Lean Home Building

Business901 Podcast Transcription
Implementing Lean Marketing Systems

Lean Homebuilding
Guests were Scott Sedam and Todd Hallett

Sponsored by

Related Podcast:
Lean Homebuilding = Better Product, Greater Return

Copyright Business901

Scott Sedam is President of TrueNorth
Development, an internationally-known consulting
and training firm focused exclusively on the
building industry. Now in its fifteenth year with a
staff of 6 field consultants, TrueNorth conducts
consulting projects and training workshops with
more than 200 builder, supplier & trade clients in
the U.S., Canada, Australia and Mexico. During the
recent industry downturn, TrueNorth’s LeanBuilding™ processes
have saved clients more than $200 million, demonstrating clearly
how to improve product, process and profit without compromising
builder, supplier and trade relationships. Scott Sedam’s
presentations are a popular feature at industry conferences and
company meetings and he has published a monthly article in the
industry for more than 15 years. Scott serves as contributing
editor for Professional Builder Magazine and writes the weekly
“Lean Building” blog on www.HousingZone.com.

Todd Hallett, AIA, President of TK Design &
Associates, Inc. (tkhomedesign.com) has been
designing award winning homes for over 20 years.
He spent 15 of those years working for a $50
million production building company. Todd designed
all of their homes but also worked in every other
aspect of the company including purchasing,
development, land acquisition, product development, and
operations, and was President of the company for three years.
Equipped with his vast building experience and fueled by his love
for architecture he left to form an architecture firm that is second
to none in working cohesively with Builders. Todd specializes in
Lean Design and works, alongside Scott Sedam of TrueNorth
Development, in the trenches with builders, suppliers, and trade
contractors. His Lean Design blog appears weekly at
Housingzone.com.


Transcription of Podcast

Joe Dager: Welcome, everyone. This is Joe Dager, the host of
the Business901 podcast. With me today is Scott Sedam and
Todd Hallett of True North Development. They are the leading
firm in introducing and implementing Lean to the home building
sector.

Scott was at the forefront of total quality implementation in the
construction industry in the '90s, and started True North
Development over 15 years ago. Todd, meanwhile, developed the
skills as an architect with Ron Mayotte, and later, his firm, TK
Design, and is recognized by a very impressive list of accolades
that are simply too many to list.
I would like to welcome the both of you. Could one of you start
out by giving us the elevator speech about True North, and how
the two of you work together?
Scott Sedam: Hi, and thanks for having us, Joe. This is Scott,
and the first thing I should say, there are really two companies
here. True North Development, that I founded about 15 and a
half years ago, after I left Pulte Homes, and then TK Design,
which is Todd's company.

Todd is an architect, and his background was very interesting.
After being a sought-after architect, he went to work full-time for
a company really well-known in this area called Delcor, which was
a big production builder and the first builder in the United States
to be ISO 9000 certified. So, very process oriented.
Todd, in addition to doing all their design work, also ran
construction there, eventually became COO then CEO. When
Delcor sold out in 2005, he went back to architecture full-time.
We think he's the only practicing architect in America, who's


deeply involved and responsible for purchasing and construction
in a production builder, which makes Todd really unique.

We started working with Todd about two and a half years ago
where; at True North, we had been implementing the Lean
process across the country. We were desperately looking for an
architect who "got it" when it came to Lean. Just to set the stage,
I guess, we should say that our simplest definition of Lean is the
relentless pursuit, identification, and removal of waste in product
process and plans.
In doing that, having a lot of success with that around the
country, we were looking for an architect to help us get much
deeper with the plan part of it. As we looked at architects around
the country, we saw that a lot of them who would say they got
Lean, but it would take only a very cursory look at their plans to
realize that they didn't understand. We'd see so much waste
inherent in their plans.
Finally, through a mutual friend, I met Todd, and it was like,
"Wow; this is the guy." The rest is history; we have worked on a
ton of projects since. He has his four design guys, and we have
our guys. There are a total of six of us around the country. We do
projects together called Lean Plan Workout, Lean Weight.
There're different variations of them.

What we have done in the home building industry is put a very
structured process around the concepts of Lean to take it into
day-to-day home building to eliminate waste in the product
process plans. We were like all the other Lean consultants in
thinking, we had to teach everyone about the seven waste or
eight waste, depending on which school you belong to and all the
classic definitions of Lean and the Japanese management, the
Toyota way, which is all very important.
What we realized pretty quickly, because we started doing this
portion of it at the depth of the house recession, was that a

