Forget efficiency, it's all about flow for Scott Hudson of Henrybuilt

30:32So we will kind of eat nine months of increased costs at least. Right. Because of how your whole cycle works. Yeah. Yeah. Yeah. To sell kind of arcane inside stuff. Well, and what's the big component that's coming out of Austria? It's all the drawer slides. Yeah. And there is no alternative. that is comparable in quality. So that's not going to be made in America unless it's made by them. Well, what do you think of the notion of trying to bring so much, I mean, your production is in America. You're the kind of company that the administration seems to be encouraging. I mean, do you think that a lot of manufacturing can realistically come back to the US?

31:15I do think it's possible that things could come back because of automation. I mean, I know that there are foreign companies who want to have manufacturing in the U.S. And this has already been happening already with car companies and other types of companies. And that's good. It's morally questionable to farm out all your low margin stuff to other countries. Arbitrage on the difference in the economies. You know, like it's healthier for us to have a mix of people who are doing lots of different things, you know, and manufacturing is much more interesting than people think it is. So there's so many reasons that we should be making more things here.

32:02I think that the thing that you can turn anything into a commodity and you can, if you're super creative, you can take a commodity and turn it into a non-commodity, you know, by the way Germany has so many products. They make meal-a-dishwashers, and everybody wants one because it's the best. And they sell it at a premium. They pay their workers well. Well, and that's one of the things, to your point, about how interesting the manufacturing process can be, that perhaps we've undersold or under-marketed this whole idea of encouraging people to come into this profession. Yeah, well, I specifically think when design and manufacturing are done by the same company, Then you have design, you have engineering, you have sales, you have marketing, you have all these different jobs, plus manufacturing, and you're learning a ton from doing them all together.

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33:37Scott, earlier we were talking about your marketing efforts, and I wanted to come back to that because you made somewhat an unusual move in that you essentially paused at one point your traditional marketing and put that budget into Untapped, if I remember, the design journal that you launched through Henry Built. And for people who aren't familiar, it's an editorial project that explores the built environment through history and culture. I wonder why make that shift and what you were thinking about marketing and connection today. And what feels like it's working in this complicated environment?

34:13Well, word of mouth, I think, is for us because we have so many clients that we've worked with over the years. So you take, let's call that 10 ,000 people. All of those people have friends. And if you take all of those people, it's probably more like 30 ,000, 40 ,000 if you talk about families. And you imagine that some ratio of those people, they become repeat or they tell their friends. And that's pretty good math compared to a lot of the other options that we have. So if you crunch the numbers on digital advertising, you can spend a lot of money. And you can still be unsure exactly who you're reaching.

35:01And you're starting from scratch. There's nothing like a personal endorsement. You get lost in the weeds. You can't control, especially as AI starts to control ad placement. It's like, what's happening? And they're even changing your language at times. It's kind of extraordinary what happens on Google. So that's getting seemingly less and less controllable, although the pitches can be so targeted. You know, that your ad can show up. Exactly. That's the sell. They tell you that you're going to see exactly who is interacting with. But I don't really believe that. Yeah. I think it's a little like stock picking, right?

35:38You think, okay, I understand all this stuff and I know that this is a good decision, but you really don't know where their head is. And so the people that you, especially as you get to the point where you have had a lot of clients or you have a lot of clients in a given year. The math just works really well if you can figure out how to have the right interactions and make sure that you're staying connected to the client all the way through and beyond. So things like writing content that your clients will appreciate even after they've moved into their home and lived there, some of that can be about using the product itself, making it better.

36:18You've lived here for 10 years and you need to do some repairs. It could be very kind of mundane, but really helpful. Oh, wow. Okay. It can improve how this works for me. But other content, like some of the content at Untappd, you know, people read sometimes only a story or two and it changes their sense of what they're doing in designing a house or living in a house. So like Edwin Heathcote wrote about door handles. really good really interesting article about how important they are out outsized you know and it's written for anyone could read it and understand it you know it's not a inside baseball kind of story and i've had people say to me i read that story about door handles and it just really made me see things differently see things in my home differently appreciate them or they'll read something about craft and objects, you know, and suddenly they're aware of things that they weren't aware of before.

