In the past 3 months I have been to 8 different industry events, each of which dedicated a significant portion of their time to the challenge of procuring innovation.
After all this discussion and the considerable brain power of hundreds of engineers trying to address this problem, we still do not have a solution. However we have uncovered three key challenges that continue to rear their heads as true demons of the innovation world. And the more we talk about them, the more we uncover incremental changes that may well be the key to enabling innovation to improve productivity and profitability in construction. These themes are:
- Culture (Risk appetite)
- Contract structures (Risk/reward sharing)
- Perceived value of innovations (Reward appetite)
Culture
Change often comes hand in hand with cultural shifts; with female emancipation we see Feminism, with Globalisation we are starting to see Nationalism. Regardless of your politics, it is clear that for the industry to progress, it will require a change of culture and perspective.
We all know the industry is capable of this. We have seen considerable change in the way we value a human life, resulting in companies redefining what safety culture looks like on site. Now we must challenge the way we value ‘digital tools’ and ‘data’. This will go hand in hand with a significant change in our adoption of technology. To enable this, we must also reconsider our perspective of risk; enabling us to adopt innovation in construction.
As a start up founder and former engineer, I get to see both sides of the table.
Engineers are raised in a culture of safety factors of 1.5 and 3, trying our very best to ensure that whatever we design and build does not fail! However, venture capitalists thrive in a culture that relies on safety factors of 0.1, assuming that only one in ten investments will truly succeed. This dichotomy plagues engineering firms trying to move into corporate ventures and, I believe, is one of the fundamental reasons that construction and engineering really struggle to adopt innovation, they are simply terrified of seeing it fail.
One company that has developed a great model for safely and gently changing value perceptions, and company culture is Anglian Water with their “shop window”. This project has created a culture of controlled risk taking, empowering partners to share the opportunity and risk, and allowing everyone to see the value generated.
For construction and engineering to really be able to innovate, at pace, they must change their appetite for risk. But they do not have to do this alone. As with any pioneering commercial partnership, it is about sharing the risk, and sharing the reward. This brings me on to our second barrier.
Contract structures
The sharing of risk and reward has been traditionally laid out in contracts. Usually written with unfathomable language on dozens of sheets of paper, these are rarely set out to support change and innovation. If anything, these contracts are often designed specifically to stifle it.
We encountered an interesting example of this recently, when discussing with a client the benefits of Qflow for their team’s productivity and risk reduction. The client pointed out that, as they are on a ‘cost plus’ contract… it is not actually to their advantage to be more efficient, as they gain more profit, the more time they spend doing something. I was astounded by this response, but having worked on cost plus contract as a consultant, I certainly understood the logic.
So what can be done here?
At a recent roundtable on innovation at pace, hosted by i3p and IAND, we discussed this at length, exploring what has been done by industry leaders in order to overcome contractual barriers to innovation.
As a short term solution, ring-fencing specific pots of money to fund the piloting of innovations seems to be the most acceptable approach, with organisations such as Tideway deploying this to great success. Others such as Heathrow have chosen to hold an entirely separate tender specifically for innovations that address predefined challenges.
However, both of these approaches are Client/Developer led. What can contractors do once they are already on the project, and the funding has already been allocated? The use of grants such as innovate UK were a popular suggestion, however no one could offer an alternative approach to fund the railing and adoption of innovation by contractors after a project has been awarded. Even when the business case is clear and agreed internally, it seems that contractors are ham strung and unable to access funds under many contracts.
More work must be done here in order to enable greater change in this industry. But perhaps there is more to this, perhaps these business cases are not as strongly believed as we think?
Perceived value of innovations
It seem to me, that the industries fear of risk (in many instances) still outweighs it’s appetite for reward.
Even when we have agreed that we are willing to take on the risk of an innovation, we need to agree how valuable it is to us. Is it worth the emotional pain of learning something new, of changing our behaviour?
Building these value cases is a fundamental part of presenting an innovation, whether internally or externally. However, our pre-existing fear of risk and resistance to change can raise significant ‘believability’ challenges.
However, discussing these at the i3p round table, we identified a real opportunity here. Believability is a challenge, but what if these case studies and value cases were reviewed and validated by an independent body such as i3p… then would the value case be more believable? Would the appetite for achieving these rewards begin to overrule the fears of taking risk?
This independent validation is something we hope i3p can offer in the future.
At Qflow, we are passionate about discovering the truth behind why innovation isn’t being adopted at a higher rate in construction. If you have thoughts on this and would like to share your insights, drop us a message on our contacts page!