builder wouldn't take the time or couldn't take the time where
they would pay for really deep training in it. What we had to do is
come up with a process that worked in a week that said, "In a
week, we'll show you the money."
By the way, we had it set up that if they don't see a multiple of
what our fee is that they don't pay us. A little risky at first, but
we found that very quickly there's so much waste in existence out
there that it was no problem at all getting paid. We took very
structured processes, and we interpreted all the Lean
methodology into the home-building world into their language.
With our suppliers in trade, we've had over 2,200 of them now
participate in the 103 Lean projects we've done with about 75
builders. When these 2,200 companies participated, 4 or five
people from each company-, we're looking at more than 10,000
people, they don't learn the seven wastes, like waste in
production, waste in inventory, waste in over-processing.
What they do is answer the questions that do relate to those, and
that saves a lot of time in that process. That's what we've done to
be successful, and I'll turn it over to Todd to talk a little more
about his role.
Todd Hallett: Joe, what I've been involved in is the Lean design
part of it. What shocked me when I first got together with Scott
was the amount of waste. Not only waste but how that waste
translates into dollars and what those dollars mean per unit of
each house.

While I was working with a home-builder, and I was the president
of the home-building company, what I thought designing Lean at
that time, where we took a strong count in the cost and we tried
to make sure that what we put out in the field made sense and
the dimensions were right, and they're well put-together.


What I didn't realize then, and I do now, since I got involved with
Scott and his company, is that the collaborative approach
between the builder, the sales team, and the trades can all work
together to save thousands of dollars per house. Before, when I
was working with Delcor, it would be a struggle to try to figure
out how to save $150, $200 a house.
When I started into this process, the savings were unbelievable,
and that was really one of the things that shocked me the most.
Scott: Yeah, we are actually in at least 103 implementations
now. We're averaging right about $9,000 a house in savings
identified. We know it's actually just scratching the surface. For
example, we have a tremendous database here now. Remember
that we've had 2,200 trade companies, along with 75 builders.
We're about 30 states and four countries now.

One of the things that we know beyond a shadow of a doubt is
that there is at least a conservative average of $10,000 per
house, sitting there, buried or wasted in otherwise unnecessary
trips to building sites. That is, if everything was scheduled right,
everything was done the right the first time; we could save
$10,000 a house in wasted trips.
Builders are having a hard time believing that until they go
through one of our Lean processes. They have different names,
Lean Building Blitz, Lean Plan Workout. We'll just call them the
Lean processes. Once they go through, they start to see it, but
you take your average builder and tell them, "There's $10,000
alone in wasted trips for each one of your houses," they're
shaking their head and they're going, "That's not possible."
After they go through a lean process, it's not just possible; it
makes them crazy when they see it. To say we're finding an
average of about $9,000 a house, yeah, that sounds impressive,
but we know there're a 1,000 more than that simply in wasted
trips, so we've got a long, long way to go. There's so much there.

$20,000 to $25,000 a house would be a very conservative
average of what we know is out there.

By the way, if you look at other industries -- automotive,
electronics -- it's even starting to turn up in health care. What
almost all these industries see, if they get really serious about
measuring everything that's waste in their products and
processes, it usually looks like a number around 35 percent.
If we take your home price...Average home price right now is
probably, 100 and a half? You take 30 percent of that. That's a
$45,000 potential. Of course, that's pushing back upstream into
your suppliers, too. Some of that is hidden from the builders. But
then if you look at where...
I know you know about these things, Joe. Automotive is
now...The Lean guys who work for Ford, GM, Chrysler, Toyota,
Nissan, they're spending the majority of their time working back
upstream at the suppliers now. They've got those plans pretty
well dialed in and wrung out. That's kind of the future, down the
road for us.
Right now, to say to a builder, any house you've got, we know we
can pinpoint five to ten thousand dollars’ worth of savings in any
house. That's just a given. It's not even particularly a challenge
any more to do that.
Joe: I want to ask you, how much of it, though, is just common
sense? How much of it is really having Lean applied. What's the
difference there?
Scott: I'll give you a quote from the best professor I ever had in
my life. His name is Dr. Douglas. He used to...When people say
it's common sense, he'd say, "I'd call it uncommon sense. If it
was common, there would be a hell of a lot more going on around
here." There are things...I like to tell the story of my dear granny
who died just a few years ago at age 103, in Columbus, Indiana.

She was a great southern Indiana lady. She was doing her own
checkbook, longhand division in her head, up until she was 102.
She was a sharp kid. She would, every once in a while...She'd
always call me Scotty. She'd say, "Now, Scotty, tell me again
what it is you do for a living." We called her Mimi. I'd say, "Mimi,
to boil it down to its very simplest, what we do in a structured
way, is to get the builders to listen to their suppliers and trades."

She'd look at me and she'd shake her head and she'd say, "You
mean they didn't always do it that way?" In her southern Indiana,
straightforward view of the world, sure that's how you do
business. You listen to the suppliers and trades, the people you
depend on to do the business. But you and I know that’s not what
happens out there.
Does that mean it's just common sense? If you look at all the
stuff, we do, which all the structure, and we've got formats.
We've developed this Lean filter with the guys at TK Design that
we now have 765 questions that have to be asked to wring out
and dial in any house plan.

