Updated: May 2
Case One: This week Katerra, who began as an innovator of a novel steel frame system and transformed into a vertical building industry integrator, collapse leaving dozens (?) of projects and an assembly of 20 formally independent companies and 3,000+ employees stranded.
Case Two: In 2019, in ye ‘ole days pre-covid, WeWork went from global real estate super-nova to a limp basket of cold in a matter of weeks (provide scale of collapse). In addition to their impressive growth, operational scale and attraction to footlights, WeWork sites also engaged with some of the most leading building innovation technologies
While their marketed identity promoted otherwise, neither company was noted for its humility nor its collaborative spirit. But both were (re)shaping the building industry and increased confidence for other innovators to help apply technology and fresh thinking to improve the efficiency of the building industry.
Michael Green timber frame pioneer and founder of MGA, a Katerra owned company lamented on the significance of this failure beyond the business impacts:
I believe that our industry is broken and that we can do better through innovation and systemic change in many areas. Our industry is made up of relatively small companies without the resources for major research and development and capital for investment in innovation.
I was hopeful that Katerra could provide a path, though certainly not perfect, to changes that would reduce the cost of buildings, make buildings more environmentally responsible, improve the quality of construction and speed the process of building to the betterment of society. The world needs climate solutions that come from major disruption as well as smaller scale adjustments in how we live and how we build. The world also needs affordable, accessible, safe buildings for humankind. https://www.architecturalrecord.com/articles/15168-i-saw-katerra-as-a-vehicle-says-michael-green-about-construction-companys-closure
WE GET IT, THE PAIN POINT
Michael summarized the pain point well: the environment needs much more responsible building, the process needs to be faster to respond to relevant market and societal needs and the industry needs to be able to produce solutions that are affordable, safe and accessible.
The disparity between the industry norm and the cultures needs are well documented:
… the average architectural project of significant scale takes 5 years or longer from design, through engineering, permits and construction (and as much as 10 years for healthcare), the built environment consumes more than 40% of natural resources annual, while construction spending contributes around 6.4% to the US GDP [SU1] . Corporate, Institutional and even some residential project costs regularly exceed $1,000 per sq.ft. in the major US metropolitan areas.
… and any significant scale project involves dozens of different companies and agencies to come together in arrangements that are involve unique combinations for each assignment on each site.
( Imagine if securing a new cell phone took 5 years, 20 contracts, cost $200,000 and was created using technology that was 3 full cycles old. … )
THE VALUE IN GETTING IT RIGHT
Does Katerra and WeWork teach us that innovators should accept the building industry as practiced with perhaps innovation around the edges? Should we forgo architecture innovation entirely and rest with fate? Or is there a viable purpose to stick with the field and fight forward?
The value in getting it right could be significant.
Consider the cost in terms of cultural productivity and R.O.I.:
In our work we find that workplaces (pre-Covid) were operating facilities at an average of 60% target efficiency. Who knows how low it will be when the dust of post-Covid workplace settles down
In education, classrooms utilization was below 28 hours/week in public schools and 24 hours per week in use in private schools, Occupancy was 30% below right-size. Universities were lower still.
Hospital clinical spaces utilization run as low as workplaces. Surgeries run 20% lower than reported use by the doctors who book them.
Environmentally, correcting the 40% operational waste would result in a 16% reduction in energy consumption without any impact to users.
Places that could maintain and report on the health of their interior conditions (air quality, water, infection spread, etc) would:
have been able to stay open during Covid-19 and returned trillions of $ to the US economy in the past year alone
could provide safe environments in the now annual wildfire, toxic air closures in the fire zones of the western US states avoiding the multiple workdays and school day cancellations, not to mention protecting our most vulnerable populations.
So it seems there is still value here.
WHERE TO FOCUS
1. Innovation with humility, thoughtfulness and less noise.
As Matthew Aitschison, head of Building 4.0 CRC, a government funded research center in Australia put it in Fast Company,
“…the scale and hubris of a company like Katerra made a recipe for failure…The idea that Big Tech or people from technology backgrounds will sweep into construction and disrupt the industry is an appealing fantasy, but must be viewed with a good dose of skepticism. It’s hard to change construction, and tech can’t go it alone.”
Technology probably cannot do it alone. Additionally and perhaps more importantly, perhaps rather than focusing on construction and all its cost, schedule, labor and location based issues, innovation would be more valuable focused on making what is created more efficient and effective. Disrupting the construction and real estate industry sounds ego satisfying and makes for significant chest pounding media copy. By the construction industry has incrementally evolved over thousands of years. Buildings last a long time through dozens of tech cycles.
Innovation that accepts and meets the construction industry where it is and focus on improved value of this CapEx heavy investment may have more incremental value, faster and thus enable improved adoption.
Valuable technology applications can have immediate impacts and value by better aligning the buildings we have with the modern and changing needs and patterns of the pace of daily life.
2. Stick to the basic principles of Less is More (Build Less Solve More):
Katerra went after greater efficiency in the construction industry. WeWork tried to disconnect workplace from fixed lease structure. Both of which are appreciated and sorely needed.
But probably the larger paint point may be the disconnect of the buildings we have their lack of ability to serve their full potential. Consider that 60% occupancy during their core intended hours of use. That means, even during peak periods, are building stock is sitting 40% unoccupied or underutilized, usually increasing at the fringe hours up to 100% during more than 8hrs/day (probably 24hrs/day on weekends). That’s 105 days a year of cumulative **inefficiency**. That’s an existing problem that doesn’t require any additional building to get out of.
If we shift the focus of problem solving from building our way through problems and shift to smart use and reuse in how we use what we already have – having tech focus on improving the effectiveness of the result the economic, social and environmental values will be considerable. The inherent less-is-more aspect of this value proposition is the basis of most successful market driven technology solutions.
Build Less Solve More allows the same investment in building to provide a much greater return to its users through a focus on quality over quantity.
Shift from technology of things to better systems intelligence, especially the evaluation of the efficacy of buildings and the means to tune our existing structure to better align with user needs.
3. It’s the impact on Culture that matters not the iconography of the Object
Lastly, architecture and the built environment probably still overemphasizes the cultural impact of the outside of buildings on the shape of cities. Unfortunately, this often prioritizes the ego of legacy over the more mundane goals of providing a place where people come to live their lives in healthy, productive ways. Buildings need to facilitate culture, not just try to be culture. And sometimes we lose that mission in the quest of building more, building bigger to put our name on something. But we need to learn from the old saying “It’s on the inside that matters”.
It’s on the inside that we’ve been working now for the better part of 10 years. We’ve developed, and continue to develop, technology that helps organizations better use the resources they already have – increasing building utilization by time and space – so that all of that environmental resource doesn’t go to waste. It’s maybe not as exciting as creating the next big, physical thing that we can put our name on, but it’s definitely rewarding seeing the impact we can have on the existing infrastructure, knowing that every square foot we use is a square foot saved. And that, that has a big impact on our planet.
As Kell Jones, a university researchers in construction transformation, put it in Global Construction Review,
“Katerra saw the destination, but tried to run before it could walk. Maybe every sector needs a Katerra to stumble before it can find its way.”
He’s right, through Katerra’s failure they’ve paved a way forward for the rest of us to innovate in the industry. It just may be less audacious and take more time rolling up our sleeves and getting to work – even working just to improve the stuff that’s already built!