Shuan SadreGhazi serves as a PhD researcher at United Nations University (UNU-MERIT) and is located in Maastricht, the Netherlands. He is also a tutor in International Business Strategy and Entrepreneurship at Maastricht University. In addition he has work experience with the private sector in Northern Europe and the Middle East. His academic interests lay primarily in innovation management and business strategy with a special focus on their application for development in the South. Shuan’s current research aims at studying pro-poor innovations. He holds a M.Sc. in Management and Economics of Innovation from Chalmers University of Technology (Sweden) and received his B.Sc. in Industrial Engineering from Isfahan University of Technology (Iran).
Saraman is an Iranian company co-founded by an Iranian and a German professor that designs, fabricates and erects affordable, earthquake-proof pre-fabricated steel structures for houses, schools and hospitals.
To download the Saraman case study from the GIM database, please click here.
What is Saraman’s basic value proposition and what makes it financially sustainable?
A number of issues surround the conventional construction industry in Iran and many other countries in the South: low safety, long completion time and high cost. Related to these are the challenges of a growing population who needs appropriate housing and employment. Saraman addresses both of these issues in its value proposition.
Saraman designs, builds and erects affordable, earthquake-proof pre-fabricated steel structures for houses, schools and hospitals. Through collaboration among German and Iranian universities and their corporate partners, Saraman adapts advanced technology to reduce cost and time of earthquake-proof construction, using locally available material in an environmentally friendly way. In addition, special training is provided to facilitate exchange of know-how and develop employment opportunities for young graduates who later implement the practice in Iran. New construction projects also create jobs for less-skilled workers.
Saraman sought financial sustainability through a number of ways. In the technical aspects, they optimized the process of construction and used state-of-the art technology to lower the costs associated with inefficient conventional methods, which enabled them to build affordable construction, but still going to scale was needed in order to make it a viable business.
In the formation phase of the company, Saraman paid special attention to invest in know-how to reduce the cost of technology adaptation and implementation in the long run. To fund training costs it sought support from the German Academic Exchange Service (DAAD).
Saraman started the commercialization phase by entering in construction projects that were likely to be continued and would allow it to build a foot-hold in the market. It would be rather difficult for a young company like Saraman to enter right away the turbulent market of housing. Winning the bids of school construction projects allowed them to enter a niche market to show their capability, prove the advantages of their method and get funding and more construction offers that would fuel its growth.
What were some of the challenges hindering Saraman’s development and growth and how did the company overcome them?
One challenge was low awareness and knowledge about construction safety among the actors on both the supply and the demand side. On the supply side, although regulations about safe construction exist, using conventional methods and designs makes earth-quake proof construction rather costly. The cost issue coupled with the lack of knowledge leads some constructors to turn to less-safe and/or fraudulent ways of construction. On the demand side, due to low awareness about importance of earthquake safety and already high-costs of construction, earthquake-safety issues are often ignored in favor of having a cheaper building. In addition, since in conventional constructions the structures that ensure earth-quake safety are hidden, it is difficult for ordinary users to check the robustness of the construction.
Saraman tackled this challenge through a number of ways. First, the founders invested a lot of their time and academic credit to provide presentations and site-visits to convince contractors and sub-contractors about the benefits of their method. Second, by making the construction-safe components visible and verifiable by the users, they made constructions not only earth-quake proof and low-cost but also less prone to fraud. Of course to ensure future demand for verifiable safe construction they had to raise awareness. That is Saraman’s third plan, i.e. to start with building schools with visible structures and putting awareness slogans on it.
To what extent was the collaboration between German and Iranian universities a critical factor in Saraman’s success?
The inter-university collaboration was crucial for the success of Saraman, especially because for affordable construction they were using state-of-the-art technology.
With using new technologies, particularly in the South, there are often the challenges of scarce “know-how” and adaptation. The machinery gets imported but the knowledge to use it properly remains with the expensive consultants and/or a handful of people inside the company. In addition, the imported technology often needs adaptation to local conditions in order to be effective and the technology providers in the North are limited in addressing local conditions. These factors lead to a less-effective and more costly use of the technology (I would compare it with the “poverty penalty” issue, but at the technical level, i.e. a “tech transfer penalty”).
Saraman started its activity by investing in human capital and know-how development, primarily by offering training to young graduates. Providing summer-schools, onsite training and establishing joint educational programs with the German institutions was a fruitful way to maintain a continuous supply of local skilled work force who have both the know-how and understanding of local conditions. The funding from the German Academic Exchange Service (DAAD) eased the financial burden of the training process.
Based on Saraman’s experience and in light of Haiti’s devastating earthquake, what are the prospects of mainstreaming earthquake-proof technology into the low-income construction industry in Iran and beyond?
One can see the prospects from two perspectives. One is through “democratizing the technology”. In many countries in the South, even if the construction codes exist, they are often either not enforced and/or the constructors find ways to get away with it. Mainstreaming certain construction technologies that give the power of verifying construction safety to people and raising awareness about it is one way to address the issue in the absence or weak presence of monitoring bodies. In line with that, training and using local skilled workforce – as we see in the Saraman case- enhances the potential of adapting the technology to what local users want rather than what a foreign company thinks the people need. Democratizing the technology is closely linked to the inclusive business approach of the GIM Initiative.
Secondly, new technologies can be employed to “leap frog” to more efficient solutions, especially in the poverty context where neglecting safety is linked to low purchasing power. As seen in the case of the Haiti earthquake, the poor are the ones who are hit the hardest during disasters. Poverty and severe effects of earthquake go hand in hand. Of course technology alone is not a panacea and it needs to be buttressed by paying special attention to know-how development, adaptation and devising appropriate business models.
Mainstreaming technologies and business models make construction agile, more robust, less costly and increases job prospects for low-skilled labor as well as job-less young graduates. Considering the significant population growth in the South, which sharply increases the need for house, there is a bright prospect for those who manage to figure out new solutions in the low-income construction industry.
What has been your personal experience going through the GIM training and case research process?
As a researcher at United Nations University I was always looking forward to cooperate with a relevant UN project and get an opportunity to learn and incorporate other ideas. The UNDP-led GIM initiative was a valuable chance for me to do so. I found the involvement with the GIM training and case research process a rewarding and pleasant experience. It gave me the opportunity to a get a deeper insight about inclusive business, which is closely linked to my PhD research on pro-poor innovations. The wide set of GIM cases have been a valuable resource for my research and even more important, the interaction with the GIM team has been a source of inspiration. In addition, the project management of the GIM case research process was done in a very professional way, which was a great experience for me to learn about handling large scale research projects.