8 reasons why the global construction industry needs to innovate

Business leaders are constantly told that innovation is ‘essential’ to business growth, competitiveness and productivity in a world of increasing competition and depleting natural resources.

A recent McKell Institute Report declared that firms must “innovate or perish” and that executives are faced with a fundamental choice. They can either take “the ‘low-road’ of narrow cost-cutting and an unwinnable ‘race to the bottom’ or they can take the ‘high road’ of innovation to position themselves at the top of the value chain in an increasingly knowledge-based economy.

These claims are backed up by evidence, which shows that innovative businesses are twice as likely to report increased productivity compared with businesses that don’t innovate. And this reaffirms other research by influential organisations such as the Grattan Institute, which has identified a lack of innovation as a key area of reform needed to raise national productivity performance.

In order to succeed the construction sector needs to have a much stronger sense of vision, leadership, vitality and appetite for innovation and continuous improvement. The construction industry needs to improve its innovation record, or risk being left behind.

Innovation is one of the latest management buzzwords that it used by many but understood by few. In simple terms, innovation is the process of bringing new creative ideas to reality, in an attempt to take advantage of what might lie over the horizon or to create an entirely new future, which no one else had imagined.

The iPad is perhaps the most vivid example of disruptive innovation in recent times and the rewards to those who can create them are enormous. Apple’s share price has risen 23,639 per cent from its first trading day and made history recently by being the first company in history to reach a market capitalisation of US$710 billion, more than double that of its rival Microsoft.

However, history shows us that we are constantly caught-out by the future. Predictions of the paperless office, personal jetpacks and holidays to the moon are just a few examples of many wide-eyed predictions which have been proven to be completely wrong, even by the greatest thinkers of our time.

Although our attempts to predict the future often fail, it doesn’t make crystal ball gazing worthless. History also tells us that businesses which attempt to anticipate, understand and organise for the future will tend to succeed, no matter how far from the truth their predictions were. Thinking about the future allows firms to capitalise on future potential opportunities, even if they may be different to those anticipated.

Below are a few selected insights into many over-the-horizon trends that may affect companies that operate in the construction industry in the future.

• The International Monetary Fund (IMF) recently pointed to two profound changes taking place in global politics and economics. First, political and economic power has been moving inexorably east. Second, we are in a prolonged period of economic instability brought about by an increasingly interconnected world.
• Over the next 20 years the emerging E7 countries (China, India, Brazil, Russia, Mexico, Indonesia and Turkey) are expected to grow by 50 per cent more than the current G7 countries (US, Japan, German, UK, France, Italy and Canada). Other countries with high growth potential rates into the future include South Africa, Nigeria, Philippines, Bangladesh, Saudi Arabia, Malaysia, Thailand, Pakistan and Iran.
• To thrive in this new world, it is critical that businesses see themselves as regional rather than domestic players and be adaptable, flexible, resilient and creative in their thinking. New relationships, knowledge and skills will need to be developed.
• The predictive capabilities of new technology coupled with the large amounts of data now available through ‘the internet of things’ will transform business. Not only will it allows firms to effectively manage ‘big data’ in a way that they could previously never do, but it will also open the way for a new generation of robots which will act like ‘virtual humans’ serving as customer support slaves which can engage in real conversations with customers, through analysing conversation patterns and the context and profile of the person they are interacting with. It is estimated by some that in 50 years, 30 per cent of the working population will be made up of these robots.
• How this new technology will affect construction is largely unknown. However, we do know that construction has always lagged behind other industries in this area. This is despite evidence that productivity increases of between 30 to 40 per cent could be achieved by the adoption of these new technologies. Some of the more immediate technologies on the horizon which are promising to transform the construction industry include new smart, super-strong and sustainable materials, new energy technologies, GPS, BIM, virtual and augmented reality, robotics, 3D printing, wireless, ultra-mobile, wearable computers and new touchscreen APPs.
• While we must clearly be aware of the many risks of new technology (obsolescence, cost, security, integration, skills and training and so on) recent research shows that existing skill levels in the construction industry are not advancing fast enough to use this new technology, that there are problems of synergies and interoperability with existing technologies and that work processes have been slow to change to accommodate them.
• Increased urbanisation and population growth will also place greater stress on energy supply, natural and human resources and infrastructure (hospitals, roads, ports, rail, energy and water). This will be exacerbated by climate change and an increasingly educated, informed and empowered community who expected the construction industry to protect the communities and environments in which it builds.
• Vast quantities of carbon emissions are generated by the construction production process, by the resources and materials used during construction and in the electricity and transport required to enable buildings to function. Prices of carbon rich materials and processes will also rise and with estimates of up to 80 per cent of a firm’s carbon footprint imbedded in its supply chain, large companies are already putting pressure on their suppliers to reduce carbon footprints and emissions.

Many of the challenges are clear. It's up to us to innovate to meet these challenges head-on.