In the era of customer-driven and digitized businesses, the construction industry has still demonstrated inadequate performance development. Contractors have enormous problems in project management, which has traditionally been their key capability. Together with production-related issues (such as poor quality management), these problems raise the question about the sector’s systemic challenges: Are there some fundamental reasons why – in the era of customer-driven and disruptive digitized businesses – the construction industry has demonstrated an inadequate and unsatisfactory development?
Our research at Aalto University Finland aimed to disentangle the construction sector’s current problems and present justified paths toward systemic innovations. Systemic innovations are industry-defining, mold-breaking changes that diffuse across companies and specialties, often resulting in fundamental changes in how companies operate within the industry.
We argue that solving issues and symptoms one-by-one is not sufficient for fundamental changes in the construction sector. According to earlier innovation research, complex adaptive systems (CAS) should be in focus when discussing new management paradigms in construction. In other words, to manage the inherent complexity of construction, a holistic understanding of multiple sub-systems and their interconnected problems is needed. Thus, we argue that five broken sub-systems exist in construction: 1) product, 2) process, 3) people and organizing, 4) information, and 5) value creation. Too often the development efforts aim to solve only one of these sub-systems. Focusing only on a specific sub-system, such as product, process, or information, leads to compromises, poor implementation, and partial solutions.
For example, innovative pre-fabrication solutions are often hindered by existing project processes, fixed roles of professionals, and disruptions of innovations to some actors’ existing business models. Similarly, innovating new information systems should take into account needs for new processes, people and their behavior, and companies value creation.
Therefore, we argue that the most successful innovations are systemic, in which multiple challenges are solved simultaneously (see Figure 1). For example, integrated design, product, process, and use of data (information system), together with modular product architecture (product system) would enable developing integrated or even cyber-physical design and construction capabilities that utilize parametric and algorithmic design and engineering.
Figure 1 Framework of systemic transformation as a solution
These systems' development requires that multiple professionals, including architects, engineers, production specialists, and owners (organizing and people system), work together for an extended period. By systematically collecting data from the use phase, these solutions can be further developed for new customers. Additional value-adding services and products can be provided during the building’s lifecycle.
Is this framework just theoretical without any validation in real-life context? We have examined 12 successful innovative companies in the global construction sector, focusing on how they have established their path from initial idea to commercial business.
What we have found this far is that the five elements of the systemic transformation framework are valid, however, companies incorporate them in varying sequence. Some companies have started from new customer segments or new business models and then moved towards customized product and required process to fulfill that need. Some others have their initial idea in a new industrial product which is commercialized through an emerging partner ecosystem with new roles, responsibilities and value capturing models.
What is common is that each of these companies have a broad perspective on innovation action, focusing not only on technical solutions or processes, but having a holistic understanding on how the innovation could be disseminated in the existing or emerging ecosystem.
The research also underlines that in the construction sector, most implementation problems are not technical but related to behavior of people and organizations as well as to locking too heavily into existing business models.
Peltokorpi, A. , Seppänen, O. , Lehtovaara, J. , Pikas, E. & Alhava, O. 2021, 'Developing a Framework for Systemic Transformation of the Construction Industry' In:, Proc. 29th Annual Conference of the International Group for Lean Construction (IGLC). Lima, Peru, 14-16 Jul 2021. pp 454-463. Available at: https://iglc.net/Papers/Details/1867