Budgets for 2017 come together for many home building, residential development, design, distribution, manufacturing, and investment organizations during the next few weeks.
External forces, including some pretty tough-to-predict local economic factors that tie to global oil and other macro issues--not to mention the growing noise of a highly-polarized presidential election race--loom large, weighing on both the revenue and expense sides of business modeling of challenges and chances to grow in the year ahead.
Even amidst the din of outside influences, builders--whose ears tend to be close to the ground when it comes to understanding the strength or weakness of demand in their local markets--are confident.
From our perspective, this confidence speaks to a level of agency many organizations sense as their strategic leaders look ahead into both the headwinds and the tailwinds. All things being equal, home building operators and their complementary organizations feel their businesses are better able to cope and thrive with challenges that their models face now, than they'd be if jobs and wages were backsliding and household balance sheets were losing ground as opposed to gaining.
Supply side constraints can be treacherous, and even deadly, don't get us wrong. But at least when there's a solidly detectable pulse of demand, particularly from the until-now largely dormant "pent-up" masses of young adults.
Characterizing the double-edged challenge for organizations looking to model and plan 12 months, 24 months, and 36 months of revenue, investment, expense, and returns, is complex. Firms need to perform, and yet, they also have to allocate time, talent, and money to phenomena that exist beyond performing successfully today.
They need to invest--without missing a beat on their current performance--in initiatives, opportunities, and yes, risk mitigation tactics for tomorrow. Tomorrow is where markets are moving; where partners' businesses are shifting; where investors' glimpse at the future resides.
For instance, even if location, location, location, as ever, define and delimit the variables of value tomorrow, will buyers, or prospects, or long-time residents not look differently at how they prioritize durability, usability, aesthetic beauty, and affordability in the homes in which they choose to live their lives?
So, what are the metrics, the key performance indicators, and the measures that strategists need to spot, develop, and apply so that they're keeping their teams and organizations in pace with moving-target customers', partners', and investors' interests? Which ones speak to changing demand, and the opportunities those changes spark? Which metrics expose fundamental shifts in architectural knowledge on the supply side, ones that would cause us to have to look beyond improving specific components, to re-engineering the entire organization around a new proficiency and mission?
Here, Northwestern University Kellogg School of Management professor Robert C. Wolcott urges business leaders not only to ensure the relevance of key performance indicators, but to scout out ways to improve on them. Wolcott writes in a Harvard Business Review piece entitled, "Don't be Tyrannized by Old Metrics:"
Changing the ways we measure success means changing how we define success. Waiting until the market has already changed means playing catch-up. Given how companies construct themselves around optimizing against their metrics, waiting until market shifts are obvious often means waiting until it’s too late.