Ep 134 - How to innovate in the timber industry

Adam Jones (00:02):

Yeah, no worries. Yeah. Well everything will get edited. That's fine. So, thanks so much for coming on the podcast. Tim, can you start by telling us a little bit about yourself and what you do?

Tim Seims (00:13):

Yeah, it's been an interesting journey. I told myself I wasn't going to get into construction because my dad was a construction guy and I'd see him just covered with drywall, dust and everything coming home. And then I got invited to go to disaster relief. So, I got started in the trades doing disaster relief after hurricane and Nikki and Hawaii in 1991 and just fell in love with it. I even learned a lot about lumber yards and so forth. So, as I progressed in my skills in the trades and then I eventually went to, which I think is a fairly logical maybe to some people not, but to the lumber and building materials channel. So, I really learned how the LBM channel works, the merchant side and tried to, I didn't really try to make a name for myself, but I ended up doing that just because there was a dearth or a lack of people on real customer experience, outside sales, really taking care of the customer side in that area.

(01:17):

Anyway, so anyhow, so then I ended up in lumber building materials, moving to building product manufacturing, which is completely different. And I learned a lot at a company called James Hardy, which I'm sure you're familiar with over there. And that was like an MBA on steroids working there and just learned so much and a lot of those things I learned I've carried through. So, then I spent 10 years at a company called Niesha, which is a Japanese company. They make cladding. What I really learned there was going to Japan and seeing the prefab nature of the entire market. Maybe 25% or 30% is modular, but probably 90% is prefabrication with all sorts when it comes to timber or steel frame facades, interiors, the prefab mindsets very predominant. So, then I took those learnings over to Iche High USA. We got really involved with that, which then led me to mass timber.

(02:19):

And since I had early days successes and a lot of learnings working with Weyerhaeuser on the injured wood product side, then I really saw a lot of these correlations over time to mass timber. And I feel like that's where mass timber is going. It's not going to be this niche edge case forever. A lot of people said the same things about glue lams and I-joists and para lambs and all those things in the seventies and eighties, and now you look at the market share they all have individually and collectively. So, I feel like that's where it's headed and there's some things that had to happen along the way. We can talk about that today, but that's kind of how I ended up where I am now. So, what I do is consulting, go-to-market consulting for building product manufacturers, especially in the prefab space, help some developers find manufacturers when they need it, and then work on some cool product development projects. So, I'm an independent consultant just working for myself out here, and it has its ups and down pros and cons I should say, but really gives me a lot. There's a lot an independent consultant can do that an employee cannot or a CEO of a company cannot. So, it's really afforded me insights into many different things. So, then I talk about it a lot apparently. So, I end up talking in public about it too. So that's been my journey.

Adam Jones (03:46):

That's amazing. That's absolutely crazy. I didn't know that Japan was 90% prefab. You think that's absolutely unbelievable in terms of where you can learn from around the world. You think there's other, when we're doing a lot of prefab, you think we're leading the world almost from us or the western world, but that's unbelievable. So, what are the opportunities in this space? So, we are now, what are the problems and where is the puck going for those listening right now, do you think?

Tim Seims (04:16):

Well, when I look at the kind of a classic adoption curve, there are a couple of things that have to happen along the way. We talked off air about crossing the chasm, and one big piece of that is credibility. So even from a marketing or a marketing support or software side, having the ability to convey these case studies and make them searchable in aggregate versus one manufacturer has a case study on their website, another manufacturer has a case study on their website. We really need to establish that credibility. And that's a huge thing on the non-hardware stuff, non-physical product on the physical product, I feel like one huge opportunity is, and this is as simple as someone that's curious and wants to learn and is hardworking and has tool bags and can direct a crane, they should be looking at this space. There's a huge opportunity for rectors.

(05:19):

In fact, you asked me about the International Mass Timber event. What I thought of it, I loved it. Favorite event of the year had a lot of integrators, what I call them at the event, but one big one missing was the erectors, the tradespeople. Either, they weren't there, they don't exist. I have a feeling there's a lot of 'em that are off the radar. Small organizations, not super visible, but there's a low barrier to entry. It's one of those odd ones where there's a low barrier to entry, but a very high upside just because, just a huge gap in the labor supply side

Adam Jones (05:58):

To tie the loop on because we had an interesting chat before hitting record, so I was like, let's just get into the podcast and go there. But you mentioned something about the theory of constraints, and I'm guessing that's a key thing to recognize as you are going to market with something and then try to scale up into this industry. So, tell us a little bit about the theory of constraints. What is it and what is it based on and where is it relevant to those listening?