Now, it's broken up into 18 areas. You have your heating and air
conditioning. You have your electric. You have your framing. You
have your flooring and your foundation, but 765 questions. That
sounds big, and complicated, and intimidating. Now we do a lot of
things to simplify it. You could reasonably ask that question.
Everyone you look at, "Well, isn't it just common sense to look at
these things?"
I guess I'd say yes, but it becomes so complex when you've got a
product that, depending on how you count it, 20, 000; 30,000
parts or more typically, at least 35 or 45 companies participate in
the building of it, and several hundred different people participate
in the building of it. This very simple thing called a house does
get really complex. On one level, I agree it's just common sense,
but it sure is uncommonly done.


Joe: When you first introduce Lean to the homebuilders and
stuff, what's the pushback? A lot of people will say, "It's a
manufacturing thing, and different industries." Has there been a
pushback in the homebuilding industry that you've noticed,
something that you had to overcome?
Todd: From the design end, there has been for sure. What I
typically get when we first go and do an implementation with the
builders is they think that Lean means we're going to strip the
house of its amenities and take all the sizzle out of the house so
what they'll end up with is a stripped-down version of a house
that, sure it costs less, but it's not very marketable.
A lot of folks equate Lean design with value engineering. Value
engineering, of course, has got itself a very bad name over the
past 15 years because of a lot of folks did just that. Instead of
truly value engineering, they've stripped the homes of all their
detail all their amenities and ended up with homes that didn't
sell.
Scott: It was really just cost engineering, not value engineering,
is what they were doing.
Todd: Exactly. As we go through the process, what they begin to
realize real quick is that this has nothing to do with stripping the
home of amenities or making...In fact, it has everything to do
with making the house more marketable. Many times we'll
find...Let's say we find $8,000 on a given house. The builder may
choose to put 2,000 of that into the home to increase their
amenities, to add additional amenities, or they may not. It just
depends. The concept is never to strip the houses down.
Scott: That's the assumptions, and there have been some
builders, especially a couple of national builders who are...the
Lean term they've thrown it around, and what they've done is
almost nothing to do with Lean. It was simply a matter of another


round of beating down the suppliers and trade and was pure cost
management.

Value is...you look at how value's defined; you look at the benefit
over cost, and those are some famous ratios there. There're
actually five different ways you can increase that benefit over
cost ratio. What most of the builders did was look at purely cost,
weren't looking at the benefit.
Other obstacles that we encounter are, one is that, "Well; we
already do this." Probably, a huge percentage, three-quarter of
our clients initially the response, "Well, we do this. We're all the
time looking how to take cost out." Again, they're looking purely
at a cost from a very narrow bid price. There's a real difference
between bid price and total cost, which is a critical element.
Some of that resistance that, "We've already done this. Why
would we have someone from the outside come in and do it?"
There's also a fear factor that we run into, and it's
understandable in some organizations where you have a let's say
a director or VP of construction or purchasing that might look at it
and go, "Well, wait a minute.
If these guys and their processes come in and reveal $8,000,
$10,000 a house, that's going to make me look bad. The boss is
going to look at me and go, "Hey, Todd, how come you didn't see
this stuff?"
Joe: What have you been doing?

Scott: Yeah, and it's a genuine fear depending on...We really
have a heart-to-heart talk with the presidents of these companies
to make sure that they talk to their guys and say, "Look, what's
going on the last five or six years." These guys have all been
working 60, 70, 80 hours a week running their butt off. There's
not a builder out there that has excess people.


They're all just working themselves to the bone and everyone's
held off on hiring. There's an incredible latent hiring demand in
this industry that everybody's holding off on until we're absolutely
sure the turnaround is here, and then it's going to come out in
gangbusters.
I personally think that the 7.8, 7.9 unemployment rate is
overstated, in reality, because as soon as things settle down
here, everybody gets over the election. It doesn't to me matter
who wins. We're going to get over all the hesitation and the
trepidation, and people are going to start hiring, and you're going
to see it in droves in the construction industry.
Overcoming that fear factor that people have, to piggyback on
something Todd said, we will not do one of our Lean processes,
unless we have somebody, and often two people, really good
from sales and marketing involved in a process. If they have a
design center that probably half the builders do now, we want
that design center manager there, too.
Because those of us who are kind of construction oriented, we get
all excited about, "We can change this and this. We can do this,"
and we think, "The customer will never notice. The customer
won't care." We're probably right 90 percent of the time. But
once in a while, the salesperson will come along and raise their
hand and say, "Wait a minute, time out guys.
I know that steep gable we have here with the little window in it,
or the fake gable seems like a total waste of 650 bucks a house
to you guys, but look at what our competitors have across the
street and down the street. If we just take those out of there,
that's going to hurt us. So that's helping us with sales. I want to
keep it."

