How to succeed in the market for prefabricated houses

In line with the trends affecting manufacturing industries in general, the market for prefabricated houses is experiencing drastic change. Consumer preferences are shifting and decision-making is ever more internet-focused. The market is growing, but competition is simultaneously getting fiercer. In this complex environment some companies are growing and prospering, while others are struggling with declining sales and negative margins. What defines successful companies, and what could companies facing serious problems do to change their destiny?

A growing and developing market

According to a report by RTS the demand for turnkey houses is increasing in Finland. In fact, 2017 was the first year to date that turnkey houses formed a greater percentage of total deliveries than traditional element deliveries, marking a significant milestone in the development of the prefab house market. Furthermore, as the financial crisis years have receded, the market for prefab houses has begun to grow and this growth is expected to accelerate in the future.

Shifting consumer preferences

I have worked with a company offering prefab houses and done research on the market, as well as on the construction scene in Finland in general. We can see a distinct trend in terms of what consumers actually want. The key words are “readymade” and “simple”. Readymade as in turnkey, and simple regarding contracts and the supervision of the process. In short, consumers seem to want to minimize their own involvement and effort – they want to sign a contract and move in when the build is finished. Obviously, there are those who prefer traditional prefab houses that entail a level of involvement and work, but their prevalence is indisputably decreasing.

Emphasis on price and online sales channels

The prefab house market is not an exception when it comes to digital solutions. Consumers increasingly base their decision-making on information they find online, and Skype meetings are increasingly common. This has resulted, at least partly, in consumers putting out requests for tenders more frequently and expecting rapid responses which, in turn, has forced companies to differentiate and improve their internal processes. The problem is that differentiation has very little effect if the price isn’t right. Many argue that today’s typical prefab house buyer knows much less about the construction of houses than previous generations. Quality is indeed crucial, but why make it the focus of differentiation if it merely raises costs and prices, and consumers neither appreciate it nor understand it?

Accepting the changing circumstances

The answer is essentially quite simple – adapt or die. Companies have to acknowledge the changing circumstances and tailor their offering and services accordingly. Based on my experience and analysis, my tips for success are:

1) Focus on turnkey houses in growing geographical markets.
2) Maintain an adequate level of quality, but don’t overdo it.
3) Develop internet sales channels to simplify the intricate process of buying a prefab house.
4) Limit your product portfolio and standardize products in order to increase control and enable sourcing efficiency.

If you have comments on the above content, or relevant experience you would like to share, I would be happy to hear from you.

 


I am Erik Mustonen, a member of the KPMG Global Strategy Group. Ever since I was little, I’ve been interested in numbers and calculus. D&A is, in a way, another outlet for my passion for numeric analysis, and an exciting means to explore and learn new things. At KPMG I’ve been fortunate to be involved in D&A-related assignments. KPMG has clearly made progress within the field and a strong D&A community has developed here, which I’m happy to be part of.

Innovate faster with free service design tools

Digitalization and new services are rapidly shaping and disrupting the markets and society as a whole. Therefore, the ability to create customer-centric services quickly has become extremely important.  Free tools, downloadable from the internet, can help to kick-start new disruptive services.

innovation

Easily combine strategic thinking, Lean and service design

When creating new services, companies are increasingly using free hands-on tools such as Business Model Canvas, Lean Startup or Lean Service Creation. Aided by a set of practical canvases, you can easily combine strategic thinking, Lean philosophy, design thinking and agile development, and apply them to your service idea.

The canvases include some key questions for your service creation process, and help you to form answers in an organized way. This ensures that aspects such as the business model, customer engagement and the service concept are considered. The canvases and related methodologies foster both creativity and critical thinking via regular checkpoints in the process.

Experienced advisors can add market knowledge, best practices and structure

However good the do-it-yourself tools are, you may benefit from using a professional advisor. A good professional will have the experience and knowledge required to help you find a solution for your specific needs. Experienced advisors can add value by providing e.g.:

  • Business insight regarding markets, competitors and users. This will require access to market data, analytical capabilities and tools, and an understanding of the business logic.
  • Best practices across industries. Ideas may come from the hottest start-ups, inspiring services or expert interviews. Copy with pride, as long as it is legal.
  • Structure and momentum for your development process. Unbiased, constructive feedback will help to balance service design elements. Engaging facilitation skills will help your team reach its full potential.

Boost your innovation process and agility by the smart use of service creation tools

You can make your organization more customer-centric, innovative and agile by the smart use of the above-mentioned tools in your service creation process, leading to:

  • Improved services that customers really need and are ready to pay for.
  • Faster innovation cycles and time-to-market.
  • More effective resource usage, as bad ideas are killed faster.

