6 Ways to Sink A Homebuilder’s New Market Entry

Posted on July 9, 2013 ยท Posted in Uncategorized

Donald Laurie's and Bruce Harreld's recent article in the Harvard Business Review (July-August 2013) provides a great general overview of growth initiative destruction. Let's apply them to a home builders entry to a new market.

The president must always be the chief growth executive. If there are many simultaneous growth initiatives consider appointing another executive to assist. Remember however that the president remains the chief growth officer.

Put the best most experienced talent in charge. Inexperience, no matter how intelligent will not do. If they fail it won't have significant impact on the company's current performance. If they do however it will have impact on the company's future performance. You must consider seasoned managers in the mainstay business for these initiatives if you are truly serious about the initiative.

Assemble the right team and avoid staffing up prematurely. Don't create the start up team until you know exactly what capabilities are needed at the start up. Focus on capabilities not availability. Go outside to find the right capabilities. With success staff up — but only as far as needed based on the stage of implementation.

Use the right kind of performance management. Performance management in the mainstay business is not the right kind of performance management for a start up. Has the start up assembled the right skills and capabilities to move closer to the next milestone? How is the new product development process moving along towards its goals?

Fund and govern the start up correctly. The funding of start ups should be separated from the annual budget cycle. As long as the new market is meeting its milestones it should be supported — regardless of other needs. New markets typically take 3 to five years to produce. If you are not prepared to invest over such a period you are making a mistake entering a new market.

Leverage the company's capabilities. A new market can use mainstay business capabilities as long as it is in control of those capabilities. The start up can use aid in product development, purchasing, estimating and accounting as long as these skills are "capabilities" and they realize they will be used in a different fashion than their application within the home market.

Organic growth is as serious an assignment as quarterly profits. Organic growth will however challenge the existing systems and conventional ways of working. The president must understand and support these differences.