Residential Market Research for InnovationResidential Market Research for Innovation 2006 Technical Report Prepared for the Partnership for Advancing Technology in Housing. Introduction

Residential Market Researchfor Innovation

2006 Technical ReportPrepared for the Partnership for Advancing Technology in Housing

Introduction

Carlos Martín, Ph.D. works in academic and governmental sectors in the areas of technological and social change related to the design and con-struction industry. Trained as an architect, construction engineer, and historian of technology, Dr. Martín studies the cultural and industrial barriersto change-especially those related to affordable housing production. He has degrees in architecture and civil engineering from MIT and Stanford.Carlos returned recently to the US Department of Housing and Urban Development and PATH after serving as an Assistant Professor at ArizonaState University.

Harvey M. Bernstein, F.ASCE, oversees McGraw-Hill Construction’s Research and Analytics division. He has served as a member of formerSecretary of State Colin Powell’s Advisory Council. Currently, he is a member of the Princeton University Civil and Environmental EngineeringAdvisory Council, the Harvard Joint Center on Housing Policy Advisory Board, and a visiting professor with the University of Reading’s Schoolof Construction Management and Engineering in London, England, where he also serves on their Innovation Construction Research CenterAdvisory Board. He is a frequent speaker and has written numerous papers covering innovation, productivity, energy conservation and greenbuilding. He is co-author of the book Solving the Innovation Puzzle: Challenges Facing the Design and Construction Industry.

2

Harvey M. Bernstein

Carlos Martín, Ph.D.

It is a critical time for the residential construction sector. With single family housing con-struction having increased dramatically over the past five years and moderate slowdownsexpected to keep construction value near 2005 levels, the timing is ideal for the industry todevelop and introduce new technologies and innovations.

Efficiency and innovation will help to address some of today’s pressures - labor shortages,increasing material costs, pressures from natural disasters, and generally low profit mar-gins. Though in the past, the industry has been slow in its adoption of innovation and newtechnology development and adoption, these challenges pose opportunities for the indus-try players to maintain a competitive edge. Yet understanding how to overcome thebarriers of new technology development and adoption is important in fostering industrygrowth.

As such, the Partnership for Advancing Technology in Housing (PATH) has been workingto more fully understand the demographics and behavioral factors that go into technologyadoption in homebuilding. Out of that effort, PATH partnered with McGraw-HillConstruction on a year-long project to begin the process of identifying data and researchneeds in the homebuilding markets. It should be noted that this project was not designedto address all of the industry's innovation needs and opportunities; indeed, PATH has otherinitiatives in the broader arena of technological change. Rather, the focus was on study-ing how specific parties in homebuilding gather, assimilate, react and are motivated withrespect to market research and 'intelligence' necessary for technological change.

The core of this work came out of the Symposium on Market Data for Housing Innovation(see page 7), created under this project. Industry experts convened to begin to addressthe challenges to moving new technologies into the market and offer suggestions onresearch areas and action strategies as well as to address some of the role of variousindustry players in that process. This report documents those discussions, findings andrecommendations.

The outcomes of the Symposium and this project have been exciting -- it points to newways to help builders, manufacturers and others overcome barriers to moving innovationinto practice.

Carlos Martín, Ph.D., Office of Policy Development and Research,U.S. Department of Housing and Urban Development and Partnershipfor Advancing Technology in Housing (PATH)

Harvey M. Bernstein, F.ASCE, Vice President, Industry Analytics & Alliances, McGraw-Hill Construction

Table of Contents

3

Introduction........................................................................Letter from Carlos Martín, Ph.D., PATH and Harvey Bernstein, MHC

Executive Summary...........................................................

Setting the Stage................................................................

Market Research Areas to Drive Innovation.....................• Value and Valuation of Housing Technology and Innovation• Performance Measures• Research on Role and Behaviors of Intermediaries• Market Data Collection Methods• Information and Knowledge Transfer

Value of Market Research................................................• Builders• Manufacturers• Intermediaries• Government

Market Research Action Strategies..................................

Existing Research Review...............................................

Acknowledgments............................................................

Conclusions drawn in this report are based on consensus feedback from Symposium attendees and do not reflect the opin-ions of the Partnership for Advancing Technology in Housing (PATH), U.S. Department of Housing and Urban Development(HUD), McGraw-Hill Construction, any contributing author, or anyone providing support to these organizations. McGraw-Hill Construction's role was to organize, facilitate and record proceedings. This project was funded by HUD (cooperativeagreement H-21490CA) and McGraw-Hill Construction.

2

4

6

12

20

24

32

35

The Importance of Market Research inthe Residential Sector

Accelerating the adoption of new tech-nology into housing is an ongoingchallenge, one that is complex anddynamic.

To overcome that challenge, industry,academic and government experts gath-ered together at a national symposium(Symposium) to discuss and clarify theR&D and market adoption process, inter-action and influences of different industryplayers, and patterns of player behavior.

However, that understanding comesonly from sound market research datacollection.

Market intelligence allows governmentand the public sector to successfully influ-ence innovation adoption, and it presentsthe private sector with an unbiasedassessment of the market opportunityand competitive advantage of innovation.Through collaborative market researchstudies, such as those suggested in thisreport, the industry - including builders,product manufacturers, homeowners,government, and a host of other industryplayers - will be better equipped to meetthat challenge.

Historically, the Federal government hasbeen involved in a wide variety of hous-ing-related activities, including "makinghomes more affordable to build, safer tolive in, and less costly to maintain andoperate." Part of these policies hasincluded sponsoring research in housingdesign, construction, and maintenance,and in setting standards for the same.The government has also been con-cerned with barriers that impede furtherhousing development and homeowner-ship.

Market research assistance - includingcoordinating shared investments, edu-cating and disseminating housingparticipants, and reducing local barrierssuch as building codes - could help withnew product market penetration.Additionally, many builders and home-owners make decisions and purchaseswith different levels of information. Theneed for non-commercial, impartialinformation on innovation and the mar-kets for innovation is critical toovercome these asymmetries.

Critical Market Research Areas

There are five critical areas for marketresearch that would greatly facilitate theadoption of housing technology andinnovation. These areas create aroadmap that Symposium participantsbelieve should direct data collection forthe next few years.

Critical Research Areas:

• Value and Valuation of Housing Technology and Innovation

• Performance Measures• Role and Interests of Other

Players or Intermediaries• Information and Knowledge

Transfer• Market Data Collection Methods

“Through collaborativemarketresearch studies, theindustry willbe betterequipped tomeet the challenge ofmoving newresidentialtechnologiesto market.”

4

Executive Summary

Market Research Strategies

There are seven market research strate-gies identified by the Symposiumparticipants that can be employed togain understanding in these criticalareas.

Research Strategies:

• Conduct Research Studies toAcquire Industry Performance and Market Segmentation Data

• Create Product and Process Performance Measures

• Research the Effects of New Technologies on Asset Performance

• Conduct Market Research Studies to Understand How Intermediaries Drive Innovation

• Conduct Market Research on Consumers’ Characteristics, Decision-Making Process, and Motives for Adopting New Technologies

• Conduct Studies on the Acquisition and Knowledge Transfer of Innovation Information

• Develop Business Process Best Practices (Including Success and Failure Information) In Homebuilding Product Manufacturing Sector Applications

The Challenge to Creating MorePublic-Private Sector Research

Collaboration is needed. Manufacturers,builders and homeowners need incen-tives to bear some of the cost and risk ofinvesting in this type of market research.

The challenge described in this reportlies in demonstrating to private sectorparticipants the value participating inthese collaborative research projectsmay have in expediting the introductionof new technologies into the residentialmarketplace.

“Collaborationis needed.Manufacturers,builders, andhomeownersneed incentives tobear the fullcost and risk of investing inthis type ofmarketresearch.”

5

Setting the StageIn 1994, the U.S. White House convenedvarious stakeholders to establish a set of"National Construction Goals" recogniz-ing that the residential building industry isone of the largest and most importantsectors of the U.S. economy.

According to the U.S. Department ofCommerce, the construction industrycomprises the second largest contributorto national GDP (over 8%, behind onlyhealthcare) with the residential marketcomprising more than half of the con-struction industry as a whole - translatingto a market size of $350 billion.

Therefore, it is critical that the barriersto adoption of new innovations in theresidential sector be understood tospeed up this diffusion of new tech-nology to the marketplace.

With this challenge in mind, thePartnership for Advancing Technology inHousing (PATH) was launched in 1998.PATH examines the issues and barriersrelated to technology development in thehousing industry and strives for viablecost-effective solutions. It is dedicated toaccelerating the development and use oftechnologies that fundamentally improvethe quality, durability, energy efficiency,environmental performance, and afford-ability of housing in the U.S. As a result,study has been done in identifying thebarriers to the use of these technologiesand the outlining of the supply anddemand chain for new innovation.

Despite the importance of the housingindustry to the American economy and itsproducts' great market value, there hasnot been much investment in both inno-vative residential technologies andmarket analyses for those innovationscompared to other industries. This isespecially true of the single-family homesthat comprise most of America's housingstock. The importance of this lower levelof innovation cannot be underestimated.

Advances in innovative technologyare widely regarded as major sourcesof improvement in the competitiveposition of firms and industries and

major factors for increased nationaleconomic growth and standards ofliving.

There has been recent work to identifythe barriers to innovation, but one ofthese challenges remains - to identifyand then acquire market data andanalyses that shed light on behaviorsand motives around technology. Thelack of sufficient knowledge about mar-ket drivers for demand of newtechnologies is creating a barrier toadvancing innovation in the housingindustry. Historically, firms have notbeen proficient in creating or adoptinginnovations because either the marketfor an innovative product was not clearor methods to understand marketbehavior were wanting.

Filling market knowledge and behav-ior gaps, then, is one method ofspurring both innovations in particu-lar, and the industry's growth as awhole.

The next critical step is to take the exist-ing and acquired knowledge andidentify research data needs and proj-ects that move beyond understandingbarriers - to understand the behaviorsand motivations to push through thesebarriers and accelerate the adoption ofinnovation in homes.

