BRAVE NEW WORLD!

1
BRAVE NEW WORLD!

• Judith Miller, Seattle WA
• NARI - Monterey Chapter
• August 12, 2009
• NARI San Jose/SF Chapters
• August 19, 2009

2
INTRODUCTION

• WHO I AM AND WHY I AM HERE
• I want to initiate an important debate about what
  we in the remodeling industry can build after
  this recession is behind us.
• Will it be more of the same, at a reduced scale
  perhaps or
• Will it be significantly different?
• Next, I want to introduce you to some books which
  might engage you more deeply into the subjects
  were going to touch on tonight.
• What do you think?
• What does the Brave New World look like to you?

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BOOK 1

• From Changing Minds the Art and Science of
  Changing Our
• Own and Other Peoples Minds, by Howard Gardner
• Gardner emphasizes 2 primary concepts in his
  study
• The 80/20 rule which states that 80 of the
  results come from 20 of the inputs. Our job as
  leaders/owners/people is to determine which 20
  drives the result.
• 7 levers of changing minds reason, research,
  resonance, redescription, resources and rewards,
  real world events and resistance.
• To change minds effectively, leaders make
  particular use of two
• tools the stories they tell and the lives that
  they lead.

4
FRAME THE DEBATE The Question

• "The definition of stupidity is
• doing the same thing over and
• over again and expecting different
• results."
• Albert Einstein
• Yesterday (pre-recession), with the benefit of
  20/20 hindsight, we can see the errors of our
  ways.
• Yet tomorrow (post-recession), barring
  cataclysmic events, were liable to act and react
  exactly as we did before.
• What will we do differently?

5
JUST THE FACTS Remodeling

• Since 1995, the Joint Center for Housing Studies
  has been conducting a comprehensive study
• of the factors influencing the growth and
  changing characteristics of housing renovation
  and
• repair activity in the United States. With
  remodeling activity approaching the level of new
  home
• construction, it also represents a critical
  investment in maintaining the nation's housing
  stock. The
• study has produced six major reports Improving
  America's Housing, Remodeling Homes for
• Changing Households, Measuring the Benefits of
  Home Remodeling,The Changing Structure of the
• Home Remodeling Industry, Foundations for Future
  Growth in the Remodeling Industry, and The
• Remodeling Market in Transition.
• The current phase of the study examines
• Variations in remodeling activity across
  metropolitan areas and neighborhoods and how to
  address the need for more home improvement in
  declining areas.
• Financing of home improvement activity and
  whether access to financing influences levels of
  remodeling activity.
• Remodeling by minority households levels of home
  improvement activity, expenditure levels, and
  types of improvements undertaken.
• SOURCE Joint Center for Housing Studies,
  Harvard University

6
JUST THE FACTS The Economy

• Leo Tolstoy famously said, Happy families are
  all alike. Every unhappy family is unhappy in its
  
• own way. So it is with downturns. Unlike most
  postwar recessions, this one stemmed from an
• asset market correction that destroyed savings
  and froze the credit system. The result has been
• more severe than a typical recession, as the
  following charts show.
• Four things to look for in this update
• Financial markets have dramatically improved, but
  from an extremely low base. Rather than pricing
  in disaster, they anticipate tough times ahead.
  For example, the charts on the spread for AAA and
  BAA bonds show the credit market moving from
  unprecedented panic to a level of fear that is
  merely in keeping with the worst experiences
  since 1945.
• Real economy indicators show signs of
  stabilization. See in particular the charts on
  manufacturing sentiment, non-farm payrolls, oil
  prices, and car sales. Nonetheless, many of these
  indicators remain worse than anything hitherto
  experienced in the postwar period.
• The collapse in the federal governments finances
  is unprecedented, raising questions about how the
  government deficit will be brought under control.
  
• By most measures, the current recession is far
  milder than the Great Depression. But the
  appendix shows that house prices have recently
  fallen much more sharply than in the 1930s.
• SOURCE Council on Foreign Relations, Quarterly
  Update, June 2009 by Paul Schwartz

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JUST THE FACTS Unemployment
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JUST THE FACTS Home Prices
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JUST THE FACTS The LIRA
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JUST THE FACTS The Future

• HIRI (Home Improvement Research Institute) cites
  3
• factors in predicting consumer spending in this
  area
• Demographics
• Single family households
• Hispanic populations
• Aging baby-boomers
• Information on Demand
• Stronger personal connections

