After receiving an overwhelming response to the concept, Pulte expanded to other markets: Washington, DC, in 1960, Chicago in 1961, and Atlanta in 1968. In this second turn of the flywheel, he broke the paradigm of construction as a local business. Under the old model, relevant scale occurred at the local level, through builders’ ability to get better pricing and scheduling preferences with local subcontractors and suppliers. The new paradigm of modular designs and selective customization applied across markets, making national scale in home building meaningful.
Pulte’s national expansion enabled him to invest in improving his company’s capabilities in developing design tools and customer understanding—building more houses with more options while increasing scale by using national building material suppliers, not just local distributors. He continued to innovate during the 1970s, turning his focus to the baby boomer market. For example, Pulte’s in-house architectural team introduced the “quadromin-ium,” a single structure made up of four two-bedroom units with separate entrances and garages priced at a mere $20,000 per unit (only slightly above the median home price in 1970), targeting first-time buyers with kids. These new capabilities provided the momentum for the third rotation of the flywheel, as Pulte built additional national scale across a wider range of price points and markets.
Bill Pulte also recognized a potential disadvantage his business model had in comparison with that of entrenched local builders, who could ensure quality through personal relationships with subcontractors for electrical work, plumbing, and the like. To offset this disadvantage, in 1980 the company created “Pulte University” near its headquarters in Bloomfield Hills, Mich., and began training construction workers from around the country. Over time, the university was expanded to include high-performing managers as well. By the end of the 1980s, Pulte was selling homes in 17 markets in 11 states at prices ranging from $50,000 to $600,000.
Continuing to bear in mind the now middle-aged baby boomers, in the 1990s Pulte developed communities in Arizona, California, Florida, Michigan, New Jersey, and Virginia, targeting “active adults” age 55 and older. (A merger in 2001 with Del Webb Corporation, a builder of retirement communities, solidified this market.) The company entered the Fortune 500 in 1999 and won recognition from J.D. Power & Associates for its high customer satisfaction, praise it continued to garner for five straight years. Along the way, Businessweek named it one of the 50 top-performing companies and Money magazine declared it a 30-year “super stock.”
Today Pulte operates in more than 65 markets in 29 states and the District of Columbia, generating $4.8 billion in annual revenue—roughly a third of its peak revenues in 2005 before the housing crash. Despite being hit hard by the collapse of the bubble, Pulte survived, while other builders did not, by continuing to look for new markets and honing its design tools. In 2009, the company acquired Centex Corporation, a leader in the entry-level home market. And in 2011, Pulte drew on consumer research to introduce its trademarked “Life-Tested” designs, which offer innovative features to meet the needs of modern families. That same year, Pulte ranked as the country’s largest home builder (in terms of revenue), and one poised to grow during the housing market recovery.
The Perpetual Motion Machine
Both JCI and Pulte created sustainable, multibillion-dollar businesses that have proven resilient despite the misfortunes of the automotive and construction industries. They built their flywheels in different ways, but still provide common lessons for other companies.
First, both recognized the stagnation inherent in the status quo, and sought to create a step change in customer value by questioning conventional wisdom or practices. JCI sought to become more than a simple contract manufacturer leveraging nonunion wage rates, and Pulte sought to break the trade-off between customization and cost that constrained other homebuilders.