Tim Seims (06:24):

I think the closest connection it has to our industry is the term we hear a lot, which I don't feel like is overused and a lot of people can resonate and connect with it, which is bootstrapping, meaning that when you have a lot of money, you don't have a lot of constraints. When you have very little money, you tend to be more innovative and trying out new things and just getting started. And I think just the process of raising money can take a year while you've lost a year, whereas you could just go out there and just start on something, partner up with somebody, learn along the way and get paid for it. And so, the theory of constraints really has to do with, to me, making big things come out of little investments because you just have constrained that flow so much. And so, you have to come up with new ideas.

(07:25):

And I know that's not the classic description and definition of it, but that's how I think of it. And one thing we had in the industry is maybe an overinvestment, there's been overinvestment, and then you have the sort of strategic play, which takes a lot offline, meaning corp dev might buy a company and then maybe it's part of the strategy or maybe it just ends up being what happens and then it ends up shutting down. And so, it takes all this supply, potential supply offline. And so when you have the ability to be nimble and work from a standpoint of constraints being a competitive advantage, then I feel like, and that's where strapping on the tool bags and getting to work or what Timber Age did, which is like, let's just get a small press and put it in a thousand square foot shop and we'll just cut down the trees around us and there's more to it than that, but let's just get started. And then you're forced to, you got people to pay, you got projects to fulfill, you got 30, 60, 90-day terms, you got to wait to get paid. So, it just makes you think a lot faster about the process, and to me, that really speeds velocity.

Adam Jones (08:41):

Yeah, I love this theory of constraints. When I hear about, I feel like say you've got a CLT factory and on the fly analogy of having too much capital or something, it's like having way too much stock at the back of the factory just sitting there. At the end of the day, your bottlenecks, the CNC machine or something, and sometimes more money in this case feed stock doesn't mean you're actually going to have better throughput or whatever you're actually trying to create at the end of the day. So as a book, I love the goal, I don't know if you've heard of the Goal, the

Tim Seims (09:15):

Goal, yeah, Liu, I don't think that's how you say his name. Goldblatt, right?

Adam Jones (09:20):

Yeah, that's right. Yeah. Yeah. So, I always get excited because that book changed a lot of the way I look at the world and it's like a factory analogy applied to business, right?

Tim Seims (09:35):

Oh, did I lose you?

Adam Jones (09:37):

Yeah, maybe. I think we did. Can you hear

Tim Seims (09:40):

Me okay? I think I'm okay here. I can

Adam Jones (09:43):

Hear you perfect.

Tim Seims (09:45):

Yeah. Okay. I can hear you well. Yeah, so anyhow, you were wrapping up about the book, how it changed your thinking.

Adam Jones (09:54):

Yeah, so I mean just on the back of that thought, so in terms of today, you mentioned installers. What other opportunities are there? What are the things shifting technologically that give room and room for someone to come in and actually try and try and do something, try and start something that's a little bit different than it's been done before?

Tim Seims (10:18):

Well, you probably, I am going to use an analogy. My friend Todd Tolac used, or I guess it's more of like a proxy, but the smart home market, there was all these kind of disaggregated pieces of tech and then everyone had their app and stuff like that. Well, if you look at communities like Lake Nona in Florida or something like that, it was just too much for the residents to deal with all this tech stack on the end user side. And so, what they did is they put together their own integrator to say, okay, we're going to put this all in one hub ish. We're going to have our own technical support and really just streamline the whole, take all the guesswork out, improve the customer experience on the end user side.