Now, maybe, we'll say let's see if we can figure out a way to do it
more efficiently but we run into that. Now, surprisingly, about as
often as we run into salespeople wanting to fight to keep

something, they will tell us that there’s something that we've
been doing. This happened recently where they had a 12-inch
wide archway built between a kitchen and a big walk-in a pantry
entry.
We looked at the wood that went into it, and taking it down to a
six-inch with the savings on the drywall and everything was
literally going to save 50, 60 bucks a house. Maybe that doesn't
sound a lot, but this company was building 600 homes. Let's just
say it was 50 bucks times 600; that's a $30,000 bill. I mean
that's real money. That's a good chunk of a head count, and if we
could take it to a six-inch.
In the session that came up kind of delicately waiting for the
salespeople to have a fit and the sales manager looked at said,
"You can take that out tomorrow as far as I'm concerned," and
construction looks over and says, "What are you talking about?
We only do that because it's what you want?"
She says, "That's so '90s. Those things have been out forever.
You could even make it a 4-inch - inch if you want. I don't care."
Rick, the construction purchasing team just sat around
dumbfounded. They thought they were doing it because it's what
sales wanted.
This pulls the whole organization together when you do Lean, and
you get all the constituents involved, all your suppliers involved in
a process, and the understanding level goes up exponentially. It's
really a remarkable process.

Joe: What is the Muddy Shoes Lean Design Charrette? I saw
that and that name just caught me. Could one of you explain
that?

Scott: I don't know if you can see the logo. I'll let Todd tell you
in more detail. I don't know if you can see the logo on it where I
took one of my great old pairs of Johnston Murphy wingtip shoes,

which I've had for 30 years, but I rarely wear them anymore. But
I took them. They were the old classic consultant shoes.

I covered them in mud and laid a hammer across them and did a
little experimenting, and everybody understood as soon as they
saw the picture, which is to say who we are is a consulting
company. It's extremely rare you're ever going to find a tie on us.
We are guys who are out there in the field with field reality.
That's all we do. We're out there every week, walking houses,
looking at houses, looking at designs.
When we finally found the architect who understood this stuff,
which was T.K. Design and Todd here, I liked his idea of Muddy
Shoes Charrette. There are a lot of big named companies out
there, architectural firms that do design charrettes, and they
charge a lot of money. We'll ask the builders, and we found out
these guys never go out and get their shoes dirty. They never go
out in the field and really talk and see what the capabilities of the
trade are, what's wanted in the field.
As a result, you get some designs that, there're a couple of cities
in America, I guess I should be nice and not name them -- but
there's a couple big metro areas which I think have the most
atrocious design anywhere in America. It's just gotten completely
out of control, because what you have is this guy sitting back in a
room never getting out in the field adding on things to houses,
fake keystones, and fake dormers, and extra shutters, and double
lintels, and coins, and add on, add on, add on, until you have no
idea what the style or design is.

20, 30 roofline breaks on a house, just crazy stuff to build, and
then, it doesn't even look good. We position ourselves as muddy
shoes guys, meaning that we got our feet on the ground in the
mud. We're out there, and that's our perspective.
Todd: What typically happens in the building company, at least
a midsize building company is that the owner, the boss, or a

president will look around for product, and they'll be the ones
that'll brainstorm what's coming down the pike in product. They
might be looking through a magazine, or they might drive and
look at models.
They'll get together with their architect, and they'll develop a
product and new houses, and then they'll go to market.

What we do is entirely different with the Charrette. First, we start
out with the Lean process. We'll spend a week with the builder.
We'll spend the week with the builder and the building team and
the sales department going through with each one of their trades
to analyze what's working and what's not working with their
existing plans. That means methodology of construction. It also
means what's happening on the sales end in terms of
acceptability and marketability.

We'll spend the entire week with them going through trade by
trade -- not all at the same time -- but trade by trade. As Scott
mentioned earlier we have this process where there's over 700
questions, and each one's broken up into a trade. After we've
done that process, then what we'll do is we'll take some of it...
We'll leverage some of that information that we've learned and
hold what we call a Charrette where we'll have everyone from the
building team, including the sales people, and oftentimes realtors
if they have independent realtors, and have them in a room, and
go through and describe to us. There's a process we do, what it is
that they're looking for in new home development.

We'll take all that information in, and now we have a
cross-section of every important aspect in the company, plus the
leveraging the information that we picked up earlier with the
trade and suppliers. Now, we have a real basis from which to
develop new homes and new designs.


