on February 24, 2014
We are now on the verge of many demand-driven and technological upheavals that would justify higher stakes in construction industry R&D. Companies that are open to cross-industry collaboration and use professional research resources can get a competitive advantage.
Compared to the economic significance of the construction industry, R&D investments among AEC companies are quite small. The 2013 EU Industrial R&D Investment Scoreboard groups industries by their research and development intensity. Construction is in the lowest category with less than 1% of net sales used for R&D. Of the 1000 EU companies that rank highest in R&D, 38 are in the construction & materials industry.
R&D is not just for the largest companies. Even mid-sized or even small enterprises can improve their position in the market and boost their productivity with moderate investments in R&D.
Why is construction lagging in innovation?
Many construction business owners and project managers can be quite creative when it comes to solving construction-related problems. However, getting involved in an R&D project or process is not an easy decision. Many practitioners think that research is too distant from the everyday to yield any business benefits.
There are also structural reasons for the low interest in R&D. The industry is comprised of large supply networks, which means that one company’s development efforts do not make much difference if other players do not comply.
Client behavior is not encouraging R&D investments either. Most contractors claim that when it comes to choosing vendors, price, not value, is the defining factor. However, that may be based on the fact that the price is actually the only differentiating factor between vendors.
Where to innovate?
The most urgent areas for construction industry development are productivity, customer orientation, and sustainability.
Productivity boosts come from process improvement, use of information technology (especially BIM and the net), and new production and material technologies. Skilled people who are committed to learning are at the core of productivity.
Sustainability is still an area where companies are able to get a competitive advantage. A recent study in the USA showed that contractors who were able to build “green” were doing quite well even during the economic downturn.
Robotic technologies will also change the construction landscape. Autonomous machines are still prototypes, but not in the distant future. Once 3D printing matures it will have a huge impact on construction. Combined with the “internet of things” we’ll see really interesting development in construction.
Not all R&D is about technology. Many firms still adhere to age-old business models. Re-thinking how to do business can create totally new growth opportunities. Business model innovation is demanding and quite risky, but testing the waters is cheaper than reacting when it is too late.
How to innovate?
R&D should be based on strategic thinking. The management should be clear about what they want to achieve and why. This does not mean that trial and error are banned. It is impossible to achieve 100% success with R&D. However, every development project teaches something valuable.
The less systemic R&D is in a company the more success is dependent on individuals. Their skills and enthusiasm are seminal to success. Since the results of development efforts are meant to change the status quo, management support is of the highest importance.
As one company alone cannot change how clients and partners work, R&D collaboration is a good idea, even though it is not easy. A consortium that shares goals and sees how everybody will eventually win is a good starting point for an R&D partnership. Successful collaboration demands leadership and requires commitment from every participating organization.
Involving research institutions
Large construction companies have their own R&D departments with full time staff. Smaller companies can use consultants and research institutes to supplement their own personnel.
Most construction industry firms have little if any experience in collaborating with universities or research institutes. They might even fear that researchers are too theoretical and do not understand the requirements of business. Sometimes that fear is justifiable, but most often it is due to lack of experience.
The biggest gap between companies and researchers is communication. Construction industry practitioners expect from scientists the same kind of straightforwardness that they’re used to in their own business. As clients, they are eager to specify expected results when researchers are expecting research problems.
Another communication gap is evident when research results are available. Few researchers excel in communicating results to business people. This can lead to frustration and substantiate the prejudice that researchers are just theorists.
Companies working with researchers need integrators. They are individuals who know the needs of the business and can guide the implementation of research results into business.
The importance of foresight
No business lives in a vacuum. Changes in culture, politics, technology and behavior create new demands and opportunities for the construction industry. Companies should use insight and information on future needs when they plan their development initiatives.
If the construction industry cannot satisfy the customer others will. Companies like IKEA and many electronics manufacturers are already testing the market. Foresight and cross-industry innovation are now in high demand.