Webinar: Building Industry Innovation

On Wednesday, July 9, we hosted “Building Industry Innovation: Insights from Sweden and Scotland.”

During this webinar, panelists shared insights from Terner Labs' recent knowledge exchange trip to Sweden and Scotland—two global leaders in prefabrication and offsite construction. Both countries offer invaluable lessons: approximately 45% of new homes in Sweden and 84% in Scotland lean on industrialized construction or modern methods of construction.

In this webinar, we unpacked what we saw, what inspired us, and what practitioners in the U.S. can learn from these models.

Panelists included: 

• Tyler Pullen, Interim Builders Lab Director, Terner Labs
• Michelle Boyd, Chief Strategy Officer, Terner Labs
• Apoorva Pasricha, COO, Cloud Apartments
• Nathan Young, CEO, MODX PDX
• Jerker Lessing, CEO & Founder, Lessing Innovation; Adjunct Professor at Stanford University and Linköping University

Access the webinar recording here.

If you missed it, here are some highlights from our discussion:

• Elements that have helped nurture a culture of innovation in Sweden and Scotland (some of which were eye-opening to us) include:
  
  

  • Reframing pilot projects: The innovation ecosystems we visited don't expect immediate cost savings from pilot efforts. Instead, pilots are viewed as feasibility and value-creation tests that lay the groundwork for efficiency gains in subsequent deployments.

  • Triple helix collaboration structure: Tight, multi-year collaboration between industry, government, and academia has proven effective in driving IC/MMC maturity.

  • Government as early-stage enabler: Public sector roles can extend beyond funding R&D, and support adoption of innovation by serving as early customers, creating baseline demand and market legitimacy.

  • Widespread understanding of offsite construction: Companies wanting to use prefabrication or other offsite methods have an easier time securing financial and regulatory support when banks and public agencies are familiar with IC/MMC methods, terminology, and processes.

• Factory maturity is not uniform. Contrary to popular belief, even in advanced markets like Sweden and Scotland, factory automation levels vary widely. Facilities are tailored to product strategy, not a universal benchmark of sophistication.

• Vertical integration as a resilience strategy: While not critical for long-term success, we observed that some of the longer-standing companies we visited had vertically integrated between developer/factory/GC - this has helped them endure market cycles and unlock a greater range of financing options.

• Regulation in the U.S. could be more modular friendly: The U.S. system of layered oversight (federal, state, and local codes) makes standardization more difficult and slows adoption of IC/MMC methods. State-wide programs for factory-built housing are being formalized and are a step in the right direction, but something that really moved the needle for Sweden and Scotland was the adoption of performance-based building codes.

Additional questions from the audience that we didn’t have time to answer fully (consolidated for brevity):

• How does the relationship between profit, competition, and collaboration differ between Sweden and the U.S.?

  • In Sweden, there is a strong culture of collaboration among industry stakeholders - we heard how companies share abundance in good times and support each other through the downturns. Part of this comes from an understanding that they need their supply chain and collaborators to remain healthy businesses in downturns so that they are ready for the next upturn. The mentality around competition and collaboration tends to be based on longer-term projections in Sweden than in the U.S.

• Is it possible for a company to successfully offer a one-unit design without allowing any level of customization?

  • Yes, this is possible, and there are good examples of companies doing this both in Europe and in the U.S. and this works when a company has carefully specialized in a specific market segment. Most companies, however, will develop a strategy with some degree of customization, within the spectrum of engineer-to-order → modify-to-order → configure-to-order → select variant.

• How can R&D and the pursuit of innovation be embedded into a company’s culture rather than them being a ‘nice to have’?

  • Companies that establish internal systems for tracking continuous improvement and for requiring cross-functional involvement in R&D develop a strong culture of innovation. Swedish firms, for example, routinely involve floor workers in idea generation, and R&D is often tied to broader business goals like sustainability.

We share more takeaways from the trip in a recent blog post titled “Global Lessons, Regional Impact: What the U.S. Can Learn from Europe's Construction Ecosystems.”