However one US builder is using the technology revolution to create a revenue stream into the future and at a stroke he expects to significantly change the bottom line of homebuilding and the way the industry is viewed by the stock market. Lifetime value - a concept so dear to many other markets - is about to become a reality for housebuilders.
We're currently somewhere in the middle of a new homes development. In fact we're standing in the basement of a building that sits between the new spec-built village church and the second highest hill in Indianapolis.
By "we" I am referring to myself and seven PCL clients who have accompanied me on our inaugural US "best practice homebuilder tour".
This building looks a bit like a house - it's made that way to blend in with its surroundings. However, a house it certainly is not. It is in fact built to the standards required of a US telephone exchange, in other words it's tough, very tough. The huge back-up generator standing outside also gives the game away somewhat.
Standing in front of us is a gentleman from a company called First Mile Technologies. He is proudly showing us the telephone network and the 61 channel digital TV feed that will shortly be enhanced by a video-on-demand service with some 300 movies available at any time of the day or night. There's also an ultra high speed internet connection.
If a typical domestic internet connection is likened to a drinking straw this system equates to an industrial pipeline. For example, something that takes two minutes to download via our miserly 56k modems will download here in just five seconds.
Then there's the AC to DC back to squeaky clean AC power system (with that back up generator), the router that is big enough to power the New York stock exchange and the cabling that connects every home in the development and every major room in every home. Finally there's the fibre optic wiring that is currently dormant but is there ready for the next upgrade to even higher speeds.
We nod knowingly as he describes its bits and its bytes, its co-axes and its... "What did he say?"
OK, let's admit it, we were a bit out of our depth and while we may have not fully appreciated the sheer breadth of the systems on show there was no doubting First Mile Technologies' commitment. This development of just 900 homes has a Network Operating Centre (as this building is known) with a capacity to service 30 000 new homes in the Indianapolis area. Capacity that is available to any new homebuilder.
Our minds were well and truly boggled and I for one had to keep pinching myself to check that (a) I wasn't dreaming this up and (b) I was actually visiting a new homes development.
What's especially impressive is the fact that First Mile Technologies is the brainchild of a housebuilder - one Paul Estridge jnr of Estridge Homes.
And what started as a vision just a few years ago has turned into an organisation that boasts several high technology companies as partners - Nortel, Intel and Microsoft to name but three.
Estridge Homes' Centennial development is the company's first to be totally wired into the operating centre.
Why has Estridge Homes put so much effort into this? Firstly, it is totally on-message with the Estridge Homes company philosophy to enhance people's lives. In our overstressed 24-hours a day seven days a week world the most precious thing we can offer a customer is time. The systems at Centennial certainly offer a lot of time-saving possibilities.
Secondly, beyond this philosophy lies a very serious business proposition. The aim of First Mile Technologies is to enable builders to enjoy a profit legacy into the future. Or, as First Mile puts it, "We are enabling builders to own the reboot".
Some of the greatest changes in our lives occur when we move home. We not only consider new service providers but we are also likely to be most open to embracing new ideas, new technology and new ways of leading our lives.
Put another way, First Mile Technologies is going to help homebuilders enjoy a profit stream, not just when they sell a new home but into perpetuity as they enjoy revenue streams from the ongoing consumption that takes place in the home.
First Mile Technologies believes that this profit stream revolution is going to dramatically change the financial strength of housebuilders and with it their stock market valuations.
The ability to think in terms of lifetime value and return will also enable builders to be more flexible with selling prices. In a market downturn a builder with a long-term revenue opportunity can weather the storm better than one without.
Restricted currently to Indianapolis builders, because of the siting of the operating centre, plans are already in hand for a rapid rollout to other booming markets across the US.
With any development a homebuilder has a duty to create something of lasting value to the community. At the same time the very act of creating new homes creates new centres of consumption. Why give away this opportunity?
Why becoming a service provider makes sense for both buyer and seller
Estridge Homes’ Centennial development not only grabbed the attention of Indianapolis locals looking for high-tech homes it also grabbed the attention of the national media, a spot on ABC news and the front page of the New York Times being two examples. First Mile, the company providing the electronic facilities, is owned by Paul Estridge jnr of Estridge Homes. Estridge believes that high-speed internet connection is going to be the most significant driver of the home working revolution. As a Centennial homeowner you can choose as much or as little of the service as you wish. You are free to go elsewhere for the services offered but what’s the point when First Mile’s bulk buying potential results in savings of about 30% over the going market rates? So what does all this mean to the residents of Centennial? Every home comes with 24-hour monitored security as standard. Each room in the home has voice, data and video ports for the telephone and TV services and there’s a touch screen in the kitchen - permanently connected to the development’s own intranet and ISP. So if you need a babysitter or a recipe for apple pie from the community’s top cook, or you want to order a home delivery pizza, or you need some spiritual guidance from the local church, local news and weather reports or you want to report to Estridge Homes a problem with your house, just touch the screen. What’s more, when it comes to generating additional revenue First Mile has calculated that a 900 unit community like Centennial will consume $500 000-700 000 of home delivery pizza per year! And if homeowners need to surf the internet they can sit back and relax as the high speed connection makes those interminable waits for pages to load a thing of the past. So fast is this connection that a doctor living at Centennial can have medical reports and patient scans sent real time into his home for initial diagnosis, saving the need to make an emergency dash across town in the middle of the night. First Mile believes future services will include links to on-line libraries and information services which will be able to bring a whole new dimension to home study.Source
Building Homes
Postscript
Malcolm Pitcher is a director of PCL and In-house Research. He specialises in marketing strategy, brand strategy, culture change, change management, marketing research and customer satisfaction monitoring. He has been marketing director for Wimpey Homes and held senior posts with Volkswagen and Honda. He can be contacted on 01793 848455, e-mail: info@pitcherco.com
