The ROI of Industrialized Construction
Down through the years there have been tremendous internal and external pressures on construction companies to make a profit on every project. Expectations are high for a return on investment (ROI), and instant results are typically expected. But as companies are scrambling to adapt to construction needs, demands and shortages, one of the things that could help them get there is industrialized construction (IC). And IC throws a wrench into the works.
As explained by Simon Waldren in a recent Bridging the Gap podcast, when companies adopt IC processes, it’s tough – very tough – for them to make a profit on their first IC projects. The upfront investment is higher, and business practices are different than with traditional construction projects.
Two of the most common IC processes are prefabrication and modular. IC processes look markedly different than our grandfathers’ construction methods, and they require a mindset shift within the company. Further, they work best when that mindset is embraced by all the teams companywide.
As companies adopt IC processes, management needs to be looking for ROI in the long term. It’s premature to expect or discuss ROI when first getting involved in IC, at the very least because of the upfront investment required. ROI needs to be considered in terms of the big picture – through the lens of multiple projects and as a cumulative number. The harsh reality is that an ROI may not – and probably will not – happen for several years.
Economics and contracting are affected by IC, as well as warranties. The finance metric also changes with these new processes and workflows. IC methods, offsite processes and standardization all need to have more effort behind them and be refined over time.
IC innovation goes hand-in-hand with the tech innovations coming to the forefront of the industry. Two frontrunners are virtual reality (VR) and artificial intelligence (AI), essentially computation by parameters. Technology bridges the chasm between the accomplishments of today and the potential for the future.
As companies become involved in IC, it’s a learning experience. Forward thinking company leaders are always advocating change and innovation to some degree. In IC, they can put forth effort, make adjustments and enhance their processes. The company’s new mindset should include allowing for mistakes along the way. As long as you learn from mistakes, you can adapt.
In the sphere of IC, the pioneers are willing to share their successes and challenges, so others can build on their experience and avoid some of the surprises and curveballs on the journey. It’s helpful to learn from others, and that includes other industries, like manufacturing.
So, while the pressures on construction companies continue to push ROI, innovators can look beyond the “now.” For them, expectations are high for the future, where they can envision a more efficient and productive industry in the long term. The results may not be instant, but they can be lasting.
Need an innovative partner as you consider industrialized construction? Contact Applied Software today and talk with an industry-trained expert about staying on the edge of innovation.