Innovation takes a major commitment in terms of both time and financial resources. Yet, Michael Dickens, partner and CMO at IBACOS, says that as an industry, we invest a trivial 0.06% of total GDP on research and development. Other major industries, like auto, invest upward of 4%.

With this type of track record, the conversation that this panel addressed at HIVE is critical for future success. Stuart Miller, CEO at Lennar, points out that builders cannot afford to invest in whole departments or groups, which is what is necessary to internally drive innovation. However, he notes that at a builder’s disposal is the large body of experience and knowledge encompassed in the network of manufacturers, suppliers, researchers, and academics with which they do business. While primary business always supersedes the search for innovation, this network can help the industry move toward a culture driven by innovation.

The Business Case of Constant, Big Change

This culture of innovation requires creating a constant circle of feedback. Lennar engages all of its employees in an ongoing dialogue about the future and potential adaptations to get ahead. The key to this dialogue is consistency and flexibility—allowing the conversations to meander. By staying disciplined with the consistency, themes will be introduced that point you in the direction of the innovation that needs to happen.

The Business Case of Constant, Big Change: Panel Discussion

More in depth discussion from this group of experts can be viewed here. Plus, some answers from audience questions are below. In the video from left to right are Barbara Alexander, independent consultant; Thomas Toomey, president and CEO, UDR Inc.; Dowell Myers, Ph.D., demographer; Dickens from IBACOS; Ivy Zelman, CEO, Zelman & Associates; and Lennar's Miller.

Q: Ivy, you mentioned a book Stuart shared with you on breaking down silos, can you share that with us? Also can you share something you feel made an impact for you on your business?
Ivy Zelman: The Silo Effect. It made me realize how easy it is for silos to form even in our small company. For example, in each area of the housing food chain in our research coverage, silos were forming and analysts weren't communicating and collaborating on their findings. Even though I did so with each of them, they weren't talking to each other. Breaking down those silos made everyone more knowledgeable and effective in their discussions with clients and industry executives.

Q: Will millennials leave urban walkable markets for suburbs as they build families over the next three to five years?
Zelman: We certainly believe many are and will continue to do so, which is supported by all of our research and consumer surveys.

Q: How can this industry innovate around adoption rates of the innovation? How can our industry award the early adopters designing, engineering, and installing innovative new technologies? Too many companies refuse to try anything new unless something else is using it first.
Michael Dickens: There are several areas that we can explore to not only move the innovation ball forward, but to also recognize and applaud the early adopters who are leading the way:

  • Create “Innovation Awards”—something that is comparable in prestige and prominence to the J.D. Power Awards
  • Utilize data and metrics. We believe that if you can measure it, you can change it.
  • Offer special financing/mortgages on high-performance homes
  • Seek increased government funding for innovation and R&D
  • Wait for a major "Apple-like Home" to disrupt everything
  • Offer insurance breaks for those who are willing to take on a bit of risk

Q: The U.S. housing industry is in last place in sustainability innovation and life cycle durability. How much longer does this panel believe it will take to catch up or lead this effort?
Dickens: We believe that this will take five to 10 years.

Q: What part does a diverse employee base, across departments and executives, play in creating an innovative culture and spurring innovative advantage?
Dickens: A company that embraces diversity can gain much innovative energy, simply in the willingness to be open to difference and newness (“Where all think alike there is little danger of innovation.” – Edward Abbey). Diversity must be seen as an asset, not a necessary evil. However, too much “yes” and not enough “no” will kill innovation.

Q: How are the cultures of small R&D or innovation teams diffused throughout a company/industry?
Dickens: It is imperative that innovation be seen as a core attribute of the company and be embraced by all divisions. All ideas must be properly vetted; this will enable greater socialization and support across the organization. Finally, innovation targets and metrics must be set at the top of the company, with regular check points to measure progress.

Q: How can a moderately sized builder successfully innovate?
Dickens: Step 1 is to believe in yourself! Commit to being a leader in your market and identify what sets you apart from your competitors. Additionally, explore partnering with other companies. For example, a tech company, solar company, finance company, or other company could be instrumental in bringing new ideas to the table. Consider how a partnership could create a novel value proposition where both companies “win.”

Q: What will the Tesla-like breakthrough look like for housing that would be equivalent to the shift from the $120,000 Tesla sedan to the affordable $30,000 model that makes a remarkably better car affordable?
Dickens: We believe that more manufactured components and supplier partnerships will reduce labor cost and cycle time; reduce cost to the buyer; and improve margins. Creative financing such as lease-to-own, cooperative ownership, etc. could be a game changer. Or, another option could be a service model, wherein the builder can reduce move-in cost because additional income will be generated through ongoing service and maintenance to the home. Alternatively, utility/solar partnerships could play a role, as could multicompany partnerships for a new ‘Apple-like’ branded product-services mix.