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JUST THE FACTS The Future

• What we shouldnt expect, though, is a return to
  the high-flying days of the
• last few years, which included types of work and
  a level of investment that was
• unusually high. Instead, the strong fundamentals
  of the market should lead to more
• steady growth like we saw from 1995 to 2000,
  Baker says.Those fundamentals
• include an aging housing stock and a growing
  population. By 2018, the average home
• will be more than 35 years old and about a third
  will be more than 50 years old. Not
• surprisingly, spending on home improvement rises
  as a home ages and essential
• systems such as roofing, HVAC and plumbing begin
  to fail or require
• upgrades for modern life.
• SOURCE Professional Remodeler, May 2009
• Investors predict the technology alone for
  high-tech homes will approach
• 5 billion/year by 2011. ..a belief that the
  typical house will undergo a
• transformation much as offices did a decade ago.
• SOURCE Wall Street Journal, 7/22/2009

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FRAME THE DEBATE Where Are You?

• In order to know how youre going to adapt, you
• have to understand where your company is
  currently
• on the growth ladder.
• Selected reading
• 5 stages of growth, developed from The Five
  Stages of Small Business Growth by Neil
  Churchill and Virginia Lewis in Harvard Business
  Review, May 1983.
• Article in Remodeling Magazine, July 2009 based
  on the above.

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5 Stages and 2 Phases

• Stage 1 owner does it all
• Stage 2 owner begins to delegate
• Stage 3 owner delegates everything except sales
• Stage 4 owner delegates everything
• Stage 5 owner handles strategy

5
4
3
2
1
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5 Stages and 2 Phases, cont.

• Each stage consists of 2 phases
• Evolutionary - systems are developed to manage
  effectively at that stage
• Revolutionary - systems become insufficient for
  current level of activity

Next Stage
Current Stage
Revolutionary Phase
Evolutionary Phase
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FRAME THE DEBATE Where Are You Going?

• There are 3 company models
• Craftsman
• Owner develops successful practice
• Stays at stages 1 or 2
• Develops retirement income from careful
  investments and personal financial control
• Chamber of commerce
• Owner grows company to stages 3 through 5
• Office outside the home
• Greater overhead
• Develops retirement income from potentially
  greater net profit dollars
• National brand
• Company is in stage 5

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Book 2

• From Construction Contractors Survival Guide
• by Thomas C. Schleifer
• Schleifer identifies 10 reasons contractors fail
  if you want to grow your
• company successfully, read this book. Any one
  reason is dangerous, two
• taken together will put the company in the ICU
  and three at one time is
• nearly always fatal!
• Here are some of the most important
• Increase (or decrease) in project size
• Unfamiliarity with new geographic areas
• Moving into new types of construction
• Changing accounting systems
• Replacing key personnel

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FRAME THE DEBATE Seek Diversity

• Diverse opinions are essential to success
  whether in writing documents which change world
  politics, such as the Constitution, or in day to
  day management of a company.
• Seek, hire, train and retain different
  personality types, different skill sets,
  different beliefs. Focus on character first.
• Develop a leadership style which first ask
  questions and then investigates solutions.
• There are terms for the wide variations in
  though
• Alpha and omega
• Ying and Yang
• A to Z

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Book 3

• From The Wisdom of Crowds by James Surowiecki
• The author, who also writes The Financial Page
  in The New Yorker, argues
• that Large groups of people are smarter than an
  elite few, no matter
• how brilliant --- better at solving problems,
  fostering innovation, coming to
• wise decisions, even predicting the future.
• This concept has relevance in the BRAVE NEW
  WORLD only by pulling
• ideas from a variety of places, from a variety of
  people with differing
• viewpoints and experience, can the best decisions
  be made.
• This could have an impact in how you manage the
  sales process allowing
• and encouraging significant time for decisions
  during design means youve
• got to have a lot more projects in various stages
  to maintain necessary
• gross profit margin coverage.

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BRIEF INTERVIEWS with FAMOUS MEN

• From Mark Pearsall, VP at Truitt White, the
  premier pro
• lumber yard in Berkeley
• Buyers will change what the sellers sell.
• The face to face relationship weve got with
  people is diminishing in importance its
  becoming less frequent, its becoming less
  powerful because the homeowner can do much of
  that at their kitchen table.
• It is CRITICAL to have younger people coming up
  in management who understand the psychology of
  young buyers.
• History cant be a good indicator of what the
  future looks like. The only lesson from history
  that makes any sense react to the customers
  need as quickly and efficiently as you can.
• How do you maintain flexibility? You have to be
  out in front of your clients, asking questions
  and listening to the answers.