(11:14):

And then what happened was you start to see this hockey stick up in adoption with smart home and because these individual manufacturers, they couldn't or wouldn't collectively work together to come up with a solution. So, the A software company worked with Lake Nona and there are other situations like this to go, okay, we're going to put this all in one place for you and then we'll manage it all on the admin side. That really improved the customer experience. Now people can live in their homes, and they can operate all these things super easily, and that's missing is, so we are a whole industry and that's kind of what Katera tried to do. They tried to be an in-house aggregator, but what probably is needed instead of an in-house aggregator is someone to say, okay, we're going to take from a design side, and you see this of course on the digital twin side and software and design and the Algorithmics app space, but we're going to take all those things and we're going to put 'em in one app store.

(12:14):

Can you take the physical things and put 'em in app store, like in a physical app store to make 'em all accessible? This works with this and this works with that. From a physical side, I think there's a real need for that. And then someone somewhere that could make pricing more visible, more accessible. It seems like it takes forever to get pricing. It should not be that difficult because whether it's 3 million average ticket or a $30 average ticket of a building material, you need to answer how much is it? This would be on the website in some form and then easily accessible when it comes to bidding, how much is it? Where can I see it in terms of proof? Where do I buy it and who installs it? Those should be on the lips. People should be, all the employees of the company should be dreaming about those things, but that's not the case. So there needs to be someone who can make that happen. I feel like that's a big opportunity. And on the lumber side, on the merchant side, you see lumberyards are that lumberyards supply a lumber package. They got the windows, they got the doors, they got the rebar, they got all the J bolts, they have the mesh, they have all the framing, lumber, the siding, the caulking, the interior package, the cabinets. They're selling the whole thing out of one outlet, and we just don't have that on the mass timber side.

Adam Jones (13:50):

One term that is coming up more often is this idea of the integrator, and it might be assumed knowledge for some listening. For others it might not be for some that might be different definitions around the world. So, what do we mean by an integrator in the context of a mass timber building?

Tim Seims (14:08):

To me, an integrator, I think it's fairly straightforward on probably the software and design side, but on the hardware side, as you have all your connectors, then you oftentimes your fasteners are different. And then you have your adhesives, your insulation, your weather barriers, your facades, all your clear elements like your windows, your doors, and then you have your interior connections and MEP and so forth. I think MEP is a little harder to do that. That's really one solution standalone, but that whole assembly could be done by one company. And there are a couple examples of this that are seeing success. One is Intelligent City. We saw them at the event. They're doing a lot of that. I think there's a real need to take that disaggregated value chain or I guess supply chain and put that whole wall assembly under one ticket. And one of the challenges in the US is it's really become de-risked over time. So, you have all these specialties because no one wants to own the risk of the whole thing, but there is a lot of opportunity in terms of margin and value creation in putting all those things together.

Adam Jones (15:33):

Gotcha. So, someone listening right now and they want to go out on their own and actually try and do something, they can make an innovation. How do they start? Where do they go? What do they do? What are their options? If they got an idea to change the industry and make an impact, how do they go about it?

Tim Seims (15:53):

Yeah, you could look at an example of this in a visual sense with a marketplace like cope. cope market I think is the website and it's more than a directory. It's kind of a hub for multiple different assemblies, not just mass timber, but a host of other things like SIPS and modular and so forth. And you can see kind of visualize what that could be. You take these pieces, and they go with these pieces and then you are going to see over time more and more innovations come out of that. On the hardware side, one thing I think of is basically setting up as a dealer, even if it's an independent rep from the independent rep side, because most of these manufacturers, they're not really sales and marketing organizations, they're manufacturers. They handle wood and resin and all that stuff. They want to make billets and get that feedstock and get some throughput out of that feedstock.

(16:51):

So, I think someone could be just like they do in multiple parts of the other industries, you have rep firms that handle an entire rainscreen facade assembly from the drywall all the way out to the sealants. They handle at least one manufacturer a lot of times two for each piece of that. So, someone could do that, say, okay, we're going to be an independent rep firm, essentially a dealer. We're going to make a deal with X, Y, Z and a B, C in terms of the mass timber suppliers or however the modality is. We're going to make a deal with the wood fiber. We're going to make a deal with the rigid installation with steel stud roller, with a sealant manufacturer and a sound deadening board and topper and all these things, and we're going to be a dealer essentially, and they become a supplier to the market. Really streamlining that customer experience for the developer, general contractor and tradespeople.