Joe: I think it's very interesting your approach at applying Lean,
because it's not about, "Here are these Lean tools. We need to
apply 5S. We need to have a Kaizen." You seem to take it into
the specific homebuilding sector and apply Lean and apply it in
their language.
Scott: This has been a pet peeve of mine. You get the Lean
Sensei, and there're a lot of great ones out there, but they're
incredibly expensive. They'll come in. It's kind of a badge of
honor for these guys to tell one of their clients, "Well, if..."
I actually heard one of them say once to a president of a
company, "If you expect results any sooner than a year, then you
aren't serious." I'm going like, "Go try to sell that to a
homebuilder, especially in the housing recession." The idea that
we've got to put everybody through the training, three days of
training, then we're going to have 20 green belts that take 15, 20
days of training, then we've got to have five black belts to take all
the certification.
That's great that you can have a lot of it. But there's an
interesting thing, a negative that can happen in a lot of these
companies. Then the Lean work -it was very similar to the quality
movement in the '70s, '80s, and '90s -- becomes the
responsibility and the ownership is in all these specialists.

Where I saw a long time ago, and I go back before I got to Pulte
Homes, I was at U.S. Steel way back in production, and then
Motorola and where we did precursors to what it is we call Lean
now. Then did the consulting work with a lot of great companies
like Caterpillar and John Deere and Cummins Engine are
examples.
At Pulte, applying this in homebuilding, what I saw was that there
was actually as many negatives in terms of having a specialist
focus on this within your company as there were positives. When
you make it the responsibility of everyone as part of what they

do, then its part of their job. It could be harder for them to focus
and concentrate on all the parameters and negatives of that, but
on the whole, we think you come out ahead.
You've got to be a pretty big organization in my mind to justify
having a fulltime staff on this. As you look at most of the builders
in America, after you get past the top 25 or so, it's rare that any
of them has more than a couple hundred employees, and
probably still the 80/20 rule, 80 percent of the homes are being
built by 20 percent of the companies that will probably
have...well, it'll actually be a little higher percentage than that.
The point is companies with 100, 115 people or less are probably
building the percentage of homes in America still. It's different
than being a Ford or Chrysler or somewhere like that.
Our idea is to get these people to understand how to do this
themselves as part of their job and see it as, "This is a way to
make my job easier and get what I want to get done," not as,
"I've got to use this special tool here or there, and I've got to
make sure I call it the right thing in order to get this done."
We're not averse at all to using things like 5S or a Gemba Walk or
something like that, but we don't stress it at all. Even in our
orientation sessions when we do our Leans, I used to try to teach
the seven wastes, and I quit doing that, because I realized it was
pretty well going in one ear and out the other.
Until these guys actually did it hands-on, it just didn't register
with them. But after they do a hands-on then they get really
interested in learning. We think the building industry is just
getting to where there might be some appetite for the more
formal official training in Lean, and we're ready to do that. But
that's just coming along as it's coming out of the recession here.
Joe: I think it's a total immersion approach?


Scott: I would say we're putting them in and actually showing
them how this relentless pursuit of waste it's in their interest. We
try to make it so it's not an event, this one time event. They
understand pretty quickly, "Wow; we could make this company
work better every day."
There is one company in our industry that is probably the best
implementer that I've ever seen, and that's Hearth and Home
Technologies. They make Heat & Glow and Heatilator products. I
know them extremely well, and you go in their plants and 350
people in each plant. They know they owe their jobs to Lean.
Those plants are in Iowa and Minnesota. They would have been
moved to Mexico or even the Philippines 12, 14 years ago if it
hadn't been what they tucked under and taken during Lean.
They totally get it. They know it inside and out. When I think of a
company that's immersed in it; I think of a company like that.
We do have a couple of our clients that come to mind that are
getting there. There's a great...The last two builders of the year,
a matter of fact before the most recent was announced just this
week, the last two before that was; last year was a company
called DSLD outside of Baton Rouge, Louisiana, a company that
grew from 0 to about 800 units in three years.
In their fourth year this year, they're going to hit over 1,000.
Fifth year, they'll do something like 12, 14 hundred. It's an
astounding growth rate. I'll add, these were experienced people,
by the way, who had sold out a few years before and then
decided to come back in. They weren't rookies starting from
scratch.
These guys and their president, a young guy named Saun
Sullivan; they live Lean every day. They push it and stress it and
every single day at working with their suppliers and trades. Their
whole notion is if they can get their suppliers and trades to
improve and get better, then they know they get better, too.

A year before that, a builder by the name of Jagoe Homes, that
company's been around for four generations, and there's a fifth
one coming along. Most companies that have that tend to get
pretty sick by the third generation. But the Jagoes are the
exception. They're remarkable people. They build in four different
cities in Kentucky.
A little bit under the radar, but I'll tell you what. I visit these
guys, and they just blew my mind. They talk Lean every day. It's
not a separate thing they do on the side. It's just what they do.
There are those builders who are getting there. We do try to,
though...We kick them off with an immersion.
It's interesting. We've had some local builders say, well, couldn't
they do...rather than this five-day with us, could they do a day a
week for five weeks? We tried that once. It just didn't have the
same impact. We even a couple times split it, two days one week,
three days the next week, you know, and it worked, but it wasn't
as good as pulling this team out and has five long days with
them.