37:18And so they appreciate them more, but they also make better decisions. And I think that the reason we started Untappd was a little bit of desperation. You know, it's like very few publications seem to be writing like this. Recently with Untappd, we started a feature called The House I Grew Up In. And the idea there is just, let's just take it back to the people who are reading and designing homes and talk about something very personal and real. And talk about what it was about the house you grew up in that had a long lasting impact on you. It could be anything. And people, everyone that Tiffany has spoken with has said, yes, I want to do that.

38:04you know it's like there's a lot of interest in reflecting on that and it's fun you know maybe it has a kind of a facebook ish element almost but it but it's focused on making you think more about not just like which pillow am i gonna buy but what are the things that really matter at home and and creating that kind of awareness and focus among people that we work with makes a really big difference. The conversation changes and the quality of the outcome changes. Well, I'm wondering to that point what your publication Untapped and the writing, as you've just described, that exists there says about who you imagine is your customer and what you've learned over the years about.

38:53And I ask that question in part because if you were to pick up most shelter publications today, There's a heavy, let's call it English kitchen vibe that seems to be very popular at the moment, right? There's lots of skirts that I see in kitchens. I don't think that's available on Henry Built Kitchens. There's a lot of other elements. So, I mean, I'm wondering who you see your customer as and how that is connected to the marketing or the creative work that Tiffany at Untapped is creating. Well, earlier in the conversation, we were talking about the European companies that started this approach of thinking about a kitchen as a system, designing as a whole thing.

39:33My theory is that the reason that they did it and we did is sort of a group of cultural things. Like, we had a fast food and still do era. We had an era in which it was unfashionable to do work in the kitchen. Everything was pre-processed. Oh, wow, you can microwave this thing, TV dinners, all that, right? So in that cultural, why would you care about the subtlety and the aesthetics of food and making food? And then you combine that with what happened in the early 2000s when people started focusing on really cooking with raw ingredients and getting good at it and appreciating the subtlety of it.

40:18it's a little bit like okay we finally caught up with where the europeans maybe were in 1950 and never and never left as much as we did i don't want to overemphasize it or idealize it but yeah the people that we work with are at that point and part of it is the general design awareness and in the culture and the sort of famous steve jobs quote that design is about how things work you know it's not just about how they look which is sometimes seems like the shelter publication world has forgotten. And the people that we work with are in that mindset when they, generally when we meet them. But it's interesting.

40:58It's a challenge to work with them in a way where everyone stays in that mindset as they move through because it's so overwhelming. The process is so overwhelming. But there's very little that they could pick up and read that would remind them that that is what is really important. So that's one reason that we on tap. As a way of re-centering them in a way. Yeah. And ourselves and everybody we work with, even if it's a small group at first. Right. Which it was, right? Yeah. And that's why when we were talking earlier about, not that there was a breakthrough moment per se, but there was a period where you could feel the momentum shift and that more people were coming to appreciate and understand what you were all about.

41:43Yeah, and I think that was related to design and food culture, evolving to a point where people kind of had a moment where they went, yeah, this stuff matters. It's not so esoteric that it doesn't matter to me. And I want that in my home. I want that kind of home. And I feel that, and this is going to segue into another conversation around this same topic, but I feel as though part of what you tried to represent for people was efficiency, that it wasn't just great design, but look at how much more efficient it will be when all of these aspects or things that you're interacting with are all sort of thought of in a very efficient manner to make the whole process of whether it's cooking or just working in the kitchen so much easier.

42:34And then you extended that into lots of other parts of the home too, because you wanted it in your kitchen. But then you thought, I want this in the rest of my home as well. Yes? Sort of, but just to take a different tack, I think efficiency is a very kind of American way of looking at it. I think it's really about flow and that feeling of mastery in your environment. In order to get flow and to get to that feeling of mastery, there has to be a certain level of organization or precision in the way that things are set up. But that's not the goal. The goal is the feeling that you get when you can talk to your friends and know exactly where the tools that you need to make this really great food while socializing.