Adam Jones (17:48):

Yeah, what I like about everything you've been saying is very practical. I feel like it's almost cliche to say, oh, the future is AI and there's just general trends. But what you're talking about always is what are the practical problems that really exist right now that need to be solved? I mean, do you think some of those other technological innovations, do you have a thought on that or just think it's too far away that, because I guess the idea of the most cliche and the most disruptive is this idea of artificial general intelligence where it's just like all bets are off and we're all who knows, but what are your thoughts? Are those big-ticket technological items?

Tim Seims (18:31):

Well, there's so much going on in the AI and LLM side. I mean, I dunno about you, but I use multiple of them every single day and it takes an inordinate amount of time, or I should say it adds in an inordinate amount of time to my day because I'm using these different tools and it's also a lot of fun. But I think that maybe someone could take the exercise of aggregating all, I keep using that word, but putting all of the different things from the industry in one say chat GPT agent and just see how much action they get off of that and could it turn into a product. I feel like that particular playground is really good for prototyping and getting ideas because doesn't really cost anything to do it. It's based on the LLM of chat GPT, but then also whatever you feed into that as your database, people could really think about that and go like, okay, what products do people need?

(19:39):

What questions are they asking? And go and use that as an identifier to say, oh, okay, nobody's really asking about X, Y, Z part of the assembly. But everyone is asking, where do I find this? Where do I find that? Where do I find this? And go, okay, and then now that's your FAQ for, okay, those are the products people need representation on. Now I need to go find the manufacturers for. So that's one way to use it. Another way from the VA AR side, vr AR side is I think that this recent acquisition of Matterport and some of the other things going on in the industry, I feel like are really focused on computer vision and how important that is in terms of the, as-built existing conditions. And there's going to be a lot of opportunity there for being able to get clients to visualize what could be done with that space.

(20:38):

I just read somewhere today, I may have even posted about it, of an old hotel that was turned into homes for people in California. And I think that there's opportunities to do that for developers who really want to do something with adaptive reuse in some of these unused commercial spaces. So that's another place where that can be applied, get connected with the designer, get connected with the architect of bim, somebody on the BIM side, and just coordinate all those things. You don't have to be expert in it, coordinate all those things and do some value creation for the developer who doesn't have an idea of where to start with all that.

Adam Jones (21:18):

Awesome. Tell us a little bit about the funding landscape. If people wanted to go down, I guess maybe just take a step back a bit, say if there's two roads to go down bootstrapping, and you mentioned that already, what does that look like? What does the VC road look like and what is the landscape today down that path?

Tim Seims (21:38):

Yeah, well, it was a little dodgy for a little bit in terms of availability of funds. It seemed like about six months there. Everything was very quiet and a lot of folks were saying it was going to break loose, and it did in a big way, especially with the Publix on the building materials side, kind of the supply chain side. Not a lot of huge deals with startups, a lot of small deals. What I'm seeing more of is sort of these smaller bootstrap deals or more grant writing where people are getting their funding through that to get started. There's a lot more of that coming and that's available through the Inflation Reduction Act and a host of other things in the us. And of course, Canada and Australia and the UK and the EU all have kind of their own versions of incentives. And I feel like I've talked to so many people lately that I never thought would be accessing those kind of funds that have been.

(22:43):

And so I think that it's not replacing vc, but I feel like it's an easier place to start. Plus you're not giving up equity so you're not messing up your cap table and you feel leveraging the conversation with VCs who are always exit, exit. So I feel like that takes some pressure off to allow innovation to happen. The other thing that's happened recently is if you were to go try and raise money for a startup right now in our space, or if you're going to try and raise money to build 200 town homes, it's easier to raise money to build 200 town homes. So can you get the investors on board with using some of that cash to front to work with a prefab, like an erector company and then a mass timber company and then some of the other assembly parts to actually prototype and build something out of that You'd have to have definitely invest, but real estate investments a lot more liquid. It's a lot more accessible. People understand it, the underwriting changes from deal to deal. People definitely have questions about prefab because you have to prepay for so many of the components, but if you can get investors in the syndication or just in the equity side, whatever the stack is, then you could do something there as opposed to going out and trying to raise money for a product. You don't know for sure if it'll have demand.

