Between global factors like climate change and the pandemic, and industry forces like the skilled labor shortage and rising material costs, the construction industry is primed for innovation. The challenge for many AEC professionals is knowing where to start. Profit margins are thin, making it seem risky to pursue new business models and service offerings or invest in technology. And while construction projects are highly interdependent, most teams still work in silos, making it hard to implement innovation at scale.
These hurdles are enough to cause analysis-paralysis and lead to delayed action or no action at all. But as external pressures increase and disruption (particularly from the tech sector) enters the construction ecosystem, inaction isn’t an option. AEC firms can start by leveraging digital transformation to support their initiatives. Digital transformation isn’t simply the adoption of new systems and equipment; it’s a cultural shift enabled by technology. Companies that successfully revamp the way their teams work with each other, customers, and partners see their efforts returned in the form of greater productivity and lower costs.
Digital transformation can lead to productivity gains of 14-15% and cost reductions of 4-5%.
Source: McKinsey, Decoding digital transformation in construction
In order to realize these productivity gains and cost reductions, digital transformation must be supported by a culture of innovation.
Breaking Down the Barriers to Construction Innovation
Organizations across industries have implemented innovation efforts––such as failed attempts at digital transformation––that fell short of desired outcomes. Fear of falling into the same trap can make it difficult to justify new investments. According to the JB Knowledge 2020 Construction Technology Survey, less than one-third of AEC professionals say their company has a dedicated research and development budget. Many construction firms don’t see the value of being first; two-thirds say that early adopters, not first adopters, are most likely to benefit the most from innovation. As a result, many are taking a wait-and-see approach when it comes to making strategic changes to their production workflows.
That lack of proactivity extends to internal practices. Many firms struggle to develop the agility needed to successfully adopt new processes, tools, and approaches. New ideas flounder when they aren’t supported by practices that will allow teams to try new things, fail fast, learn, and iterate. Agility depends on being able to make decisions quickly, making employees feel comfortable with taking risks, and being open to adopting new technology when it becomes available. Further, this agility needs to occur at scale. Even if small teams are charged with acting as incubators for new ideas, the rest of the organization should be able to adapt new practices once their value has been proven.
Attracting young and diverse employees is critical to agility and innovation. Arguably, this could also help solve the construction industry’s long-term skilled labor shortage as well. Firms that broaden their appeal to non-traditional employees and recruit diverse construction talent benefit from the fresh ideas and digital competency these workers bring to the table. Instead of stalling innovation, the pressure to attract skilled workers should serve as a reminder of the need for an intentional, well-planned, and well-executed approach to making the cultural shift needed.
3 Steps to Creating an Innovation Culture
Making the cultural shifts needed to innovate requires alignment of people, processes, and technology.
1. Start at the top
Fostering innovation requires a change in mindset throughout all levels of the organization. And it starts with the C-suite. Companies with executives who understand and commit to innovation are more likely to see revenue growth. AEC executives must be engaged with innovation and create the conditions for new ideas to be introduced and tested.
Trimble Ventures, a $200 million venture fund devoted to early-stage innovators, is just one example of a top-down innovation initiative. Led from the highest level of the company and supported by company domain experts, the fund invests in early and growth-stage companies that are changing the way work is done through technology-enabled innovation and disruption.
“Innovation is a cornerstone for Trimble. By providing capital, industry expertise and broader access to markets for early and growth-stage companies, we can help them scale more rapidly.”
–– Rob Painter, Trimble CEO
The reality is that many construction teams are encouraged to rely on familiar processes instead of seeking new ways to solve problems. When this type of thinking permeates a culture, creativity and innovation are stifled. Furthermore, claims of open-mindedness to new ideas can feel empty when there is no formal plan or strategy for implementing those ideas.
Leaders can create a cultural shift by committing to addressing age-old problems that are often accepted as status quo. This should include formalizing a process for submitting, reviewing, and rewarding suggestions for improvements. To encourage curiosity and creativity, mistakes and failures must be encouraged and accepted as part of the process. And once an innovation is proven to have merit, leaders must commit to removing roadblocks, such as interdepartmental silos and budget constraints, to implement it at scale.
2. Create a vision and set targets for success
A commitment to innovation doesn’t require a rush of risky, unchecked change. Executives can establish the vision for what innovation looks like in their company, and how they plan to measure it. Instead of simply aspiring to be a “leader in innovation,” AEC firms should set clear objectives of what they plan to achieve with that innovation.