43:20That's a great feeling. Or look, our kids clean the dishes and empty the dishwasher, and they just put everything back in the right place. How did that happen? That's cool. So it's not that efficiency isn't important, but it's not the end goal. Well, the reason I was talking about efficiency is because one of the things I wanted to ask you about is that I know you have feelings about how sometimes our industry as a whole is not the most efficient industry. And I wonder if you can elaborate on some of your thinking about that. It's mostly about are we able to spend our time on things that are important?

43:56So are we spending too much time with each other in the design community and not enough for their clients? That's a real problem in a business because the tendency is to market to your design partners constantly. I'm not saying that's not enjoyable or fun or sometimes meaningful, but the ratio is often way off. and we have conversations about this all the time in the company trying to refocus you know let's talk to our the people who are living with our product more right it's not so much an efficiency thing it's more of a are we able to focus on the right things and the amount of time that is spent reinventing the wheel when you're renovating or building especially building a house is insane because we've done so many projects with so many different people and firms you hear the same conversation over and over and over and a lot of them are getting to the same outcome eventually if you can figure out how to shortcut some of that work so you can get to the higher level so you can sort of get away from for example if you start with a question a q a process with a client you ask them what do you what do you like what do you need what do you want you get a shopping list sort of of things but not necessarily any wisdom so if you show them photographs and you ask how they feel or just you don't ask anything you just show them photographs and let them talk you'll learn a lot you know you can kind of intuit where they're coming from and what they want in their home.

45:47And then you can go back and interpret that without so much conversation if you're good at that and get farther faster and sort of consolidate or combine a lot of things at once and move forward faster. And I think all the great designers and architects do that. But the industry, the organization of teams, So like at Henry Boat, we have about 120 employees and we have probably about 20 architects, people trained as architects and industrial designers, really smart, really dedicated, really hard workers, really easy to get dragged into this thing that we're talking about, you know, where you're just sort of constantly changing details.

46:34Let's make the doors 10 feet. Let's make the door 80 feet. Like, oh, well, what about, can we think about walnut or oak? Or, you know, it's just like overwhelming the details. So something like AI, the beauty of something like AI visualization is that it just gives you this thing that is holistic because you said a few things that you like. So that's what it's doing. You know, it's kind of generalizing and using patterns to come up with images that are sometimes amazing. They can be really beautiful. They don't necessarily fully match what a client wants, but that's kind of what I'm talking about, being able to synthesize things really quickly, use technology to do that.

47:19when you can get away from having the same old conversation over and over again and really focus on the higher level of refinement that it takes to create something really exceptional. The short-term AI tools that we have are really exciting and helpful. The long-term might be totally disastrous. I think there's little doubt of that at this point, But I keep trying to stay positive and say, but right now, I was having a conversation with someone the other day. No, no, it's the tractor. We're just giving farmers the tractor and look at all of the efficiency that was created. And I was like, yes, right now it's the tractor until that tractor actually comes for that farmer and eats them alive, which will eventually happen.

48:11But right now it is a wonderful tool. And so... I mean, the interesting thing, going back to your point about getting people together in a room, often you discover that often clients, through no fault of their own, don't have the language to talk about design or style or time periods in design. They don't have that. But if you show them a bunch of images, they can tell you what they like and what they don't like, regardless of whether it turns out to be modern or classic or whatever period, right? Yeah. Yeah. They'll focus on what matters to them. Yes. One thing that's exciting about AI, even maybe in the future, and maybe the process of maybe at first we think, oh my God, it's going to be horrible.