Adam Jones (24:17):

And you mentioned on the grants, so grants does, where does that money flow from? Does that come from big government programs? I mean, there's a lot of investing in sustainability from a public funding point of view. Is that where a lot of the grant money comes from?

Tim Seims (24:33):

Yeah, it's almost always some sort of public private situation where you got a private developer, I'll give you an example. Like Zenni Home just, they're a coal formed steel volumetric modular manufacturer out of Arizona. They just received a grant from the Navajo Indian, Navajo Native American Nation or Indian Nation so's some of that money coming from what we call Indian country that's funding their housing projects because it's internally funded, there's a lot more appetite or maybe flexibility to use new building technologies because you're not dealing with appraisals or you're not dealing with commercial banks or anything like that. So that's an example. Tens of millions of dollars to do modular homes. You have, again, the inflation reduction act, the IRA, which has been talked about a lot lately. And then you have these energy grants. So like NYSERDA in New York, of course, that's mostly for facades and building systems, but there is all this money available through either these GSEs or the government directly. Yeah,

Adam Jones (25:50):

Amazing. And what are the world's different today in terms of GoTo market? So how are sales strategies and GoTo market strategies a little bit different today? And what is this topic of go to market? If you want to unpack that a little bit as well. We might've covered a bit of the ground already, I believe, but yeah.

Tim Seims (26:11):

Yeah. I think of go to market in terms of, I try to start with the personas and the customer experience at the end user side, whether it's the building owner, the homeowner, the tenant, whatever the case is, and think of, okay, now how does a building product manufacturer, a building systems manufacturer or a supplier or a trades person, all that entire value chain, how did they connect to add value to that end user that moves them to then pay for that entire channel? And what I've seen mostly in the last 10 years and have had success with is the disintermediation model, which meaning we don't need all these intermediaries if they're not adding value, if they're adding value, great, like the rep firm I was talking about earlier, that person could add value to a general contractor, an owner, but if they're not any value, they're out.

(27:11):

And so much of the direct to consumer model has sort of bled over into building materials and building products. And so now you have building product manufacturers who sell through a two-step dealer distributor. They sell through a one-step dealer, and then they sell direct to the contractor in certain arenas and certain markets. And that gives, first of all, it offers a competitive element that sort of keeps everything kind of in check, but it also allows, if one tide is lifting, it kind of raises the other one. So what you really want the end goal of a go-to-market strategy is you want a large footprint as quickly as possible and as sustainably profitable as possible. So how can you do that? You need multiple locations of your product across whatever region you want to supply. And so how do we make that happen? So the fastest way to make that happen is have a direct relationship with the end user, whether it's communicating that pricing to them, but the transaction goes through somebody else, whether it is just on the marketing side, all the communication is directed and developed for this particular place in the channel, like just the trades, if that's the real target.

(28:35):

But then you still have to manage all the supplier relationships and all those things. I think what has happened in the past is twofold, at least in the United States building, product manufacturers spend a lot of time with architects, engineers, and designers, which is fine. They're easy, they're easy to find, they love to talk and they always have projects going fine, but that's not who makes the decisions. You need to get to the person who makes the decisions and then figure out how to get the rest of their trade partners and suppliers and everyone else on board, or can you just sell directly to them and work directly with them and have them fund the project. I feel like, or I've seen, I should say that consumer direct to consumer mindset in the messaging, the pricing, the communication, the Marco, all the marketing assets at trade shows, really getting better at focusing on the person that is actually going to end up with the product as opposed to focusing just on trying to sell to the distributor and they count on the distributor to then market your product for you.

(29:52):

That's a terrible model. It used to be great, but it's a terrible model usually, unless the distributor's amazing. So the go-to market should be about achieving a footprint as quickly as possible. One way to do that is working with national brands. So you could have an agency that has this kind of amalgam of products that all work together and then go call on the Chick-fil-A's and the Starbucks and the Hilton's and so forth and say, Hey, here's this assembly. And then really get into their prototyping and roll out because they will build several hundred or several thousand of the same type of building over and over again. So even if you have a little bit of that, you have that multiple times, and then you not only have that, you have it across multiple markets. And so then we are getting back to the adoption curve, achieving credibility, publishing that credibility, and then it starts to be a flywheel on its own. So to me, my long-winded reply to how I think about go to market,

Adam Jones (31:02):

It's not long-winded at all. It's very dense. And you had a lot of analogies packed into that as well. You mentioned flywheels crossing the chasm and everything like that. So that's an amazing response. So Tim, looking into the future, what do you see as the future of our industry over the next 10 years? What is the blue sky of where we're all heading?