We work them hard and wear them out. But at the end of that
week they're exhausted but exhilarated because they see what it
is they found.
In these workshops, we usually identify an average; I work with
the suppliers and trades, an average of 150 specific
improvements that we get dollar values on, difficulty of
implementation ratings, and what the benefits are. Then they
have them all on a spreadsheet, tracking forms, and they take off
with them. They get about the task of getting it done.
What's really interesting, I'll anticipate another objection you
might ask about that we hear a lot of. "Well, isn't this going to
take our guy? We're going to find all this stuff. We're going to get
overwhelmed." Some of the really intuitive builders will realize
about halfway through the week. They'll say, "Everything we're

putting up on the walls here, there's not one thing we've
identified that didn't already exist."

We didn't create any of this. It was there. We just didn't identify
it. A lot of them, we had identified, we didn't have our arms
around it all, and we didn't understand it from the supplier/trade
point of view. Sometimes, we look at this in a different way than
we did before.
This immersion is what pulls all that out, and it's more effective. I
never did anything in my life that worked the first time and
worked 10 times in a row. Well, this process worked the first
time, and now it's worked 103 times in a row.
Joe: I want to ask Todd. It's something just a little off of Lean,
but are we getting to a point in home design that we need the
sophistication of something like BIM, which is Business
Information Modeling software? Is that starting to happen?
Todd: It is more and more now than it was before. We actually
just got involved about a year ago with BIM with a company
called VisionREZ. It's a tool, right? Once you have that tool and
apply it properly, you can go a long way towards this Lean
process. It's just like having a great CAD program. If what you're
putting into it is incorrect, or it hasn't been fully flushed out, then
you're not really creating any benefit.
But with it, it can be a very powerful tool, mostly in terms of
creating these anti-collision aspects of home building. Typically,
that's been left to commercial building where now you'd put it in
BIM, and you'd make sure that the heating and ventilation
doesn't run into the plumbing. It doesn't cross paths with
electrical. Home owners have always just figured that out in the
field.
They'd build a model, and whoever got there first, usually it was
the HVAC guy, would carve out his base and put his tin in there,

then along would come the plumber. Of course, he would have
trouble getting through because now there was something right
in his way. He'd figure it out a different way. Then the next time
they build a house, well, whoever got there first, it's the same
thing repeatedly.
With BIM now what we can do is we can identify that working
collaboratively in a Lean process with the trades to identify what
these bays are and how can we avoid collisions? Not only can you
put them in there, but you see them now in 3D, and then from
that, you can create a take-off list, which is really effective in
terms of cross-management.
Scott: There's another critical aspect that Todd touched on with
this. We had a long conference call yesterday with a client, and
the light bulb went on in his head. They were in the process just
getting started in a big BIM conversion, so taking all of their plans
and running them through, and getting them converted over to a
BIM system.
About halfway through our conference call, he said, "I was
thinking about telling you guys that we're going to have to wait
until we're done with this BIM conversion, because it's taken so
much of our time and effort, but then looking at doing the same
with Lean with you guys in the spring."

He said, "But it's occurred to me halfway through this that if we
do the Lean process first, everything we do in this BIM conversion
is going to get a lot easier, because what we're going to do is
clean things up before we try to automate it and make it more
sophisticated." One of the biggest lessons of software, as Todd
mentioned, you never automate a bad system. You never do
something electronically that doesn't make any sense manually.

He was asking us, "Are you saying if we go through this process,
look at our plans, we're going to clean up all this waste in our
plans first?" I said, "That's exactly right." "Wouldn't it be better to

do that before we go about all this work to put them through a
BIM system?" I said, "One of the big companies..."

A couple of guys from VisionREZ, there are four of five of them
out there, VisionRez, and there're others, but one of the ones
from VisionREZ said, "In the ideal world, they'd have all their
clients go through one of our lean plan workout processes first.
Then start running them through BIM, because it would save
them, a lot of brain damage and a lot of the trouble and extra
work, and it'd save them time and money, too."
Joe: I think the old ERP principle, or they called it the USA
principle; it was always, "Understand, simplify, then automate."
You're saying, "Use the lean to understand and simplify, then use
the other part to automate."
Scott: Yeah, that's really well-said. That's a perfect application.
Joe: Now, you normally introduce Lean through a workshop. Is
that really the best option for someone to get started, for a home
builder to get started?
Scott: Well, here's why we think it is. It comes down to the old
line, "Show me the money." I was asked recently to write an
article, I had gotten an article due in a week for a professional
builder. I've got three or four started and haven't finished any of
them yet, and I've got to get on that.
One of them was I was asked to do was write something on
leadership and how do you get to leaders of these companies?
Whether you want them to do a BIM process, a Lean process,
you've got one of the new sales management programs, a CRM
program, whatever it is. How do you get to them, because they
tend to get a little detached from the day-to-day?
They aren't living the pain of dealing with, for example, a design
center who has 27 front door options on a little town home, which


is completely insane. But we see that kind of stuff all the time.
How do you get senior's management's attention?