49:00And the closer we get to it, the more we realize we can actually control this. Maybe that's how it will work out. We'll see. is it's going to automate a lot of the onerous work in architecture firms and design firms and companies like ours. It is just going to happen. And that is, in most, I think, organizations, that's probably 70 % or 80 % of the work. But the cool thing to me is that because we have a software team slash sister company, they're using coding. So they're eliminating a lot of kind of repetitive work and coding with software, but they're also using it to see patterns and data. So we built our own CRM slash workflow tool.

49:49We have all this data. Salesforce does a similar thing. The difference is we have control of the whole thing internally. But they're able to take that data and find patterns that might take us days to find. And I think the same thing happens in designing. like designing well is about pattern recognition and pattern refinement not mostly the sort of logistical and administrative details that we have to do that take up 90 of our awareness so i think if you can find the patterns and make the client understand the patterns that you see at a high level, then you can get much farther faster and you can actually create new, call them archetypes or patterns that are fresh and more relevant to how we live now.

50:51But you have to see the pattern first. I wonder in sort of wrapping up the conversation, the kinds of issues that come up within the makers alliance, for example, I take it that's still an active organization where you gather and a bunch of people who are makers in the industry? What are some of the issues? Is AI a hot-button issue? Or what does come up in those meetings? It's a great organization. The topics are really wide-ranging. So everyone who's part of it is an owner of a company. And they're mostly design and manufacturing companies. It's everything from how do you price, how do you market, how do you produce and improve your margin or create a margin.

51:44I think everybody is focused on AI to some degree. I think it's generally positive sort of curiosity at this point. I'm also curious in going back to something that you talked about earlier, your decision to not take on investors or venture capital. Maybe you've taken on friends and family over the years. I don't know. You can tell me. But I know it was important to you to not go down that route. And I wonder what you feel you've learned from that experience. Do you feel great about that decision over time? Or do you think, God, I'm so much older now than I would have been if I had just taken$10 million and had some organization help get me to where I am today?

52:35I mean, how do you think about it? And do you feel it was the right decision? For me, it was the right decision because I had experienced having split focus. Because once you take money, you really have a big responsibility to those investors and you have to think about them, what they are trying to achieve. If you're primarily focused on growth, then there are definitely times when you might wish you had more capital. So that's my last question. How do you think about growth? Is that important to you? Yes, it is important. You may have run across a book that was written a long time ago called Small is Beautiful by an economist named Schumacher.

53:22And it's really a great book because it kind of explains why small is beautiful and why scale can be so dangerous. But we're in an economy where without growth, it's really hard to create advancement, to create new opportunities, to create higher income, and to some degree to have just a vibrant culture because you're bringing fresh people in. So it's tough to figure out how to get that without any growth. on the other hand it's more important i think it becomes more important to focus on profitability at some point at least for us because that also generates opportunity so you can imagine staying at the same size but using that profit to improve whether it's improving benefits and compensation for people who work with the company or it's going into r &d so that you can create new things and maybe new companies.

54:22And you don't have to be so focused on growth. Maybe 10 % or 15 % growth a year is perfectly fine. Maybe that's the most healthy thing to do. Over time, that generates a large company. Sure. It becomes huge. Yeah. But focusing on doubling sales every year is really not interesting.

54:47Well, it seems very interesting to the PE community, which is part of what I ask, right? Because often when we talk about venture capital, people say, oh, it's just growth for growth's sake. And what is that about really? And often profitability is not the focus, nor is sort of perfecting the product or a lot of other things that are really important as it turns out. Yeah, I do think that's changed a little bit. I think there is more awareness in the investment community that the long-term return can be higher if you focus more on quality, more on improving the product, as long as you have a good sales system.

55:23But generally, I hear what you're saying. Yes. I mean, and I would love to hear more. I would love to hear more firms embracing that notion. And I think with so many of these maker companies, so many of the members of the Makers Alliance and others, that is, I think, part of the challenge. Do I have to grow? Do I have to get to scale? And how do I keep those key people to your point, employee retention, getting people excited? Do I have to create new opportunities for ownership, advancement, growth, all of that? Yeah, I do think this is one great thing about Makers Alliance. There is a right scale for most companies where below that scale, you can't really succeed.

