Last week, Warren Buffett stepped down as chairman of Berkshire Hathaway. And the Oracle of Omaha, at 96, moved to chairman emeritus… a shareholder alongside everyone else.
“Father Time always wins,” he wrote as a realization before stepping back.
For those of us in home and building products, this is worth a significant pause. Because few investors have placed bigger bets on our industry’s brands than Buffett.
Benjamin Moore. Shaw Industries. Johns Manville. Acme Brick. MiTek. Clayton Homes. And just recently for Berkshire Hathaway, a $6.8 billion acquisition of homebuilder Taylor Morrison.
Look at what those businesses have in common. Not one of them wins on novelty.
Each holds a position that remains hard to take away.
What Buffett Meant by a “Moat”
Buffett borrowed the vision from medieval castles. The water-filled trench that kept invaders at a distance.
“The most important thing to me is figuring out how big a moat there is around the business,” he has often claimed.
After all, a moat is any durable advantage – that keeps a competitor from taking customers away – even when they show up with a comparable product.
Economic moats tend to take a handful of forms. Brand strength – that helps audiences ask for a product – by name. Cost advantages which rivals can’t match. High switching costs. Ecosystem advantages. And intangible assets like patents, approvals and reputation.
Notice what isn’t on the list. A big launch. Or buzz.
Buffett was explicit about this. The key, he said, is “determining the competitive advantage of any given company and – above all – the durability of that advantage.”
Durability. Read that word again. Not different this quarter.
Defensible for a decade. Or much longer.
Building Products Start With A Moat Already Dug
Here’s the good news for our channel.
A sheet of drywall isn’t arriving on a doorstep in a padded envelope. Neither is a pallet of block. A banded bunk of plywood. Or a truckload of trusses.
Building materials are heavy, bulky and unforgiving on the jobsite. They need yards, boom trucks, and will-call counters. Staffed with people who know how to run a takeoff.
Add credit terms – a contractor who trusts the rep – and a delivery that shows up, before the crew does.
That is a genuine barrier-to-entry.
The dealer, the distributor and the pro desk… still move our industry’s product.
Amazon hasn’t changed us. E-commerce will continue to grow around the edges, sure.
This week, Lowe’s began piloting drone delivery in North Carolina… in as little as 20 minutes. But the payload tops out around two and a half pounds. A sheet of drywall can weigh 20 times that.
The purchase that matters still gets made close to the jobsite… between people who know each other.
Now the harder truth. That moat belongs to the channel.
Not to a brand.
Every competitor enjoys the very same protection. Two-step distribution protects the category from outside invaders. Yet, it does nothing to shield a brand-promise… from the manufacturer across the aisle.
Building products are hard to disrupt. Even though individual brands are easy to substitute.
Inside the castle walls… the fight is still on.
5 Ways To Defend A Moat
A question worth considering with leadership.
What keeps a dealer stocking our product – a builder specifying our solution – a contractor asking for us by name… when a rival shows up with a lower number?
Brand Value. The strongest moat in building products isn’t a logo. It’s the brand name channel influencers use instead of the generic term… to represent the whole category. Sheetrock is an example from USG… typically saluted to describe drywall or gypsum wallboard. Another example? Jacuzzi is often cited for jetted tubs and whirlpool baths.
Switching Costs. A crew that’s trained in a particular system. And the specifier who has those details in the master spec. Dealers whose inventory – pricing and warranty program – is built around a brand promise. Each one raises the cost of leaving. And the reward for staying.
Cost Advantages. The product that installs in half the time. Cuts callbacks. Or removes a trade from the schedule. All create advantages, the builder can appreciate… even at a premium.
Ecosystem Advantages. Each trained installer – certified dealer and completed project – makes the next sale easier. Familiarity lowers the perceived risk for choosing a brand. And in building products… lower risk, closes the deal.
Intangible Assets. Code approvals. Third-party testing. Editorial coverage. A reputation for showing up when something goes wrong. None of those – can be copied and pasted – onto a competitor’s website.
What connects all five? Here’s a hint. Not even one of them… is a product feature.
They are all reasons-to-believe. And that’s exactly where brand differentiation does its work.
A challenger brand doesn’t need the widest moat in the category. It needs one in a place the market leader has left unguarded. A unique selling proposition – an application or an audience – where it can become a category of one.
How To Put Each Moat… To The Test
Consider this useful exercise for aligning sales and marketing.
Do customers ask for our brand by name? Or accept us when we happen to be in stock?
What would a dealer, builder or specifier lose by moving to something else?
Can we measure the labor, schedule – or the risk we remove – as “better performance” is claimed?
What do we have – that a competitor could not reproduce – in six months?
Is the advantage compounding… or quietly being copied?
Moats Get Dug… They Also Get Filled In
Buffett had standing instructions for the leadership running his companies.
Widen the moat. Every year.
Because a moat left alone doesn’t hold its shape. Competitors fill it in.
A spec position erodes when a new project manager arrives. Crews trained on a particular system retire. Dealers get a better program from someone else.
Brand advantage – is discipline – rather than an event.
It shows up as consistency in messaging across sales, marketing, PR and the channel.
As proof… instead of adjectives.
The challenger brands that win continue to grow those investments. Even when interest rates rise.
One Last Thought
Innovation creates an advantage. Commercialization turns that advantage into a moat.
For a building-product manufacturer, widening the moat means:
- Validating that the advantage matters to the people who actually make the decision.
- Translating product innovation into economic value for each audience.
- Building proof through projects, testing, third-party validation and advocacy.
- Embedding the product into specifications, training, distribution and workflow.
- Aligning sales and marketing around the same differentiated promise.
- Repeating the process until preference becomes difficult for competitors to dislodge.
Buffett spent a lifetime proving that the most valuable asset a company owns… rarely appears on a spreadsheet. Not the plants, inventory or the cash position. Instead, the intangibles. The reasons a market trusts that brand.
Now he’s handed the job of protecting all of it to the next generation.
Your moat works much the same way.
It is the confidence of a channel. And it needs a guardian too.
At Kleber & Associates, we’ve invested some four decades in helping building product brands find that advantage. Proving and defending those moats.
Pressure-testing the position before the spend. And turning innovation into the kind of preference a competitor can’t price their way past. Our guide to challenger brand marketing is a good place to learn more.
When your brand has an innovation worth protecting – or a moat that’s much narrower than it should be – we’d welcome the opportunity to compare notes.
(404) 918-5700
