Tuesday, July 24, 2018

Time for Modular Construction 2.0

Over the past decade I’ve written a lot of articles about the art of sales and marketing in the modular home industry and discussed the people side of improving the factory’s overall sales.

But have you looked out the window lately at what is happening to the home building industry, not only in the US but around the globe? Change, innovation and even entirely new ways of marketing, selling and building homes have sprouted up like freshly planted corn.

Yes, there are plenty of weeds also. Things that showed great promise in changing the way our industry could do things but soon fell flat on their face. Remember when “Green” was the catch phrase? That was replaced with “High Performance” and that has been replaced with “Sustainability” by the media that reports on the construction industry.

Hotels used to be built on site as were dormitories, senior living complexes, condos and apartment buildings. Today modular is the answer being promoted by everyone in the commercial construction field.

Foreign modular factories are passing us in both design and production. Many have begun shipping modules to the US simply because we haven’t kept up with demand needed in the commercial side. Foreign modular housing factories are eyeing the US as the low hanging fruit.

Don’t think it will happen? All you have to do is look at the American auto industry. Japan, Korea, Germany and other countries opened factories here. Even our Big 3 automakers are manufacturing cars and trucks with transmissions from Asia or Mexico, engines from Europe and steel fabricated offshore.

Small modular factories are sprouting up here in the US to fill some of the void of the existing modular home factories are not filling. Again, when was the last big modular home factory built in the US by a company more than 20 years old? Sorry, there have been a couple built by the Clayton and Cavco but mostly to feed the growing manufactured housing industry.

The modular factories that have been opened recently such as ‘factory OS’ and ‘Kasita’ have been started to fill a specific need for affordable housing.

If the old guard modular housing industry which is located mainly East of the Mississippi really wants to once again be the media’s ‘Darlings of Modular’ like we once were, we need to begin by taking the following steps:

Identify Goals

My father used to say “you can’t get lost if you have a map.” Even though today’s map is the GPS on your phone, many in our industry are lost as to what to do next.

Today a factory simply can’t have just a ‘sales goal’ that is handed to the Sales Manager and arbitrarily passed on to the sales team. That puts the company in survival mode only. Sure, winning a contract for another 200 module apartment building is great but at what expense? Unless your factory has a separate line that builds projects and some do, then not only are you in a dangerous position with your single family home builders but also with the sales reps who will not be making commissions on their builder’s houses.

We, as an industry, need to identify what our industry should be in the coming decade. Will we continue on the same path we have for the past 30 years or will we look for new business opportunities and build more capacity to meet it.

Recognize Sales as a Process

The days of the Sales Manager giving a sales rep a map and a thermos of coffee and telling them to find more builders has been over for a long time. Or has it?

Most traditional new home builders now carry an AARP card or worse yet, have retired or died. So who is taking their place in the food chain? Now that is a very good question.

The modular factory sales team is the answer. No thermos of coffee as most of them only drink Starbucks. That should be your first indication that something is afoot within our industry. The new sales reps coming into our industry need a sense of belonging to a successful effort. They enjoy selling as a team, working on projects together, embracing new technologies, supporting each other’s efforts and look upon each day as a challenge to be met and conquered.

That is in sharp contrast to what many Sales Managers grew up with in our industry. It was a dog eat dog sales contest with the loser being let go. Builders were sending in orders faster than many factories could handle them. Then we had a housing recession and many factories closed their doors forever and builders left the industry.

Today is different. Sales is becoming a process with many projects being handed from one person or team to another taking the project through to fruition. Marketing is now the first thing that should be addressed in the sales process. Marketing is how Starbucks got you to drink really strong coffee with all sorts of flavorings to mask the bitter taste and make you happy spending $5 a cup. Now that is impressive!

Many factories are using social media to show pretty pictures of their homes and commercial projects but fail to use it as marketing. If I post a picture of my dog on Facebook or Twitter my friends ‘Like’ it but not one asks why I posted it. Maybe my dog has passed away, maybe I’m trying to find a new home for him or maybe she is having puppies and I’m looking for buyers. But if I don’t expand on why I posted that picture all I ever get is “Cute dog”.