56:06And that is one of the challenges in any industry, generating company growth to that level. And then if those companies have longevity and they're led well, they can create some amazing things. So at a level that you can never create it when you're super tiny. So getting to the right scale is really important. And that scale is probably a little bigger than most companies are in our industry. Business of Home is focusing on a lot of companies that have been around for a long time and are sizable. And it's a real industry. But when you're out in the design world, in the making world, there are many companies that will be gone in five years.

56:48And that's kind of sad. The ones that are doing great work, if they were able to get to two or three or four times their size and sustain it, make it healthy for them to run, not all-consuming in their life, have a margin that makes sense, that would be a really good thing. So that's kind of a pro-growth to a point mindset. So that's why they're not going to be here in five years, because they're not going to get to the scale necessary to achieve sustainability with that model. Is that essentially what you're saying? Yeah. Well, like take our industry, specific industry, for example, part of it is cabinet makers.

57:30That's a really tough business, but people have this sort of charm association for that. Right. And the way I feel is like, it's not charming. You're just taking advantage of the fact that they want to do this so badly. They're willing to do it for you at a loss or at a very low profit. And they're not going to be around for that long. It's not good for them and it's not good for the industry either because those are options for buyers that are not sustainable. So it would be great if those two or three person firms got to 15 or 20, whatever that, it depends on what you're doing. And that there was more focus on that, more openness to whatever you want to call it.

58:12It's not industrialization, but it is systematization of companies so that they can be sustaining to the people who are working in them and not just be a flash in the pan. What would need to exist to help those companies get there? Is it a Y Combinator of sorts in our industry where there's just all of this help and support? Or is it, I don't know, something like the Maker's Alliance? Or I don't even know. There is a connection to the Toyota production approach, which is the willingness to accept a known formula. That Toyota production system, which led to Lean, is a known formula for improving a business that really does anything.

59:01but we have the same cultural resistance to it that we do to following design standards or systems. We need to create our own. I'm doing this because I wanted to do it from scratch. So it's not like there aren't answers out there. Maybe we're not all ready for them. Right. It's so interesting when you see people who resist, as you say, lean manufacturing, for example. It's just a known fact that this is a very efficient manufacturing process. And yes, it's going to require other people to learn to do different things or do it in a different way or think about time and your efforts in a different way.

59:44But the jury is in on whether this is an effective manufacturing system, right? There's no debate about that. Yeah, I think it's the efficiency word again. Yeah. You know, we don't really like that word. And I don't really like that word either. But it's actually not, it can be, there is a more soulful version of that. Yes, that's it. Efficiency makes it sound like you're being forced to eat your vegetables. Whereas flow, as you were saying earlier, sounds spiritual, sounds Eastern philosophy, medicine. Oh, you're in a flow state. You're not even thinking about time or place. You're just in your activity, whatever it is.

1:00:26So yes, I need to work on fixing that. Forget efficiency, focus on flow.

1:00:34That's going to be the big takeaway message from this conversation. Scott Hudson says, forget about efficiency, just focus on flow. Whenever you don't like something, just romanticize it. Yes, yes. Make it sound more spiritual, more soulful, more Eastern, less Western. I think that's the answer. All right, Scott, it's great to get to talk to you. I always appreciate hearing your thoughts on any number of subjects, and I really appreciate you making the time. Well, thank you for the conversation. Thanks for listening. If you'd like to keep up with the latest design industry news, visit us online at businessofhome.com, where you can sign up for our newsletter, browse job listings, and join our BOH Insider Community for access to online workshops, a free print subscription, and much more.

1:01:23If you have a note for the podcast, drop us a line at podcast at businessofhome.com. If you're enjoying these conversations, please leave us a review on Apple Podcasts. It helps others to discover the show. This show was produced by Fred Nikolaos and edited by Michael Castaneda. I'm Dennis Scully. Thanks again for listening, and I'll see you next week.