For the housing and construction industries, the recent market shock has created an opportunity to reexamine the way we do business, and new approaches that might bring greater resilience to our sector.
In this next series from Adam Sgrenci and the Center for Infrastructure and Society, we’ll take a systemic approach to analyzing this pandemic’s two most important lessons - the need to come up with more resilient business models and the need for collaboration
between for-profit and nonprofit sectors.
Many of our trades, custom builders and developers have undergone the toughest 7 weeks of their careers. Some have laid off entire crews, others have furloughed their staff awaiting government financial support, while a small handful have actually emptied their savings to keep crews on payroll - giving trades the only chance they will ever get to WFH (work from home).
Ironically enough, trades can WFH. They can study new techniques, research budding technologies, and learn about business management, networking and utilizing task management software.
However, if you didn’t guide your WFH field teams to leverage their time as such, you didn’t miss the boat. There’s still time to innovate and plan.
Housing Industry 2.0?
Now that job sites around the country are starting to open up, what kind of strategies might you implement? Some of the more common approaches include:
Accessing top talent from the swollen labor pool and shedding some of your weakest performers
Downsizing your office space knowing your staff can be productive WFH
“Greening” your image by focusing on smart technologies and IOT solutions, and
Acquiring small businesses for a bargain price that didn’t survive the shutdown
While those strategies may sound reasonable, they ignore what the world has learned from this experience and do little to ensure resiliency against similar market shocks.
From the mainstream media to frontline healthcare workers, it’s been acknowledged that healthcare systems were unprepared for such an event due to lack of resources, community awareness, and overall foresight. An interesting result of this is the break from conventional business practice to minimize the impact of the pandemic by repurposing resources for PPEproduction and making privatized education free.
If we’ve learned anything in the last 7 weeks, we’ve learned that ego, individualism, fragmentation and competition make us less resilient, not more. As most of you know, these are the same characteristics that have prevented the housing industry from positive productivity growth for decades.
Many of you have been working to eliminate these old traits. Now is the time to shed them completely and leverage two great lessons from recent events (briefed here and detailed in the coming two articles) to make us more resilient:
Lesson 1: Our business models are vulnerable to shock because they are extractive.
Conventional models narrowly focus on reducing the cost of labor and selling as many products as possible to achieve economies of scale. They do nothing to preserve or protect the market in which they operate. Rather than solve for the skilled labor shortage, housing crisis and destructive environmental impact, our extractive business models may propagate the problem by directing us to simply produce and consume new things (eg. Smart Technologies). This is analogous to the predatory approach that marketing and manufacturing companies took to capitalize on the desperate need for PPE. But what can we expect from old-school business models that are designed to prioritize financial gain?
Fortunately, we have options!
What alternate business models exist or can be iterated upon? In the coming series, we will explore models that:
Address the “feast or famine” mentality by creating recurring income business models. The focus shouldn’t be more clients, but longer-term clients. Don’t terminate the project once a client occupies their home, begin the next phase by providing services to care for their home.
Invest in your people by creating training programs that encourage entrepreneurship. Your workers are the future of your business. Products are temporary because market preferences evolve.
Acknowledge collaborative interdependency with your competitors. How can businesses work with one another to retain market share, compliment each other and create new markets?
Lesson 2: Market-led strategies are more resilient when they bridge public and nonprofit sectors
While the Triple Bottom Line framework - which recommends companies commit to focus on social and environmental concerns just as they do on profits - has been around for decades, its application typically catches on during economic downturns when organizations are forced to look outside of their immediate market for support. Some experts have traced the rise of social enterprise in the US to the 1973 oil crisis when nonprofits saw a big cut in government funding. Another wave came in response to the 2007-2008 economic downturn which has, no doubt, inspired our own construction sector to start thinking about “Impact.” Now we have an abundance of market players who have leveraged this language, as well as the government financial incentives that come along with it.
So how might we enable more housing and infrastructure leaders to take this path? We’ll be taking a look at:
Government incentives (eg. The Green New Deal) have been launching programs for affordable housing for years. Many of the larger traditional (ie. Single Bottom Line) developers have leveraged their market share to win these projects. However, new incentives favor the Triple Bottom Line.
Impact investment funds for businesses are becoming more mainstream. You don’t need to be a 501(C)3 nonprofit any more to receive social impact grants or investments. The line between nonprofit and social enterprise (and for-profit) is beginning to blur as conventional capitalism ages out. Even the most traditional financial services companies have launched impact initiatives. Citi, Mastercard and Goldman Sachs are three examples. They refer to a Double Bottom Line (but that’s ok, they’ll come around and capture the 3rd soon enough :)
Nonprofit and corporate partnerships are also on the rise. For decades, social enterprises and the increased influence of smart business after the tech boom of the early 00’s has encouraged nonprofits to refine their enterprise models for sustainability. Today, nonprofit organizations are incredibly business-savvy and some are profit-making machines. How might we envision new ways for business and philanthropy to work together more frequently? Especially as the low-cost housing sector continues to grow, these alliances will become critical!
With an open mind and willingness to make bold decisions for your teams and clients, we can solve the housing crisis and skilled labor shortage. As your job sites begin to open up in the coming weeks, which strategies will you pursue?