The modular housing industry has always been lacking in conducting any type of research into new procedures and products and even slower in implementing any type of change.
It doesn’t matter where the factory is located in the US they all share these traits. They are followers, not leaders.
Expansion within the residential modular industry is at an all time low point. Even when a new single family modular home factory is built it is modeled after what the old guard consultants, who grew up in the modular industry, tell the investors it should be.
There is no disruption in our industry like we are seeing on the prefab or the commercial modular sides of our industry.
Walk through any single family modular home factory in the country looking for signs of AR (augmented reality), BIM (Building Information Modeling), Robotics and Data Analytics and you will not see many of these applications being used.
Research is also absent from our niche in the construction industry. Instead we “react” to new processes and usually with little or no knowledge of costs and proper procedures needed to implement a change. There is no single person, let alone a department, devoted to doing research into new products and procedures.
Overall, most industries in the US invest between 3 and 8 percent into research and development while the total construction industry is only about 1 percent. It’s hard to believe that any modular home factory in the US is investing even 1 percent.
Here’s an interesting thought. Years ago I was a successful Realtor happily listing and selling homes knowing there was no way a homeowner could do it better than me.
Today there is Zillow using real estate listings to showcase all types of homes, bypassing the real estate agent in a lot of cases and my new favorite, Opendoor!
If you are ready to sell your home, instead of calling a Realtor who will list your home, market it, hold Open Houses, wait for an offer, wait for the buyer’s financing to be approved, force you to make all the repairs the home inspector says is needed and then get a check for probably less than the sales price and with the Realtor’s commission taken out, you can simply contact Opendoor.
Click Here to visit Opendoor and you will see exactly what a disruptor is. This is what can be accomplished with research and development, something the rest of the real estate industry could have done but didn’t.
Zillow and Opendoor are exploding on the real estate side while Katerra is exploding on the prefab side of the housing and commercial industry.
Katerra has gone from zero to 100 MPH in only a few short years simply by studying what was needed (research) and implemented a plan to take over the prefab world (development).
Construction companies traditionally invest less than 1% of revenue in new technologies—lower than every other major industry and as a result, the last several decades have seen U.S. construction productivity fall while costs continue to go up.
Katerra is changing the supply side by optimizing every aspect of building design, materials supply, and construction.
Which brings us back to the single family modular housing industry.
Let’s assume a modular home factory has annual sales of $30,000,000. Most industries in the US spend 3-8% on research and development which could mean the average modular home factory might spend $900,000 to $2,400,000 on R&D but will never ever be the case.
Now let’s look at that average factory investing 1%. That would be $300,000 in R&D. Does anyone honestly think any modular home factory in the US is investing even that amount of money in R&D?
Here is the typical R&D department at a single family modular factory. Someone in management reads an article online or attends a conference and tells the owner, GM and other management staff what they learned. A discussion follows that might last an hour where all agree they can’t afford it right now and besides none of our competitors are doing it, so why should we.
Even if all the single family modular home factories banded together to form a central R&D group that could recommend future directions for our industry, would any factory turn over even ½% of their revenue to this concerted effort?
We all know the answer to that question.
Related Article: Innovation or Disruption – Which is the Future of Modular Construction?
It’s not as if the factories don’t want to plan for the future, it’s simply that they have been competitors for so long each working on their own set of problems that actually starting the process of cooperation is almost foreign to them. Plus the profit margins are certainly not enough for any single factory to go it alone.
It will be interesting to see what President Trump and HUD’s Ben Carson have in mind to solve the affordable housing crisis in the US and hopefully the single family IRC home factory will be part of it.
Gary Fleisher (the Modcoach) is a housing veteran, editor/writer of Modular Home Builder blog and industry speaker/consultant. [email protected]
