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The prefab challenge

What does off-site construction or prefab have in common with electricity or the Internet? Like most 'breakthrough technologies', the breakthrough can often take decades before it gets established and even longer before it shows an improvement in productivity, says Box CEO Dan Heyworth.

I happened upon a fascinating article written by Tim Harford of BBC World Service. The moral of the story is that a number of 'ground-breaking' inventions (electricity, computers, Internet) have taken up to 50 years for their potential to be realised in terms of business productivity improvement. Who would have thought that 20 years after the first electricity generating station was built in Manhattan, less than 5 percent of mechanical drive power in American factories was coming from electric motors? And for two more decades, industrialists would still choose steam power over electricity for their new factories! Only in the 1920s did they really 'get' electricity and manufacturing productivity improved.

There appears to be some similarity in the story of prefabricated building. Everyone understands the promise: better productivity, faster build times, improved quality, more cost certainty. Yet time and time again it does not deliver. There have been recent well-publicised bankruptcies and a recent industry report shows many companies have yet to see the productivity benefits. Yet, there are many companies who do succeed, particularly if you are based in Japan or Sweden and take cheese with your coffee.

The economic historian Paul David gives much of the credit for the adoption of electricity to the fact that manufacturers had finally figured out how to use technology that was nearly 50 years old. As Harford notes, the key to reaping the benefits was not 'simply by ripping out the steam engine and replacing it with an electric motor. You needed to change everything: the architecture and the production process.' You also had to change the way staff were recruited and trained. Business owners were understandably nervous about scrapping their assets and starting over with an unknown business model. It took innovators like Henry Ford to show how an electric-based manufacturing process could really work.

The prefab challenge

When we started Box eight years ago, we talked about adopting off-site production. We talked a lot. It has taken us a while but now we have a facility – an ex boat-building factory in Henderson - in which to start walking the talk. The most-daunting challenge to overcome if we are to succeed with the move to off-site production is to resist doing things the 'old way'. I would go out on a not-so-slender limb to say that this is the biggest failure of the industry to date. Off-site construction is not simply building under cover - this approach is doomed to failure and will not address the chronic productivity problem in the industry. To make off-site construction work, the entire value chain has to be questioned - from the product itself to the way it is designed, to the procurement arrangements, building code compliance pathways, production process and delivery. This challenges the fundamental business model and mindset of design and construction.

If you keep asking architects and builders how to improve industry productivity, you'll keep getting the same answers. It is interesting to note that Henry Ford was originally trained as an engineer and became an acquaintance of the electricity-innovator Thomas Edison. He wasn't of car or manufacturing pedigree, but an outsider turned car-enthusiast who challenged an old-school, craft-based industry. We need people from other disciplines who can look at the construction industry and forge a different path.

Harford also makes comparisons to the promise of computers and the Internet - we are only recently seeing productivity gains as a result of the Internet, the basis of which was 'invented' forty-odd years ago. Computers, invented in the 1950s, took decades of evolution before they had a discernible impact on industry productivity. So before people write off prefab as being an old idea that hasn't worked, I'd challenge them that prefab's time is yet to come. Like electricity at the turn of the 20th century, we just need to figure out how to use it.

We may not know exactly what the most productive off-site construction business model looks like, but we do know that the key to success is to consistently challenge our preconceived (and centuries-old) ideas of how to design and build houses. And in years, probably decades to come, people will look back and think what a bloody obvious idea it all was.

Dan Heyworth is CEO of Box.