Simplex Open House

Tuesday, November 14, 2017

Disruptive Forces and Traditional Modular Construction

Over the past few years our industry has seen many forces trying to reshape not only how existing modular housing is done but how all things modular and prefab operate.



So much attention has been given to the “disruptive” forces at work to change the present market conditions and rapidly alter the way modular is perceived in housing and commercial construction that holding off these forces may prove futile.

There are many well-established segments of the modular industry suffering the ‘death of a thousand cuts by hi tech start ups all intent on taking business away and offering up more ‘viable and attractive’ propositions that meet specific needs of a customer base.


The attraction of new low-cost, good enough products is stripping away the identity of what modular used to mean to customers and replacing it with any new hi tech construction process being sold. Wall panel factories, flat pack homes, shipping containers, tiny houses and even manufactured homes are all calling themselves “modular”.

Modular factories are seemingly caught between sustaining their existing business models and approaches to market and those waking up increasingly to finding a different, more radical one as they sense real threat. Technology is driving the need to change. The pressure of ‘connectedness’ and the whole ‘network effect’ are forcing rapid rethinks of how to combat these different pressures.

Gone are the days of each factory being secretive and fiefdom-like in conducting business. These new disruptive forces are open and transparent sharing their latest hi tech ideas and processes with each other. They are highly connected and collaborative.


There are new conferences and seminars popping up every day across the world devoted strictly to what the future of modular construction will be. Attendees are gathering to talk about storming modular’s old guard castles. Very few, if any, old guard factory management is attending these events.




As modular factories and even their builders grapple with this new reality, they need to find ways to combat these threats. The ones that turn even further into becoming highly defensive, closed in, applying the fortress mentality seem to be doomed. It is working through how to open up, how to collaborate more openly, how to share and how to engage that is the key to survival.

Since the inception of this blog just before the 2008 housing crash I watched an industry lose its heart and soul just trying to keep the the doors open. For the past few years we have begun to rise again. Huge commercial projects like dorms, apartments and hotels are now a major part of our business model. Factories are once again hiring people for production, manage and sales.


However, while these are good things, there are hundreds of new hi tech and foreign factories beginning to chip away at our growth. Instead of being world leaders in modular, we are flocking to see what Sweden, China, Germany, England and even Australia are doing with robotics, light gauge steel, CAD and other hi tech things.

As discussed discussed above, there are multiple forces at work at reshaping the modular industry. We need to combine, scale and innovate through a collaborative force; built on an ecosystem of partners, enabled to connect more directly with customers, who share in wanting value. In other words, it’s time to start working together to meet the challenge posed by hi tech building methods that could erode what the US modular industry has accomplished over the past 50 years.

The primary operating system of the modular industry ecosystem is under threat. Mature industries must go to established lenders to get the money needed for replacing old worn out equipment and expanding their business into new markets.


The new hi tech visionaries circumvent the traditional systems and look for investors that will throw money at companies that use the latest hi tech innovations that want to take over entrenched industries. These investors love hi tech or perceived hi tech. Blu Homes got over a hundred million in investor money and blew through it trying to go national with their folding homes only to end up in Northern CA selling to people that can afford one of their homes.


But here is a problem our industry faces. What would any current modular home factory do with that same hundred million besides buying some updated equipment and doing additional marketing? The established modular housing factories do not have long range goals based on technology. They don’t have any way of implementing procedures to attract and train new builders and developers in the modular advantage. In fact, some factory managers look at all the new hi tech homes coming on line and say “It’s just a fad.”


Amazon, Google and Yahoo are all funding modular housing projects using the latest technology. How much of that is going to the traditional modular housing industry? NONE!


Microsoft’s Bill Gates just bought a huge plot of land in Arizona where he is going to build a new hi tech city. Will he choose the established modular industry to build it?
NOPE! It will be revolutionary and that definitely leaves us out of the loop.


To become part of these different ecosystems means making change forcing existing systems to radically alter their operating and business model thinking.

The emphasis of modular factories speeding up innovation is becoming critical. The ability to sense and respond to ‘breaking’ market opportunities requires a de-layering of the established innovation process. Lean management principles, alongside agile and adaptive techniques are all becoming part of the organization need to redesign the innovation process.


The ability to learn a common language of innovation, to work on collaborative projects that build new value. to speed up, scale and scope opportunities differently, requires new skills and competencies.


We can do these things but will we even try?

The very nature of modular construction is changing and becoming deeply disruptive to the inner workings of the more traditional modular industry and it will require platforms and ecosystems on part of future management that will allow for this internal change to form into new states of collaborative organizational design.

The old linear way of conducting business of each to their own is being shredded.


The future form is based on value creation networks. The thinking of “just me” needs to become “the power of us”.


This was made very clear at this year’s MHBA and BSC Annual Meetings which saw large attendance by their members. We want to move forward together but we aren’t sure where forward will take us.  


We will need to re-equip ourselves to move ideas into market in different ways, those ideas to be of lasting value, with the need to understand and build on complexity but then break this down in their design, for the parts to give the value each participant wants, from extracting their value from this platform and within an ecosystem.

Combining existing building methods, opening direct lines of collaboration and being transparent will be needed to combat these new well funded hi tech “modular” housing enterprises.

2 comments:

Carl Nolan said...

"Transparent and collaborative" Sure thing Gary. Don't hold that door open too long as your arm will get tired waiting and waiting.

Steve L said...

Gary,

"Thank you for being late" Author Thomas Friedman has written about these disruptive changes in all consumerism and manufacturing the next 10 years.


The Status Quo is on notice