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Quadrant Homes

A Project Management Methodology

1. How did Quadrant Homes grow into such a large builder of homes?

Quadrant Homes had gained renown for its lean-oriented business model. The company had
introduced the “More House, Less Money” (MHLM) value proposition. It served the needs of
first-time home-buyers in the Puget Sound region of Washington State. Despite the
corporate-level scrutiny it had faced, Quadrant was motivated for change. This caused the
growth in annual gross sales and expansion in market share. Quadrant had a laser-like focus
on operational excellence as a value discipline, which led to the meeting of the needs of its
target market.

Quadrant was able to develop cooperative relationships with city, country, state, inspecting
agencies, and could generally count on inspectors to complete their work during the time
window designated in the string line. This made it easier for Quadrant to follow an even-flow
schedule.

2. Describe the Quadrant Homes design-construction operating system.

Quadrant Homes had an integrated system which includes the customer-facing activities. The
system was built around even flow and predictability. Quadrant followed a disciplined process
for using overtime to catch up where needed.

All of Quadrant’s designs had standard elements that aided suppliers in developing and
sustaining reliable, safe work routines. The company had employed the Design for
Manufacture and Assembly (DFMA) concept of part commonality across designs to take
advantage of volume discounts for windows, doors, and other features.

All feasible option combinations were assessed out on Quadrant’s IT-based configurator, so
pricing on a home order was instantaneous as soon as a customer completed all choices. This
eliminated the time and cost in prototyping and reduced information delays that can frustrate
customers and discourage them from completing the ordering process.

Quadrant houses were built on level lots and had no basements where foundations were
poured after contracts were signed. Every Quadrant house, regardless of its size or
configuration, was built in 54 days after the foundation was poured.

The standard process starts from the Customer visiting model houses in a Quadrant
community and deciding on fit with Quadrant’s value proposition. The Customer, then,
selects lot and plan, and signs initial contract. Visits in the Quadrant showroom are highly
advised to make detailed design selection and finalizes agreement. The Customer must settle
method of finances by then. The house plans are sent to suppliers in advance of start of
construction. Houses are selected from backlog to optimize schedule efficiency.
Consequently, the Quadrant builds the house in 54 days, following a standard process. After
which, the contract is closed and payment is settled.
3. What was the market environment up to 2007 like? What were the economic forces
acting on the company during that time?

From a low of 168 spec homes sold in 1996, Quadrant grew its gross sales to a peak of 1845
houses in 2004, and held on to similar sales volume through 2007. US foreclosure starts had
risen in the year 2000 to 2006, and soared even higher in 2010. Declining backlog and looming
economic uncertainties in 2007 were major challenges. However, as the housing market
declined, Quadrant could not sustain the demand pattern that had fueled its growth. By 2012,
housing market conditions and new home sales had begun to turn around and were reflected
in increased demand for Quadrant houses.

4. Describe Quadrant’s relationship with its customer and suppliers.

Suppliers and contractors were treated as partners by Quadrant Homes. Continuous stream
of if suggestions were flowing between the parties involved which resulted in design
modifications making the houses easier and less costly to build.

Quadrant Homes imposed limitations with their customers for the “More House, Less Money”
(MHLM). Employees were trained to feel comfortable politely saying “no” to customers who
were not willing to comply with the restrictions. With this, Quadrant was able to economically
serve better the needs of customers who were suited to the MHLM project.

Meanwhile, Quadrant Homes outsourced the construction portion of its work to a carefully
managed, limited group of supply chain partners. Quadrant relied on single sources, the
majority of which were local, family-owned businesses. The companies appreciated the
regularity in Quadrant’s schedule and respect for their cash-flow needs and knew they could
expect to be paid right on time for the work they completed.

5. What happened in 2007? Why did the market ‘crash’?

The Great Recession arrived in the Puget Sound region in 2007. House values declined and
unemployment rose, people lost confidence in their ability to own homes. Quadrant Homes
had to dip into its backlog more that it had historically did in 2007. Many customers cancelled
their contracts because of looming economic uncertainties. They were refunded with their
deposits with no obligations held by Quadrant to sustain long-term goodwill.

6. What specific market ‘shifts’ occurred after 2007?

Quadrant shifted its ever-present focus on formal market research into much higher gear,
and also began paying closer attention to the options its customers were ordering and
requesting contrary to the policies. Quadrant had to upgrade its base feature levels by adding
$5 to $15 per square foot in features that previously would have been considered upgrade
options. Quadrant began offering more options in greater variety.

7. Was it necessary for Quadrant to change its strategy after 2007?

Yes, it was necessary for Quadrant Homes to change its strategy after 2007 after they realized
the growth that had fueled their success would not continue. For them to be able to fill
production schedules and maintain even-flow schedule stability, the company had to insert
make-to-stock houses into the string line schedule. This can only be recovered by exploring
and experimenting on other strategic options to sell.

8. How did Quadrant recover from the changing market? What re-alignments and re-
directions did it do?

Quadrant Homes initiated a deliberate rebranding effort that removed “More House, Less
Money” and replaced by “Built Your Way” strategy. It was now acceptable to respond
favorably to customer requests, order options outside limited showroom offerings, or allow
the customers to visit their construction sites.

The company had to explore and experiment on the designs and had to rebalance and extend
the string line to accommodate the higher feature level. Money-back guarantees were also
instituted in the assurance program for any customer not completely satisfied.

From this, three demographic groups were identified: Build Your Way (BYW), Evoke, and
Urban Innovations. These groups vary on the price range, size, and exterior appearance. For
a specific age and income range, an appropriate profile is highly suggested.

9. With its new strategy, do you think that Quadrant Homes can increase its sales
revenue again? Why? What specific steps should it follow?

Yes, I think that Quadrant Homes can increase its sales revenue but not extensively as before.
It was late 2012 when the Quadrant customers’ willingness to refer friends had grown and
this led to the resurrection of demand levels.

If the level is kept all throughout and with the sustenance of their operating system to
accommodate the needs of the three different market segments, then the revenue would
grow. More design innovations and better customer and supplier relations must be further
developed.

10. What are the challenges and risks associated in shifting to the new strategy?

Few of the challenges and risks associated in shifting to the new strategy in reinventing their
operating system to accommodate the needs of three different market segments, as well as
evolving future market segments.

Moreover, house plans grew in number. The need for additional management, planning,
clerical, and IT support grew as well. It was an ongoing challenge to keep every design up-to-
date with the code requirements of multiple municipalities and counties.

Quadrant Homes also had to deal with the profit risk due to the lengthy practice of the new
strategy and the challenges brought by the need to meet the buyer expectations when
unfamiliar configurations were created for the first time.