Whether you work for a corporation or a startup, do try out some of these free service creation tools. Even with their limitations and shortcomings, they can significantly boost your organization’s ability to build disruptive services faster.

Antti Turpeinen works as a Strategy and Operations Advisor in the KPMG Global Strategy Group. He has advised organizations in manufacturing and service industries for over 10 years in Lean, Supply Chain, Operations and Strategy development. In his leisure time Antti organizes a low-threshold sporting activity program known as “Matala Kynnys” for school pupils, and he also plays football for FC Simpsons.

Short survival guide for new entrepreneurs

When I had just moved to Finland, without a job, I was desperate to find “something” to do, whether one calls it working for an employer or working independently. I was trying both: applying for jobs and thinking of how to make a living by myself.  It took me three months to find what is still my current job, but in the meantime entrepreneurship crossed my mind.

I recently handled a startup case that brought me back to that time. It was a good feeling to know that after all these years and after working with many different cases, I’m able to look back at that situation and give a piece of advice to that “old me” that was thinking of a startup. Here are some recommendations that I hope will be helpful for people considering becoming entrepreneurs or who are having difficulties making it work.

Be ready to fail… and to wait for results

As tough as it sounds, startups involve risk. If you are not willing to take risks, this is not for you. It may take several attempts until you get it right, and it can take time to reap the rewards of being an entrepreneur. This is most likely the reason why a startup was my plan B when I moved to Finland. I wanted to see results immediately!

Stop boiling the ocean

Ideas, ideas, ideas… You can spend the whole day thinking about new things to do. That’s fine. BUT, you also need to focus. If you try to do everything, you most likely won’t manage. Don’t try to boil the ocean. Take time to analyze your options and be realistic. Ask several questions: Is there a real need for your product? Do you have access to the target customers? Is your product different from what’s being offered by the competition? And a critical one, do you have the capabilities to develop the product? Here you need to think from the skills and financial point of view, either with reference to yourself or with the help of another person. If I want to build the next Ferrari, I will need more than just good ideas.

Incorporate the lessons learnt

You also need to incorporate all the lessons you have learnt. If you try something and then drop it suddenly to start something new again, you are not really giving time to grasp what went wrong and what you need to change in order to develop your product and service. Again, focus is important!

Consider all the available help

Fortunately, you are not alone in this journey. Governments are increasingly acknowledging the value and new jobs that entrepreneurs bring to the country, and support for startups is growing. It can be difficult to find where to start, but if you are in the Nordics, I strongly recommend that you take a look at this report prepared by KPMG for Nordic Innovation. It gives a good picture of the startup environment in the Nordics, and even what options there are to get financial help.

Being an entrepreneur is a tough job and I truly admire the passion and courage of people embracing this journey. I do hope these few tips can be of help.


Claudia Salto
is an Assistant Manager at the KPMG Global Strategy Group. She has experience in Operations Planning, Procurement, Change Management and Process Improvement. She has worked for several international companies in industries such as Telecommunications, Retail, Consumer Durables and FMCG. In her free time, she enjoys being with her family and friends and travelling to sunny places that remind her of home.

Private equity company, make your life easier with Data & Analytics tools

Target screening seems to be regarded by private equity buyout investors as both time-consuming and a nuisance. However, the introduction of new D&A tools has made screening processes more efficient and less time-consuming, which, in turn, allows investors to allocate more time to creating value for their portfolio companies.

private equity

Who knows where the time goes?

According to a study commissioned by Tekes and FCVA (Finnish Venture Capital Association), private equity buyout investors spend a significant portion of their time selecting and developing acquisition targets. In fact, it is estimated that, on average, over 50% of the lifespan of a fund is taken up by these activities.

Furthermore, almost one quarter of a fund’s lifespan typically goes into target selection alone. Hence, it is essential that this time be used productively and that suitable targets be chosen. To achieve this, it would clearly be beneficial to make the screening process leaner and less time-consuming, as this would allow more time for developing the targets, which yields the real value for private equity players.

Private equity investors live and die according to their respective track records. It is thus vital for them to make profitable and suitable investment decisions and to be able to develop their portfolio companies so as to maximize their value. The better the target selection is at the start, the easier it will be to establish value creation practices later on.

What gives a headache to private equity investors?

According to the above-mentioned study, the issues that create the worst headaches for private equity investors are the finding of suitable investment targets, and issues related to the quality and quantity of the potential targets.

In addition, approximately two-thirds of private equity investors examine at least 30 companies per investment.

Therefore it is imperative, as a time-management tool, to make the screening process as efficient as possible, and to gather enough data on potential investment targets in order to make coherent decisions on which targets should be contacted and on how the acquisition process should be started.

