News - Be Our Own Disruptor - A Call to Action from AKD CEO Shane Vicary

This is not an attack on anybody in this sector. It is a rally cry, and it is meant as one.

Being the incumbent does not secure your future

Think about what the taxi industry did while Uber was on the horizon. Operators worked on being a bit more efficient. Tighter costs, better rosters, more hours behind the wheel. Nobody was lazy. They kept running the same system, and somebody else changed the system around them.

We are the incumbent. Plantations, mills, factories, skills, standards. All of it worth a great deal and none of it a guarantee. There is no prize for getting more efficient inside a system that is quietly being replaced.

Start with what we call ourselves

We describe this as the frame and truss industry, or we call it prefabrication. Both undersell what actually happens. This is house frame manufacturing. Homes designed digitally and manufactured in factories, to engineering tolerances, delivered to a program.

Governments keep asking for modern methods of manufacture as though the country has to go and build it. It already exists. Factories right across the country, most of them regional, with the capital already invested. Language is not cosmetic. If we call ourselves a components industry, we will keep being bought like one, and price will be the only conversation.

Coca-Cola does not tell you what is in the bottle. Intel made a component nobody ever sees, and for 20 years people asked for it by name in a product they could not open. Neither name describes anything, and neither needed to, because the reputation arrived before the explanation.

A name only means something when there is something behind it, so I am not suggesting we pick a clever word this year. But it is worth putting on the table. If this industry had one name and one properly funded voice using it, what would we want it to stand for? Certainty. Speed to lock up. A house that gets finished. A strong reputation means people come looking for you and specify you.

Australia has a completion problem

The country cannot finish houses fast enough. That is the problem the market has, and it is not a framing problem. Most of the lost time sits in coordinating trades on site, in sequencing and in rework. The further a home is completed before it reaches site, the less exposed the build is to the thing that is actually broken.

That is your opportunity, and it is the question the country is asking. The measure on this industry should not be how many cubic metres we shifted. It is what we did to the completion rate.

What AKD can do about it, and what we cannot

AKD’s responsibility is upstream of yours, and there is plenty to do there. We start with log procurement and timber recovery. A sawmill converts around 55 per cent of a log into timber, and of that, around half to 60 per cent ends up as structural product. Every percentage point we leave behind is cost the whole value chain carries.

Some of that is a milling opportunity, but a good part is a value chain problem. We get asked for a narrow range of lengths, as well as set length packs, because that suits the next step. Each decision is rational on its own, and the result is businesses in our value chain optimised separately and a chain that works worse.

If we understood together how lengths, grades and cutting patterns affect recovery across the chain, there is real money in it. It does not come out of anybody’s margin. It comes out of the log.

That work belongs in the research and standards channels, where it can be done properly and the rules are clear. Every business still competes and makes its own commercial calls. But it is exactly the kind of problem no single company can solve alone, which is the whole argument for having associations.

The bigger prize is componentry. We still frame houses out of whole pieces of solid timber, to assumptions set when most roofs were concrete tile. If we are serious about timber as a building system, the question for a sawmiller is what components we should be manufacturing and selling into your factories, so that more of the log ends up in the house and more of the work is done before it gets to you.

Why are we still building to imperial sizes?

Ask where our sizes come from. A 90 by 45 is a four by two that got shaved in the 1970s. Our lengths generally step up in 600 millimetres, which is two feet. We converted to metric by rounding the imperial numbers down. Fifty years later the whole system, span tables, plate layouts, software, fixings, sheet sizes, uses a measurement system this country walked away from before most of our employees were born.

I am not saying the numbers are wrong. A log has a geometry and a taper. A house has loads and spans. If you designed the sections and the length steps from those two things, rather than from what somebody was cutting a century ago, how much more of every log would end up in a house?

Here is what those increments cost us. A job needs 4300. The next length up for us is 4800, so 500 millimetres gets docked off and is gone. That piece of wood was grown for 30 years, harvested, carted, sawn, dried, graded, treated and freighted, and every one of us paid for all of it. Then it becomes chip, or it goes to the boiler as steam.

