How Toyota came to shape the housing sector

Saurabh Saxena is Founder of Houzen, the fastest supply-side sales and lettings engine on the market. He is a double-certified master black belt in the Lean Six Sigma discipline – a problem-solving philosophy that he is applying to eliminate waste in the property sector.

The Lean Six Sigma philosophy centres around eliminating waste from processes in order to positively impact speed, time and cost. I’m using this discipline right now with the team at Houzen in order to make the property sector more efficient. However, this modern-day application is nothing new – we can trace its roots all the way back to post-war Japan…

Japan had a mighty task ahead after World War II. Reconstructing and rebuilding was necessary across a range of industries, including their management and production systems. American statisticians Joseph Juran and William Edwards Deming worked with several Japanese companies to embed a high quality product and service mindset during this period. Their philosophy was a mix of technical, data-led statistics, management psychology and discipline, and a high respect for people across customer, user and supplier groups.

One of the biggest advocates of this thinking at the time was Toyota Motors. Toyota had already introduced the Toyota Production System (TPS) – am approach based on having a customer first mindset, creating just-in-time processes and identifying and eliminating waste and errors in processes. Toyota also opened up their production line to all suppliers, giving 360° visibility and establishing a true partnership model. This led to a manifold increase in speed of product delivery and a notable reduction in errors and rework. The zero-error mentality quickly spread across Japanese industries, becoming a contributing factor to the Japanese economic miracle (the period of record economic growth that the country experienced following World War II).

The Toyota philosophy continued to evolve and in the 80s and 90s became known as the Lean and Six Sigma methodologies. These were widely applied in the global manufacturing secotr, including by Motorola, Honeywell, Boeing, Dell and others. Then GE’s Jack Welch – arguably one of the greatest corporate bosses – became a huge advocate of the practice. Hedeployed it widely across all of GE’s business unit, even making certification a condition of mid-management promotion. The philosophy was later adopted widely in the services industry by the likes of Bank of America, Credit Suisse, the NHS, Transport for London and more.

LSS essentially identifies product or service outputs and aims to speed up delivery, reduce costs and improve quality. When I started out in the property industry, I immediately saw the potential of applying LSS. Having worked with a wide range of agents, developers, corporate landlords and others in the sector, I can only conclude (politely and with the utmost respect!) that some 60-80% of property sector tasks are “waste.” As such, the industry is expending two to three times more money and time than it needs to.

Not only could the property sector be more lean and efficient by using the LSS approach, it could also drive up service quality. The DMAIC is entirely appropriate in this case:

  • Define the problem/operational pain
  • Measure the specific pain
  • Analyse it
  • Improve it by running recommendations through a pilot on a small team or process
  • Control the solutions under management supervision and if they work, scale them up across the entire firm

Let’s apply this to a hypothetical residential sales process now:

  • Define – selling time for 200 units is 15-18 months for developer ABC.
  • Measure – benchmarking suggests every other developer achieves a similar result. Root causes could be insufficient access to target customer databases, inefficient management of leads, non-disciplined on-site customer journeys, lack of calls to action at point of sale, lack of feedback after viewings etc.
  • Analyse – data collected across 10 developments in London shows that there is a positive correlation between unit sales and post viewing feedback calls with customers with a household earning level between £80,000 and £140,000. Further analysis shows that this specific target group is just moving up the corporate ladder and has most likely recently received a high-impact promotion after putting in years of hard work. This target group was found to have an increased willingness to pay for high quality service and will move quickly on a decision when offered it.
  • Improve – two new processes were created:
    • (i) a well-crafted user journey that ensures that all comments, concerns and feedback are captured at the point of sale
    • (ii) a new ‘delighter’ delivery process for post-viewings, where a customer success rep politely follows up with personalised messaging and a small gift
    • Control – the two new processes were implemented for a period of three months to see if the solutions were achieved across all kinds of varied customer sub groups, all days and time of the week, etc.

The end result? A 66% increase in conversion rates, bringing down the 200 unit sales to just a six-month period and achieving a 20% increase in sales prices. This resulted in additional revenue of £3.4m, while three times faster sales resulted in three times bigger portfolio approval from ABC’s investors. The impact was signed off by ABC’s CFO and then the process was scaled up and across the entire portfolio of 5,000 units. Meanwhile, competitors PQR and XYZ are still selling at a 12-18 month timeline and price point. Having seen the massive disparity in results, PQR and XYZ’s investors now start backing ABC.

The power of Lean Six Sigma goes far beyond simple corporate lip service. It is a powerful statistical philosophy that can cut costs and lead times, increase revenue and massively improve service quality. Houzen hopes to extend this programme across its entire employee base, including clients and suppliers. I have personally deployed LSS in industries as varied as aerospace, banking, insurance, travel, utilities and legal services. Now it’s the housing sector’s turn to benefit.