This report is built off the recommenda-tions and discussions from theSymposium on Housing MarketResearch held in February 2006 (seeright). It reviews the problems associ-ated with firms not fully comprehendingthe behaviors and motivations behinddriving through the barriers to funda-mental technology innovation and offerssome market research solutions toanswering some of the most criticalmarket questions. It includes an outlineof the most critical areas for research,the advantages to different industryplayers, and a set of proposed researchactions.

“The lack ofknowledgeabout marketdrivers fordemand of new technologiesis creating abarrier to advancinginnovation inthe housingindustry.”

6

On February 15, 2006, more than 50 representatives from privateindustry, government, and academia attended the Symposium onMarket Data for Housing Innovation (Symposium), held at the U.S.Department of Energy Headquarters in Washington, D.C. TheSymposium's purpose was to vigorously examine the market datagaps related to housing innovation.

This Symposium was not designed to address all of the industry'sinnovation needs and opportunities; indeed, PATH has other initiativesin the broader arena of technological change. Rather, the focus wason studying how specific parties involved in homebuilding gather,assimilate, react and are motivated with respect to market researchand ‘intelligence’ necessary for fundamental technological change.

As such, the end goal of the Symposiumwas to begin the process of identifyingdata and research needs in homebuildingmarkets by:

• Defining the primary groups involved in homebuilding technological changes and the market data or research that has described them to date.

• Identifying the gaps/opportunities in market data and research for those groups and their most critical elements.

• Justifying the gaps' importance.• Determining whether the public or

private sector should lead in development of the market data and outline the sequence of that development.

• Evaluating the potential impact of the market data, including the policyimplications that each market data opportunity entails.

The three identifiedgroups around whichthe discussion tookplace included ‘manu-facturers’ (above),‘consumers’ (homeown-ers or buyers) (left), and‘builders’ (below).

7

Symposium on Market Data for Housing Innovation

Innovation = Economic Growth

Advances in innovative technology improve the com-petitive position of firms and industries. Technologyadvances are also major factors for increased nationaleconomic growth and standards of living.

In the residential construction industry, evidence hasindicated that innovations, in terms of building materialsand techniques as well as in marketing and associatedservices, are not adopted as quickly and do not spreadas quickly as in some other industries, such as ship-building and automotive manufacturing. Theresidential industry not only suffers from lack of diffu-sion accelerators (Commonly-cited causes:homogeneity, shared 'culture,' strong communica-tions, strong opinion leaders), but it also suffers fromthe presence of many additional diffusion barriers.

Diffusion Barriers

Four broad diffusion barriers to innovation exist in thehomebuilding industry1:

• The high level of risk aversion in the home-building industry caused by low risk bearing capabilities causes a lower level of willingness by industry players to adopt innovations. For example, size and low profit margins can affect the ability of manufacturers to innovate, since their end customers (contractors and sub-contractors) want to avoid the risk of litigation and as a result stick with proven products, applications and processes.

• Industry participant preferences can influence which innovations are pursued and adopted. As a result, understanding the preferences of all industry players, including consumers, who may be influencing innovation (despite previous thought that their preferences are represented by builders and contractors).

• Education of industry players in innovative techniques and practices coupled with communication between these players regarding costs and benefits from these new technologies is essential in moving innovation forward.

• Home building is a fragmented industry. As such, diffusion of new technologies becomes even more challenging to implement. However, many of the challenges posed by fragmentation are addressed by understanding how to overcome the other diffusion barriers.

Definitions and Explanation of Key Industry Actors

The term ‘Innovation’ in this report refers to new products andprocesses for the residential construction sector. Though thetransformation of these products and processes from devel-opment to the market is touched on, the focus here is onunderstanding ways to encourage the demand and develop-ment of such innovations.

The research actions proposed on pages 24-31 require par-ticipation from four categories of industry players:

• Builders: Includes custom, production, and manufactured home builders as well as remodelers, primarily of single-family detached homes

• Manufacturers: Includes large, multi-sector manufacturers as well as smaller, homebuilding-focused innovators

• Intermediaries: Affiliated industry players that influence innovation adoption and includes distributors, suppliers, retailers, realtors, appraisers and media

• Government: Refers to Federal Agency players

8

Setting the Stage

U.S. Single Family Housing Starts Value

170

190

210

230

250

270

290

310

330

2001 2002 2003 2004 2005 2006 2007 2008

Year

$ Bi

llion

s

Source: M cGraw-Hill Construction 2006;

2001 - 2005 represent actual figures, 2006 - 2008 are forecasted values

Homeownership Rates by Region

68.664.7

73.470.4

63.868.7

65.472.5 70.4

64.7

0

10

20

30

40

50

60

70

80

U.S. Northeast Midwest South West

Perc

ent

Second Quarter 2005 Second Quarter 2006

Source: U.S. Bureau of the Census

Existing Information: Scant, Disparate, and Not Detailed

Symposium participants believe that housingresearchers are faced with minimal amounts of dataand data collection vehicles in their attempts to under-stand production in general as well as how existingproduction shapes housing innovation. This lack is par-ticularly acute when examining participant behaviors,motives, and perceptions.

There is also currently a lack of information, literature,and market data for PATH and others in governmentand as well as in industry to truly understand housinginnovation adoption or change. This information,though, is critical when trying to change a complexindustry that includes a wide mix of players, lowprofit margins, and labor shortages.

Private Sector Information

The information that does exist is often proprietary innature and primarily housed within private industrywhere it is available for sale or difficult to access due tothe competitive value it provides to its owner.

Nonprofit industry related organizations provide com-plementary and, oftentimes more comprehensive,information and analysis on housing production andpractices compared to their public counterparts. Withinacademia, organizations performing such work include,but are not limited to, Harvard University's Joint Centerfor Housing Studies and Virginia Polytechnic Institute'sHousing Research Center. Trade associations withthorough and ongoing market research include, but arenot limited to, the National Association of HomeBuilders (NAHB), the National Association of Realtors,

Why Should the Private Sector Care About A Public-Private Research Agenda?

All stakeholders:• Industry-wide data, though hard to justify

internally since it is not linked to specific competitive advantage, could help explain how to move innovation into practice.

• Participation enables positive relations with Federal partners and provides an ability to set research questions

• Collaborative efforts leverage the cost of market research dollars.

Builder-specific:• Data on home technology perceptions directly

impact sales.

Manufacturer-specific:• Information on how builders adopt technology

provides insights for the development and introduction of new innovations.

9

12%

9%

17%

13%

24%

28%

38%

38%

50%

49%

Strongly Agree

Agree

Customers prefer traditional products/construction

Innovative materials/practices cost more

Banks/insurance companies are hesitant to underwrite projects that contain/involve

innovative products

Innovative products or practices tend to be difficult to install/learn

Manufacturers do not provide enough support for innovative

products

73%

63%

55%

47%

40%

Builders’ Top Challenges To Innovation

Source: McGraw-Hill Construction, 2006

and the American Institute of Architects. Lastly,numerous private sector survey instruments and datacollection services exist that usually execute the marketresearch for industry, but who offer some level of pub-licly accessible information. Leading among these areproducts from McGraw-Hill Construction's Dodge dataand analytic information; the NAHB Research Center'sBuilder Practice and Consumer Surveys; Frost &Sullivan; R.S. Means cost data; housing customer sat-isfaction studies by J.D. Power and Associates; andtrade journal surveys in McGraw-Hill Construction,Reed Publishing, Scripps, and Hanley-Wood publica-tions (though this is not a comprehensive list).

Public Sector Information

There are some significant fundamental data collec-tions and analyses provided by the public sector uponwhich much of the industry information is generated.

From the ubiquitous U.S. Census - which includes theCensus-HUD American Housing Survey (AHS) - to theResidential Energy Consumption Survey (RECS),public data sets and analyses provide much insight intoconsumer and commercial practices, and thereby spurimproved commercial practices and increased con-sumption. Along with the AHS and RECS, a variety ofstudies done by Energy Star®, its multiple partners, andState or regional utilities and energy offices shed lighton home consumers. The Census Bureaus' Survey ofConstruction, Survey of Manufacture, and - jointly withthe National Science Foundation (NSF) - the Survey ofIndustrial Research and Development, as well as theNSF's Science and Engineering Statistics all revealinformation about the production side (from manufac-turers to builders and remodelers).

There are shrinking public resources for funda-mental research on housing, let alone for housinginnovation.

In addition to broader issues that offer challenges andopportunities for the industry, funding for direct supportto innovation research is under pressure. Traditionalnongovernmental funding sources for basic andapplied research that might be directed toward innova-tion in home building - philanthropic foundations,university endowments, and other nonprofits - havebeen under financial pressure recently. Much of this isdue to the poor performance of equity markets inrecent years, where most of the assets of these insti-tutions are invested. Government funding for basicresearch through agencies such as the NationalScience Foundation, the National Institutes of Health,and the National Institutional Institutes of Mental Healthare likewise becoming more restrictive on fundinggiven the recent pressures on federal budgets.

Two data sources that are potentially being scaledback, but are particularly important to understandingthe longer-term impact of innovation in home buildingoperations are the American Housing Survey (AHS)and the Residential Energy Consumption Survey(RECS).

The AHS is conducted biannually at the national level,with studies of major metropolitan areas conductedannually on a rotating basis. It is principally funded bythe U.S. Department of Housing and UrbanDevelopment (HUD), was initiated over three decadesago, and tracks a large panel of homes nationally. Withits focus on housing conditions, it is an important anduseful database for helping to evaluate the impact ofhome building innovations on longer-term housing con-ditions, durability, necessary improvement and repairs,affordability, and so forth.

The RECS is a national survey conducted every threeyears across a panel of homes and funded by the U.S.Energy Information Agency. It focuses on energy con-sumption, and it is also an important and usefuldatabase to track the impact of energy investments andconservation measures on home energy consumption.

Additionally, there are several other government spon-sored data efforts that can help with the understandingof the innovation process in homebuilding. The 5-yearConstruction Census undertaken by the U.S. CensusBureau provide useful information on the structure ofthe residential sector in terms of the distribution of thesize of establishments, and the revenue generated peremployee, which is a rough estimate of the productivityof these employees. The quarterly survey of expendi-tures for residential improvements and repairsundertaken by the U.S. Census Bureau tracks homeimprovement activity to owner-occupied as well asrental housing units, activities that generally are over-looked from their innovation potential.

