Did you catch the most important booth at IBS this year? I bet not. Chances are you walked right by it and didn’t notice it.
The most important audience for this booth wasn’t the builders but the manufacturers who were exhibiting at the show. Unfortunately, most building materials manufacturers spend their time outside of their booth looking at the competition or meeting with customers. They don’t spend enough time, just looking around.
The Company with the Most Important Exhibit at IBS is Katerra
If you are a building materials manufacturer, Katerra represents the biggest threat to the future of your business.
With their money, scale and smarts, I predict that they are going to totally reinvent the way buildings are designed and built. Being more of a Silicon Valley type of firm they have a singular focus on reducing the tremendous waste and inefficiency in construction.
Think of how Craigslist decimated local newspapers by making classified advertising, their biggest source of income, free. In its own way, I predict this will have as much effect on residential and commercial new construction.
Lack of efficiency will make the way manufacturers do business now irrelevant in new construction. They may be relegated to competing with each other in the repair/remodel, big box and smaller high-end custom construction.
Your products will still be used. The reasons why a company is chosen will dramatically change. Many types of building materials are at risk of becoming a commodity.
Your brand may no longer have any value. How your products are made, may even be dictated to you. If this happens, what value do you provide? How can you charge a premium?
In this scenario, building materials manufacturers will need to act more like suppliers to the car manufacturers. Do you know who makes the upholstery or air conditioner in your car?
Here’s What I Predict Will Happen
Katerra will approach builders and developers with an offer they can’t refuse. To design and build for them at a lower cost with higher quality and to do it faster.
What if the builder could eliminate the need for designers, estimators, installation labor, and materials sourcing? Just like Nike or Apple, builders will become brands who don’t need to actually make anything themselves.
What This Means to the New Construction Market
1. The builder, Katerra, will be ordering truckloads of products to be delivered to their factories. No more need for distributors, dealers or contractors.
2. Labor shortages and installation errors will be a thing of the past.
3. The builder will be taken out of the equation when it comes to product sourcing. There will be no more rebates. Katerra will want the best bottom line price, period.
4. Katerra will be able to look at making really big changes in how homes and buildings are built. Because of their scale and process, it will be easy for Katerra to consider big changes like changing to metal framing in residential construction.
5. Their investors might be willing to run a loss to gain market share. What will you do to remain relevant and compete?
Just like what Uber did to the taxi industry, this is going to happen fast. And just like the taxi industry, the NAHB and some builders may try to push back with legislation that may slow but won’t stop this change.
In two to three years, or sooner, you will feel the effects of this change as your larger builders will no longer be buying from you. It will also happen to you in the commercial area.
Just like Lyft, there’s room for a few more Katerras. Look for people like Elon Musk or others to create new companies designed to compete with Katerra. FullStack Modular is another company to watch who is focused on the multifamily market.
What Should You Do
- Don’t stick your head in the sand and wait to become irrelevant.
- Learn as much as you can about Katerra and factory built buildings and find out how you can better meet their needs than your competitors. Go meet with them.
- Develop a three to five-year plan that is based on Katerra being as big a success in new construction as Uber is in transportation.
“I had chills watching this video.”
Monica Prichard Building Materials
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What People Are Saying
“This is an interesting piece and I think you’re spot on.”
Matthew Kupersmith – Partner at Iron Compass
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Maurie Jones – VP Marketing, Wayne Homes
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Cooper Koch – Principal, Cooper Smith PR
“You are so correct. An additional point is Katerra approaching manufacturers to buy product direct. While many think of “modular home builders” as low end and multi-family providers, these projects are multi-million dollar luxury homes.”
Rick Locke Owner, Windows, Doors & More
“Great article. Food for thought for sure.”
Joselyne Walter – Strategic Marketing Manager, Masonite International
“Couldn’t agree with you more, Mark!”
Susanna M. Ross – Industry Analyst, Principia
“Dead on… good one Mark”
Joey Peters – Senior Masonry Brand Manager, Oldcastle
“Excellent assessment Mark. Manufacturers need to wake up. If prefabrication isn’t a big part of product development planning, they’re not going to make it.”
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