Multiply that across every plant, every day, for a decade. Nobody captures that value. Not the grower, not the mill, not the factory, not the builder. It is destroyed on the docking saw because of a dimension somebody settled on in feet a century ago.

So where is the real innovation?

We have become very good at making the same products faster and cheaper. Scanners, optimisers, better kilns, more throughput. That has kept us alive as we try to outrun inflation. What we have not done is change the product or the system. The frame going up today is recognisably the one from 40 years ago. Same sections, same lengths, same centres, same assumptions. That is precisely what the taxi industry did.

Here is the test I would apply to anything we call innovation. Does it take cost out of the finished house, or does it just move cost from one of us to another? Most of what we do is the second one. A shorter length pack, a tighter spec, a harder negotiation. Cost moves along the chain, nobody is better off, and the builder never notices.

We must be competitive in our own backyards every day. But if that is the entire contest, we are getting better and better at dividing up something in a market that is getting smaller. That is insanity, and worse than that, it is irresponsible of us as industry leaders.

The advantages we should be building on

Solid timber is a natural product. It takes very little energy to make, almost no glue, and far less labour than the alternatives. Those advantages are ours. Which brings me back to a line I keep using. Growers and Sawmillers are the sheep farm and the abattoir. We need the restaurant to help us write the menu that satisfies the customer. Growers, sawmills, and the manufacturing factories working together.

Let us be clear about the problem, the products taking share are not winning on quality. They are winning by needing fewer people on site. That is worth solving, and it cannot be the only one. What else is a builder struggling with that we could design out? Nobody has made that list, and until we do, our research and marketing money is being spent on guesswork.

Ask a builder what good looks like and the list is short. It arrived on the day it was promised. It was complete and it fitted. When something went wrong, somebody fixed it. It was easy to deal with. Certainty, consistency and follow up, and our marketing talks about none of it. We lead with environment and sustainability, i.e. the Ultimate Renewable or the Carbon Warrior, which is true and valuable, but its value is in codes and policy, not in a conversation with the person choosing a system. On that test I think we are barely marketing at all.

Consolidation is not the answer. Collective capability is

The pattern across other industries is consistent. Value moves to whoever takes responsibility for a bigger piece of the customer’s outcome, and to whoever the customer asks for by name.

This sector is too fragmented and too geographically spread for consolidation to be the fix, and I am not proposing it. What we can do is build capability together that none of us can build alone. That is what the associations and research bodies are for. They are the vehicle, but a vehicle needs fuel and a destination, and both come from members. Give them the two or three things that actually need to change, or they will keep doing 100 worthwhile activities that move nothing.

So be demanding. Tell them what to work on. Ask what was delivered for the money. Put your own people and dollars behind it. And be demanding of your suppliers, us included.

And be clear about which problems qualify. The only ones worth our collective time and money are the ones none of us can solve alone. Dimensions and length increments. What componentry should exist and who should make it. What a builder actually needs that nobody has designed yet. The completion rate. Not one of those gets solved by a single company being clever on its own, and not one of them has been solved in 30 years of us all trying separately.
Pick two or three. Put the right people in the room, through the proper channels. Fund it properly and hold it to a result. That is collective problem solving, and it is the only thing that has ever moved an industry.

The questions I would sit with

•   What are the two or three problems in your business you cannot solve on your own?
•   Who are you working with on them, and if nobody, why not?
•   Is your entire conversation with your suppliers about price and volume, and have you handed it to a buyer and taken yourself out of it, and if so really?
•   Add up what you spent last year on associations, research and marketing. Does that look like a business investing in its future, do you view it as a cost or an investment?
•   Is your business a modern factory built to sell solutions, or is it a land play that pays the rent today while you wait for the day you sell it? One of those is worth investing in. The other one is a countdown, and if that is what it is, none of this will matter to you.

Be our own disruptor

Somebody is going to change how houses get built in this country. I would rather it was us.

We have the infrastructure, the skills and 30 years of investment in the ground and on the floor. What we are short of is long-term thinking and the willingness to do the hard parts together. Most of what we have was paid for by people who thought that way. We are individually and collectively responsible for whether it is still here to hand on.