Episode 1: Home-in-a-box

Between 1908 and 1942, Sears sold 100,000 homes that were delivered in kits consisting of 12,000 pieces. While Sears is no longer in the business of making prefabricated homes, a number of technology-driven startups have picked up the mantle and are now delivering new kinds of kits, which, once they’re put together, make modern homes. In the first episode of a 6-part series on the future of homebuilding, Andrew interviews some of the most innovative companies that are reinventing the way we think about prefabricated housing.

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Interviewees

Other Leaders Consulted for this Series

Episode Excerpt

My Home Renovation

My interest in homebuilding began a few years ago when I renovated a summer home in the Hamptons at the end of Long Island in New York. My plan was for a total gut renovation: new kitchen, three new bathrooms, new plumbing, electric, insulation. I acted as my own general contractor and quickly learned why people aren’t their own general contractors. The project took four times as long as I expected and was 100% over budget. There were two main reasons for the overruns, and both of them were predictable.

First, I changed scope as we went. With each reframing, I thought of a new way to configure a room, a nook, a lighting plan. And changes in scope set off a cascading series of work orders from different tradesmen that made the smallest modification significant.

Second, there were scheduling challenges: the plumber couldn’t begin work until the framing was done, so when the framer was late, the plumber needed to be rescheduled. Once he was rescheduled, I had to reschedule the insulation company, and then the sheetrocking company. All of the workers had other jobs, which meant I faced weeks of delays before getting them back to my job.

I had largely put the development out of mind until a friend of mine, also with a home in the Hamptons, told me that he was looking to tear down his house and replace it with a factory-built home. A “modular home” was what he called it.

Homes Made In A Factory

Sometimes, you hear things and a light bulb goes off. This was one of those times. We live in an era of mass production where every item we consume is made in a factory. If a factory can churn out toasters and phones and cars, why aren’t homes made in a factory?

Instead of using labor in the most expensive locations for home construction, factories might be set up outside of cities where the cost of building was less. Maybe in the future, homes would be built overseas and shipped to us, much like how other types of manufacturing have moved offshore.

Sometimes you look at an industry with which you have little familiarity or experience and see what’s obvious about where it will be in 20 or 50 years. At that moment in time, that’s how I felt about the construction space.

Of course, everything will eventually be built in a factory. Of course, one day I will go to a website and create the design of my home. I’ll choose the number of rooms and bathrooms and style of my kitchen. I’ll select from a few models. There will be paint choices, and maybe even the ability to apply for a mortgage as I complete my purchase. A few weeks later, a crew will arrive at the address I provided at the website to pour a foundation and grade my property. Then my house, delivered in modules, will arrive. In a few days, it will go up. Shortly thereafter, I’ll move in. The whole process won’t be that much more complicated than buying a car.

So if the future is so obvious, why isn’t everyone buying factory-built homes? I began my research with two objectives: first, to figure out who the leading players were in this space; and second, since none had achieved such widespread recognition that I was familiar with them, to determine what one of these companies would need to accomplish to become the Google of the factory-built home space.

Technologists Leading The Future

When I hear ideas for startups, I always think back to the advice someone gave me long ago. If you have an idea for a business and you can do something 10% better than the best company out there, odds are your product or service will never be heard of. That’s because 10% better just isn’t good enough. You need to do something 10 times better than your nearest competitor if you’re going to break through the clutter and build a great business.

So what would it mean for a startup in the business of making factory-built homes to be 10 times better than traditional homebuilders? 10 times better probably means 1/10th the cost, or maybe a construction schedule that takes 1/10th the time, or perhaps a combination of both. If you were able to accomplish that without any sacrifices in aesthetics or quality, then you’d have a truly great business.

The new entrants to the factory-built housing space could be grouped by their approaches to building. In the first category are kit builders. These are next generation Sears-style builders who transport all of the pre-cut and pre-sized pieces in a box for assembly on-site. These homes are prefabricated, in the sense that components are made in a factory. In the second category are the modular builders. For them, not only are the components made in a factory, but they are largely assembled inside the factory in the form of six-sided boxes, or “modules.” Depending upon the size of a house, there may be many modules. The kitchen might be a module, as might all of the bedrooms.

When I began researching for this podcast series, I set out to identify builders, architects, and academics all focused on factory-built housing. My initial focus was on companies that constructed single-family homes inside of factories, and I was particularly looking for businesses run by technologists. Over the past 20 years, I’ve found that the disrupters of the biggest industries have been people with no experience in the industries they were disrupting. Steve Jobs had never worked with phones before creating the iPhone. Elon Musk had never worked with cars before Tesla. Jeff Bezos had no experience as a retailer before founding Amazon. If there was going to be a massive disrupter, the next global behemoth in this space, I thought it likely to be founded by a technologist.

Image courtesy of Blue Sky Building Systems