Tuesday, March 26, 2019

Is the Modular Housing Industry Ripe for the New Entrepreneur?

If you are looking for signs of change within the modular construction industry it might take you a while to notice them. But there is something coming over the horizon. The new entrepreneur.

There is a lot of new and innovative things happening on the prefab side of the business with big companies like Katerra and Entekra producing wall, truss and floor panels on automated production lines but they are NOT modular, no matter what the media and their PR people tell you.

Modular is a 6 sided, volumetric module built on an assembly line with 75% or more of the home complete before it leaves the factory gate.

Most of the big national players in IRC modular housing also build HUD Code manufactured housing. Companies like Champion, Clayton, Commodore and Cavco dominate the manufactured housing market and also are huge players in the modular housing arena.

Yes, there are new modular factories popping up like factory OS but most of these are located on the West Coast serving the cookie cutter apartment, hotel and townhouse markets in California, Oregon, Washington and Colorado. East of the Mississippi River doesn’t see much of these types of factories. The only one that comes to mind at the moment is Blueprint Robotics in Baltimore, MD which is a prefab factory and not a modular home factory.

One of the biggest reasons the modular construction industry is ripe for change is the dominance of old guard modular factory owners and a lack of new independent modular factories coming on line. Even the old guard companies are very slow in opening new factories or modernizing their production lines.

They have begun to use technology in their engineering departments but other than that they continue to build the same way they’ve always done it. This is not to say they are wrong for not bringing in automation or opening new factories. It’s simply the way the old guard has successfully done business in the past and to be honest they don’t see an urgent reason to rush into adopting new ideas and procedures.

But being entrenched in doing things the way they’ve always been done leads to a greater incentive to preserve the past rather than innovate for the future. And that is exactly what the new breed of innovative and disruptive young entrepreneurs, armed with investment money to burn, are looking for. An old guard industry ripe for change.

These young startups have the ability to work fast, to develop quickly. Speed is their greatest asset, other than their technology. They may appear small fry, but they'll likely find opportunities when they enter the modular industry with these dynamics. Some of the large modular companies have become self-aware they will soon be lagging behind on keeping up with technology and just might find an exit strategy among these new players.

Another reason the time is ripe for change in the modular construction industry is the incredibly complex systems existing modular factories have in place which makes it difficult to implement new technology quickly. Today a business has to agile to survive and it requires simplicity, not complexity.

Old technology is best for entrenched modular home factories and that is what these new entrepreneurs are looking for. It gives them a huge edge in getting their foot in the door of modular construction bringing with them the latest in technology, automation and financing.

And let’s forget yet another reason the modular industry is ripe for change. Negative Consumer opinion about what a modular home is has always been one of our biggest hurdles. So many people including the media and even our own industry get confused about the differences between manufactured, prefab and modular. Now we have ADU, tiny houses and affordable housing being added to the mix. It’s now wonder the consumer looking for a new home is confused by the term ‘modular’.

The new innovators and disruptors that are eyeing the modular construction industry as the next best place to invest their time, talent and treasure will quickly find a way to let consumers know exactly why a modular home should be the only way to build their new home.

They aren’t about to bring technical innovation into an industry that hasn’t figured out how to inform consumers what they build. No! They will hit all the social media platforms in ways the old guard doesn’t. They will enlighten consumers through podcasts, YouTube videos, Twitter, Pinterest and even Facebook. Social media departments will be added from day one to get the word out.

Is the modular construction industry ripe for change? Certainly looks that way.

1 comment:

Frank Catalano said...

Coach you are so right about Millennials about to take over the modular industry. I already see them biting at the ankles of your Old Guard and think it won't be too long before they start buying into or buying out some of those old modular factories and begin bringing in all those new ideas.

There will probably be a couple of failures along the way but given the time they will trun modular upside down and inside out bringing it into the modern world.