I don't want to sound like I'm getting old and curmudgeonly now
that I just turned 60, but I've been doing this stuff a long time. I
really think that with rare exceptions, and there are some out
there. That Tom Sullivan I talked to you about was one, Bill and
Scott, Brad Jagoe. But rare exceptions, you don't get senior
management attention unless you can put a firm dollar value on
something.
You've got to be able to show them the money. As a guy I
worked with used to say, "What is it that we're about to do is
going to help us build one more house to a satisfied customer at
a profit? Everything we do have to stand up to that test."
Well, what we learned out of desperation during the big crash, if
you said to the builder, "We're going to show you the money in
one week, show you so much money that you're going to be
thrilled to pay our fee, which is a teeny-tiny amount in relation
to the savings," then they get really excited and they'll listen.
I've had a couple of builders over the years call me and say,
"Hey, Scott," after the fact, "This was fantastic." They'll go on and
on how great it was." They'll say, "But you're selling this all
wrong." I said, "Well, what do you mean?"
He says, "Well, you come in and you emphasize how much
money you can save us, but the money's fantastic. But the
impact it's having on our people, the impact on our culture. The
way we're working with our suppliers and trades, we've even
seen improvements, of how we're working with the local
inspectors, and it's remarkable. That's what you should be
selling."
I said, "Let me ask you this. If I had come to visit you or called
you and said I want to show you this thing, and what it's about is

doing these things you just mentioned. It's going to build better
relationships with your suppliers and trades. It's going to help
you work with the cities and communities better. It's going to
improve your internal culture. Would you have bought it?" I never
mention the money. "Would you have bought it?"
They always say, "Well, no. Probably not." It's like we sell them
on the fact that it's going to give them a very huge, quick
financial return, and then they start to discover it has all of these
other benefits that would have been worth paying for. But it sure
is nice that they just come with it and you get the money.
That's a long answer saying, "Yeah, I think it is the best way
because there aren't too many conceptual buyers out there,
especially in the building world. Who's attracted to building? I
think an awful lot of us were guys who played with the Erector
Sets if you're in my generation. But in Todd's generation, was it
Legos?

Scott: Now, they're probably building Sim stuff on the computer.
But I still like Legos. We're people that we're hands-on. We like to
build stuff, and we like to see stuff. We like to be able to drive
our family through and point to it. "See what I built? See what we
did?" They tend to be big conceptual buyers, so we show them
the goods. That's the whole point of the Muddy Shoes.
Joe: I think that's a great statement, and it's very interesting
because you give Lean an ROI, which so many others try to solve
something different than that. I don't think there's anything
wrong with that. I think it's a...


Scott: With the Lean purest, the sensitive types, it's almost like
talking about the money is verboten or something, like it's dirty
or a bad word. I look at the money as a route to getting the
companies where we really want to get them, and it's the money
that can justify that. I feel like we own that. If we can't show
them, the money, why should they be doing it?
Now, when we have really good times again, and they can afford
to think three-year, five-year paybacks and stuff, well, OK, but
we aren't there yet, and it's been a lot of years since we've been
there.
Joe: What's something you might want to add, either of you,
that maybe I didn't ask?
Scott: I think that one of the things in Todd's area...I'll tell you,
again, I mentioned I just turned 60. I started working with Todd
on these Lean design workshops a little over two years ago.
Pretty quickly, I had some of our other field guys complaining
because I was hogging them all.

The reason why was, I was learning so much. I'd come back from
these sessions...I'd be so excited. I mean I've been out there a
long time and I could become one of those guys who said, "Yeah,
been there, done that, seen that." After working on the plan and
design process it just opened up a whole world to me. I'd done it
before, but never with anybody who understood it at the level
Todd did and also had the knack for working with the suppliers
and trades.

So to see those guys come in and working and sitting down next
to Todd...we have a whole system for this of a color-coding
system. The trades get the color. They get to take highlighters
and markers and mark up the plans. We give them permission to
tell the builder the baby's ugly, and they have at it.


