Mother Nature – a.k.a. necessity – is the mother of housing invention. Or it had better be.
Every wildfire, super-convective storm, seismic spasm, tidal surge, polar vortex bomb cyclone, tornado, months-long drought, inch of coastal erosion – there were 22 events whose destructive toll eclipsed $1 billion and took 262 lives in 2020, according to the National Centers for Environmental Information – now clocks in as a statistical menace, impacting one in three U.S. homes at risk of catastrophic damage.
In the face of such challenge, paradigms rotate. Tried and true ones in construction and real estate formed around cyclical constancy and copious quantities of relatively cheap manpower, trees, land, and access to money. Now, those structural baselines no longer revert to their historical norms – there are just less of them everywhere.
What’s more, President Joe Biden’s new $2 trillion infrastructure framework, now treading an iffy, tricky, bumpy, bruising gantlet through Congress, would quite literally redraw residential property value maps in the U.S. The plan’s master architects and lawmakers up and down the national, regional, state, county, and local policy life-cycle will face tough choices on where – and where not – to invest those dollars to replenish and freshen infrastructural foundations.
It’s no coincidence, then, that Jack Truong, CEO of the $2.8 billion in net sales global fiber cement building products manufacturer James Hardie (ASX: JHX; NYSE: JHX), figures there’s no better moment than now to challenge — head-on — practically cardinal rules of engagement for construction products distributors in a volatile, disrupted global supply and value chain.
The commonly-held, if idiosyncratic, laws of a still largely un-industrialized residential construction community come down to four received-knowledge assertions:
- Being a true, strategic global residential construction products producer and distributor is practically an oxymoron, given shipping costs, trade and tariff disputes, and supply chain dysfunction;
- Design aesthetics are sharply local, and almost never port over from market to market, especially when the markets are culturally, climatically, and hemispherically separate;
- Exterior cladding and finish products bear little impact on interior live-ability features;
- That consumers view homes as a cross between a quick-turn investment vehicle and a cash dispensing ATM based on escalating valuations.
Thing is, COVID-19’s sundry crises and upheavals broke a lot of rules and turned many notions previously regarded as a reach into urgent necessity. Just over a year ago, in housing — like everywhere else in society’s daisy chain of trillion-dollar value gains and losses— nearly everything seemed instantly to sort into before-COVID and after-COVID. What the world of housing looks, feels, and acts like now is a place with altogether less patience for hidebound stipulations as to what can and can’t be done.
More needs to be done – for people and their homes, for communities, and for a planet whose bounty – while enormously resilient and abundant, is alarmingly finite.
James Hardie’s Truong, just over two years in as CEO, has cause to believe that what loom as structural challenges for most of the construction industry’s household names represent a frontier full of opportunity for his current enterprise.
A business and economic-cycle stress-tested track-record, highlighted by a seven-quarter run of sequential better-than-market growth and a 250% increase in market capitalization to more than $14 billion in early 2021, has earned Truong this “think-global-act-local” case-study play for worldwide strategic cohesion where few have achieved it.
Odds of succeeding owe in large part to James Hardie’s core proprietary fiber cement building block and just how applicable, adaptive, and, in an ever-more-climate challenged built environment, enduring it can be. The fiber-cement “secret sauce” ingredient-brand in James Hardie’s array of exterior siding and trim product lines has the DNA virtue of being made of 85%-locally sourced raw materials, like water, sand, and natural cellulose fibers.
A top-down focused lean-in on lean production in facility-tooling, manufacturing, best practice, and process standardization across the James Hardie global network of factories has begun to net performance improvements, says Truong. “We now ship 70% of our products to customers within a 500-mile radius of our plants, which lowers our operational carbon footprint.”
The other part of James Hardie’s step-change potential, says Truong, springs directly from an exclusive capability to draw on its multi-continent operating footprint – with 18 production facilities as of March 31, 2021 and distribution capacity spread across Asia-Pacific, Europe, and North America – as an enormously rich sounding board to discover consumer needs and wants around the next corner.
“We have spent the better part of the past year-and-a-half intensifying our investment in consumer research – and among architects and designers – so that we can be ahead of the changing curve on homeowners’ wants and needs,” says Truong. “We bring homeowners into our innovation centers, expose them to the way varied materials look and perform, and ask them to respond. Our role as an innovator, though, is not only to listen carefully to what they don’t express to us, but to also study their actions, reactions, and behaviors, so that we can also discover what people find difficult to articulate about what they need.”
Within the broad context of crisis – pandemic, economic, social, and climate – what people may be incapable of saying about what they need is a strategic critical path issue. In Truong’s mind, it’s an opportunity for an enterprise to de-couple from the legacy secular status quo and do more.
Step one for Truong and the James Hardie organization meant busting the myth that to fit in functionally as a go-to producer of its portfolio of exterior solutions in building’s value stream, it needed separate, siloed, one-offs for myriad different operating arenas dispersed across its multi-continent footprint.
To free up trapped opportunity in global operational streamlining – which by cutting down on the number of steps and hand-offs that layer costs on top of costs, Truong took all the right cues from the deep-dive to the company’s center-of-the-universe: consumers. He was not driving for efficiency sheerly to impact consumers’ costs, but, in the end, to aim to become a “passion brand” among consumers.
“By realigning our operations across three global regions and integrating manufacturing, supply chain, sales, marketing, and design into a cohesive platform, we have given ourselves a front row seat to discover all the things that are happening among consumers around the world,” says Truong. “It used to be assumed that design needed to behave strictly on a micro-region to micro-region basis, but we’ve seen first-hand the adoption of California-style modernism in homes adopted whole-cloth in Denmark, while more South Hamptons-style elevations are going gang-busters in Australia. This kind of portability opportunity is new, and we’re on the front lines of helping bring this about.”
An unappreciated dimension of James Hardie’s ability to both listen to and anticipate consumers wants and needs – especially in a climate-risk-filled residential landscape — is in its essential building science product properties. Few of us look at a home’s exterior cladding and finishes and realize how much of the interior livability derives from what goes on outside the walls of the home.
For instance, room air comfort, interior flow, indoor-outdoor living, natural lighting, and, ultimately, a sense of peace-of-mind and well-being spring in large part from how durable, saft, and resilient the exterior materials serve functionally as well as in aesthetic form.
“We view affordability, sustainability, and that sense one wants so deeply in their home – of its beauty – as synergistic as opposed to mutually exclusive,” says Truong. “Our mission is in understanding unmet needs among people, and as people spend more time at home, those unmet needs change.”
Truong’s ahead-of-the-curve focus – particularly at a time more people are spending greater tenure in their homes, and as climate conditions worsen – is on securing both the beauty and the viability of the nation’s second-hand homestock.
“There are 80 million owner-occupied homes in the United States and 55% of them are 40 years old or more – which tallies up to 44 million 40-plus-year-old houses,” says Truong. “When you think about it, just 5% of that total would come to 2.2 million homes, which is double the size of new construction. We believe that many of those homes are built with wood, vinyl and other materials that are not durable enough, or are highly flammable, or are just not going to be fit to survive more adverse natural disaster conditions. We see James Hardie in that light as a solution homeowners can turn to, and we’re working to transform that landscape of opportunity.”