May 9, 2011

Housing Boom

A proprietary method for constructing low-income homes in a single day gave this Brazilian company a huge competitive advantage. But capitalizing on that success has proved to be a bigger challenge.

Sharon Kahn

It’s the most basic principle in business: find a pressing need and fill it. That’s what BS Construtora>, a family-owned business headquartered in Brazil, has done since 1994. Fueled by the country’s voracious need for inexpensive homes — between six million and 10 million families in Brazil lack housing, according to various estimates — BS Construtora constructs, delivers, and assembles complete precast, low- to middle-income homes in 24 hours. That’s compared to a typical 20-day turnaround for competitors.

An ingenious construction process, in which concrete is poured into a room-sized cast, might seem a sure ticket to success. But the company has grappled with the best way to grow. Operational issues, such as the cost of transporting cement houses to locations hundreds of miles away, have been a constant barrier. Says Eliane Borges dos Santos, who operates the 2,000-plus employee company with her husband Sidnei, “We face challenges daily.”

Making a Cast — and Breaking It

Sidnei founded the company with his father in 1994, when he was just 19 years old. A bricklayer with a fourth-grade education, Sidnei focused on building agricultural warehouses and silos. The company struggled, though, until his new wife joined as a partner. Trained in accounting with a graduate degree in business management, Eliane took over company management.

That freed Sidnei to focus on construction. The method he developed starts with factory workers inserting pipes, plumbing, and electric wiring into room-sized wood casts. The workers then fill the cast with concrete. After the concrete is speed-cured with a combination of steam and heat, the cast is knocked way, leaving a concrete room complete with windows. A crane lifts the structure onto a flatbed truck for delivery to a residential lot, where other BS Construtora workers have already laid a foundation. Assembly workers combine several modules to make a house, adding a roof, shutters and fixtures, and voilà! A house is built.

In 2008, the company got a huge boost when one of its customers, the Brazilian food company Sadia, contracted for the construction of 1,500 houses for new workers in a remote region of Brazil. The following year, energy company Energia Sustentàvel do Brasil (ESBR) approached Construtora. Backed by French energy company Suez, ESBR was gearing up to build the Jirau hydroelectric power project in the middle of the Amazon jungle. With no civilization within 300 km, ESBR needed not just housing for its 1,600 workers but an entire supporting city: roads and sidewalks; schools, a hospital, a police station, a fire station, and a shopping mall. And it needed everything within 120 days.

“Jirau changed the way we delivered construction,” says Eliane. “The logistics of casting the rooms at our factory then transporting them to northern Brazil did not make sense.” So, BS Construtora replicated a full casting factory near the project site.

Building Success, Brick by Brick

To help manage further growth, Eliane enrolled in the Entrepreneurship and Competitiveness in Latin America (ECLA) program sponsored by The Chazen Institute, Argentina’s Universidad Torcuato Di Tella, and the nonprofit entrepreneur mentoring group Endeavor. “The business model didn’t change drastically,” reports Nelson Fraiman, professor of professional practice at Columbia Business School. “But they’ve learned to become more efficient.”

For example, instead of transporting a single room on each truck, now the company packages smaller rooms, such as bathrooms, within larger rooms, such as living rooms. Putting cubes within cubes required Sidnei to design a new crane, but the transportation savings offset the cost.

An even bigger change in strategy involved expansion plans. Eliane and Sidnei were already meeting with government representatives in Africa, Asia, and other parts of Latin America. “My work with ECLA convinced me that BS Construtora should first go to other areas of Brazil, where there is still a great unmet need and we already have an infrastructure,” says Eliane. She points to government-subsidized housing program Minha Casa, Minha Vida program (My House, My Life), which has doubled demand for home ownership since it was instituted two years ago. “A total of 9.1 million families say they plan to buy real estate in Brazil over the next 12 months,” she says.

BS Construtora has also brought in some outside management, although Fraiman says the company still has a way to go. “They can be a very successful company within Brazil,” he says. “But if they really want to grow, at some point they will need to approach a private equity firm for cash. For that they will need a more professional management structure.”

Add new comment

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.