You saw pictures of some of these plans when they get marked
up. It just blows your mind. They have Post-It notes, and colored
makers, and they really get into it. As a result for every plan,
we'll typically end up with an average of 100 improvements.
I would say opening up people's eyes to the fact, I don't care how
good you think your plans are; we have never, - we've worked
with so many people on this and a lot of really good
builders, -- seen a plan that working in a structured process with
your suppliers and trades, you could not find significant
improvement dollars, and without hurting the plan, and without
doing collateral damage on your suppliers and trades.
To have them excited, to have them see that they're going to
make more money, too. That sounds like an impossible dream,
but it's absolutely real. The suppliers and trades do better, the
builders do better, the homeowner does better, and that's just
because there's so much opportunity out there.
Todd: From my end, Joe, the thing I find, again, most striking is
the amount of money per unit available on every single house
you build, you can make these improvements, but these
improvements are invisible to the customer. In other words,
we've done a lot of different things in terms of advanced framing
and methodology to teach builders how to build things a little bit
differently to save thousands of dollars.
And that was what the big shock was to me was that you can do
this. It's invisible to the client. It's not something that detracts
from what you're building, but it actually improves it, and the fact
that it is available and readily attained was the biggest thing to
me that I'd like to put out there.
Scott: Well, you know, on top of that, Joe; we have also had to
identify a couple engineering firm to work with, and I always say
architecture never trained in cost, so a lot of times you have to
hold harmlessly and say they didn't get training in that. They're

taught to design really cool stuff, and we love cool stuff. We say,
"Cool and cost efficient. That's even better than cool."

When you go to engineers, and what I find a lot of them know
about the cost, but they don't deal with it and don't want to deal
with it. The engineering attitude is often, "I get this thing sealed
and stamped, and if they've got 20 percent more wood,
engineered wood in the floor system than they need, well, that
just protects me even more. Why should I tell them?" That's, in
effect, even if it's not done brazenly like that, that's what
happens.
We have found a couple of engineering firms that are fantastic
and who really get it, and we bring them in on a consultant on
these projects and get them to look at how everything is laid in
the house -- the framing, the foundation, the engineered wood,
truss, or even if it's still stick built roofs -- and they always find
big money where the house is just as good as it was before,
sometimes even better, but costs quite a bit less.
We're quick to point out when we look at things, when we get
into codes; we say it's not just enough to meet the building code.
Of course, we have to meet the building code, but you also have
to meet the customer code.
If someone goes pulling a lot of wood out of a master bedroom
floor on a second story and the customer, every time they walk
across that bedroom once they get it loaded up with a bed and
furniture, it bounces every time they're walking back, you lost.
You may have completely met that code, but you lost, because
the customer's going to be unhappy, and they're liable to tell a
whole lot of other people.
It's not just simply; let's figure out the minimum way to meet the
code. Let's figure out a way that we can meet or beat that code
and keep the customer happy at the lowest possible cost. There's


very few that understand how to do it. We're very, very fortunate
to have found a couple to work with.

Joe: What's the best way for someone to contact you?
Scott: Well, we have...our website is truen, short for True North,
truen.com, and I'm simply Scott@truen.com. Todd, they're in the
process of building their new website, but I think it's still on, isn't
it?
Todd: Our existing website is tkhomedesign.com, and, of
course, you can reach me directly through there. It has an area
where you can just type in and I'll get your emails. The other
thing Scott and I do just about each week is we're on
housingzone.com. You can see that we write blogs each week
about Lean.

Scott: And that's the blogs or the electronic space for
Professional Builder magazine, also Professional Remodeler is
there, so housingzone.com. You can just put in Hallett or Sedam
and we'll come up there. Often, they have us featured on that.
We do have a huge event coming up this year at IBS,
International Builders Show, in Vegas in January. They only
approve three full-day workshops, and we have one of them on
Lean design. We'll be running a full day really hands-on workshop
on Lean building and Lean design, so if anyone's going to IBS this
year and usually there's a...

Well, we aren't quite back to those great days when we were
running 125,000 people at that show, but I think it might be
looking back up to 50 or 60 or 70 this year. But that's going to be
a tremendous experience so that would be a great way to do it.

Also, every month, I have an article in Professional Builder
magazine, and we have PDFs of our different article series. For
example, there was a three-article series on BIM. There was a


five articles on quality management, so if anybody contacts me or
goes on the website, we're happy to send them those PDFs of
articles we've done.
Joe: Well, I'd like to thank the both of you very much. This
podcast will be available on the Business901 iTunes store and the
Business901 blog site, so thanks, Scott and Todd. It was a
delight.
Todd: Thank you very much.

Scott: Thank you, Joe. I appreciate the opportunity.



Joseph T. Dager
Business901
Phone: 260-918-0438
Skype: Biz901
Fax: 260-818-2022
Email: jtdager@business901.com
Website: http://www.business901.com
Twitter: @business901

Joe Dager is president of Business901, a firm specializing in
bringing the continuous improvement process to the sales and
marketing arena. He takes his process thinking of over thirty
years in marketing within a wide variety of industries and applies
it through Lean Marketing and Lean Service Design.

Visit the Lean Marketing Lab: Being part of this community will
allow you to interact with like-minded individuals and
organizations, purchase related tools, use some free ones and
receive feedback from your peers.

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