What’s spaghetti without meatballs, a movie without popcorn, or Forest without Jenny? The answer: not much. After being paired with their soulmates, these duos have become iconic.
The take-away here is no matter how incredible something might be on its own, it will never attain its highest form until it meets its better half. The same is true for technology. As published by the Harvard Business Review, what makes a new product or technology truly transformative is not a single feature, but rather, the pairing of this new technology with an emerging market need through a new business model.
Case in point: the iPod.
Arguably the most innovative product of the early 21st century, the iPod meant you could have “all of your songs in your pocket at one time,” as Steve Jobs often claimed. We thought then and now that the iPod was absolutely incredible, a groundbreaking achievement. But in truth, it wasn’t, at least not on its own. It did however become truly transformative when paired with a new business model. In this case, the new emerging market need wasn’t actually all of my songs in my pocket, it was every song in the worldin my pocket. Which was ultimately brought to life through the iPod’s soulmate, iTunes.
Imagine just for a moment, how long the iPod craze would have lasted if it weren’t for iTunes. Would we feel it was an iconic piece of technology if we were still buying, uploading, then downloading CDs onto our iPhones to this day? I think not.
Productization at scale
Now, consider another new(ish) piece of technology: modular prefab building construction. The world’s number one hotel flag, Marriott International, has embraced the technology since 2014 and even proclaimed a “modular future” after seeing their “average time to build and open a hotel in North America increase by as much 50 percent” thanks to modularity.
But despite this multifamily housing, a relatively similar industry, has yet to truly embrace this technology. Why? There are a variety of reasons modular prefab works well in the hospitality sector but still faces pushback in multifamily housing, which can be summarized in one phrase: a lack of productization.
First off, what is productization? What does it mean to have a productized business model?
The great Neil Patel describes it as follows: “Productized services allow you to grow your business and serve more customers without doing a ton of hands-on work on each project. The model is duplicatable and should only need modifications, not overhauls, from client to client or project to project. Once you productize your service, you can sell it to multiple customers.”
Remember, housing and hotels are both products, but the development process itself is a service. The key difference is simply that the hotel development process is already mostly productized, while the development process for multifamily housing is not. Almost everything in housing is one-off and developers are constantly reinventing the wheel on every project. Thus, scalability in housing development is traditionally conceptualized in linear terms through larger and larger projects, as opposed to thinking about scalability as an exponential force across multiple projects, developers, and cities.
The major hotel brands, on the other hand, are already standardized across projects, developers, and cities, and therefore inherently benefit from a production process like modular prefab. This is because hotel guests generally expect the same Marriott standards no matter where they are, and hotel developers benefit from having ‘a playbook’ to follow as the project comes together. They can tweak various elements but generally, the broader design and final guest experience are largely the same.
With multifamily housing, however, tenants have become accustomed to less than uniform quality and experience as the outcomes often vary from project to project. Even within the same developer’s portfolio, different projects have different architects, general contractors, and operators with various incentive structures and a range of quality standards. Thus, there is a lack of standardization and reliability from one project to the next.
Why does this happen? Well, like most problems, it stems from the start. Housing developers get a plot of land under contract because “it’s a good deal” and then do a highest and best use study to determine what to actually build there, how much to charge, and the appropriate quality of the finishes and final product. Essentially, they lock up the land, then determine the product.
The opposite is true in hospitality, where the land is sourced with the final product, a hotel, already in mind. At this point, the multifamily housing developer might bring in the modular factory once the plans and concepts are almost complete. And ultimately, the prefab factories say “sure we can build your one-of-a-kind housing project, but we will have to essentially start over, from scratch, so the plans for this project can actually work for our factory to build.”
One of the leading modular design experts Jeremy Linzee perfectly summarized this by saying, “the problem is housing developers are used to building projects, but factories want to build products.” Therefore, even when housing developers proceed with prefab modular for one project, they lack the ability to simply and easily scale this product across multiple sites.
Measure once, build twice
Imagine however, if multifamily developments were built through a new, more productized business model. This would mean that for the first time in history, modular prefab housing could finally meet its better half.
We designed my company Madelon so that developers can send their specs to factories like IndieDwell or Rise that can re-build the same module over and over again, instead of starting over with each developer. With a new productized process, we can finally achieve a state that connects the hardware and the software.
For example, does your city (LA, I’m looking at you) need more low-rise products in its small, underutilized infill lots? Great, there is already a product for that. Or does your city (Denver, I’m looking at you) need to quickly ramp up mid-rise housing development to account for the massive population growth over the past decade? Great, there’s already a product for that too.
And best of all, tenants would know what to expect. Ultimately, quality and overall experience would become core elements of the final product, held in place by a brand name. Developers would also benefit from knowing the entire process, from land to cash flow and everything in between, has been standardized thereby reducing many of the variables associated with ground-up development risk. This risk reduction will even incentivize the building of new housing, something most cities desperately need.
If we want to truly increase the housing supply in our cities, we need to think exponentially across sites, neighborhoods, and cities. We can’t think on a project-by-project basis any longer, the dire need for more housing requires us to build more efficiently. And most of all, we can’t let modular prefab technology (which will finally allow us to scale) to become stagnant, solely because it’s missing out on its soulmate: a new, more productized business model.