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BRIEF INTERVIEWS with FAMOUS MEN

• From Paul Winans, past president of NARI,
  Remodelers
• Advantage facilitator and past co-owner of Winans
  
• Construction
• Marketing is useless what works is real
  relationships with real people!
• It takes 3 meetings to truly connect with someone
  include a meal in one of those meetings.
• People still have money, people still want to
  remodel their houses that isnt going to
  change.
• Read Selling the Invisible by Henry Beckwith to
  really understand how difficult it is to sell
  service as opposed to product. He makes a
  huge deal about the distinctions between selling
  a product that can be seen and touched, and a
  selling a service that is bought "touch, taste,
  feel, smell, and sight unseen." Coming to
  understanding the subtle dynamics of how a person
  buys a service can be a stunning reality check
  for those who provide (or sell) services.

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BRIEF INTERVIEWS with FAMOUS MEN

• From Sal Alfano, Executive Editor of Remodeling
  Magazine
• and Replacement Contractor
• Energy efficiency is going to drive greater
  regulation someone who sells their house after
  doing an energy audit is going to want and need
  verification and documentation.
• There is 5 billion dollars of weatherization
  money going out the door from the Department of
  Energy. It will go to non-profits to manage but
  theyre going to have to subcontract like crazy
  to get this done. They certainly cant do it
  with the people theyve got.
• In Atlanta, they have 150 million to spend next
  year on weatherization up from a normal budget
  of 18 million. How on earth are they going to
  spend 10 times their budget from one year to the
  next?
• This is just the first wave!

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BRIEF INTERVIEWS with FAMOUS MEN

• From Paul Deffanbaugh, current editor of
  Professional
• Remodeler, former editor of Remodeling Magazine
• Home building is about designing and building a
  product. Remodeling is the delivery of a service.
  That means the margins youre familiar with are
  nonexistent. The 20 to 25 gross margin youre
  used to working with? Not in remodeling. Think
  45 gross. If you price the same as you do for
  home building, youll lose money even faster than
  if you didnt work at all.
• And, in order to charge that much, youve got to
  deliver the goods. I dont care if your team of
  supervisors and trades can build a house thats
  perfect down to the tightest miter joint. If
  theyre unrepentant louts who curse, smoke, and
  listen to loud music on site youll not only lose
  your shirt on that remodeling project but also
  lose the 10 referrals it could have engendered.
  Thats a quick way to go out of business.

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WHAT MATTERS NOW

• WHO YOU ARE
• The best predictor for future behavior is past
  behavior.
• Personality profiles DISC, Myers-Briggs
• WHO YOU KNOW HOW YOURE KNOWN
• Professional and personal relationships
• Six degrees of separation (networking)
• WHAT YOU HAVE
• Net worth both company and personal
• Cash flow both company and personal

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Book 4

• From The One Thing You Need to Know About Great
• Managing, Great Leading and Sustained Individual
  Success
• by Marcus Buckingham.
• Buckingham, who worked for 17 years with Gallup,
  is a good
• writer who speaks with surpassing common sense,
  yet reaches
• profoundly uncommon conclusions, according to
  Tom Peters.
• Buckingham concludes that
• Great managers help people succeed beyond their
  wildest dreams
• Great leaders place the flag, the vision, clearly
  in front of their people and help them get there
• Individual success is about doing what you love
  and delegating the rest!

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WHAT MATTERS NOW Who You Are

• DISC personality assessment
• The assessment classifies four aspects of
  behavior by testing a
• persons preferences in word associations
  (compare with Myers
• Briggs Type Indicator).
• DISC is an acronym for
• Dominance - relating to control, power and
  assertiveness
• Influence - relating to social situations and
  communication
• Steadiness (submission in Marston's time) -
  relating to patience, persistence, and
  thoughtfulness
• Conscientiousness (or caution, compliance in
  Marston's time) - relating to structure and
  organization
• SOURCE Wikipedia

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WHAT MATTERS NOW Who You Are