Finally, monthly data on manufactured housing activityundertaken by the U.S. Census Bureau and HUDtracks activity in this important sector. Given the factoryenvironment for the production of manufacturedhomes, there are numerous opportunities for innova-tion in production techniques. Comparable informationin modular home production (homes built off-site butshipped to their site without a chassis like manufac-tured housing) would also be potentially helpful inunderstanding industry innovation.

10

Setting the Stage

Advantages to Industry-Focused Data Collection

By focusing efforts on gaining access to market datathat is more industry-focused rather than product spe-cific, the public sector can serve a need for the entireindustry. Further, it protects proprietary advantage byavoiding product-specific information. As a result, thepublic sector will find collection and partnerships withprivate firms easier to navigate.

With strategic, increased understanding, there is greatopportunity - both economically and competitively - forbuilders and manufacturers but also socially for home-owners, where new technologies can create moreefficient and improved living conditions. The privatesector has an opportunity to implement some projectsthat will not only benefit their bottom line but also willhelp advance the industry’s ability to move innovationmore rapidly into practice.

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Type of Construction Method of New One-Family Houses Completed

0

500

1000

1500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005Year

Num

ber o

f Hou

ses

(in th

ousa

nds)

Other (Includes panelized and precut units)Modular Site-built

Source: U.S. Census Bureau, Survey of Construction, Characteristics of New Housing 1992-2005

Limitations of Existing Data

Despite this somewhat extensive listing, two pointsshould be noted:

1) The level of detail needed to understand obstacles and drivers to innovation adoption is insufficient (particularly when looking at some physical conditions of homes and home production practices).

2) Many of these are not ongoing or have decreased resources to perform their work. As such, Symposium participants recommend not only expanding the kinds of data they specified as needed, but also ensuring continuation of core, more generalized data sources.

Number of New Single-Family Houses Built by Each Builder

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000 60000

100 - 499

25 - 99

10 - 24

5 - 9

1 - 4

Total

Num

ber o

f Hou

sing

St

arts

Number of Builders

Source: U.S. Bureau of the Census, The date in this table are based on the 2002 Economic Census. To maintain confidentiality, the Census Bureau suppresses data to protect the identity o f any business or individual. The census results in this chart contain sampling and nonsampling errors.

Gaining additional market research information provides insights into the barriers and obstacles facing innovationdevelopment and market adoption. Ultimately, the result of increased innovation is increased competitive advantagesto individual firms and overall value to the U.S. economy.

In order to focus efforts in the most critical areas, experts (see page 5) propose directing market research over thenext five years around five areas:

• Value and Valuation of Housing Technology and Innovation• Performance Measures• Research on Role and Interests of Other Players or Intermediaries• Information and Knowledge Transfer• Market Data Collection Methods

Work on these five areas will have the greatest impact in gathering this important information. Below are descriptionsof these research areas (pages 12-19, followed on pages 20-23 by the value of research in these areas to key stake-holders: builders, manufacturers, intermediaries and government (see page 8 for definitions of these groups).

Importance of Research to Public The government has a unique role with regards to market intelligence - they are both a user of data and analysis forpolicy formulation as well as a generator of data and analysis either through funding, coordinating, and/or executingthat market research work. Because of these multiple activities, it is critical to revisit the context within which hous-ing statistics in general - and housing technology and industrial practice statistics in particular - are generated.

All five target initiative areas outlined in this section require necessary public interventions due to the competitivenature of private sector research results, which are not always available in the public domain.

Despite housing's importance in individual lives and family outcomes, it is a social phenomenon. More than almostany other industry, it deserves efficient public interventions that neither change regulations nor require ongoing pub-lic funds. Funding of preliminary market intelligence is one such intervention.

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Understanding the perceived value of housing tech-nology and innovation is necessary to overcomeexisting barriers to innovation. Specifically, Symposiumparticipants identified three types of perceived value toinvestigate:

• Consumer valuation • Builder interpretation of value to projects• Builder perception on consumer valuation.

The various industry players will use data on one or allof these according to varying degrees of importance.

Why This Research Area Is Important

The home building industry and consumers are reluc-tant to embrace innovation due to the little objectivepublic information documenting the full benefits of aninnovation. Little is known about how well constructionproducts or processes perform over the lifecycle of a

home. While the first cost of an innovation often can beestimated, the final cost of an innovation - to help deter-mine its full benefit - often is missing. One reason forthe success of the government's Energy Star® programis that it gives consumers clear information on theongoing energy consumption of products.

Builders and homeowners make decisions and pur-chases based on different levels of informationavailable to them. The more market research that isavailable in the public domain, the easier it is for firmsto weigh the risks and rewards of investing in innova-tion. Lack of this information adds risk to the decisionand generally leads to more conservative, time-testedresults.

As a result, the information gained from housing valu-ations would directly benefit all firms.

Market Research Areas to Drive

Market Research Area:Value and Valuation of Housing Technology and Innovation

13

Public Value

The public value of research directed toward technol-ogy valuation stems directly from public interest inimproving the condition of American housing (throughincentives rather than regulation, to the greatestextent possible) and from decreasing the costs of hous-ing in order to increase the number of households inactual housing.

Knowing whether changes in production and productscan alter the cost structure and, in turn, demonstrateimprovements in the quality and/or increases in thequantity of homes is critical to all of the governmentalprograms that have either of these as a goal.Moreover, the simple measurement of that valuation iscritical for creating industrial incentives - therebyspurring further cost considerations without additionalpublic resources.

Current Data Information

Databases, particularly longitudinal data bases, thatprovide information on housing quality and character-istics, energy consumption and efficiency, andmodifications to the housing stock that affect their per-formance and cost of operation, are critical resourcesfor the development of these performance metrics.Some publicly-funded databases, such as the AHS andRECS, are rich and reliable. However, industry datasources also are available that have not been fullyused to evaluate the longer-term impact of home build-ing innovations, and have the potential to supplementgovernment efforts.

Data Needed from Manufacturers

Data from the manufacturers' perspective is needed,though not demographic in nature. Rather, manufac-turers' willingness to share some data on their productsand the processes involved in the manufacturing ofthose products would help overcome industry barriers.

Those manufacturers that are successful in demon-strating the data on how homes with new technologiesperform and lead to increased home values will havean easier business case for innovation.

Potential Actions

Developing an effective monitoring system for assess-ing the impact of innovations is a three-step process: 1) A systematic review of publicly available data

sources to identify data items that can help to assess the long-term impact of innovation in home building.

2) Identification and review of private data sources that can supplement public data sources in this effort. Because private sector historical data may be perceived as having less value than recently collected data, providers may be willing to put it in the domain at a more modest price. The willingness and costs of accessing private sector historical data sources needs to be assessed to combine with public domain data.

3) Identification of the gaps in required information and creation of a strategy for filling these gaps. Adding a few data items to existing surveys often can fill an existing data need. In other cases, a new data collection effort will need to be considered.

Supplemental information may be needed to developthese performance metrics, such as having productmanufacturers document the performance of a productover its life cycle or having an outside testing and doc-umentation agent assemble the information over thelife-cycle of the home, in effect creating sort of a"Consumer Reports" for the home building industry.government agencies may need to provide incentivesfor this effort.

Innovation

Percentage of Sampled Production Home Builders that Rank Specific Technology

Benefits as "High" Over the Last Five Years

23%

23%

23%

25%

35%

41%

42%

45%

46%

64%

Reduced build time

Decreased costs of building

Increased profit

Helped comply with codes and regulations

Increased productivity

Created image as an innovative builder

Reduced call-backs

Increased competitiveness

Helped meet customers' expectations

Increased quality of homes built

Source: Koebel and Cavell, "Characteristics of Innovative Production Home

Not only is there no comparable information abouttechnologies' performance, but also there is no uniformbenchmark or standard practice for how home buildersadopt technologies or how manufacturers innovate.


Specifically, the creation of an industry performancemeasure can outline the advantages and added valueof innovation to builders' and manufacturers' bottomlines. Though there are a number of challengesinvolved, establishment of new measures will helpmake the business case for new technology develop-ment and the advantages transparent to the market.As a result, more industry players will be able to justifyexpenditures for new innovation research and devel-opment.

By establishing performance metrics, the homebuildingindustry would be able to set a standard and create alevel playing field - the result being information relevantacross stakeholder groups.

Public Value

Probably no greater problem exists in trying to under-stand how innovation has affected residentialconstruction than the near impossibility to measuredefinitively the impact of these innovations on industryperformance.

To date, the industry has not been able to create per-formance metrics. This is likely due to two causes.The first is that there are no incentives for any one firmto take on such metrics and, as such, public interven-tion is required to provide for the common good. Thesecond is the fact that extreme competition in theindustry prohibits virtually all collaborations - particu-larly with regard to manufacturers' operations (thoughdeterrents to proprietary exchange appear to be mini-mal). A neutral, non-regulatory third party such aspublic research and incentive programs fill in thesegaps nicely.

While the public interest is served by both spurringmarket intelligence that might increase industrial R&Das well as evaluate other governmental programs, theneed for government to produce such investigations

14

Market Research Areas to Drive Market Research Area: Performance Measures

also stems from its role as a common arbiter. Reliable,unbiased, and easily available information on homeperformance and industry productivity can only be pro-vided by the public sector - though with significantindustrial assistance.

Current Data Information

Conflicting estimates exist on the direction of trends inproductivity in the construction sector, given that theBureau of Labor Statistics does not compute produc-tivity in this large and important sector of the economy.Productivity measures the relationship between laborinputs and output, and in the case of construction, bothsides of this computation presents challenges.However, the lack of precise measurement certainlyinhibits innovation, since it is nearly impossible toassess the overall impact of innovations without know-ing how productivity is changing.

A commonly held perception is that productivity gains inconstruction have been low (or nonexistent) over thepast several decades. Serious efforts to measure pro-ductivity trends in construction have not generated aconsensus. (See for example Allmon, et al., 2000, andTeicholz, 2001.) The lack of a consensus of productiv-ity in the industry almost certainly colors theperceptions of innovation in home building.Construction productivity studies have proven prob-lematic in part because they have used aggregate datathat often contains serious measurement flaws. Anexample is the measured amount of home improve-ment activity in the U.S. Two government surveys - thequarterly survey of residential improvements andrepairs and the biennial American Housing Survey -generate estimates of homeowner improvement activ-ity that were recently estimated by the U.S. CensusBureau to be about $40 billion or 48% different. Whilesome of the difference was due to varying definitions,much of it could not be explained (Rappaport and Cole,2003). The magnitude of these differences in outputmakes any effort to measure home improvement pro-ductivity suspect.

