Conversations at the Remodeling Show

I made a quick stop at this year's Remodeling Show in Chicago yesterday. For those of us who have been attending these events year after year, we might have noticed how much smaller the show is, how many fewer exhibitors there were, with smaller booths, and fewer attendees walking the aisles. So at first glance, some of those who chose to sit this one out might be congratulating themselves on not wasting their time or money.

On the other hand, I learned that one third of the exhibitors this year were brand new to the show. They'd never before had the chance to be visible in what used to be a crowded market with big players. The smart ones were enthusiastically engaging with some of the thousands of attendees who made their way around the exhibit floor, learning what challenges they face, and what interested them. They were starting conversations, rather than simply "having a presence" at the show. They were getting their money's worth from their investments.

There were others at the show who could not have appeared more DISinterested in having a conversation. Exhibit staffers engrossed in their smartphones, standing with their backs to the aisles, looking bored, or more focused on making dinner plans with each other than starting a dialogue with attendees. These are the ones who really wasted an opportunity.

Did you attend? Have any good conversations?

Align Your Strategy to Win

In a Harvard Business Review blog post yesterday, Paul Leinwand and Cesare Mainardi reported on the results of a recent Booz & Company survey that reveals a lot of disappointment with current business strategies. According to the post:

• Most of the respondents (53%) don't feel their company's strategy will lead to success.
• Two thirds (67%) say their company's capabilities do not fully support the company's strategy and the way it creates value in the market.
• Only one in five (21%) executives think their company has a "right to win" in all the markets it competes in.

Pretty discouraging. But as the authors point out, some of the frustration may be rooted in the tendency for companies to pursue multiple strategies over time - to the point where an overarching, clear focus for the company becomes blurred. This may be especially true for building products companies that have scrambled over the past several years to find new markets, targets or ways of winning in the market, as their traditional business base shrank. It can be hard *not* to chase after every opportunity, whether or not it supports long-term goals.

Do you know what it is that your company does better than anyone else? Can you articulate why your customers and prospects should buy from you? Are your operational, sales and customer service teams set up to support your strategy?  Do you have a clear resource allocation model that aligns your strategy with how you make decisions about where to invest time, people and money?

There are an awful lot of companies out there who set business and sales objectives, but stop the planning process there. So the question of "how" they will win in the market goes unanswered, or gets answered differently by different segments of the business. It takes some upfront work and thinking, but can be a lot more efficient - and effective - to align those efforts through a clear, focused strategy to win.

What happened to Spring?

No, really? Where did it go? Haven't seen it in the weather, and certainly there's been no sign of it in the housing market. Even the usually dependable, "we were counting on you" remodeling market has sort of stayed in hibernation. Still, the calendar marches on, and so must we all.

For building products manufacturers, finding spots of warmth and sunshine might mean taking a much more detailed look at your own data and matching it up with the market opportunities. Because there *are* markets where people are building, remodeling, and spending money on your products - or would if they knew about them.

We often help our clients spot those glimpses of Spring with Opportunity Maps™.  We'll take the data you may already have, or that might be available, or recommend some original research, and then really take a hard look at how to make sense of it and turn it into a real action plan, focused on getting real results.

A recent study by Unica found that most marketers say they value data, but struggle with how to make it meaningful and actionable. We can help.

Number Crunching

So here we are, at the end of March – and the first quarter is over. Now it begins in earnest. I’m talking about the regular “adjustment” of housing starts forecasts…where every month, we see a revised – downward – assessment from economists backing off their bold predictions for the year. Don’t get me wrong, I wouldn’t want that job. But the number-crunching hasn’t been adding up because the market’s just not behaving as we expect it to.

700,000 starts? I suppose it didn’t really sound that unreasonably optimistic late last year. Because all the numbers say we are heading for a housing shortage. The demographics  and household formations all point to the need for housing (but not necessarily “new” houses). Interest rates are still hovering near record lows. Inventory of new homes varies by market, of course, but is still dropping  - now just over 76,000 completed new homes are available nationwide (but many markets have plenty of “used” houses for sale). Prices are depressed, and may continue their decline, according to Case-Schiller. Fortune Magazine proclaims, “It’s time to buy again.”

So why aren’t Americans building – or even buying? Because even if they can, they aren’t sure they should. There are too many unknowns. They don’t know if they’ll have a job two or three years from now. If they get a new job, where will it be located? Will they be able to sell their house if they need to move? Will it be worth even as much as they paid for it? What if they get stuck?

Sales of new homes hit an all-time low in February. Personally, I think we’ll be lucky if we build as many new homes this year as we did last year. My prediction is it might take an entire generation – including a re-invention of the fundamentals of our economy, the future of jobs and where they’ll be located – before building a new home becomes part of the fulfillment of a dream for the next generation of homeowners, and new home construction once again begins to track with household formation.

Now, there’s talk of re-instituting the 20% minimum down payment and reducing or eliminating the home mortgage interest deduction. Who knows what impact that will have? In the meantime, developers and investors have found something to do with all that cash they’ve been accumulating: according to the National Association of Realtors, a third of existing-home sales in February were made to cash buyers. And that’s not counting foreclosure auctions. 

My guess is, those investors will be renting out those properties for quite a while before selling them, giving all those new households a low-commitment option for “housing” in major markets. And who knows what the impact on “the numbers” will be.

I'm sure all this will be fascinating to economics students of the future. In the meantime, those of us who make our living in this industry are faced with the challenges the numbers present. Let us know what you think. What are the implications for builders and remodelers? For building products manufacturers? How is your business responding?

Owning vs. renting: the equation has changed

For the past couple of years, we've repeatedly heard that all the demographic data point to the need for millions of new homes in the coming decades. In my mind, there’s a whole lot of psychology to be reckoned with when it comes to those “positive demographic indicators” – read: people – out there actually making a decision whether to build or remodel a home.

Many prognosticators seem to think the return to new home construction is all tied to the return of jobs. I’d agree having a job and feeling pretty good about the security of that job makes a big difference in people’s willingness to spend. But I believe some fundamental rules governing the equation of home ownership have changed. For several generations, the story has stayed the same:

- 20-somethings get a job, get married, buy a starter home;

- 30-somethings have kids, maybe change jobs;

- 40- and 50-somethings buy a move-up home, maybe even a second home, make home improvements;

- 60-somethings retire, empty their nests, maybe buy a retirement home….

But with Gen X and Gen Y delaying marriage, having fewer kids, frequently changing jobs (and potentially, hometowns) and – importantly – not knowing/trusting that housing is a good long-term investment, the belief system that drove the “owning is superior to renting” paradigm may have fundamentally shifted.

So even when the jobs “return” or are created, the equation of owning a home – with a 30-year mortgage – that you might get stuck with – might not quite add up for the younger generations. They’ll still need a place to live, but we may see a real shift to a bigger share of multi-family housing in the future. Hey, we’re going to have to do something with all those McMansions – maybe they’ll all get converted to duplexes!

What do you think?