Insights to Guide Construction Strategies

🏗️🤔 In the modular construction world, the difference between wild success and sudden death often lies with one small business model nuance – fixed cost management! In modular construction, this is the whole game. Many companies in our space go all-in with vertical integration – owning the equipment, the processes, everything (KATERRA anyone?). It works perfectly while there is a continuous stream of projects. But this is real estate… when has there ever been a constant with anything? We are the most cyclical industry out there. So when the market takes a downturn, it's a whole different story when you have high fixed costs. 📉 At Assembly OSM, we've taken a different route. Business model resiliency is king. Everything is optimized to become a variable cost, tied directly to a project, instead of a fixed one that locks us in for years. Think about the usual modular approach: owning every step of the manufacturing process to shave off costs. It's tempting but comes with the burden of fixed costs -- huge factories, skilled labor forces, massive overhead. You lose the ability to quickly adapt when the industry tide changes. 🌊 Our strategy? Embrace third party manufacturers to build subassemblies – just like the automotive OEM model or electronics final assembly model. It’s about having the agility to dial up or down production if the game changes (which it always does in real estate), without derailing our entire operation. It’s about balance – controlling quality, efficiency, and cost through our digital technology while staying nimble and ready to pivot. Every modular construction company has its playbook, dictated by its goals and market dynamics. For Assembly OSM, it's about being robust and adaptable, ready for the real estate's inherent highs and lows. 🔄 I'd love to hear your thoughts on this approach, especially from those in the modular construction space. How do you balance fixed and variable costs? #ModularConstruction #VentureCapital #housing

KATERRA, once hailed as a beacon of construction innovation, faced an unexpected downfall, prompting a critical reassessment of its ambitious modular approach and technology integration strategies. 🏗 As we dissect the rise and fall of Katerra, it's important to glean actionable insights to prevent similar fates for future ventures. The collapse of such a high-profile project reveals not only the challenges faced but also the crucial lessons that can shape a more resilient and forward-thinking construction industry. 1️⃣ 𝐈𝐧𝐧𝐨𝐯𝐚𝐭𝐢𝐨𝐧 𝐯𝐬. 𝐄𝐱𝐞𝐜𝐮𝐭𝐢𝐨𝐧 While Katerra's vision of revolutionizing construction with off-site manufacturing and technology was ambitious, the execution fell short. Innovation must be paired with rigorous planning, testing, and adaptation to meet real-world challenges. 2️⃣ 𝐒𝐜𝐚𝐥𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐂𝐡𝐚𝐥𝐥𝐞𝐧𝐠𝐞𝐬 Rapid scaling can strain even the best-laid plans. Katerra's aggressive expansion highlighted the risks associated with scaling too quickly without solid infrastructure and management in place. 3️⃣ 𝐒𝐮𝐩𝐩𝐥𝐲 𝐂𝐡𝐚𝐢𝐧 𝐕𝐮𝐥𝐧𝐞𝐫𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬 The demise underscored the importance of a resilient supply chain. Disruptions and inefficiencies in procurement and logistics can derail even the most promising ventures. 4️⃣ 𝐌𝐚𝐫𝐤𝐞𝐭 𝐅𝐢𝐭 𝐚𝐧𝐝 𝐃𝐞𝐦𝐚𝐧𝐝 Understanding market needs and aligning offerings with real demand is crucial. Katerra's initial enthusiasm did not always match market realities, leading to misaligned strategies and products. 5️⃣ 𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐒𝐮𝐬𝐭𝐚𝐢𝐧𝐚𝐛𝐢𝐥𝐢𝐭𝐲 Effective financial management and sustainable funding models are vital. The financial strain on Katerra illustrates the importance of balancing innovation with sound financial practices. As we move forward, let’s take these lessons to heart and build a more resilient and adaptive construction industry. Innovation remains crucial, but it must be matched with pragmatic execution and strategic foresight. Read 𝐊𝐚𝐭𝐞𝐫𝐫𝐚: 𝐊𝐞𝐲 𝐋𝐞𝐚𝐫𝐧𝐢𝐧𝐠𝐬 𝐟𝐨𝐫 𝐁𝐮𝐢𝐥𝐝𝐢𝐧𝐠 𝐚 𝐇𝐞𝐚𝐥𝐭𝐡𝐢𝐞𝐫 𝐏𝐫𝐞𝐟𝐚𝐛 𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐓𝐡𝐫𝐨𝐮𝐠𝐡 𝐂𝐨𝐥𝐥𝐚𝐛𝐨𝐫𝐚𝐭𝐢𝐨𝐧: https://lnkd.in/g2w89tby #IndustrializedConstruction #BusinessLessons #IndustryInsights Ken Semler Gary Fleisher Ben Hershey Tom Hardiman, Stuart Emmons Steve Burrows Doug Tollin, Daniel Small, Audree Grubesic Dennis McMahon Jennifer Castenson Pete Majewski Adrian Mitchell Kirby Mano Roy P. Patrick S. Hamann Gilbert Meier Matthew Bowe Arash Shekari Gon Zifroni Patric Hellermann Tim Nobles Renee Puusepp Landon Boucher Diego Rivera Gene Meredith Eric Schaefer Carson Holmquist Edie Dillman 

🏗️ A Pattern Is Emerging in US Modular Construction Success The winners in US modular construction aren't selling a product - they're developing their own projects. Here's why this matters. Three major players are showing us the future: • Zekelman Industries (Z Modular): $1.2B invested, targeting 3,858 units by 2025 • Greystar (Modern Living Solutions): Just debuted first 312-unit project in PA, 15 more in pipeline • ICON/Lennar partnership: Scaling 3D-printed communities The key insight? Vertical integration. This mirrors successful models we've seen in: • Japan (Sekisui House) • Indonesia (Modern Land) • Nordic Europe (Bonava) Why it works: • Control quality end-to-end • Eliminate margin stacking • Build repeatable processes • Optimize for specific product types • Faster feedback loops between factory and field Traditional "sell modules to developers" models often struggle because: • Developers want customization • Site conditions vary wildly • Complex coordination between parties • Misaligned incentives The future? Companies that control both factory AND development. Greystar's approach is telling: Their Knox factory created 350 jobs and they're already planning expansion. When the world's largest apartment owner/operator makes this move, pay attention. Thoughts on this trend? Will we see more developers launching their own manufacturing operations? #Construction #ModularConstruction #RealEstate #Innovation #Development #Sustainability