Tim Seims (31:26):

One thing I noticed that was, notice I was noticeably absent, I should say, from the CBS. There was a CBS, I think on Sunday night about mass timber, and that newscast was okay, but it missed some major elements, not the least of which for mass timber is the carbon sequestering nature of the product and how valuable that is in comparison, especially to concrete and steel. But I think that we're starting to see more and more of a balance, at least I am talking to different manufacturers of thinking realistically about you can't completely remove steel from a project. We can't completely remove concrete from a project. How can all of these play together better instead of mass timber folks going, wow, oh, concrete. It's the worst. There's some advancements being made. If you go to World of Concrete, you see some really great advancements being made in low carbon or reduced carbon footprint cement, and that's not the best description, but they're, there's huge value creation happening within those markets.

(32:43):

And you get Holcim and Cemex and some of these huge organizations, they're investing a lot of money. They have a lot to lose. If wood takes their place, they only make cement. So anyhow, we're seeing more and more of these less, how do we get these to work together to achieve a net zero or a high-performance building, or at least towards that arena. And then I think that I'm starting to see more and more tools that communicate well, the lifecycle analysis, the LCA of different products and assemblies and buildings, great. That needs to be communicated to building owners who raise the money and write the checks to do 90% or 95% of all the projects in the United States. They need to know what that means for their deal underwriting, what it means to their land, to building cost ratios, what that means to their speed of construction, path to market, their stabilization rate, their disposition and values.

(33:52):

What does that mean in the structure of their business plan from a real estate development standpoint? That's what I feel like is a gap to where is the money is to all these tools. How do we communicate that in a way that the real estate developers go, oh, okay, that makes monetary sense to me. In capitalist society, we got to talk like capitalist. So there is money on the green building side, there are these incentives, that's great, but incentives can go away and not every building qualifies for them. And so how can we get to the point where we're getting this balance of what the real estate developers want for the buildings they own in their portfolio, and what the building manufacturers in the building industry is making available for them to buy. The communicating of what value that is to them and the value prop isn't going great right now.

Adam Jones (34:50):

Yeah, totally. Well, Tim, it's been a phenomenal conversation. There's so much to learn from you and anyone out there who's looking to go to market and helping with strategy, of course, encourage them to get in touch so much there. So Tim, if they want to find more about you or they want to get in touch, where should they go?

Tim Seims (35:10):

Well, a lot of times you can find me at the different industry events, but the easiest way to,

Adam Jones (35:18):

It's a funny story on that, we were trading emails and on LinkedIn and then we were both at the international Mass Team conference and I was having a beer on top of a balcony with my wife there, and then I didn't know who you were. It looks like in person, we were chatting for 20 minutes and then both of us, the next day it clicked like, ah, we have to do a podcast. We didn't even realiz

Tim Seims (35:39):

That. Anyway, that's who we've been planning a podcast with. Yeah, I dunno why I didn't pick up. It was really nice to meet in that context though, because I got to hear really clearly what both your vision is and what you're working on to really make the industry better. And I tell people that, thank you for making the industry I love stronger, better to grow it. And there are people that are doing that. And I feel like what you guys are working on is something that's necessary because it improves the customer experience and streamlines the process on mass timber. And I know that's a way oversimplification, but you can tell when something looks like it's going to work and when something just looks like somebody raised a million dollars and built it and let's hope somebody likes it so people can reach me like you did on LinkedIn. I respond to messages on there and that's probably the easiest way to find me. And I hope we can connect across the industry and for those out there who are looking for interesting things to work on or already working on interesting things and trying to make the industry better and stronger, I say thank you and I hope I get to meet you.

Adam Jones (36:57):

Thanks so much, Tim.