There are many modular startups and established factories that may soon start going south, not because they are poorly managed or under-funded. They had a business plan and lots of potential business but now the business plan they worked on so hard before the pandemic is not working now with higher demand, labor shortages, and rising LBM costs.
Viking Carrier
Mariotti Building Products
PFS Corporation
When this happens, business leaders face a critical dilemma: They can stay the course and see if their current strategy just needs a little more time, or recognize that a change in direction is necessary for the business’s survival.
Many modular factories are finding a changing landscape. Dave Boniello, vice president of Scranton’s Simplex Holmes, said: “We have seen dramatic growth in the business of single-family homes. Single-family homes have always been an active part of our business, but there has been a significant increase and it continues at a very good pace.”
He predicts that the company will outperform last year’s single-family home sales by at least 75%.
This evolution in what modular factories are building today compared to what they used to build just a year ago has forced the traditional modular home factory to once again focus on single-family homes.
Innovations in single-family home production require factories to start listing both their strengths and weaknesses in order to better understand the impact change is having on them. Listing what your factory does well should be easy but listing and admitting to what your factory doesn’t do so well is a lot harder. And there are also the other things that keep you awake at night like out-of-control material costs, product and labor shortage.
Without a full list of both, you will never move successfully in the right direction. Start by having internal conversations with everyone that works with you to produce product including your builders and investors. What they may have wanted when they first talked with you could also be changing.
A big change in recent years is the “build to rent” investor/developer wanting to use modular to get people into homes faster than site-building their homes.
“Some traditional builders tell their customers that they haven’t been at home for more than a year,” said John Colucci, chairman of the Modular Home Builders Association. “In a modular business, we know exactly when we can deliver a home to someone. It only takes six days to build a 3,000-square-foot colony at our factory.”
Recreating and innovating as you uncover changes is a key to success. Being locked into what you’ve always done or what you thought they wanted can lead to stagnation and erosion of business.
A veteran of the off-site industry says that he is not afraid of someone following in his footsteps, he is more concerned about the person t-boning his plans that he never saw coming.
Encourage everyone in your company to look for external threats and opportunities. This is healthy paranoia for a company just starting out and for established companies that thought they owned their market.
To learn who is planning and maybe even executing a process that could challenge your company you need to spend time reading industry journals, attending conferences, listening and watching podcasts and vloggers, and talking to your customers and investors. If someone has an idea they want to sell, you can bet your bottom dollar they are talking to your customers and investors.
Try not to get distracted by the small stuff, and figure out which threats or opportunities are actually worth action.
If and when you’ve pinpointed a threat significant enough to warrant a change in your business, it’s time to sit down with others in your circle and talk strategies.
If someone were to build a modular factory just down the street from you building the same product as you and sending out their reps to your builders and investors, I’m sure you would react quickly, probably by doing what you’ve always done…give discounts or lower your prices. But there are other strategies you can explore, you just have to look a little harder.
Now imagine that factory was a hundred miles away and you knew nothing about them until they opened their doors and t-boned you by stealing your builders and investors. Now those purposeful strategy meetings you should have had with your staff will become panic meetings.
You must be constantly working to recreate and innovate. The modular industry is changing and being one of the last kids on the block doing it the same way you’ve done it for decades just won’t work today.
Once you and your team have decided on what strategy you are going to implement, you have to generate a company-wide “buy-in”. A best practice when making company-wide changes is to talk to each department head personally and find out what he or she may want to know before putting your final vision into motion.
Generating support throughout the company means you will be stronger and more able to fend off those t-boning competitors.
And finally, remember that the need to evaluate threats and opportunities, and to change your approach, is ongoing. This isn’t 1990 where everything was butterflies and flowers.
Today the pace of change within the modular housing industry is more like survival of the fittest with the loser closing their doors simply because they couldn’t figure out how to implement the changes necessary to stay competitive.
Single-family homes are once again taking center stage in modular construction. In the words of that famous baseball philosopher, Yogi Berra, “It’s like déjà vu all over again.”
Let’s hope you begin looking at what is changing in our industry and take steps to innovate, generate and reinvent your factory to meet tomorrow’s modular needs.
Gary Fleisher is the contributing editor of the Modcoach News blog and industry speaker/consultant.
Contact modcoach@gmail.com