Total Btu Consumption Per Household by Census Region

106.6116.7

70.1

92.2 82.5

0

20

40

60

80

100

120

140

Total West South Midwest Northeast

Mill

ion

Btu

per H

ouse

hold

Source: Source: Energy Information Administration, 2001 Residential Energy Consumption Survey (RECS): Household Energy Consumption and Expenditures Tables

15

Innovation

Data Needed from Industry Players

Intermediary Data: Needed by Manufacturers

Among intermediaries, data are needed on what kindof technologies suppliers and retailers are buying andthe value added at each delivery stage. Without the fullunderstanding of these affiliated players (or intermedi-aries), understanding about innovation adoption will beincomplete. Understanding the role intermediaries playalong the delivery cycle is important in creating a com-plete picture of the performance measuresmanufacturers require to convey superior performanceand advantages of their technologies.

Consumer Data: Needed By All Industry Players

Understanding consumers' decision-making processesand characteristics will help builders, manufactures,distributors, retailers, and other intermediaries gainmarket advantage and improve their customer satis-faction.

Builder Data: Needed by Intermediaries, Manufacturers, and Builders

Both these intermediaries and manufacturers needmarket information on builders with regard to eachstage of the supply chain, specifically what builders arebuying, how much they are purchasing, and the valuethey assign at different stages. Attitudes and prefer-ences of builders are important since they have been aprimary innovation driver, and they must be involved inany research or understanding of performance meas-ures.

Potential Actions

The development of a database would allow the calcu-lation of overall productivity in the residential sector,facilitate the analysis of trends at different stages in thebusiness cycle, as well as permit comparisons acrosskey housing segments (e.g., production housing con-struction, custom housing construction, high-risemultifamily construction, improvements to existinghousing). Such measures would give industry leadersas well as policy makers better insight into the directionof the industry and whether innovations, in aggregate,are producing desired results.

Developing reliable information on productivity in resi-dential construction is a significant undertaking.However, while detailed information on labor produc-tivity in all phases of construction is the ultimate goal ofthis initiative, any reliable information on productivitylevels for any type or facet of construction is an impor-tant start.

The kinds of metrics in question, though, is expansive;these might run the spectrum from the physical andengineering performance of building systems andwhole houses, to operational performance of home-building firms, to the research and developmentactivities of manufacturers. For example, a set of bestpractices regarding improved business operationswould allow for an evaluation of how home buildingproduct manufacturers and home builders are doingcompared to competitors and other industries. Thecreation of an industry performance measure can out-line the advantages and added value of innovation tobuilders' and manufacturers' bottom lines. Thoughthere are a number of challenges involved, establish-ment of new measures will help make the businesscase for new technology development and the advan-tages transparent to the market.

Percentage of Energy Consumption per Household (National)

Electric Air Conditioning

8.1%

Water Heating16.6%

Other Appliances

and Lighting23.7%

Refrigerators5.3%

Space Heating

46.3%

Source: Energy Information Administration, 2001 Residential Energy Consumption Survey (RECS):

Household Energy Consumption and Expenditures Tables

16

Numerous other players beyond consumers, builders,and product manufacturers are having or can have pro-found impacts on influencing housing innovation.Understanding these players' motivations and roles cancreate further mechanisms for leveraging increasedtechnology diffusion.

These other players (or intermediaries) fall into fourmajor categories:

• Technological: subcontractors, installers• Distribution: dealers, suppliers, retailers• Informational: media, retailers• Financial: realtors and appraisers

Intermediaries influence industry players in a number ofways:

• Builders may be influenced by intermediaries such as subcontractors and installers, who would have to work with the new technologies. Because builders are so risk-averse and perceived as the 'face' of the home building process to the consumer, new technology selection and installation needs to be done correctly.

• For consumers, a influential intermediaries include realtors, media and appraisers just to name a few.


Information of other players’ influence and behaviors isvery limited. However, these industry players can havea profound effect on the supply-demand for new prod-ucts and technologies. As such, understanding thedemographics of these payers and how they interactwith builders, manufacturers, and consumers will shedadditional insight into innovation adoption processes. It

is also important to study their own perceptions andvaluation of innovation in order to understand andinfluence their behaviors.

Public Value

Insight into the role of intermediaries directly shapesthe industry’s ability to predict costs and sales - and,therefore, the ultimate costs of producing and pur-chasing homes. Yet, because of the industry-widenature of the research that could result from thisresearch, collaborative work among private industryfirms - with the public sector as convener - might be agood solution.

Potential Actions

Symposium participants (see page 7) were not awareof individual firms doing this work likely due to theindustry-wide nature of this research. Conducting jointresearch could yield results that might spur changes inintermediaries' practices in the same ways that studieson homebuilder productivity and manufacturing effi-ciency improve those.

Such changes could include:• Improvements in subcontractor and installer

training • Expedited dealer and supplier transactions that

lead to improved market choices • More extensive media and retail providers for

builders and consumers• Corresponding restructuring and reductions of

mortgages and insurance premiums based on technological improvements

• Reduced regulatory barriers to innovations in code adoption and enforcement

Market Research Areas to Drive Market Research Area:Role and Interests of Other Players or Intermediaries

The challenge and proposed research recommenda-tion highlighted below is just one example of potentialresearch on increasing understanding of how interme-diaries influence the industry in terms of innovationadoption.

Innovation

17

Example of a Current Production Change:Increased Use of Installation Services

One example of a current production change thatrequires public analysis is the increased use of instal-lation services. an increasing number of builders areusing installation services from their distributor andmanufacturer suppliers. Research from the HarvardDistribution Study (Joint Center, 2006) has determinedthat, although it varies considerably by product line,somewhere between a third and two-thirds of productspurchased by larger builders (those that build 500homes a year or more) are generally purchasedinstalled, meaning that the product and installation arepurchased together.

As common as this practice is becoming among certaintypes of builders and in certain areas of the country, lit-tle is known about the implications of this growingpractice on construction cycle time and quality, com-petitiveness, labor needs, construction costs, supplychain integration, liability issues, and more generallythe risks and rewards of having suppliers moreinvolved in on-site construction. It may, in fact, be asubtle change where suppliers are absorbing subcon-tractor management responsibilities, or it may be thebeginning of a more significant change in liabilityassignment and industry structure.

While it appears that supplier installation for homebuilding and potentially even home remodeling is thewave of the future, little is known about the implicationsof this shift in the production process. An industry/gov-ernment partnership could significantly enhance thediffusion of this process. However, the costs and ben-efits of supplier installation to the industry and to theeconomy are not well known. More focused analysis ofthis activity would inform decision-makers on itsbroader implications.

An evaluation of the benefits and costs of supplierinstallation programs for a range of different construc-tion products is best undertaken with a field researchstudy. Product manufacturers, distributors, and buildersand contractors should all be involved in the study. Acomparison of supplier installation with traditionalbuilder crew/subcontractor installation would coverissues such as the following: efficiency of on-site instal-lation (e.g., installation time frame, labor hours requiredfor installation, total costs of installation); efficiency ofsupply chain integration (e.g., required inventory levels,communication and ordering issues, supply chain effi-ciencies); warranties and product liability issues; andlife-cycle costing issues for products that are supplierinstalled.

18

Market Research Areas to Drive

Beyond barriers, it is critical to understand how infor-mation is transferred to those who will adopt the newtechnologies. Though study has been done on identi-fying barriers to innovation, there remains a gap inunderstanding how users actually get information.


In order to knock down barriers to innovation, itbecomes essential to understand the different learningprocesses of consumers, builders, manufacturers andothers. It is not only important to understand how usersof innovation learn about and incorporate informationon new technologies, but also how manufacturers learnabout and absorb market feedback.

Specific Areas Needing Understanding:• Behavioral motivations (how to change a

mindset): This information is important because it gets to the heart of changing those behaviors and influencing adoption rates and numbers.

• Data receptivity: Understanding how receptive technology purchasers (e.g., consumers, builders) are to new information is necessary as well as how much data can be absorbed and actually used.

• Ability to implement: It needs to be better understood whether consumers or builders areable to implement new technology as well as how that technology is used. The result is an improved ability to tailor new information.

Participation Needed from Industry Players

This work is clearly of interest not only to manufactur-ers and home builders who are in the business ofselling product to consumers, but also to those mediaand sales channels whose business it is to serve as theinformation conduits.

Sharing of information and greater transparency levelsthe playing field and makes the industry as a wholemore productive. Firms then have additional informa-tion they can use effectively to plan strategically.

This is one area in which the private sector is clearlymore effective than the public sector, but one wherepublic sector involvement may ensure a non-commer-cial nature to information that may help benefit theindustry as a whole.

Public Value

As users of information, research in this area is partic-ularly important. Getting insight into the behaviors,motives, and actions of consumers, in particular, isessential for governmental programs involved in mar-ket transformation. Once achieved, this knowledge ispassed on to industry forces attempting the same.

Potential Actions

The issues surrounding content and quality of informa-tion is a particular concern, and one in whichgovernment can play an active role. These include thelevel of information detail that is needed for a decision-maker to be able to pass judgment, as well as themanner in which it is delivered (i.e., in the form of mar-keting or sales information versus unbiased technicaldelivery).

In numerous focus groups for PATH's ToolBase infor-mation resource, builders and remodelers (as well asmany architects, homeowners, and other homebuildingparticipants) have demonstrated that they have veryspecific needs and questions about innovations.

Generally, smaller-scale innovators do not developadequate materials for these decision-makers. Havingunbiased, clear, and readily accessible information isnot only critical but absolutely necessary for a technol-ogy to be introduced to decision-makers, to beconsidered, and to be decided upon.

