“We are now at a point we have never been at before. The industry is standing on a burning platform and all other options have gone. It simply has to change”. Mark Farmer, UK Construction Week, Oct. 2017.
The Burning Platform
Over the last few years the construction industry has seen numerous reports, from Latham in 1994, through Egan in 1998, to the most recent one: The Farmer Report entitled “Modernise or Die” published last year. Although these reports drove some initiatives, the industry has failed to change at a scale necessary to make the slightest improvement to levels of productivity in 25 years. The ever-increasing skills gap, low margins and lack of innovation have been at the root cause of large losses for main contractors over the last few years.
So, is Mark Farmer is right? Is the industry now faced with an overwhelming set of factors that, in his words, place it on a burning platform where change is the only option to avoid the flames?And if he is right? What do we do to change? Well, Farmer believes that one of the keys to driving the right kind of change, is “manufacturer-led construction”.
As I watched Farmer’s presentation at UK construction week, I recalled a quote I had seen a few years ago:
“We are on a burning platform. We’re running out of cash… [and] likely won’t survive”
This was a quote from the newly appointed CEO of LEGO, Jørgen Vig Knudstorp in 2003, brought in to turn the company around following nearly a decade of declining sales, losses and failed new business models. For years, LEGO had been increasing their number of parts, developing more sets and diversifying. By 2003 they were making electronic toys, clothes and TV shows, they had even opened theme parks. They were haemorrhaging cash and needed to change.
When Knudstorp came in and they analysed this period of expensive and largely unsuccessful disruptive innovation, they discovered one consistent success; a construction toy called Bionicle. This was a typical LEGO construction toy that had numerous accessories that kids used to build different action heroes. The difference with Bionicle is that they had supported this toy with a string of ancillary innovations such as videos, merchandise, books and a video game.
They discovered that their core customers didn’t want other toys, they wanted LEGO to produce bricks. They wanted to construct with LEGO.As a result, their parks were sold off and other toy production stopped. They analysed their sets, slashed the number of parts from 13,000 to 6,500 and focussed on producing sets based on themes that they could support with complimentary offerings.
They called their reduced set of parts, their “pallet” and, although they had no IP, they made it available to everyone, developed and released “Digital Designer” (a design tool) and encouraged their fan base to design new sets, the best of which would go in to production.
By 2015 they were more profitable than Apple.
So, what can we learn from this?
Well, by generating a standardised kit of parts and making it available to anyone, LEGO turned their fans in to designers, able to generate limitless constructions each one completely unique.
Is this not manufacturer-led construction?
Extending this to construction, should then manufacturers be providing a reduced, more standardised, pallet of products? A set of compatible products that fit together simply, quickly and easily. Do we, as Tata Steel, start working with window & door companies, sky light manufacturers, M&E installers to develop a click and fix system? By making this pallet available to the industry to design whatever they may choose, is this the future? Is this Farmer’s manufacturer-led construction?
Design for Manufacture and Assembly (DfMA) has been around for some time with companies like Bryden Wood leading the charge. This is the modern construction sector’s take on building from a kit of parts. So why hasn’t it taken off? Well, mostly because there simply aren’t enough standard parts out there to design from. Considerable fabrication and pre-assembly needs to be carried out to engineer a modular set of building elements. Although this is quicker on site, it isn’t always cost effective especially if there isn’t the upfront lead time to generate the assemblies. Economies of scale are needed for these systems to work as the parts are not standard products.
But it is clear that times are changing. Modern design tools enable companies to design buildings based on function and output and then work back to the products they would like to use to build it. This is leading to development of completely new products, ones that could form part of a new “pallet”.This also offers the potential for construction products to be sold as the true solution to a circular economy (dismantle and re-use) adding huge value to building owners, developers and the wider environment. Extensions and building amendments are simplified too as the modular nature and standardised connections remove compatibility issues.
What do we need to do?
So, if Farmer is right and we need manufacturer-led construction to save us from the “burning platform”, how much of a revolution is required?
It is fair to say that LEGO didn’t succeed based on disruptive innovation, they cleverly used new digital tools to maximise the value from their existing, standardised, system. As we don’t have that in the construction industry, some disruptive innovation is needed to generate that standardised system and associated digital tools. If you have ideas about how we could do this together, get in touch and let's talk. Then, perhaps one day, as in LEGOLAND, we too will be saying: “Everything is awesome”.