How D&A tools can replace painkillers

The screening of potential investment targets can be made easier by using sophisticated D&A tools that help cut through the noise and support private equity investors in recognizing those targets with the highest potential for growth in value.

Establishing industry benchmarks is essential for any screening process, as it allows the performance of potential targets to be matched against industry best practices. But all too often, benchmarking doesn’t provide the details and context required for a truly well-informed investment decision.

Therefore KPMG has developed a unique and rapid D&A tool named “Benchmarking Plus”. The tool goes beyond the usual publicly sourced data used in screening and taps into KPMG’s robust proprietary database, along with third-party databases, thus giving the private equity investor access to beneficial information e.g. financial, operational and segment specific KPI’s gathered from our engagements.

With the help of Benchmarking Plus and KPMG, private equity players can save time and make the screening process more cost-efficient.


Jan-Patrick Haikkola has worked for the KPMG Global Strategy Group since April 2017, and has recently worked on several projects related to private equity. He has advisory experience in growth and deal strategies and M&A. In his free time, Jan-Patrick enjoys watching football (even though watching Arsenal at the moment is not the most enjoyable pastime!), and jogging.

Why flexibility is critical when planning an operations strategy

Operational excellence can only be achieved if a robust operations strategy is in place – a strategy that truly integrates an organization’s people, processes and systems. One of the more difficult aspects is how to plan for flexibility. Better responsiveness enables both savings and sales opportunities.

Under ideal conditions, developing an efficient operations strategy would be relatively easy. However, in the real world, operations managers and business owners face many challenges, including the need to plan for different flexibility aspects and options. Typically, operations frameworks fail to sufficiently address the challenges that arise when creating an operations strategy.
One major challenge that operations managers need to deal with when developing an operations strategy is balancing cost, quality and time. A typical operational framework requires operating costs to be kept as low as possible, or at least on a par with, or lower than, those of its competitors. However, operations managers must simultaneously ensure that quality standards remain high and at a consistent level, and that delivery and development speeds are also at optimum levels.

What about Flexibility?

Operations managers should, to a much greater extent, include flexibility as a key component when developing their operations and manufacturing strategies. Flexibility is costly, but allows a business to respond effectively and efficiently to fluctuations from the norm. In fact, many studies have shown the beneficial impact an operations strategy can have on performance, provided flexibility is included in the strategy.

Most managers consider flexibility to be a complex process. This is because of the lack of generally accepted definitions and concepts relating to operational flexibility. However, in the context of developing an operations strategy, flexibility refers to certain key elements. These may include:

– Flexibility in coping with incoming materials of varying quality levels
– Flexibility in satisfying the market demand for products of varying quality levels
– Flexibility in competing against new products introduced by competitors
– Flexibility in modifying existing products
– Flexibility in changing delivery and development schedules
– Flexibility in accepting demand volumes of varying levels
– Flexibility in making changes to the product mix
– Flexibility in coping with changes to the resource mix

In my opinion, technology and costs sometimes play too large a part in the overall strategy, especially because they fail to sufficiently emphasize the value of superior outsourcing partners, flexibility in external operations, and the mission to cut overall lead times.

For example, one leading company looked at end-customer behavior to better understand the impact of the demand pattern on the supply chain. Another company in Finland measured their “micro-flexibility”, i.e. how rapidly their manufacturing process responded in real-time when a truck arrived late, a machine went off-line, or an unexpected order came in. This has created real savings and extra sales for the company.

The above-mentioned challenges can easily be overcome. With the right tools and methodologies, realistic planning and smart people, any organization can improve their operational flexibility.

Berndt Wickholm is a director in KPMG’s Global Strategy Group enhancing performance in Strategic and Operational areas in a wide array of industries. He has 18 years of international experience in Strategy execution and supply-chain consulting. Offline, Berndt is a foodie, spending time in the kitchen and balancing with a bit of snowboarding and golf.

Releasing cash from inventories never runs out of fashion!

This is a claim I dare make after having had the privilege to work with leading global corporations in Europe, the Middle East and Asia on numerous inventory reduction initiatives for about two decades. Cash release through inventory reduction has been used to finance growth, repay debt, reduce capital restraints or pay shareholders, and has long remained a priority issue on the executive agenda. In speeding up the cash conversion of companies, I have found that releasing cash from inventories has been a fascinating, challenging and rewarding task!

Inventory Management

Everyone in the supply chain benefits from releasing cash!

In many cases, carrying inventories is an essential part of providing a service as raw materials, semi-finished or finished goods, at the supplier’s or at own site, in transit, or at the customer’s site. But, irrespective of who owns the inventory and who carries the inventory-related risks, all parties in the supply chain will benefit from not tying up excess cash in inventories at any stage. The key questions are how to optimise inventory levels throughout the supply chain, and how to collaborate for mutual benefit.