• These four dimensions can be grouped in a grid
  with D and I sharing the top row and representing
• extroverted aspects of the personality, and C and
  S below representing introverted aspects.
• Dominance People who score high in the intensity
  of the "D" styles factor are very active in
  dealing with problems and challenges, while low
  "D" scores are people who want to do more
  research before committing to a decision. High
  "D" people are described as demanding, forceful,
  egocentric, strong willed, driving, determined,
  ambitious, aggressive, and pioneering. Low D
  scores describe those who are conservative, low
  keyed, cooperative, calculating, undemanding,
  cautious, mild, agreeable, modest and peaceful.
• Influence People with high "I" scores influence
  others through talking and activity and tend to
  be emotional. They are described as convincing,
  magnetic, political, enthusiastic, persuasive,
  warm, demonstrative, trusting, and optimistic.
  Those with low "I" scores influence more by data
  and facts, and not with feelings. They are
  described as reflective, factual, calculating,
  skeptical, logical, suspicious, matter of fact,
  pessimistic, and critical.
• Steadiness People with high "S" styles scores
  want a steady pace, security, and do not like
  sudden change. High "S" individuals are calm,
  relaxed, patient, possessive, predictable,
  deliberate, stable, consistent, and tend to be
  unemotional and poker faced. Low "S" intensity
  scores are those who like change and variety.
  People with low "S" scores are described as
  restless, demonstrative, impatient, eager, or
  even impulsive.
• Conscientious People with high "C" styles adhere
  to rules, regulations, and structure. They like
  to do quality work and do it right the first
  time. High "C" people are careful, cautious,
  exacting, neat, systematic, diplomatic, accurate,
  and tactful. Those with low "C" scores challenge
  the rules and want independence and are described
  as self-willed, stubborn, opinionated,
  unsystematic, arbitrary, and careless with
  details.
• SOURCE Wikipedia

D
I
C
S
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WHAT MATTERS NOW Who You Know

• Around the country standard marketing is not
  working
• how about here?
• What is working
• Networking
• Developing gatekeepers
• Becoming an expert
• Leading the pack

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WHAT MATTERS NOW How Youre Known

• 8 Branding Truths
• Focused brands are more powerful than diffused
  brands therefore do a few things very well and
  focus marketing on those few.
• The first brand in a category has a huge
  advantage first in the mind, not necessarily in
  the market.
• Keep it simple one big idea is best (Mark Twain
  said Im sorry I didnt write you a shorter
  letter - I didnt have time.)
• Dont neglect PR its a great way to build a
  brand.
• Landscaper
• Hand out shovels in your neighborhood and take
  over the landscaping on a parking median in the
  neighborhoods where you want to work
• Remodeler
• In the summer develop a lets build summer
  program for kids 4 weeks every Saturday build a
  doghouse or something like it. Every weekend a
  different carpenter handles the project.
• In the fall seminar in the office on
  winterizing your home
• In the winter seminar in the office on lowered
  energy costs
• In the spring spring cleaning provide a
  dumpster in front of one of your best clients for
  a week in the spring and pay for it
• Be consistent and patient building a strong
  brand takes time.
• Avoid sub brands at all cost.
• Quality is important, but not as critical as the
  perception of quality.
• Somehow, someway, you must be different.

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Book 5

• From The Influencer the Power to Change Anything
  by
• Patterson, Grenny, Maxfield, McMillan and
  Switzler
• Quoting from Edward Deming it is not enough to
  do your best you must know what to do and THEN
  do your best.
• The authors say a few behaviors can drive a lot
  of change.
• They also identify the importance of stories in
  modifying behavior because, as Gardner indicated,
  stories create resonance.
• So, when trying to help people view the world in
  a more complete and accurate way, couple your
  stories of the harsh realities youre facing with
  equally concrete and vivid plans that offer hope.
  Tell the whole story. Provide hope! (page 67)

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WHAT MATTERS NOW What You Have

• 1. TIME
• Plan 3 5 years, then
• Focus on 1 initiative per quarter!
• Stay healthy!
• Take care of your people!

• 2. MONEY
• Get your numbers right!
• SNIPPY
• Backlog
• Cash
• Track changes in net worth!

• 3. DECISION
• MAKING
• Make major decisions with care
• Make minor decisions rapidly

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I PREDICT Where Youll Be!

• Where youll be in 5 to 10 years depends on 4
  factors
• particular to you and to your company
• Geography California coast will maintain
  above-average per capita income
• Products California will maintain above average
  interest in new products and methods
• Brand Californians run in large packs
• Delta Force Your ability to deal with the speed
  of change will determine whether you sink or
  swim!