As we move forward in collecting accurate information,it must be research-based. Because intellectual prop-erty and proprietary interest can be a barrier, it may benecessary to look beyond specific product innovationknowledge transfer. For example, research on howhomeowners interpret and learn about energy-efficienttechnologies would help the entire industry and issuited for multi-client studies. On the other hand,research on knowledge transfer for a specific energyefficient product (such as an HVAC system) would holdgreater value for one manufacturer due to the informa-tion’s competitive advantage.

It will also be important to capture different channels forinformation dissemination, ways of thinking and learn-ing about technology, and rates of efficiency.

Market Research Area: Information and Knowledge Transfer

19

Innovation


Data collection methods should be standardized toallow for data comparisons and easier analysis ofknown information. In order to make research and datacollection most useful, consistent standards of studyneed to be identified and developed. Consistent datacollection and new analysis methods will allow for moreefficient data collection, comparison, analysis, andresults.

Public Value

Because of sensitivities to proprietary, product-specificintelligence that firms - specifically manufacturers - willnot want to divulge, it is important that researchers(governmental, independent and academic) work withindustry to develop standards for non-product specificintelligence that will benefit the industry without takingaway the competitive market advantage of innovation.This partnership expands the warehouse of knowledgethat serves the broader marketplace, helping spurincreased activity.

Current Data Methods and Sources

There are currently a number of market research meth-ods and strategies being employed by a number ofresearch groups (academic, governmental and private)to understand better the housing marketplace.Methods employed include surveys (via web andphone), focus groups, and interviews. Research isoften oriented around market projection, marketdemand and opportunity, customer satisfaction, brandawareness, and market drivers. There is existingresearch that new research can leverage. For exam-ple, under this project, McGraw-Hill Construction usedits annual survey of home builders to acquire someadditional market information (shown below and onpages 9 and 13).

Potential Actions

Current data collection methods have relied heavily onsurvey mechanisms that rarely allow for easy compar-ison, and because of industry fragmentation,development of statistical methods is difficult.Researchers need to use broad-based partnerships todevelop better research instruments and find ways toeffectively use existing studies (such as the AmericanHousing Survey).

Market Research Area:Market Data Collection Methods

90% 90%85%

81%

58%

68%

87%

74% 76%

55%

48%

37%44%

33%

55%

Media Sources Store Sources Internet Sources Other Sources Professional Sources

Getting Ideas Finding Products/Services Managing Projects

Main Categories of Sources Used for Different Tasks

Source: McGraw-Hill Construction, 2006

Performance Measures

Builders will find great value in this information. It willhelp them gauge the market and provide beneficialend-user information that they can then use to capturebenefits of technology integration. Builders should con-sider funding more research of this type and being anactive participant in research initiatives.

Builders need benchmarks and performance standardsthey can use in selection and use of new technologies.In particular, they need to encourage this research inorder to identify useful technologies more easily.

Research on Role and Behaviors of Intermediaries

Builders will greatly benefit from increased under-standing of intermediaries. This research is a criticalunknown link in the innovation chain. Builders shouldbe especially interested to know how suppliers and dis-tributors are sharing information, motivated, and howthey might be hindering or encouraging innovation

adoption. This study shouldbe one which builders fundand actively support.

Information and KnowledgeTransfer

Builders can use this informa-tion to formulate appropriatedissemination and marketingstrategies. Transparency andawareness of how knowledgetransfers and benchmarkingwill help increase the rate oftechnology adoption and cre-ate market awareness of newproducts.

BuildersBuilders are often seen as the key influencer of technology adoption in the residential construction industry, drivingthe market value of such technologies. They influence both homeowners and manufacturers at driving trends in newproducts, materials, and processes. Below are the market research areas outlined on pages 12-19 above, with spe-cific detail on how this research will benefit builders.

Value of Market Research

Assembly-Line-Produced Houses: One Example of Builder Innovation

Pulte Home Sciences (PHS), the research-and-development arm of Pulte Homes,has been experimenting with production line manufacturing of modular housing. In anew plant, they are using digital design data to drive a production line, house byhouse. This process consists of concrete forming set-up equipment to produce base-ment/foundation walls and machines to fabricate steel studs from flat stock. It drivesmachines to create structural floors and panelized interior and exterior walls withopenings for doors, windows and utilities. Parts come off the line grouped for eachhome, and the plant can switch designs with the press of a button.

The computer-assisted manufacturing technology that sets up and drives themachines allows each home in the line to vary from others in the chain. The result isstiff floors, wide spans, high R-values and fast construction. New software was alsodeveloped to convert architectural design into engineered construction data that couldautomatically drive component-producing machines.

Source: Tom Sawyer, “Demand Drives home builders to Build Fast and Innovate,” ENR, January 2/9, 2006

20

Each market research area requires participation from the four key actors listed on page 8. However, the variousareas have different priority levels and value to these four players. Below are a summary of how the differentresearch areas could benefit these groups.

Value and Valuation of Housing Technology and Innovation

Builders may be underestimating the demand of theircustomers (homeowners and homebuyers) for newtechnologies. Generally risk-averse, due to low profitmargins, some home builders (particularly smallerones) are cautious to adopt new technologies orprocesses. Some builders, though, have had greatsuccess with new innovation (see one example below).

Builders may also consider themselves the sole driversof new technology. With increased understanding ofconsumer opinion, builders will be able to match theirperceived valuation with true market value, thus mak-ing decisions about innovation based on sound data.

If builders understand even better the increased valueof homes with innovation features, they will be morelikely to promote their use of new technologies. Thisresearch could help shed light on how builders canmarket homes and new technologies more effectivelythan is already being done by some.

21


Manufacturers, the chief suppliers of new technologies,need quantifiable market data to justify increasedinvestment in new technology development and per-haps even more importantly, marketing and supportingthird-party promotion of new innovations. By perceivingmarket interest and attributing revenue and competitivegains as a result of innovation, manufacturers will bemore inclined to support the marketplace and increaseefforts to drive demand.


Manufacturers will be the primary users of most of thisinformation. It is critical in justifying expenditures andrisk involved with the development of new technologyand innovative processes.

Manufacturers should also consider investing in thisresearch because its results could also transform theways builders see the supply-demand chain and mayspur demand for new products.

Research on performance measures would allowmanufacturers to compare their performance with theircompetitors and within the marketplace through under-standing the full cycle of product delivery.

This research would help manufacturers because itwould be a non-biased source of intelligence manufac-turers could provide to their customers, who typically donot trust individual manufacturers to be objective aboutthe advantages of their products and services.

Furthermore, understanding the motivations and buy-ing decisions of consumers and builders will helpmanufacturers better understand the end user andwhether they are a viable direct customer channel.

The results could help create strategies to increaseinnovation adoption. The EnergyStar® program is anexample of how some consumer preference data canbe used to change buying habits and create marketsfor new technologies. Delving more into broad innova-tion drivers could have the same effect.


Manufacturers could use this data to effectively influ-ence adoption of their products and lower risk into newresearch and development efforts.

Information and Knowledge Transfer

Manufacturers can use this information to formulateappropriate dissemination and marketing strategies.Transparency and awareness of how knowledgetransfers and benchmarking will help increase the rateof technology adoption and create market awarenessof new products. In the example of the manufacturing'best practices,' manufacturers benefit from learningfrom their mistakes and successes.

ManufacturersManufacturers, or the innovators, perform two important roles (accelerator functions) in the innovation process: (1)reduce risk by providing information, and (2) generate demand through advertising and consumer-oriented com-munications. Manufacturers provide information about the product, and in many cases, they also provide the trainingrequired to use the product efficiently. These two factors, information and training, are a constant and a necessarycondition in all successful innovations.

Below are the market research areas outlined on pages 12-19 above, with specific detail on how this research willbenefit manufacturers.


Housing intermediaries require data on how the insur-ance and mortgage industries measure risk and howthey find data and information. As a result, intermedi-aries - from retailers to real estate agents to suppliersto contractors - will benefit from understanding howtechnologies lead to increased value.

IntermediariesMany industry leaders acknowledge the role affiliated industry sectors, such as realtors, appraisers, retailers and dis-tributors play in influencing innovation adoption rates. Though very little is known about the exact role and influencethese players have on innovation adoption, it is clear that they play a significant role influencing consumer behavior.More than ever, retailers such as Home Depot and Lowes have become the major educational conduit for home-owners.

The role of such builder intermediaries, such as suppliers and distributors, can also be included under this umbrellasince they are key stakeholders in builder information. Dealers/suppliers serve as the intermediaries in the supplychain delivering new products to the builder.

Below are the market research areas outlined on pages 12-19 above, with specific detail on how this research willbenefit intermediaries.


Intermediaries themselves may gain an understandingof the value they add in a changing industry - particu-larly given the consolidation among both themanufacturing and homebuilding circles and theincreased presence of retail competition. As key mem-bers of the distribution chain for new technologies fromproduct design and manufacture to the marketplace,understanding how this knowledge flows is importantfor strategic planning purposes.


Intermediaries can learn to filter information more effi-ciently. This information will enable intermediaries togain power in order to influence the innovation market-place. As key members of the distribution chain fornew technologies from product design and manufac-ture to the marketplace, understanding how thisknowledge flows is important for strategic planning pur-poses.

22

Value of Market Research

Intermediaries in Action:Below: A supplier/distributor has an impact on buildersBelow Right: A realtor has an impact on consumers

23


The public value of research directed toward technol-ogy valuation stems directly from public interest inimproving the condition of American housing (throughincentives rather than regulation, to the greatestextent possible) and from decreasing the costs of hous-ing in order to increase the number of households inactual housing.

Knowing whether changes in production and productscan alter the cost structure and, in turn, demonstrateimprovements in the quality and/or increases in thequantity of homes is critical to all of the governmentalprograms that have either of these as a goal.Moreover, the simple measurement of that valuation iscritical for creating industrial incentives - therebyspurring further cost considerations without additionalpublic resources.


Probably no greater problem exists in trying to under-stand how innovation has affected residentialconstruction than the near impossibility to measuredefinitively the impact of these innovations on industryperformance.

While the public interest is served by both spurring mar-ket intelligence that might increase industrial R&D aswell as evaluate other governmental programs, theneed for government to produce such investigationsalso stems from its role as a common arbiter. Reliable,unbiased, and easily available information on homeperformance and industry productivity can only be pro-vided by the public sector - though with significantindustrial assistance.

