B-to-B Networks - A Lasting Legacy Of The Internet

As a 25-year veteran of the homebuilding business, I've seen dramatic changes in our industry, but none will be as dramatic as the changes brought about by new technology in the 21st century.

For a while, I feared that our industry was being left behind by the Internet revolution. Financial markets have not accorded established builders much respect, while even the most far-fetched Web companies are often accorded astronomical valuations. It became clear that builders had to take action - within our companies and within the industry as a whole. We had to start re-examining our corporate culture and adopting some of the best ideas from Internet companies.

At Kaufman and Broad, we recognized that the scope of change we wanted to implement was so large, it couldn't be done piecemeal. Without a catalytic force, we faced the risk that our initiatives would die on the vine. Instead, we created our own e-commerce subsidiary - e.KB.

When I took on the role of president of e.KB, I was given one order à make e.KB the driving force of Kaufman and Broad.

We have focused e.KB initiatives in three areas. First, we're teaming up with others to create a true business-to-business network for the homebuilding and real estate industries. Second, we're building longer-term relationships with our customers. And lastly, we're tying together all our sales platforms into a single, efficient system with better response times and superior customer service. By doing this, Kaufman and Broad will be able to move buyers from inquiry to sale and complete configuration of the home faster than ever before.

I'll focus this column on the importance of establishing a business-to-business network for our industry. During the last few months, b-to-b has been the buzzword of the Internet, especially as investors wake up to the fact that many business-to-consumer e-commerce companies may never make a profit. While b-to-b may lack the sizzle of the most well known Web companies, I think the work that's being done in this area will be one of the real lasting legacies of the Internet.

Through a b-to-b network, homebuilders finally will be able to streamline the bidding process, the benefits of which will be a more profitable business. Any builder who wants to be successful needs to be involved in a b-to-b network and every b-to-b network needs a large, cooperative group of builders to succeed.

We'll be able to create much better internal processes. The distribution of plans, bidding, contracting, work orders, scheduling, invoicing and payment all can be performed by software via an Internet base. Additionally we'll create a better regional and national supply of products and services because it will be easier for suppliers to work with us. We'll also re-engineer the distribution network, eliminating multiple layers with multiple mark-ups.

A b-to-b exchange is a natural fit for an industry so dependent on subcontractors and procurement, and all the big players know that we'll need to cooperate to make it work.

What will it take?

The key aspects of a successful procurement platform will be the creation of a common communications protocol, likely XML. We'll also need a platform that starts with qualification of bidders and goes through the distribution of plans, the bidding process, and ultimately through the payment cycle.

To make this work, we'll need buy-in from both sides of the equation. The buyers and the sellers need to commit to eliminating the middle layers of the distribution channel and need to agree on a process that allows for seamless integration with the back offices of the users.

In just the last few months, Kaufman and Broad has joined Pulte, Lennar, Horton, Centex and many of the other large builders in two major b-to-b programs, BuildNet and HomebuildersXchange.

BuildNet deserves a lot of credit for pioneering the idea of an electronic b-to-b exchange for the homebuilding industry, and they've made great progress. HomebuildersXchange is an exciting concept, because we're also working with Oracle - one of the real leaders of Silicon Valley. Both will provide contract and spot buying, online auctioning, and reverse auctioning, and both are well-financed with a significant investment of resources.

There's no doubt that these two initiatives overlap each other. That doesn't bother us. We believe the market is large enough to support both BuildNet and HomebuildersXchange, and I suspect each will create its own important niche within the industry.

Ultimately, virtually all of our b-to-b transactions will be Web-enabled. Whether the transaction is done by one or any combination of these initiatives isn't as important as the fact that we are committed to this strategy.

I think I speak for all the major builders today when I say that we're serious about making this work. If you're not prepared to join the industry online, you're going to miss out - because I can guarantee you that your competitors will.

The homebuilding industry as you and I have known it has changed forever. But it's changing into something that's far more challenging and far more exciting than we've ever thought homebuilding could be.

I've heard colleagues talk enviously about dot-com entrepreneurs who've generated more wealth in two years than homebuilders have in 20. I've even heard some of my peers recently cheering the fact that many dot-com stocks have taken a dive. That's wrong. We all have a stake in the success of the Net economy. It's creating new homebuyers. It's creating new technology. And it's generating new ideas that help us do more than we ever thought possible.

Kaufman and Broad built its reputation on setting the pace for the industry. Now, we're not just learning from the dot-coms, but teaching a few tricks of our own. And the truly remarkable part is that we've just begun. If you look how far we've come in just the last 12 months, you'll understand why I think we will remake this industry, brick by brick, and click by click.

For more information, contact:
Glen Barnard,
President
e.KB, Inc.
Kaufman and Broad Home Corporation
Los Angeles, CA
Phone 303-220-6000 www.kbhome.com

Also See:

Barnard Discussion