By Tobias Michels, Senior Manager, Porsche Consulting
Tobias Michels, Senior Manager at the Porsche Consulting management consultancy.
©Porsche Consulting/Marco Prosch
The current economic climate — marked by inflation as well as rising construction costs and interest rates — is posing major challenges to the construction industry. A significant decline in the number of building permits is signaling a critical turning point, with no signs of any meaningful short- or medium-term improvement in sight. Clearly, a sustainable strategy cannot consist of hope and government support alone. Instead, some companies need to fundamentally rethink their business models and adapt to the new market conditions. In particular, the traditional, low-margin, project-based business model needs to be reevaluated.
Kleusberg is an example of a company that has succeeded in taking a strategic new course. Although it had already worked with modular construction, it had not been able to take full advantage of industrial construction — due to the project-based nature of its previous business.
Products over projects
The solution: shifting to a product-based business model. This, however, requires selecting target markets early on in order to take country-specific regulatory requirements (such as building codes) into account as early as the product development phase. It is essential to understand the needs of both the owners and the end users. Only then is it possible to provide customized solutions that prove themselves in practice.
Developing these modular products requires an overall approach that covers manufacture, delivery, and assembly. A well-thought-out modular construction and production system — consisting of cleverly designed, prefabricated modules — not only increases quality but also guards against interface problems. Furthermore, it addresses skilled labor shortages, material scarcity, and weather-based delays. And finally, it ensures that budget agreements can be met.
It should be noted, however, that transitioning from a project- to a product-oriented business model also brings extensive changes to the company itself. Whereas buildings used to be planned on the basis of individual contracts, company experts now need to produce product-optimized solutions. Sales departments, which previously responded to calls for tenders, now need to position their products proactively on the market. Procurement, which used to act with respect to specific projects, can now establish long-term partnerships for ongoing series production. As is evident, introducing a new product requires a company-wide strategy that extends across all functions and processes and needs to be clearly defined by top management.
Kleusberg’s example shows that transitioning to a product approach is not only possible in theory but can also be successfully applied in practice. At a time when the construction industry needs to reinvent itself, modularization and industrial construction offer a promising chance to tackle current challenges and also increase efficiency and customer satisfaction. Companies that view modularization and industrial construction as opportunities today will come out ahead of the game in the future.