Home-builder D.R. Horton is the largest residential construction company in the United States. Like many companies, it has optimized its business model using simple principles: Build a simple product, make it customizable and make it easy to support.
With this strategy, D.R. Horton has realized 84 quarters of consecutive growth. There are a variety of reasons the company is thriving, including strong leadership. Let’s take a closer look at their three principles.
Simple Product: D.R. Horton sells a simple product, a home. Their core competency is building homes. Usually it offers three or four models in each suburban community it serves. Each home is built from the same materials and designed by the same architect. Each caters to a spectrum of buyers, including those willing to pay a premium for high-end finishes, upgraded appliances and designer paint colors. And that is where it ends.
Customizable Aftermarket: There is a cycle of goodness around each new housing development. Retail stores like Home Depot move in, ready to serve the needs of new homeowners. Local landscapers and service providers thrive with new business, outfitting new homes with different fixtures or adding a deck, a spa or a cabana. Spending by new homeowners stimulates the local economy, the town grows, and the housing market flourishes as new buyers settle in and existing home buyers return for more.
Maintenance Services and Annuities: Often new homes are part of a loosely organized home owner’s association. Homeowners pay a monthly fee that covers ongoing maintenance of community assets like sidewalks, lighting and water, trees and grass. The business of collecting fees and distributing proceeds back to D.R. Horton, the city, and contractors is outsourced. The fees generate revenue like a silent tax on buyers, who are beholden to their basic desire for a nice park, clean sidewalks, ample street lighting and cut grass.
Applying the Lesson Plan
The case study of D.R. Horton is interesting because there’s a strong parallel between how it approaches the housing market and how Dun & Bradstreet addresses the market for commercial data and analytics.
Product: D&B sells a product such as D&B360, DNBi, D&B Direct 2.0 and others. Features and functions cater to use cases and price points, with customers willing to pay a premium for confidence in the veracity and richness of our commercial business insight. The architecture for each product is standardized, the materials largely the same.
Customizable Aftermarket: When buyers want customization, we leverage our partners to fulfill those specific needs. Our system integrator (SI) partners – part of the Dun & Bradstreet Global AllianceNetwork program – have the specialized skills needed to stitch together the fabric of software and applications, Dun & Bradstreet commercial data, and the many workflows and business processes that fuel an enterprise. System integrators develop a myriad of features our customers want.
Maintenance Services and Support Annuity: At its core, Dun & & Bradstreet maintains and supports products like D&B Direct 2.0, DNBi and D&B360. As the variety of customizations glom onto our products, we increasingly turn to SIs to maintain the growing labyrinth of custom applications and services hanging off our products. SIs collect a recurring fee to maintain these enhancements, and customers are happy because someone is servicing their ongoing need for customization and support.
The business potential here is the same: a virtuous cycle that connects buyers to the products and services they want and need. The markets are different – homes vs. data – but the approach is similar. Figure out how much of the buyer’s need your business can address, and then refer, recommend and partner to make sure your product is going to market with the support and services needed to make it a ripping success. Because that’s how markets – and economies – grow.
Image credit: Brock Builders