improve your product based on user reviews, opinions, and suggestions. This feedback loop is based on the concept of mutual interaction between both the business and its customers.

Make no mistake, however complicated the feedback loop gets as it threads through a matrix of disciplines, an ecosystem of handoffs, and a maze of interconnected areas of operational activity and focus, it always comes down to doing business in the simplest of terms with a customer.

Listen. Respond.

A timely Harvard Business Review piece today zeroes in on why Scott Spradley's role and accountability are so important, not just to Lennar, but for homebuilding and its business partners as well.

The article, from author Randy Bean and Allison Sagraves, founding chief data officer at M&T Bank and currently Adjunct Faculty for the Carnegie Mellon Chief Data Officer Program, poses a challenge: "Why Chief Data and AI Officers Are Set Up to Fail."

First, according to the authors, here's where companies go wrong in their expectations around the role:

  • Knowing what problem you're trying to solve
  • Trusting that commitment and investment in data, analytics, and A.I. (real-time, real-world operational feedback loops converted to measurable and manageable data terms) deliver business performance impact.

Here are Bean's and Sagraves' five concrete steps to ensuring that folks like Lennar's Scott Spradley and other homebuilding "CDAIOs" can win.

  • Make data everyone’s business
  • Make business leaders champions for data projects
  • Review all data and AI investments to make sure funds are well spent
  • Shift to an ecosystem mindset
  • Proceed with caution

The HBR authors look to a use-case perspective to ground their framework in a real-world business setting, and they turn to none other than a global leader well known in the residential construction business community, Schneider Electric and its chief artificial intelligence officer, Phillippe Rambach. Here Rambach speaks to the first of the author's five imperatives, Make data everyone's business.

Being serious about data management requires a dedicated organization. To support this ambition, we decided to carve out data from IT, focusing data on a governance, business, and performance agenda across the company. We then decided to create two roles of chief data officer and chief AI officer. What’s key in the data-focused journey is to strive to have a single source of truth in the company, and to make high-quality data easily accessible across the company to all decision makers.

That single source of truth – in a homebuilder's end-to-end residential build-cycle – puts customer behaviors first, as the shaper of strategies, tactics, and then entire operational value stream. An earlier, 2009 Harvard Business Review piece puts it this way:

The strongest feedback loops do more than just connect customers, the front line, and a few decision makers in management, however; they keep the customer front and center across the entire organization."

In so many words, this is Lennar CTO Scott Spradley's job: Listen. Respond. Listen. Respond.

ABOUT THE AUTHOR

John McManus

John McManus

President and Founder

John McManus, founder and president of The Builder’s Daily, is an award-winning editorial, programming, and digital content strategist. TBD's purpose is a community capable of constant improvement.

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John McManus

President and Founder

John McManus, founder and president of The Builder’s Daily, is an award-winning editorial, programming, and digital content strategist. TBD's purpose is a community capable of constant improvement.

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