Tuesday, April 25, 2017

The Cost of Innovation in the Modular Home Industry

Every modular factory person and modular home builder regards innovation with a lot of skepticism and for good reason. Rising costs associated with freight, new regulations and codes and now a projected 20% increase in lumber prices can have that effect on people.

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It takes a lot of time, talent and money to produce innovations that affect the entire modular housing industry and who really wants to be the person or factory that leads the way? “Not me” said one after another.

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OK, if innovation for an entire industry is the challenge, then what about innovations for a single factory or a single modular home builder. You still need the same time, talent and money. The trick is how to allocate those limited resources, especially money, to first learn what the future needs are and how to innovate to achieve them.

You do not get innovation for free – you have to allocate time, money and people to the search for new products, services, methods etc. However, innovation can lead to powerful cost savings, profitable new products and competitive advantage.

Right now for the residential housing industry, the main benefit of innovation simply might be survival. If we just continue to cut costs without innovating we will be bypassed by other types of construction that are being innovative.

No matter that we understand that innovation is a priority, it still comes down to one person, either a builder of someone in the factory, deciding that they will pick up the flag in begin leading the charge.

There are many ways to achieve innovation. Let’s divide activities into three categories.

It costs virtually nothing to:
  • Communicate a vision of innovation
  • Set goals and objectives for ideas, prototypes and innovations
  • Ask your people for ideas
  • Ask builders for ideas
  • Ask your customers for ideas
  • Ask suppliers for ideas


2. It costs very little to:
  • Run brainstorm meetings
  • Evaluate and select the best ideas
  • Build models and prototypes
  • Ask customers to evaluate your prototype products or services
  • Implement small incremental innovations in your products, services and methods
  • Empower people to try more initiatives in their areas
  • Investigate new collaborations. Partnerships, ideas and products


3. It costs a lot of money to:
  • Roll out major new products or services
  • Try an entirely new business model

So you should do a lot of items from Category 1. Generate many ideas from all sources – it costs very little.

You should do a few things from Category 2. Definitely move the best ideas to the prototype stage and evaluate them (but kill them if necessary).

You should think long and hard about items from Category 3, but be prepared to allocate some of your scarce resource in this area.

Innovation involves making bets. Often these bets fail. But if the modular housing industry is to stay in the game someone will have to start making small bets until one or more come off.

Innovation is not free, but it can be done on slender means if we adopt this kind of approach.

1 comment:

Builder Bob said...

The modular housing industry on the East Coast hasn't had an original new idea in decades but we are getting better at doing what we've always done. I say let the Architects and designers on the West Coast be the innovators while we just slug it out in the hedge rows.
I agree with Coach when he says "If we just continue to cut costs without innovating we will be bypassed by other types of construction that are being innovative"