“Light Switch Innovation” is often used to describe instantaneous, impactful change. The construction industry has developed an appetite for Light Switch Innovation over the last several years with McKinsey’s reports, labor shortages, and robust demand for housing. People are looking for a brand-new way to solve housing’s issues with something like 3D printing hoping to completely change the game. Despite the appetite, Light Switch Innovation isn’t capable in construction. Here’s why:
· Existing housing inventory and homeowners’ equity
· Building codes and municipalities
· History of construction
Much of the US economy is dependent on the equity Americans posses in their homes. With record levels of personal debt, home equity is the one sliver of hope many families have of escaping personal debt. If housing is brutally disrupted in any way, the value of existing homes and the equity in those homes will likely plummet causing an economic depression that will make the Great Recession look like an all expenses paid vacation. Many people’s largest investment is their home and the aggregate effects of disrupting that investment would be catastrophic. Any innovation that occurs in construction needs to be similar in nature to existing methods that preserves the current system’s value to the economy.
The construction industry is HIGHLY fragmented at all levels. This includes local jurisdictions who have authority over building codes, their interpretations, and their enforcement. While frustrating to disruptors, it is effective in that it protects local interests based on needs specific to each community. Local residents are able to impact the communities they live in at the local level. The downside is that anyone looking to direct change has to do so with thousands of varied approaches. This not only takes time, it is expensive. Look at the U.S. adoption of CLT in recent years as an example. Any wide-ranging change takes years to implement in construction and simply doesn’t happen overnight.
Speakers at conferences and trade shows are quick to point out the lack of change in the construction over the past 100 years. Most homes are still built with vertical studs on 16” centers with top and bottom plates with sheathing applied to exterior walls and wallboard to their interior face. This concept hasn’t changed, but the products used to deliver the concept have. Oriented strand board has supplanted plywood. House wrap has been added to limit vapor and air infiltration. And now the two are commonly found in the same product. Construction history shows us that changes are incremental and focused around products, not processes.
While I don’t want to admonish anyone’s dreams of radically changing the construction industry, the facts simply don’t allow for this to happen without a lot of changes. As a result, any significant, impactful change will occur over a lengthy period of time that allows markets to react and correct themselves. Rather than looking for “Light Switch Innovation”, the more prudent efforts are to look towards incremental changes in products and micro-processes that shift where value added services take place and how to impact small changes that add up to significant results in the near term.