GovernmentThe government's role in market intelligence is that of a user of data and analysis for policy formulation as well as agenerator of data and analysis either through funding, coordinating, and/or executing that market research work.Because of these multiple activities, it is critical to revisit the context within which housing statistics in general - andhousing technology and industrial practice statistics in particular - are generated. Then, a review of the primarythemes for data collection presented in the Symposium can be viewed with regard to public sector involvement.

Below are the market research areas outlined on pages 12-19 above, with specific detail on how this research willbenefit government.


Insight into the role of intermediaries directly shapesthe industry’s ability to predict costs and sales - and,therefore, the ultimate costs of producing and pur-chasing homes. It also allows for better understandingof how government regulations impact the level andcost of construction

By explicitly measuring the potential impact of the per-mitting process, building codes, and land-userestrictions or innovations, there will be a better knowl-edge base on the ways these processes canencourage or discourage innovation. It would thenhelp policy makers to identify those provisions and pro-cedures that are particularly conducive to encouragingmore innovation (or those that discourage it).


As users of information, research in this area is partic-ularly important. Getting insight into the behaviors,motives, and actions of consumers, in particular, isessential for governmental programs involved in mar-ket transformation. Once achieved, this knowledge ispassed on to industry forces attempting the same.

Market Research Action The areas Symposium participants proposed which were outlined above comprise the recommended key marketresearch topics. In order to build on those needs, the participants identified seven research action strategies aroundwhich industry players can engage to increase market understanding about the challenges of innovation developmentand implementation.

These proposed market research strategies are:• Conduct Research Studies to Acquire Industry Performance and Market Segmentation Data• Create Product and Process Performance Measures• Research the Effects of New Technologies on Asset Performance• Conduct Market Research Studies to Understand How Intermediaries Drive Innovation• Conduct Market Research on Consumers: Characteristics, Decision-Making Process, and

Motives for Adopting New Technologies• Conduct Studies on the Acquisition and Knowledge Transfer of Innovation Information• Develop Business Process Best Practices (Including Success and Failure Information)

In Homebuilding Product Manufacturing Sector Applications

On pages 25-31, each proposed strategy is discussed, including descriptions of each and why they are important toindustry players. Additionally, each strategy area contains a roadmap, which includes potential action, priority levels(ranked low, medium and high in order of importance to furthering understanding), proposed funding sources (pub-lic, private, or public-private (joint funding by private and public sources)), as well as tentative timeline for taskcompletion.

Main Heating Equipment for Owner Occupied Units

Warm-air furnace66.6%

Electric heat pump11.5%

Steam of hot water system10.8%

Floor, wall or other built-in hot-air units

without ducts3.2%

Room heaters with flue1.1%

Other1.2%

Built-in electric units3.0%

Room heaters without flue

1.4%

Stoves1.2%

Source: American Housing Survey for the U.S. in 2003,

U.S. Department o f Housing and Urban Development and U.S. Census Bureau

Main Reasons for Choice of Present Home for Owner Occupied Units

21.9%

4.3%

4.6%

5.7%

7.1%

11.6%

22.2%

22.7%

Other

All reasons equal

Exterior appearance

Quality of construction

Yard/trees/view

Size

Financial reasons

Room layout/design

Source: American Housing Survey for the U.S. in 2003, U.S. Department o f Housing and Urban Development and U.S. Census Bureau

24

Strategies

Proposed Action RecommendedPriority

201020092008

1.1 Create a Stakeholder Consortium• Invite appropriate experts• Use group to identify data gaps

1.2 Aggregate Existing Information• Collect and organize existing

information• Leverage off existing data• Analyze existing data

1.3 Map Market• Use Consortium to take existing

results and map out market

1.4 Acquire Needed Data• Identify data gaps• Acquire additional data using

appropriate survey mechanisms and partnering

Medium Public-Private

High

High

High Public-Private

Public

Public

Research Strategy:Conduct Research Studies to AcquireIndustry Performance and MarketSegmentation Data

Manufacturers presently have limited public sources ofavailable residential information which produces abreakdown at each stage of the supply chain. Theyneed information on who is buying, how much they arebuying, which products they are buying, and what valueis added at each stage of delivery. Federal governmenthistorical and continuous industry performance dataand industry segmentation/ market mapping data willalso contribute data on homebuilding industry perform-ance.

Manufacturers want to be able to follow products fromupstream raw materials and component suppliersdownstream, through pre-assembly and batching, tosite installation and first-use by homebuyers. Beyondsales numbers, manufacturers would also be interestedin reasons and motivations behind those numbers.Understanding market drivers behind sales will thenlead to forecasts that will allow fine-tuning of productionand product planning.

The research is critical, most significantly to manufac-turers but also to builders and consumers. It will bringhomebuilding product manufacturers closer to the cus-tomer, ultimately making them more competitive asindividual organizations and as an industry. The infor-mation will reduce risk and, because of efficiency,should increase overall affordability of housing.

Federal government historic and continuous industryperformance reporting may be the most useful substi-tute for 'real-time' activity tracking. In addition, productmanufacturers will want case studies and survey infor-mation, as well as specific analysis to answer detailedquestions. Purveyors of information related to home-building markets already use government information,or information from other organizations and sources, tobuild upon and derive specific interpretations.Therefore, market segmentation by industry, conductedcollaboratively or independently by industry, will logi-cally follow and build upon the initial federalgovernment data collection effort.

2006RecommendedFunding Source

Why Should Manufacturers Want to Participatein This Research?

• Provides justifications for risk in fostering new technologies

• Offers critical mapping information to understand market drivers to increased sales

• Brings them closer to customers, increasing competitiveness

2007

25

Why Should Manufacturers Want to Participate inThis Research?

• Creates increased opportunity for unbiased analysis and objective third-party verification which builders often use to supplement manufacturer product information

• Provides a way for innovators to gain market advantage

• Can provide justification for R&D investments into new technology development

Research Strategy:Create Product and Process Performance Measures

Reflecting the need for greater access to performancedata from objective sources, Symposium participantsstress the importance of third party verification andpublicly available data that would allow comparisonsamong products, including building code and installa-tion requirements (including ease and cost ofinstallation and the relationship between installationlabor and product performance).

Presently, manufacturers with building products andmaterials with long-term superior performance, such asimproved disaster resistance or durability, are disad-vantaged because it is difficult to communicate thesebenefits to builders and potential home buyers. Theperformance information needed spans the entire cycleof product delivery (lab - production - delivery - distri-bution - installation - post installation).

It is important that the benchmarks and ultimate infor-mation delivery system be provided or managed by acredible, third party because builders do not rely onmanufacturers for objective evaluations andproduct/process comparisons.


20102009

2.1 Review current evaluation programs on diffusion and adoption processes• Analyze current programs• Develop alternative models

2.2 Document private data sources

2.3 Establish alternative research methods• Outline limitations of surveys• Create methods for research and

data collection aligned with goals

2.4 Create independent information broker for results

High Public-Private

Medium

High

Low

Public-Private

Public

Public

26

2006RecommendedFunding Source

2007

Potential Questions for Survey Instruments

• What information currently exists quantifying product and process performance?

• What is the price/time on market of new technology?

• What are the value, cost and benefits of new technologies?

• What are other data collection methods possible for use?

• How is profitability measured? How profitable are current innovations?

• What areas have the greatest opportunity for improvement?

Market Research Action

2008

Research Strategy:Research the Effects of New Technologieson Asset Performance

Data on houses that contain new technologies andthe performance of those houses, both from a safetystandpoint as well as the resale value, will helpacceptance of new technologies provided that thedata support better safety records, more efficientoperation of the house (lower costs of operation), andhigher resale values. Additionally, consumers may bemotivated to adopt new innovations if there is quantifi-able data on how these technologies can improve theperformance of their homes.


• What consumer reports exist for products andperformance?

• What are the most important products and elements of product performance to consumers?

• What outcomes of technology interest consumers most?

• What data do the insurance and mortgage industry use to quantify advanced technology risk reduction? How do they acquire such data?


201020092008

3.1 Determine focus group/area• Analyze current housing

programs that include new technologies

• Set a representative sample for investigation

3.2 Acquire baseline data• Gather safety and operating data

of sample

3.3 Conduct market research tracking increases in innovative home value• Track resale value of sample

3.4 Conduct studies of customer satisfaction• Gather market data on real estate

agents' preferences and satisfaction with new technologies

• Use customer satisfaction studies

Medium Public

Medium

Medium

High

Public

Public-Private

Private (lead)

Why Should Industry Players Wantto Participate in This Research?

• Will help acceptance of new technologies

• May be used for sales purposes - data may tie innovation to increased house values

RecommendedFunding Source

2006

Strategies

27

2007

Conduct Market Research Studies toUnderstand How Intermediaries DriveInnovation

Little is known about the role of dealers, suppliers,retailers, realtors and other industry players in movingnew building products to the market. However, theseintermediaries can have profound impact on thebehaviors of builders, consumers and manufacturers inadopting new housing innovation.

To date, Symposium attendees were unaware of anypublicly available research or information measuringthis influence. Industry leaders, as a result, believeemphasis within new research should be on under-

standing the role, behaviors, motivations, andprocesses affecting knowledge transfer from manufac-turers through intermediaries to builders andconsumers.

As with builders, intermediaries also respond to theincentives and risks that influence their profitability.They depend on past practices and experiences tominimize their risks in introducing new products. As aresult, they are motivated to serve existing customerswith familiar products that have demonstrated value.


• What are the roles of intermediaries in transferring information to builders and contractors?

• How do they select products to stock? Is it driven by manufacturers?

• What motivates them to introduce an innovative product?

• What do they know about the cost to adopt a new product, and how do they communicate this to builders?

• What role do they play in transferring risk/liability to builders?


20102009

4.1 Document existing information• Aggregate existing research on

suppliers (as first group for study, can be expanded to other intermediaries based on funding, etc.)