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I PREDICT 1 2009 2012

• Were on the transitionary curve of a U-shaped
  recovery
• Failure of 40 of current remodeling companies by
  1/1/2011
• More leads, smaller job size, greater competition
• Client focus on needs, not wants
• More self-financed projects, greater importance
  of cost factor

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Book 6

• From How The Mighty Fall by Jim Collins
• Jim Collins also wrote Good to Great and
  co-authored Built to Last, both
• national best sellers on the subject of building
  good companies.
• This book focuses on why companies fail and how.
  He cites 5 stages, each
• as definitive as the 5 stages of growth mentioned
  previously. They are
• Hubris born of success
• Undisciplined pursuit of more
• Denial and risk and peril
• Grasping for salvation
• Capitulation to irrelevance or death

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I PREDICT 2 2013 - 2016

• Successful companies are those which remain
• focused on
• Developing niche specialties
• Green building, green remodeling
• Home performance energy, water, home as food
  source
• Home repair and maintenance
• Embracing technology
• Becoming product driven
• Mixing up team members
• More youth
• Greater diversity

35
I PREDICT 3 2017 - 2019

• 10 years from now
• Shared resources among vendors imagine an office
  space where 2 remodelers, 3 designers, an HVAC,
  plumber and electrician share space, dues and
  subscriptions, computer systems and management
  personnel
• Spanish/English from top down in California
• Team remodeling between generals and subs who
  will design the solutions together
• Pricing becomes transparent paid for your time
  and expertise not for products
• More self-financed projects

36
MY BRAVE NEW WORLD 2050!

• Communities will form around
• central core which contains the
• energy, financial and civic
• infrastructure

Well ride small bullet trains into the core
whenever we want or need its services.
The size of the community will be dependent only
upon the ability of technology to
deliver instantaneous information along all
spokes of the wheel.
Citizens will be more self- sufficient the
further they live from the core.
What does remodeling look like in this future?
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CONCLUSION

• Micro level self preservation now requires
  focused attention on  
• Customer satisfaction net profit (Benchmark
  Sept 2005)
• Backlog  (Benchmark November 2005)
• Cash conservation    ( September 2009)
• Macro level future success requires personal and
  company engagement in the BRAVE NEW WORLD of the
  future. 
• What are you doing to protect your company now
• and to preserve it for the future?

38
BIBLIOGRAPHY

• 3 Strategies for Positioning the Remodeling Firm
  by Doug Dwyer, Professional Remodeler, Sept. 2008
  
• http//www.housingzone.com/proremodeler/article/C
  A6593253.html
• Joint Center for Housing Studies Research
• http//www.jchs.harvard.edu/research/remodeling.h
  tml
• Home Improvement Research Institute
• http//www.hiri.org/research.asp?id152
• Bureau of Labor Statistics
• http//www.bls.gov/
• Companies Chase the Promise of High Tech Homes,
  Wall Street Journal, July 22, 2009
• http//online.wsj.com/article/SB12482215236857038
  7.html
• The Future of Remodeling in 2018, Professional
  Remodeler, May 2009
• http//www.housingzone.com/proremodeler/article/C
  A6558033.html
• 10 Truths about Leadership by Pete Luongo
• http//dayton.bizjournals.com/dayton/stories/2008
  /05/26/smallb2.html
• DISC Assessment
• http//en.wikipedia.org/wiki/DISC_assessment
• Selling the Invisible by Henry Beckwith
• http//www.newfangled.com/selling_the_invisible

39
BIBLIOGRAPHY

• Growing Concern by Stacey Freed, Remodeling
  Magazine, July 2009
• http//www.remodeling.hw.net/owner-issues/growing
  -concern.aspx
• Five Stages of Small Business Growth by Neil C.
  Churchill and Virginia L. Lewis
• http//harvardbusiness.org/product/five-stages-of
  -small-business-growth/an/83301-PDF-ENG
• Changing Minds the Art and Science of Changing
  Our Own and Other Peoples Minds by Howard
  Gardner
• Amazon http//tinyurl.com/mm3fn8
• Construction Contractors Survival Guide by
  Thomas C. Schleifer
• Amazon http//tinyurl.com/nnfplz
• The One Thing You Need to Know About Great
  Managing, Great Leading and Sustained Individual
  Success by Marcus Buckingham
• Amazon http//tinyurl.com/nzsvm3
• The Influencer the Power to Change Anything by
  Patterson, Grenny, Maxfield, McMillan and
  Switzler
• Amazon http//tinyurl.com/lubyxu
• How the Mighty Fall by Jim Collins
• Amazon http//tinyurl.com/rbkp5g
• The Wisdom of Crowds by James Surowiecki
• Amazon http//tinyurl.com/npsk7m

40
THANK YOU

• Thank you for attending.
• Please let me know how I can help you.
• Judith F. Miller
• jfmiller_at_remodelservices.com
• 3518 Fremont Avenue North, No. 546
• Seattle, WA 98103
• Verizon [phone]
• ATT [phone]
• website  http//www.remodelservices.com   
• blog  http//www.remodelservices.wordpress.com