We can be both high on service and low on inventories!

Although there is a trade-off between product availability and inventory size, the risk of losing sales is all too often accepted as justification for failing to permanently reduce inventories. It is not either high service level, or low inventory levels, it can be both!

Inventory level is a result, not a parameter!

A common misconception is that we can meet the challenge of maintaining good service with proper inventory levels only by finding the right parameters. We certainly need parameters for managing inventories, but we must first understand the factors that drive inventory levels up or down.

For companies producing and selling goods business-to-business, answering the questions below will reveal the main factors driving inventory levels.

Service – What is the service we offer to customers? What is our product assortment? What availability guarantees, limitations and service levels do we have? What is the lead time? What is the customer demand, and how does it vary?

Steering the supply chain – How do we steer production in terms of batches and production cycles? How do we schedule inbound and outbound transports? What variability do we have in supply? How are cycles and schedules synchronised?

Structure of the supply chain – How are our resources spread, and how are they located in relation to suppliers and customers?

Reliability and trust – How reliable is the supply chain’s deliverability? Do customers trust our delivery dates? Does our sales & operations planning trust customer forecasts? Does our production trust the delivery dates given by sales? Do we trust suppliers to deliver on time and in full?

Rightsizing inventories is always worth the effort!

In my years of engaging with clients, I have experienced inventory reductions of a third, or even more. In each case, the key has been to identify the underlying factors driving the inventory levels, and to impact them systematically and persistently. This has resulted in released cash, improved service, lower inventory costs, and significantly lower risks of damage and obsoletion.


Anders Hahnsson is a Director in the KPMG Global Strategy Group (GSG). He has long experience of supporting clients in both their strategic aspirations and operational development. Anders has mainly worked with industrial manufacturing companies in steel, pulp & paper, chemical and engineering works. Besides spending time with his family, Anders enjoys the Finnish archipelago, alpine skiing and long distance running.

Strategy implementation requires… Communication!

When translating an overall business strategy into operational changes, and instilling ownership of the strategic pursuit throughout a company, one’s got to communicate properly. In this blog I’d like to list some key pointers on how to create and deliver such communication.

communication

Get the message right

Ensure it resonates with your employees
According to research, to be successful, a person’s level of grit is more important than talent. The two underlying components of grit are purpose and perseverance. In my view, this is also valid for successful companies. At its core, purpose is the idea that what we do matters to other people. A company’s purpose – its impact on the lives of whomever it tries to serve ─ should be ”felt”. Through communication, employees should get a sense of alignment with their company’s purpose, in order to enable the changes that are being pursued. A great example is the Kellogg company purpose: ”Nourishing families so they can flourish and thrive”.

Utilize tools for structuring your message
The pyramid principle (Barbara Minto) ─ a classic in consulting ─ can help you ensure your message has a solid structure. Through structured messaging it will be easier for the recipient to follow your reasoning. In the case of presentations, storyboarding can improve the efficiency of your efforts. Joint meetings and the use of whiteboards in which key messages and supporting arguments (presented in words and graphs) are discussed, will give you a head start in knowing how to build your content and will highlight potential gaps in your logic.

Utilize different platforms
Different individuals have different preferences regarding the consumption of information. Even though official channels must be used when a strategy is ready for company-wide communication, other small efforts will also go a long way. For example, if an employee is writing an internal blog – ask her/him to relate part of the story to the overall strategy.

Deliver your message

Know when to communicate what
The timing of communication matters. For example, if cost cutting is required, it may cause alarm among employees. In this case, sensitively timed announcements of actions to be taken to help weather the storm are crucial – especially if the aim is to create understanding and acceptance of lay-offs. Nor is it a good idea to give ‘bad news’ on a Friday or just prior to a holiday period.

Be flexible and willing to listen
Although strategy messages should be well-structured and logical, these are not the only important criteria. Dialogue and flexibility are just as crucial, if you want to help a strategy start ’living’ within your firm. Make sure that co-workers can participate in guided discussions on how the strategy could affect daily work. If the outcomes of such sessions have slightly tweaked parts of the strategy, these can be used as ”stories” which help employees take ownership of the ideas expressed. And when employees sense they are able to influence the company’s strategy they are much more motivated to work on its pursuit. This will also validate the company’s purpose and your employees’ alignment with it.

Henk-Jan Kruit works as a Strategy and Operations Advisor in the KPMG Global Strategy Group. He has advised organizations in manufacturing and service industries for over 10 years, for example in Gross margin improvements, Sales & Operations Planning, Lean Six Sigma implementation, Integration management, Value Chain management and Strategy development. In his leisure time Henk-Jan enjoys spending time with family and friends and releasing energy through sports like snowboarding, cycling and swimming.