How Fira is using technology to rethink the construction industry.
The construction business is ripe for disruption, says McKinsey & Company. Their 2016 article would seem to sound the death knell for the industry. It reports that large projects typically run 20 percent longer than scheduled and go up to 80 percent over budget. It claims productivity has declined, and financial returns have become volatile.
The Finnish general contractor Fira is trying to change all that, at least in the Nordics. Formed in 2002, Fira enjoyed modest turnover until 2009, when Jussi Aho, a builder who’d taken a detour into the telecom business, returned to the industry. Aho saw then what McKinsey wouldn’t point out for seven more years: that process and technology innovations could be brought to bear on the building industry, and that Fira could become a serviceoriented construction company.
Aho’s goal was to take Fira’s 2009 revenue from 14 million euros to 100 million euros in only seven years’ time. He accomplished it in five.
By Aho's way of thinking there were two paths available in the construction business. The first was to become a developer: buy land, develop, sell. The second was to develop skills to serve clients more thoroughly and add value from beginning to end.
Ville Wikström, Fira Group's Vice President responsible for their modular business unit, says construction projects are usually divided into distinct and separate phases – preplanning, development, construction, and so forth – and each has a separate budget. "In each phase the customer hires the lowest bidder, and from phase to phase information is lost," says Wikström. "The Fira approach puts builder and client on the same side of the table. We play on transparency and trust through an open-book system that aligns risk with reward."
Talking with Wikström feels like talking to a startup entrepreneur. He describes the Fira approach as “digitalizing best practices” and uses terms like “agile” and “scaling.”
Fira's most famous success has probably come in the area of plumbing retrofits. Helsinki contains vast numbers of buildings constructed in the 1960s and '70s which are in need of complex plumbing renovations. Actual plumbing can differ dramatically from old blueprints. The usual construction model, as Wikström puts it, is "outsiders come into your home, smash up everything and make a mess. There are many surprises, and the customer feels completely unempowered."
Wikström says these type of jobs traditionally run way over budget and schedule. "The Fira Agile model changes all this. We bring in construction experts in the beginning, who point out potential trouble spots and conduct small inspections by opening up some walls. We get all the residents together and they have their say. We constantly feed them information so they feel they're in control." Wikström says the agile approach can keep project costs down 20 percent and enable them to complete the job 30 percent faster. "However, the client has to mentally commit that he wants to do it in a new way."
One client who did commit was in eastern Helsinki, where Fira did a retrofit of a 19-unit housing complex. "People had to move out for two weeks and came back to new bathrooms and kitchens," says Wikström. The usual time required for this job: three months. The success was unusual enough that Fira was awarded an EMEA Gold SABRE Award in 2017– sometimes called a "communications Oscar" – for the job. In this honor Fira stood alongside builders of Dubai's tallest building and the Panama Canal retrofit. Online articles about the job garnered 63 million clicks.
"People from outside Helsinki started calling us after that," says Wikström. "Their interest was in our tools and processes which made the job possible."
Fira constantly measures itself against the automotive industry which is known for not only its pioneering work in Lean practices, but also for assembly using modular components.
Fira Modules, a company which began from scratch as a Fira-funded startup, is an effort to modularize housing components to reduce costs and increase speed. Fira bathroom modules, for example, are dropped via crane into a building's central shaft, with plumbing, electric, heating and air conditioning, all connectable in a plug-and-play fashion. (Ensto products enable the electrical wiring system hookup -- see the end.)
The modular bathroom is only the beginning. Wikström says that the modules themselves will be developed further to have "modules within modules,” enabling mass customization from project to project and apartment to apartment – enabling personalized and well-thought-through bathrooms. On a larger scale, the apartment shaft will serve as the backbone of the structure and could be infused with all kinds of technology. "Ensto wiring could go out from the shaft to bring electricity and data connections to the rest of the apartment." Smart technologies could also be installed. "What if you have an elderly person in an apartment and the system could tell you that his light hasn't been switched on and off in 12 hours. You could then look in on him. The modular approach would enable the house to better serve its inhabitants."
The construction industry is massive. Estimates place it at over 10 percent of the world’s GDP. “But even the biggest players have less than one percent of the market,” says Wikström. “There just aren’t big gains to be had from getting big.”
But once upon a time there were hundreds of automobile manufacturers. Wikström notes that today there are fewer than a dozen big players. “Those who thrived were those who utilized information in a new way and made production modular. Through mass customization they produced higher quality for lower prices.”
Can the construction business be scaled? Katerra has done it. The Arizona-based company offers software for the construction industry for building design, logistics and purchasing, and in 2017 sought a valuation of 2.5 billion dollars.
Fira’s turnover reached 217 million in 2017, and though management has not formalized the goal, one gets the distinct impression they would not object to being the construction industry’s first unicorn in Finland. “We’ve been waxing our surfboard for about five years now,” says Wikström, “and I think things are now really starting to happen.”
Ensto is Fira's key partner when it comes to the electrical wiring in the Fira bathroom modules. A typical module is about four to six square meters and prefabricated to the level that it can be dropped into the apartment using a crane. "A similar principle has been applied in ship building for a very long time," says Jani Pesonen, Product Manager at Ensto.
The modules follow an electrical plan with luminaires, panel boards, and sockets already in place and tested before the module is shipped to the construction site. Ensto supplies standard and customized items, but Pesonen says for the longer term Fira and Ensto could cooperate to design modular wiring accessories to bring electricity to the entire module and beyond.
Pesonen thinks that the modular approach in the construction industry is the way of the future and Fira is the horse to bet on. “The approach Fira has chosen makes things happen. They gather expertise around the idea, and cooperating with other companies allows quick solution building. Scaling the business will be easier, as well as convincing builders to start using a system which takes their business to the next level. Fira has a clear task to change the entire industry. It's great to be part of it!”
Author: Scott Diel