While I heard a lot of fantastic presentations at PCBC, the most intriguing and enduring ideas came out of our dinner conversations. (Over a bottle of wine, with a lively hum of chatter all around us, nowhere near a convention center ballroom.)
At one of those dinners I mentioned a recent article profiling Indra Nooyi and her efforts to transform PepsiCo into a wellness company. A member of our party, whose firm does work for Pepsi, commented that Nooyi’s greatest obstacle is the company’s internal culture. The mindset of many of their employees is ‘We make sweet and salty snacks and drinks for people who enjoy them, and there’s nothing wrong with that.’ PepsiCo, like so many other organizations (and even industries), has a Scorpion and Frog problem—its intrinsic nature may prevent it from changing, even when failure to change threatens its existence.
Later that evening our discussion turned to homebuilding, in particular the industry’s glacial pace of innovation. (In 1950 we listened to music on phonographs and began building mass-produced, uniform, suburban housing. Today we have iPod Nanos and…mass-produced, uniform, suburban housing.) Which brings us right back to the topic of prevailing culture.
In its defense, homebuilding is an industry that, until recently, has had very little incentive to innovate. Homeownership has been prioritized—and aggressively promoted—as a social and cultural value since our nation’s founding. And from post-World War II until 2006 (give or take), it was held as a truism that home values could only increase. For more than 50 years, then, government subsidies and market forces conspired to make vanilla housing the safe, replicable way of doing business. And while it’s clear that’s no longer the case today—that fundamentally new approaches and new thinking are needed—50-plus years’ worth of prevailing culture takes a while to adapt.
Indra Nooyi is an ambitious and visionary leader for wanting to “healthify” the world’s second largest food and beverage company, and I sincerely hope she’ll be successful. But I’m skeptical that that organization—its people, its culture, its legacy—will let it happen. More likely it will be new players, ones whose cultures flow with (not against) their strategy, who ultimately own the healthy food space.
A similar dynamic is playing out in homebuilding. In the same way that PepsiCo recognizes the devastating implications of America’s obesity epidemic, builders now understand that drive-till-you-qualify development is dead (even if many of them lament its death). But prevailing culture—in companies and in industries—doesn’t change overnight, and many of the “new” builders are being formed with an awful lot of old institutional memory.
Housing needs a number of things to fuel its recovery—job growth, restored consumer trust, razing of Las Vegas and Phoenix (easy, easy, I’m joking). Perhaps most of all, it needs a culture shift, and that can only happen when new leaders embed new thinking in the very core of their organizations. Because when you try to graft it on later, you get Pepsi’s culture clash.
Brent Herrington speculates that the biggest players in homebuilding ten years from now will be names we haven’t heard of today.
Those are the ones my money’s on.