McKinsey found that a key differentiator between innovation leaders and laggards is the ability to reinforce their vision with goals and metrics. The stakes are too high in construction to implement innovation without measurable outcomes in mind. By setting quantifiable targets for innovative programs and infusing them into strategic plans across the business, AEC leaders can responsibly guide innovative initiatives and set parameters for accountability.
“Despite the high importance that executives place on innovation, fewer than 25 percent said they were involved in setting innovation targets and budgets. That figure points to the shift in mind-set—and management approach—that many leaders must make.”
Source: McKinsey, The innovation commitment
metrics may include revenue generated by new products, number of new clients acquired through innovation, or client satisfaction levels. They don’t need to be complex or numerous; they need to ground your vision in reality.
3. Increase workforce diversity
The construction industry’s labor pool is shrinking, and it’s also overly homogeneous. Women and young people in particular are underrepresented, and cultural diversity is lacking in leadership roles. That lack of diversity stifles innovation. Inclusive teams with diverse viewpoints are critical to generating new ideas. Companies that prioritize diversity derive 19% more profits from innovation than those that don’t. These organizations aren’t just hiring a diverse workforce, though––they value employee contributions, have an openness to new ideas, and support frequent communication between teams. These values create the conditions needed to foster employee creativity.
Watch On-Demand: How Diversity Increases Innovation
The relationship between diversity and innovation is circular. In addition to attracting young people, a willingness to innovate can also draw in candidates from other industries who have transferable skills, but are used to working in more agile organizations with sophisticated technology. Similarly, a modern, digitized work environment that supports workplace flexibility will attract new folks to AEC roles.
How AEC Firms Embed Innovation into Their Culture
What does a strategic approach to innovation look like in practice? Here’s how two forward-thinking firms are making innovation a strategic priority and translating it into tangible business benefits.
Encouraging and supporting innovation from all corners
Turner Construction Company is a Seattle-based construction and building services company known for its expertise in large, complex projects. The company has an established unit dedicated to innovation strategy, as well as a network of innovation champions who are tasked with seeking out new ideas. Turner also hosts an annual Innovation Summit, where employees, business leaders, and thought leaders gather to share new initiatives within the company and industry.
This approach to innovation is infused throughout the organization. For example, instead of sending engineers to work on multiple job sites, the company employs virtual design and construction (VDC) teams to provide services from a central location. VDC is a process that emphasizes collaboration and data integration among teams throughout the project lifecycle, with the development of integrated 3D models being a central element.
Renzo di Furia, who heads up Turner’s Northwest Regional VDC, takes a measured approach to innovation and technology adoption:
“We have always focused on refining our process over accruing technology...By adopting a scientific approach where practice and measured results are more important than a hypothesis, we’ve been able to avoid unintended negative consequences.”
–– Renzo di Furia, Northwest Regional VDC Manager, Turner Construction Company
This focused, metric-driven approach enables teams at Turner to realize project-level improvements––from productivity, to safety, to waste reduction––that can be deployed throughout the business. Read More >>
Proving out innovation with a pilot program
Integrated Sustainability is a Canada-based provider of lifecycle water, waste, and energy solutions. The team at Integrated Sustainability pride themselves on their willingness to adapt. That flexibility enabled them to expand their services to include complete heavy civil construction and earthworks services, where the team could apply productivity and quality lessons they’d learned as construction managers. For their new venture, they wanted to explore how well advanced technology (such as 3D machine control and drones) would work with their new processes.
Because their technology was limited at that time, they chose to pilot the new tools for an oil and gas project. They selected technologies based on how well they could integrate with one another to support the process improvements the team wanted to implement. The pilot program was a success, improving their efficiency, agility, communication, and change management, and the team now incorporates the processes and technologies they tested into the company’s overall execution strategy. Their success in entering a new market and offering new services comes from having the vision of what they could accomplish, the openness to pursue new ideas, and a measured approach to implementing them. Read More>>
Create Your Own Culture of Innovation with the Constructible Process
Prioritizing innovation is well worth the effort and any “risk” involved. With the right technologies supporting your initiatives, you can realize a host of improvements within your own organization, as well as deliver greater value for those you partner with and serve. By taking a strategic approach to innovation, you can set the stage for identifying, planning, and realizing disruptive improvements that drive your business forward and create competitive advantage.
The Constructible Process provides a framework for the digital transformation needed to support construction innovation. To learn more about the Constructible Process and how you can implement it to create a culture of innovation in your company, download the white paper.