July 12, 2011

Collaboration Produces Virtual Value for Clayton Homes and UT Business School

Overview: One year after the completion of a 13-week collaborative project between Clayton Homes and the UT Knoxville College of Business Administration, tremendous benefit is being achieved. With the help of five full-time MBA students, Clayton Homes is more closely integrating the customer voice into its business processes, and the college is piloting a new course for aspiring student entrepreneurs titled Monetizing Technology- Enabled Social Media.

The project that produced these benefits is an out-of-the-classroom, applied-learning course required in the college's entrepreneurship and innovation (E&I) MBA curriculum.

The E&I MBA faculty select four or five client partner organizations each fall from entrepreneurially minded business ventures that desire strategy implementation research. Students "walk in the footsteps" of these entrepreneurs to develop skills from both faculty mentorship and applied-learning opportunities as they contribute value to the client organization.

Company: Clayton Homes, a Berkshire Hathaway subsidiary with over 12,000 team members, is the nation's largest retailer of manufactured homes. The modular and manufactured homes are built in 35 U.S. building facilities and distributed through a network of over 1,500 home centers. Clayton Homes also offers home financing, loan servicing, and insurance through several subsidiary companies.

Opportunity: CEO Kevin Clayton requested two deliverables of the MBA team:

1. Research and document best practices to develop products based on consumer input
2. Propose and evaluate a new process for Clayton Homes to integrate consumer input into the product design process

MBA Students: Carl Hill, Mikala McIntee, Kara Stansell, Brent Starnes, and Charlie Voissem. Faculty mentorship was provided by Glenn Swift; Sarah Gardial served as faculty advisor.

Client Partners: Joining Kevin Clayton from Clayton Homes were managers Wes Boyd, Andy Hutsell, and Dave Kerschbaum as well as Vice Presidents Mark Ezzo and Lance Hull.

Approach:
The UT team devoted 655 hours to a proven problem-solving framework of engagement, developing baseline measurements, conducting research, benchmarking best practices, and making recommendations with predictable outcomes.

The team conducted secondary research of the industry and Clayton Home's competitors, interviewed team members, toured the Appalachia Building Facility, visited several home centers, benchmarked best practices of companies across various industries who prioritize customer data for product design, and interviewed current and potential customers.

Key Findings: The MBA team found four key findings:

1. Clayton Homes could more effectively leverage customer feedback for new product design.
2. Clayton Homes was underutilizing social media.
3. Clayton Homes had the opportunity to use customer intelligence to reduce inventory carrying costs by streamlining its portfolio of model homes.
4. Homes had been designed with a focus on attributes (e.g., dimensions, shape, location of doors, etc.) rather than on emphasizing the customer's desired experience with the product.

The team also recognized the opportunity for Clayton Homes to integrate the customer's voice into every aspect of its business by doing in-depth consumer research and creating an on-line dialogue with customers.

"Our main goal for this project was to learn more about our customers," said Ezzo. "Ultimately, everything we do ties back to understanding our customer's needs and aspirations, and we as an organization strive for total satisfaction. We are building a customer-centric culture and applying customer insight to everything from ClaytonHomes.com to the new i-house 2.0 concept. We are learning to innovate by listening to our customers."

Recommendations: The team provided three strategic recommendations for Clayton Homes:

1. Utilize the Customer Value Determination Process (CVDP) to design products that satisfy customers' desired end states. This process helps identify customers' needs by understanding the values that motivate a customer to purchase a particular product.
2. Support a customer-oriented culture by incorporating customer feedback into all business processes and decisions. The motto at Clayton Homes is "Innovation comes from listening to customers."
3. Improve the cost/sale ratio by continuously collecting and analyzing data from recommended customer touch points, such as an initial visit to a home center, pre-qualification process, pre-build home site inspection, follow-up with non-buyers, and the Internet.

Lessons Learned: The student team came to better appreciate the role of entrepreneurial thinking inside a corporate environment, the role that social media can play in engaging customers in a dialogue, and the value that the CVDP adds to the product development process.

"One of the biggest challenges of this project was to understand how entrepreneurial strategies can harmonize with corporate objectives," said Hill. "As we dug deeper into the business model and uncovered new ways for the company to leverage customer feedback, it was clear that our client partners saw the value of integrating new processes into the organization."

Outcomes One Year Later: A true win-win-win scenario has been achieved.

First Win: One year later, the five students have reentered the workplace with bright futures as value creators.

Second Win: Clayton Homes has created a Customer Insight Group with the task to bring the voice of the customer to decision making, including product design.

Key initiatives for the Customer Insight Group include developing an integrated social media strategy; dialoguing with consumers on a daily basis using the website, blogs, personal contact, etc.; collecting and analyzing all consumer data; and developing metrics regarding the success of these efforts.

The group's first hire was Carl Hill, who worked on this MBA project.

Third Win: UT's College of Business Administration came to appreciate the important role social media is playing in the entrepreneurial growth of our global economy and developed a new course, Monetizing Technology-Enabled Social Media, for aspiring MBA and undergraduate entrepreneurs. The course is being led by lecturers Glenn Swift and Pat Richardson.

"Innovation comes from listening to customers, and as we entered this project we wanted to enhance our ability to incorporate the customer's voice into everything that we do," commented Clayton. "When we created the first i-house, we wanted to build an affordable, green and sustainable alternative to the modern home. Now there are thousands of i-house fans who we engage through blogs and social media, and, with the help of the UT MBA team, we developed the tools and processes to collect and analyze their feedback. As a result, we have completely redesigned the i-house to better meet our current and potential customers' needs."

Contact Information:
Clayton Homes
5000 Clayton Road
Maryville, TN 37802
865-380-3000
Web site: claytonhomes.com

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