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Karo Calgary, Alberta
Karo Calgary, Alberta

Case Study

Lean approach to commercial interiors pays off for DIRTT Add to ...

THE CHALLENGE

Calgary entrepreneur Mogens Smed knew the construction world needed a big change. So when he sold his venture, SMED International Inc. to Haworth Inc. in 2000, he focused on one goal: revolutionizing the interior commercial building industry.

During the non-compete period with Haworth in the months following the sale, Mr. Smed found two inspiring partners that shared his vision of a rapid interior construction manufacturing company: Barrie Loberg and Geoff Gosling. Together, they wrestled with how to manufacture a completely custom-designed interior, made with craftsman-like detail, with radically reduced lead times, which was good for the planet and their community. They wanted to create shared value: value for their shareholders and their stakeholders.

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Set on “Doing It Right This Time”, they established DIRTT Environmental Solutions, Inc. in 2004 and opened for business in May 2005.

THE BACKGROUND

Mr. Smed, Mr. Loberg and Mr. Gosling knew they didn’t want to manufacture in the “red ocean” of commoditized modular interiors, rife with long lead times, little room for customization and an inefficient top-down business model. Their entire business model required innovation, including designing the project with the client in mind, pricing the project, creating a bill of materials for manufacturing a completely custom project, and rapidly installing high-quality interior systems.

The three partners took stock of their available means to achieve this goal.

Mr. Gosling was inspired by the simplicity and versatility of Lego blocks, and focused on the product design. He needed to ensure he was creating a product for complete versatility, not one for obsolescence.

Mr. Loberg was convinced the answer was in escaping the countless complex design and engineering softwares that existed in the manufacturing business model. He instead drew on the inspiration of real-time gaming technology to develop innovative solutions that improve the clients’ experiences and the ability for DIRTT’s production facility to deliver exceptional quality incredibly fast.

In Mr. Smed’s signature enthusiastic approach, he didn’t wait for the perfect DIRTT wall to be created by Mr. Gosling, or the perfect software to be programed by Mr. Loberg – he was operating a lean start-up. He went out and sold based only on the idea of DIRTT as an innovative solution for clients.

Well-received by the market, DIRTT had its first orders flying in. But now they had to build it and deliver on their promise.

THE SOLUTION

Knowing that commercial spaces were typically renovated every five years – resulting in a staggering amount of construction waste – Mr. Gosling created a parametric design (think Lego) for DIRTT. The 100 per cent custom walls could be assembled rapidly, supported infinite design flexibility and the opportunity to repeatedly renovate the client space, and would drastically reduce the carbon footprint for DIRTT and the client.

Mr. Loberg’s solution for space design and manufacturing was ICE Software, based on gaming technology that provides a virtual experience of a client’s space while it designs, prices and produces a manufacturing bill of materials and specifications. The flexibility of Gosling’s design and agility of Mr. Loberg’s software resulted in a disruptive innovation.

Finally, Mr. Smed insisted the company would be a flat organization, where everyone was empowered and accountable for their actions. Every challenge and mistake was an opportunity for the team to learn and improve, developing a solution-oriented culture that leveraged contingencies.

But there were still two final challenges to be met: scaling growth without getting sucked into traditional, inefficient, centralized manufacturing; and ensuring vendors could keep up with lead times and material demand.

To meet these challenges, DIRTT focused on a distributed manufacturing model. Facilities were built in areas where demand was highest, after first confirming adequate vendor relations and the willingness of the community to welcome an innovative company.

The Savannah facility (2009) was opened to support the eastern seaboard, and the Phoenix facility (2011) to support the western seaboard. This resulted in faster transportation of raw materials and finished goods, and a lower carbon footprint.

To ensure vendors could benefit from the radical innovation and keep up with demand and lead times, DIRTT educated them on ICE .

THE RESULT

DIRTT successfully went public on Nov. 28, 2013, and now counts many of the world’s Fortune 500 companies as clients, including Google, Microsoft, eBay and Devon Energy. They have 700 employees across North America.

The company boasts a strong culture: everyone is known as a DIRTTbag, there are no job titles, and staff is empowered to make decisions and implement change (all these factors contribute to a low turnover rate).

At its core is a culture rooted in sustainability, from a program that rewards employees for driving hybrid cars to the company’s green supply chain. Every decision is viewed through the lens of social and environmental value, which provides ample opportunities for innovation.

Mr. Smed assembled a team of entrepreneurial thinkers to create an agile organization that reduced the industry lead time of 18 weeks down to two to four weeks, while being completely custom and sustainable. This has resulted in DIRTT truly being a shared value enterprise, generating shareholder value through embedding social and environmental strategies from startup to IPO.

Houston Peschl (@houstonpeschl) is an entrepreneurship instructor at the University of Calgary’s Haskayne School of Business (@haskayneschool).

This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.

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