Strategic Direction for a Building Industry Consortium

A consortium of building industry professionals formed a corporation to develop innovative housing using seed money from the U.S. Department of Energy, and included Ventana in their strategic planning. At the group’s early strategic planning sessions, consortium members expressed strong convictions about the attributes they wanted their products to have. Their values included a strong sense of community and neighborhood, as well as advocacy for resource conservation and design harmony. They felt that by delivering homes that promoted these values, their corporation would succeed. To test this feeling, they built a system dynamics model of the factors contributing to the market attractiveness of homes. Working with a modeling facilitator, they systematized their experience and understanding of the marketplace in a simulation model.

The modeling helped them use what they knew about market dynamics to predict the likely market response to their vision—and  did not confirm their feelings. Indeed, the group discovered that dynamic psychological factors involving conformity and ‘anchoring’ conspired to limit the attractiveness of anything new or original. Consequently, a strategic plan based on the consortium’s most dearly held values would not have early mass market appeal. Moreover, the consortium had no special expertise for accessing a smaller niche market of like minded consumers. Therefore, the group decided to rethink its marketing plan.

The group started work on a second model. This model focused on the entire building system, not just the end use housing market. The purpose of the second model was to identify points of business leverage that the consortium could use to increase their chances for market success, and paid even more attention than in the first model to gathering data and making concepts concrete. This second modeling exercise showed that the conclusions from the earlier model were more limited than originally thought. The problem was that not everyone understood concepts like ‘conformity’ in the same way. Consensus judgments about concepts were not as universal as previously thought, and existing data didn’t support the pessimistic interpretation given to the earlier model results. On the other hand, the new model failed to identify any points of high leverage that the consortium could exploit. Indeed, model results suggested that the fragmented structure of the building industry virtually guaranteed low leverage for all industry participants. Consequently, the consortium adopted a strategy of consolidation and integration. In particularly, it sought a much tighter linkage between the housing manufacturer, marketers and developers. The discipline imposed by the modeling process helped the group find a direction more likely to help them realize their values than they could have from their initial plan.