• Analyze results and identify data gap areas

4.2 Set study sample• Establish study group and

research methodology

4.3 Conduct market research determining supplier preferences, communication methods with manufacturers and builders, information exchange, etc.• Analyze results

4.4 Determine supplier impact on profitability

High Public

High

High

High

28

Public

Public-Private

Private (lead)

RecommendedFunding Source

2006 2007 2008


• To gain an understanding of how intermediaries behave and drive sales, such as how retailers influence consumers and suppliers influence builders

• Determine best incentives to maximize interest from intermediaries in new technologies


Research Strategy:Conduct Market Research on Consumers: Characteristics, Decision-MakingProcess, and Motives for Adopting NewTechnologies

Industry has little information about what consumersknow about the homebuilding process and what is intheir homes. Another unknown is how consumers findinformation about residential innovations, as well as theperceived reliability of that information. Industry leadersassume that most consumers make that decision onlywhen there is a problem to solve, but that conclusion isanecdotally based.

From an energy-efficient product side, Energy Star andBuilding America have acquired some of this data, andresearch groups, such as J.D. Power and Associates,have information on homeowner satisfaction drivers,but this information is not the core of what is needed.

The American Housing Survey contains some demo-graphic information but is inadequate for a deeperunderstanding as it relates to innovation-adopters.There is a need to understand the 'switches' or motivesthat drive adoption and how users interact with newtechnologies.


• What are the characteristics and demographics of innovative technology adopters versus non-adopters? What motivates their behavior?

• What are the most important socio-economic drivers for adopting new technologies?

• How much do consumers know about technology in their homes?

• How do they find information about new processes, design and products? How do they perceive the reliability of those sources?

• What are the most influential social incentives to new technology adoption (e.g., safety, value)?

• How do consumers interact with technology?

Proposed Action RecommendedFunding Source

RecommendedPriority

2010

5.1 Create public/private partnershipgroup• Gather existing consumer

demographic and preference data

• Determine data gaps

5.2 Set study sample and research methodology

5.3 Conduct market research, examining the following areas:• Knowledge of housing

technologies• Create methods for research

and data collection aligned with goals

• Behavior drivers• Interaction with technology• Sources for information

5.4 Analyze results and disseminate widely

Medium Public

Medium

Medium

Medium

Public

Public

Public

2006 2007 2008 2009

Strategies

Why Should Industry Players Want toParticipate in This Research?

• Demystifies drives to consumer decision-making processes beyond demographics

• Delves more deeply into drivers behind customer satisfaction

29

Research Strategy:Conduct Studies on the Acquisition and Knowledge Transfer of InnovationInformation

The goal of knowledge transfer from the builder's per-spective is to ensure that the correct information (e.g.,installation instructions) is present and known by all keyactors at every step of the building process. There areboth behavioral and motivation impediments to knowl-edge transfer. Open transfer of knowledge could resultin unanticipated exposure to liability and other risksparticularly if the quality of information is faulty.Competition rewards proprietary information that iscontrolled rather than widely shared.

The primary challenge is improving knowledge transferassociated with understanding an innovation, theimplications of use, and lessons from previous trialfrom every use of the innovation. Manufacturers andsuppliers need to bundle product information withincentives to early adopters (e.g., enhanced financing,training, warranty).

There are both tangible and intangible costs associatedwith not having better knowledge about new products.By supplementing existing information with new stud-ies, the industry will be able to better leverageknowledge and transfer it to builders and/or con-sumers, who purchase and adopt new technologies.For reliable comparisons, the performance of existingsystems needs to be benchmarked.

The process of transferring knowledge across the sup-ply-chain should be modeled to help identify problemsin getting the required information to builders and con-tractors.


• What information currently exists/is used to gain information?

• What are the cycle-times, callbacks and warrantee claims?

30


RecommendedPriority 2010

6.1 Aggregate existing information

6.2 Conduct multi-stage study• Establish research methodology• Identify and model the transfer of

knowledge about new products• Identify best practices

6.3 Document sources of data• Identify data sources for

technology measures• Identify methods for generating

information

6.4 Create case studies

High Public

High

Medium

High

Public-Private

Public

Public

2006 2007 2008 2009

Why Should Manufacturers Want toParticipate in This Research?

• Enables easier transfer of new information to consumers and other technology users

• Allows insight into other motivational factors that go into decision-making as it relates to innovation

• Provides insight into transfer rates for effective planning in moving technology to market


Research Strategy:Develop Business Process BestPractices (Including Success and FailureInformation) In Homebuilding ProductManufacturing Sector Applications

As opposed to a set of 'how to' and 'why' case studies,homebuilding product manufacturers need to under-stand the effectiveness of their practices and businessprocesses. This proof of a particular process' effec-tiveness, for many manufacturers, will only berecognized when their competition introduces themsuccessfully. These manufacturers contend that theywill not be able to speak intelligently about options untilthey hear more than anecdotal evidence of whatworked and what did not for their direct peers. It isimportant to note that in order for best practices to be ofmost use, they also must include information on fail-ures as well as successes, and they should becomprehensive and highly detailed.

Fundamentally, homebuilding product manufacturerbusiness success requires effective business process:

• Business process innovation requires the identification and implementation of 'best practices' or proven strategies for improving business operations.

• 'Performance metrics,' primarily related to time, cost, and deviation from planned outcomes, are necessary and key components of best practices.

• Industry benchmarks enable evaluation of how homebuilding product manufacturers are doing compared to competitors and other industries.

Efforts should be similar to those practiced by leadingmanagement consulting firms in other industries, eval-uating practices and processes in specific companiesand compare them to the practices and processes ofthe most successful operations. The result would beincreased efficiency in operations and home produc-tion.


RecommendedPriority

7.1 Convene a consortium of home-building product manufacturers

7.2 Establish collaboration with business schools• Gather business information• Document data collection

7.3 Collaborate with research groups• Analyze results• Prepare final outcome for

third-party credibility

7.4 Create case studies

Medium Public

Low

Medium

Medium

Public-Private

Public

Public


• Provides insights that could lead to competitive advantage through innovation

• Offers justifications for engaging in new R&D efforts because of hard measures and benchmarks

• Gives smaller firms the opportunity to gain intelligence they could not gather internally

Strategies

31

2006 2007 2008 2009 2010

Consumer Research Review

Purchase Decision

Problem Recognition Purchase

Evaluation of Alternatives

Information Search

Post-Purchase Evaluation

Difference Between Desired and Actual Condition. Marketing Can Stimulate “Awareness of Need”

Cognitive Dissonance – “Buyer’s Remorse” /Satisfaction or Dis-satisfaction

Alternative chosen. Decision Includes Where and How Purchased.

Internal -from memory or External: Word of Mouth , Contractor , Media, Home Store , Comparison Shopping, etc.

Criteria for Evaluation Established. Rank/weight the Alternatives.

May Be a Lag Between Decision and Purchase subject to Availability, etc.

Stages of the Consumer Buying Process

Source: A. Brown, University of Delaware

Although more research has been conducted on con-sumers (defined as homeowners or homebuyers)compared to builders and manufacturers, there are stillfew non-commercial resources of information regardingconsumers and new home technology. Not only arethere market data gaps on consumer motivations andbehavior, but there are also gaps in knowledge abouthow consumers get new technology information andhow they perceive that information.

Generally, private firms commission most of theresearch conducted on consumer behaviors and pref-erences and, in turn, use the findings for proprietaryreasons. As a result, the information that exists iseither not available for public use or focused on a spe-cific product versus broader behavior patterns.

At the same time, there is a perception that consumerscare more about product features of their homes, suchas granite countertops, than in more involved techno-logical changes. In fact, according to a recent study byPATH, it has "almost become an industry-wideprophecy."2 Consumers have been believed to be atthe tail end of technology adoption where their interestswere deemed sufficiently represented by the buildercommunity. As a result, consumer preferences,behaviors, and motives regarding homebuilding inno-vation diffusion have been mostly ignored by innovationadoption studies and research. This information gaphas created a new area for market researchers to

determine consumer trends about new homeowners'perceptions of technologies, willingness to pay, andcustomer satisfaction due to innovation. To date, thelittle research existing has focused on energy-efficienttechnologies, which is still not conclusive.3

Most of what is known is in the context of general pur-chase processes and decisions, rather than thespecific homebuying or home remodeling scenarios.For example, it is known that many consumers makepurchase decisions in a six-step process outlinedbelow.

Consumers rely heavily on major media sources forinformation compared to home builders. Consumerpublications and television appear to be strong generalvehicles for this group. One unique information chan-nel, however, is the sales force of home builders. Newhomebuyers rely heavily on this group for informationabout all of their prospective home's characteristics,including new technologies and the benefits of thetechnology. For consumers that are remodeling theirhomes, similarly, the sales staff at large home andhardware stores are critical to informing and guidingtechnology decisions. For the early adopters amongboth kinds of consumers, exhibits and demonstrationsat consumer events are likely very effective communi-cation channels, as are non-commercial vehicles likeConsumer Reports© or simple word-of-mouth.

Existing Research Review

32

There is a limited amount of public information on the three primary groups involved in home technology decisions:consumers, builders, and manufacturers. These players differ from the actors described above (though there is someoverlap) who represent groups that generate and use market data on the participants described in this section.

The following reviews the extant literature on those groups that can be used to augment market research gatheredthrough any research actions described above.

The home builder and the home remodeler play a crit-ical role in the diffusion of innovation within theresidential construction industry. For the most part,building materials and products originate upstream ofthe homebuilder and the latter is rarely engaged inmanufacturing. However, builders do act as either asingle purchaser of materials and building products oras specifiers of purchasing requirements for the sub-contractor. As such, builders can influence innovationcreation.

Home builders are the bridge between the consumer(homebuyers and owners) and the various productsthat constitute the house. Some of the consumer'sdesires are explicit and some are implicit. Based onthe experience of the builder, the consumer is mostlikely to have explicit choices on exterior claddingoptions, finishing options, fixtures and appliances.Similarly, builders perceive consumers being less likelyto have choices (or preferences) in the basic buildingmaterials and electrical and mechanical systems thatare largely hidden and unobservable. Home buildersrespond to explicit consumer preferences but often notto other modifications. Due to the intense competitionbetween homebuyers in many market areas, buildersneed only deliver a reasonably performing product.This tendency is not conducive to adoption of innova-tion.

