What the construction industry can learn from the iPod
What’s spaghetti without meatballs, a movie without popcorn, or Forest without Jenny? The answer: not much. After being associated with their soul mates, these duos have become iconic.
The takeaway here is as amazing as anything in and of itself can ever reach its highest form until it meets its better half. The same is true for technology. As the Harvard Business Review published, what makes a new product or technology truly transformative is not a single feature, but rather the association of this new technology with an emerging market need through a new business model. .
Example: the iPod.
Arguably the most innovative product of the early 21st century, the iPod meant you could have “all your songs in your pocket at once”, as Steve Jobs often claimed. We thought then and now that the iPod was absolutely amazing, a revolutionary achievement. But in truth, it wasn’t, at least not on its own. It has, however, become truly transformative when paired with a new business model. In this case, the new emerging market need was not my songs in my pocket, that was all song in the world in my pocket. Which finally came to life thanks to the soul mate of the iPod, iTunes.
Imagine for a moment how long the iPod craze would have lasted without iTunes. Would we feel like it was iconic technology if we bought, downloaded, then downloaded CDs again on our iPhones to this day? I do not think so.
Large scale production
Now consider another new technology: the construction of modular prefabricated buildings. Global hotel leader Marriott International has embraced the technology since 2014 and even proclaimed a “modular future” after seeing its “average time to build and open a hotel in North America increase by 50%” thanks to to modularity.
But despite this multi-family housing, a relatively similar industry has yet to really embrace this technology. Why? There are various reasons why modular prefab works well in the hospitality industry, but still faces a setback in multifamily housing, which can be summed up in one sentence: a lack of productization.
First of all, what is productization? What does it mean to have a product business model?
The great Neil Patel describes it this way: “Product Services allows you to grow your business and serve more customers without doing a ton of hands-on work on every project. The model is repeatable and should only require modifications, not revisions, client to client or project to project. Once you have produced your service, you can sell it to multiple clients.”
Remember that housing and hotels are both products, but the development process itself is a service. The main difference is simply that the hotel development process is already mostly product, while the multi-family housing development process is not. Almost everything in housing is unique, and developers are constantly reinventing the wheel for each project. Thus, scalability in housing development is traditionally conceptualized in linear terms across larger and larger projects, instead of thinking of scalability as an exponential force across multiple projects, developers, and cities.
Major hotel brands, on the other hand, are already standardized across projects, developers and cities, and therefore inherently benefit from a production process like modular prefab. Indeed, hotel guests generally expect the same Marriott standards, wherever they are, and hotel developers benefit from a “playbook” to follow as the project unfolds. materializes. They may change various elements, but in general the larger design and end customer experience is largely the same.
With multifamily housing, however, tenants have become accustomed to a less uniform quality and experience, as results often vary from project to project. Even within the same developer’s portfolio, different projects have different architects, general contractors and operators with different incentive structures and a range of quality standards. Thus, there is a lack of standardization and reliability from one project to another.
Why does this happen? Well, like most problems, it comes from the beginning. Property developers get a plot of land under contract because “it’s a good deal” and then do a best-use study to determine what to actually build there, how much to charge, and the appropriate quality of finishes and the final product. Essentially they enclose the earth, then determine the product.
The reverse is true in the hospitality industry, where land is purchased with the end product, a hotel, already in mind. At this point, the multi-family housing developer could bring in the modular factory once the plans and concepts are nearly complete. And finally, the prefab factories say “of course we can build your one of a kind housing project, but we will basically have to start from scratch, so that the plans for this project can actually work for our factory to be built.
One of the leading modular design experts, Jeremy Linzee, summed it up perfectly when he said, “The problem is that developers are used to building projects, but factories want to build some products.” Therefore, even when real estate developers proceed with prefabricated modules for a project, they do not have the ability to simply and easily scale this product across multiple sites.
Measure once, build twice
Imagine though, if multi-family developments were built through a new, more produced business model. It would mean that for the first time in history, modular prefab housing could finally meet its better half.
We designed my company Madelon so that developers can send their specs to factories like IndieDwell or Rise who can rebuild the same module over and over again, instead of starting over with each developer. With a new product process, we can finally reach a state that connects hardware and softwares.
For example, does your city (LA, I’m looking at you) need more low-rise products in its small, underutilized infill lots? Great, there is already a product for that. Or does your city (Denver, I’m looking at you) need to rapidly accelerate mid-rise housing development to accommodate massive population growth over the past decade? Great, there’s already a product for that too.
Most importantly, tenants would know what to expect. Ultimately, quality and the overall experience would become essential elements of the final product, held in place by a brand name. Developers would also benefit from knowing that the entire process, from land to cash flow and everything in between, has been standardized, thereby reducing many variables associated with grassroots development risk. This risk reduction will even spur the construction of new housing, which most cities desperately need.
If we really want to increase the housing supply in our cities, we need to think exponentially across sites, neighborhoods and cities. We can no longer think project by project, the crying need for more housing forces us to build more efficiently. Most importantly, we cannot allow modular prefab technology (which will finally allow us to scale) to stagnate, just because it misses out on its soul mate: a new, more productized business model.