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Big Builders Play It Safe on Innovative Technology
 In an industry that is slow to give up the traditional way of doing things, larger, national production builders may not be entirely sold on innovative building technologies and materials, but they are more likely to invest in them than their smaller counterparts and they do see many possible benefits from using them over the next couple of decades, according to a recent report from the Partnership for Advancing Technology in Housing (PATH).
The report, “Characteristics of Innovative Production Builders,” was based on surveys of NAHB members affiliated with the 400 largest builders in the U.S., all of which build 200 or more single-family homes per year from stock plans rather than custom designs. The study was prepared by the Center for Housing Research at Virginia Tech in Blacksburg, Va.
National firms are in a better position than local builders to use innovative building technologies to their advantage and to continue to gain market share, the study finds, “but they are also very reliant on the success of established business models. The risks associated with building innovations are magnified by the volume of units built by a large production builder. Without substantial field-testing to demonstrate the performance and benefits of an innovation, the risks faced by large production builders generally outweigh any advantages.”
However, the current slowdown in the housing market and increased materials costs could be helping to create a better market for building technology innovation, according to the report. Also, “shortages in skilled construction labor in terms of both overall availability and the inadequacy of training by small contractors is pushing companies to look to solutions that include process and quality control technologies and vertical integration,” the study says.
With large builders focusing more on their land inventories as part of their business strategies, more small builders could be prevented from obtaining desirable locations for development, further accelerating the trend toward concentration in the industry over the past 20 years. However, the study says, the growing importance of land in the cost of housing diminishes the potential impact of building technology innovations.
“As ‘bricks and mortar’ contribute proportionately less to the final cost, the contribution of building technology innovation to profitability declines….This supports the survey results that emphasize the impact of innovation on quality and customer satisfaction rather than costs or profits.”
When asked to rate their likelihood of investing time and money over the next five years on a variety of management and building technology objectives related to construction, respondents gave the highest ratings (“very likely”) to reduce construction defects and callbacks (81%), improve subcontractor dependability (76%) and improve the attractiveness of the homes being built (72%). Cost reduction and productivity (reduced cycle time) were rated very likely by 61% and 62% of the respondents, respectively.
In looking at factors they believe contribute greatly to their success, 75% of the firms represented in the survey emphasized customer service in terms of quickly addressing problems in homes. “This aspect of customer service rates in importance well above the next two items, providing amenities within the communities they develop (57%) and developing and offering high-quality architectural design (57%). Fifty-one percent indicated that higher structural quality and better mechanical systems made a significant contribution to their success; energy-efficiency and environmental sensitivity was cited by 35%.
The study included 11 innovative products and process technologies, and it found that their market penetration fell into three tiers:
- Early-stage innovations with a relatively small share of respondents saying they had tried or were currently using them included: Structural Insulated Panels (8%), pre-cast concrete foundation walls (16%), Enterprise Resource Planning software (18%) and GPS land tracking (27%).
- Middle-stage innovations were: spray-in foam insulation, or Icynene (33%), hand-held PCs or PDAs (58%), Web-based scheduling (59%), factory-built wall or floor panels (62%) and wood/plastic composite or cellular PVC exterior trim (62%).
- Late-stage innovations with the highest penetration were: laminate flooring (78%) and wood I-joist structural floors (91%).
The survey found that the single most important trend that could affect future innovation in building technology is the increase in energy costs, which was cited by 70% of the respondents. That was followed by land costs and availability (62%) and labor costs and availability (61%).
“For the most part, there were no clear associations between business strategies and current or past use of the innovative technologies measured in the survey,” the report says.
“However, companies planning to invest in educating buyers about new technologies were much more likely to have adopted one or more of the early-stage innovations. This pattern confirms other findings stating that building technology innovation by production builders is not pulled by demands and suggests that these innovators focus on their role in (or even the necessity of) educating buyers about the benefits of higher building performance. Given that many building technology improvements are invisible to the consumer, the successful innovator will need to be highly skilled in communicating the benefits of a better quality product.”
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