Because builders often determine the design and pri-mary characteristics of the house, consumers often seebuilders as the 'architects' of homes. As such, if mate-rials and products fail or perform poorly, the consumerturns first to the home builder. Call-backs (returning tothe house to fix problems) reduce profit margins andcan diminish customer satisfaction and hurt the repu-tation and potential market of the builder.Consequently, homebuilding firms are extremely sen-sitive to the risks associated with new products andmaterials. Through direct experience and well-knownexamples, home builders know that lab testing doesnot substitute for field-testing where challenges andbenefits of new technologies can be best understood.

Builders look upstream to manufacturers to producenew products and materials. They look to manufactur-ers and suppliers to provide information about newproducts, to provide technical and marketing assis-tance, to train installers, to conduct field tests, and toaddress liability issues. Although building material andproduct manufacturers receive signals from homebuilders about improvements and innovations, theirdecisions about innovation are made on the basis oftheir own business models.

Production builders, particularly larger firms, are likelyto focus on innovations that allow them to manageassembly better rather than change the process signif-icantly. Innovations in process management canimprove quality, supply-chain management, schedul-ing, delivery of the finished house, and customerrelations and satisfaction. Builders can signal the needfor product improvements up-stream to manufacturers,and they can market innovations down-stream to con-sumers.

Builders also look to their subcontractors to provide thetraining and supervision needed to install new productscorrectly. Builders manage this relationship through thespecifications issued to subcontractors and through on-site monitoring of performance. Since subcontractorshave few resources to provide training and are facingincreased shortages of skilled labor, they have littlecapacity to manage innovation.

In short, there are numerous gaps in our knowledge ofbuilders' and remodelers' acquisition of information,decision-making, and general propensity to innovate.

Builder Research Review

33

Design and Testing

Engineering and

Manufacturing

Design and Testing

Design and Testing

Feasibility Assessment

Engineering and

Manufacturing

Product Launching

Basic and Applied

Research

Innovation

Figure 1: Example product development and marketing phases(adopted from James Hickling diffusion of innovation model)

Manufacturers, or the innovators, perform two impor-tant roles (accelerator functions) in the innovationprocess in addition to actually innovating:

1) Reduce risk by providing information2) Generate demand through advertising and

consumer-oriented communications.

Manufacturers provide information about the product,and in many cases, they also provide the trainingrequired to use the product efficiently. These two fac-tors, information and training, are a constant and alikely condition in all successful innovations, thoughthey are not the only condition.

Despite the need for understanding manufacturers' rolein innovation, there is little study on the actual marketcharacteristics or behaviors of these firms. The infor-mation that has been documented focuses on theprescriptive steps to innovation adoption as well as itsadvantages, rather than empirical or even descriptivestudies. Patterns and variances in the product devel-opment process across firms are still largely unknown.Figure 1 below, adopted from the J. Hickling diffusion ofinnovation model, illustrates an example of such prod-uct development phases.4 This also suggests thatmanufacturing firms have largely done most of the mar-ket research in the homebuilding industry, where littleinquiry into the firms themselves has been done.

When considering the work that firms do, though, weopen up a huge terrain for investigation. For example,one key activity of these firms with regard to innovationis commercialization. Commercialization involves thefull spectrum of activities required to move a new tech-nology, product, or process from its conceptual stage tothe marketplace.5 Commercialization can be said to

have occurred when a new product or process is actu-ally being sold into the market. Commercialization hastwo main components:

• Technical: Efforts to transform technology into a viable and desirable product, and to produce it in sufficient quantities and quality. This work involves product development and design as well as manufacturing engineering functions.

• Business management and market analysis: Processes needed to ensure that the product demand is adequate and profitable, that intellectual property is appropriately managed, and that parts of the firm built around the new product are well run. This work involves business planning, market characterization, marketing strategy, manufacturing supply chain, distribution and services systems, and management and intellectual property rights.

Innovation is the core function within a company withthe most competitive value. According to Bernstein inthe Civil Engineering Research Foundation's 2002paper "Guidelines for Moving Innovation into Practice,"the benefits of innovation are tremendous and areaccrued to practitioners, users, and society as a whole.6 However, despite these advantages, innovation ismanaged with the least discipline.7

Understanding how residential product manufacturingfirms manage the ideation, product development, andcommercialization processes is a critical component offuture market research. It is just as important to under-stand the motivation, history, personnel, and resourcesinvolved in embarking on these processes in order toimprove public assistance to these firms - particularlywhen there is public need for them to innovate.

34

Existing Research ReviewManufacturer Research Review

35

Acknowledgements

References

1“Overcoming Barriers to Innovation in the Home Building Industry,”U.S. Department of Housing and Urban Development, Office of Policyand Research, April 2005.2Martín, Carlos, “PATH Program Review & Strategy, PerformanceMetrics & Operating Plan Draft,” U.S. Department of Housing andUrban Development, August 2005.3Torbica and Stroh, "Customer Satisfaction in Home Building," Journalof Construction Engineering and Management 127:1 (2001); Sirmans,Bacheller and McPherson, "The Value of Housing Characteristics,National Center for Real Estate Research," (unpublished monograph:National Association of Realtors, Washington, DC, 2003).4"Technology Transfer and Innovation in the Canadian ResidentialConstruction Industry," James F. Hickling Management Consultants,1/1989.5"From Invention to Innovation," U.S. Department of Energy6Harvey M. Bernstein, “Guidelines for Moving Innovation IntoPractice,” Civil Engineering Research Foundation, 2002.7Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia, "Money Isn'tEverything," strategy+business, Winter 2005. Booz Allen Hamilton,reprint No. 05406.

ContributorsProject Leaders

This project was coordinated and conducted as a jointeffort between McGraw-Hill Construction and thePartnership for Advancing Technology in Housing.

Three key individuals provided leadership on this project:• Harvey M. Bernstein, F.ASCE, vice president,

Industry Analytics and Alliances for McGraw-Hill Construction, served as the lead on the project as well as the overall chief facilitator for the Symposium on Market Data for Housing Innovation, the key element of the project from which recommendations and conclusions were drawn.

• Michele A. Russo, LEED AP, Director of Industry Communications for McGraw-Hill Construction, served as the project manager, coordinating the many elements of the project, including pre-paring an overview of existing governmental resources, coordinating the Symposium information and preparation of project papers and reports, and acting as liaison with project partners.

• Dr. Carlos Martín, U.S. HUD, PATH provided project oversight for PATH and HUD. He also provided expertise on available literature, research and other information related to moving innovation into the marketplace.

Symposium Leaders

Six key industry experts served leadership roles at theSymposium. Their role in the project consisted of servingas co-chairs of the Symposium breakout sessions, pre-senting group consensus voting results at the Symposiumclosing plenary session, participating on the Project TaskForce, and collaborating to provide a written report ofindustry information as it related to their breakout ses-sions. This information served as a summary of theoutcomes of the Symposium and helped formulate theresearch strategies presented herein.

These key individuals were• Ed Hudson, National Association of Home Builders

Research Center• Dr. C. Theodore Koebel, Virginia Technology

University• Lexi Moriarty, McGraw-Hill Construction• Dr. Anne Sweaney, University of Georgia• Dr. Walid Thabet, Virginia Technology University• William Whiddon, Building Technology, Inc.

Policy Advisor

The policy pieces of the project were led by Dr. KermitBaker, Senior Research Fellow at Harvard University’sJoint Center for Housing Studies and Chief Economistfor the American Institute of Architects (AIA).

The Joint Center on Housing Studies is HarvardUniversity's center for information and research on U.S.housing. The Joint Center analyzes the dynamic rela-tionships between housing markets and economic,demographic, and social trends, providing leaders inthe public and private sectors with the knowledgeneeded to develop effective policies and strategies.

The Joint Center is generally considered to be the lead-ing housing research center in the country. It has anactive Policy Advisory Board comprised of the leadinghome builders and building product manufactures anddistributors in the country that serve as a valuableresource in helping the research staff at the center tobetter understand industry practices and motivations.

McGraw-Hill ConstructionExecutive OfficesMcGraw-Hill Construction2 Penn PlazaNew York, NY 10121-2298

www.construction.com

Residential Market Research Needs toStimulate Innovation2006 Technical Report

Prepared for the Partnership for Advancing Technology inHousing (PATH)

www.pathnet.org

About PATH

The Partnership for Advancing Technology in Housing(PATH) is dedicated to accelerating the development and useof technologies that radically improve the quality, durability,energy efficiency, environmental performance, and afford-ability of America's housing.

PATH is a voluntary partnership between leaders of thehomebuilding, product manufacturing, insurance, and finan-cial industries and representatives of Federal agenciesconcerned with housing. Working together, PATH partnersimprove new and existing homes and strengthen the tech-nology infrastructure of the United States.

HUD's Office of Policy Development and Research (PD&R)coordinates all PATH activities. PD&R manages PATH'sbudget, strategy, and daily operations. Staff in PD&R'sAffordable Housing Research and Technology Division haveexpertise in various construction systems, housing issues,and technology policies.

Because PATH involves many participants from diverse partsof the home building community, PATH seeks guidance fromthe Industry Committee and other Federal agencies. PATHalso works with industry partners to advance housing tech-nology.

About McGraw-Hill Construction

McGraw-Hill Construction (MHC) serves one million cus-tomers within the $4.6 Trillion global construction community,helping industry players save time, money and energy. MHCis a leading information and market research provider to theFederal government, research centers and commercial con-struction community.

MHC hosts the largest construction project database in NorthAmerica through which its Research and Analytics group isable to offer market intelligence and research. Those serv-ices, found online at www.analytics.construction.com,include:

• Market and survey research, including an annual survey of homeowners and home builders to identify trends in material use and preferences

• Monthly reports of number of residential project starts and value in a given month down to the county level

• Market trend forecasting and analysis, including forecasts of construction activity for major project types, such as single and multi-family housing

• Thought leadership through conductingconferences, seminars and focus groups to convene experts and discuss leading edge technologies, business practices and economic trends

• SmartMarket Reports that provide overviews of research in a smaller, easily digestible format

• Leading national publications: ENR, Architectural Record, GreenSource, and 10 regional publications

Documents

Residential Market Research for InnovationResidential Market Research for Innovation 2006 Technical Report Prepared for the Partnership for Advancing Technology in Housing. Introduction