That’s what is happening on your social media pages. You show a huge commercial project going up or a new home that was just finished but you don’t tell anyone what you want them to do with this information. Maybe all you really want is a “Cute Dog!” but my guess is you want more sales. THEN ASK FOR IT!

Create a Business Pain

Another of my father’s sayings was “You can’t get lost if you’re not going anywhere”.

Many modular home factories really aren’t going anywhere because management has not sat down and planned for the future. Planning at management meetings is mostly focused on problems a project is presenting to the production line, labor shortages, profit, aging equipment breaking down that needs replaced and other every day mundane things. These are important but when they become your focus for the future…..well, think about that for a minute. You’re not going anywhere.

Business Plans are not hard to prepare. It simply takes someone to have a goal for the factory and people discuss it and come up with ideas on how to get there or possibly come up with a different one. The key here is the goal. That is the shiny point of light everyone in the company wants to reach.

Along the way another shiny star may begin to form and another group may pursue that as a goal along with the first one. Opportunity breeds opportunity.

There were 13,000 businesses in the wagon and carriage industry in 1890. Modular construction is not considered out of date, far from it. What is out of date however is how we perceive our place in the future of modular construction.

One company that planned beyond the wagon and carriage industry made wheel bearings for them.

Giant Timken Company, whose signature products, roller bearings, were first used in wagon wheels in the 1890's, moved ever to automobiles and now employees over 14,000. That didn’t happen by chance. They knew they had to find a way to stay in business so they sat down and came up with a business plan that involved making bearings for other industries. They easily adapted to the automobile because they could be applied "to nearly anything that moved."

Measure Every Step

When faced with a flight of steps, do you move back, get a running start and jump from the floor and over all 13 steps to the next landing. NO! Even Jackie Chan wouldn’t attempt that.

He may do two or three at a time and for him that is OK but not for your business.

Yesterday I followed a middle age woman up a narrow flight of steps. She had crutches and special braces on her ankles and shoes. I could tell the first steps were very calculated and painful. She turned and apologized for being so slow. “No problem” I answered.

As she moved up the steps her gait became a little faster and she didn’t appear to be in as much pain as she was when she started climbing. By the time we reached the landing she was smiling and thanked me for my patience.

She looked at and measured each step as she climbed and become more confident with each one. She reached her goal knowing she would have to climb more steps later but this goal was reached.

That is exactly what has to happen in our industry. Those steps to a different future are steep but taking that first step, measuring what we accomplished and moving on to the next one soon makes our transition from a wagon and carriage industry to a better modular home industry using the latest equipment to build modules we never thought possible.

Change is Inevitable

Here’s a challenge I want you to do today. Imagine you just bought your factory and you’re walking through it for the first time after signing the paperwork. Now ask yourself what you would change, what would you keep and what would you throw in the garbage.

This is not only for all the things in the factory but also for people and procedures.

After you do that go back to the beginning of this article and start doing the work needed to stop making wagons and carriages and start building the best modular product you can.

1 comment:

Bob Bender said...

Gary - per your note that few seem to be investing in the modular world, I have a different perspective. Our company built a new modular plant that launched in 2005, and 3 years ago significantly expanded it (Pennwest Homes); we purchased a bankrupt modular company in 2014 (R-Anell Homes), which we reorganized and now employee nearly 200 people; expanded a modular plant in 2013 and may expand it again (Commodore Homes of Indiana); and acquired a near-empty facility in 2016 in Wisconsin and started from scratch a new company building a variety of housing, including modular (MidCountry Homes).

There are certainly lots of other modular companies expanding their footprint, capacity, and technology. There is also no doubt that the market has become wonderfully aware of the potential of off-site construction, and other investors are seeing that potential as well. Our company is excited to be in this market, and with groups like MHBA and others like you, are excited about what is around the corner.