It's interesting to compare this to the software industry, which seems to share a lot of characteristics with construction (high dollar value, each project has unique conditions, many sequential dependencies, mistakes are often difficult to fix though maybe not as difficult as construction). My impression is that people come up with new/better ways of building software much more frequently.
I think this is good evidence for your idea that a less-fragmented construction industry might be more innovative: a lot of new software tools were pioneered inside one of the few largest tech companies.
(A large part of this is also obviously that the construction industry has existed for >100x longer than the software industry, so there's much more low-hanging fruit in software. Another relevant difference might be that it's easier to experiment with new software tools in a low-stakes way via side projects; I'd guess that the minimum practical size for a software project is much smaller than for a construction project?)
"Maybe not as difficult as construction"???? Not close. Enormous life expectancy differences - working in a 50-year old building is not uncommon, working on 50 year old software is not common. I could do a long list of differences. I have experience in both domains.
Building software and buildings are entirely different beasts. In software you are typically delivering something that is intangible, e.g. productivity, user engagement, etc. and can be easily modified, so can rapidly iterate/ modify the processes and products delivered. In addition a product is never really done, whereas a building has to match spec, has a clear spec, is highly regulated and has a clear finish. Unfortunately, companies try applying project-management processes and metrics designed for building physical objects, and as a result fail even more spectacularly.
Robert Gordon finds that the construction industry recorded negative productivity growth from 1995-2005 in both the US and EU-10, owing entirely to declining multi-factor productivity, i.e. the residual that's supposed to capture output from new ideas and innovation.
Construction productivity is notoriously hard to measure, but stipulate that these estimates are at least directionally correct. What drove the decline in construction MFP? Would you consider doing a post on why and how construction innovation is not just hard, but may even be somehow regressing?
To achieve significant change (and risk reduction!) you need to vertically integrate and internalize. SpaceX is my favorite example of getting a stagnant industry into innovation mode. I think the problems of the Space Industry before SpaceX are similar to Construction now. And it's also massive, bold and complicated undertaking to establish a successful "BuildX". But the upside should be even more massive than in Space.
Isn't it true that manufacturing and agriculture also had innovations that were incremental and slow? After all, the processes of agriculture also basically stayed the same for hundreds of years. Before mechanized vehicles came into use. A great book on the topic of innovation itself is the excellent book How Innovation Works, by Matt Ridley. Using dozens of examples, Ridley shows how in most cases innovation is incremental and slow. The major exceptions being the rapid pace of technological evolution in the past 50 years or so. So I think that the construction industry having slow and incremental innovation isn't a bad thing. As long as innovation is there and continues to be there.
You might enjoy https://philpapers.org/rec/SCHGEA, which looks at a very similar set of constraints and processes in evolutionary biology. Under that model, I would anticipate the most innovative areas of the construction industry to either be, as you said, ones that improve something without changing other parts, or to be "finishing touches": how plumbing gets installed should change rarely, but the quality of tile in bathrooms could improve at a reasonable clip, because it is harder for failures at the end of a process to cascade substantially.
I LOVE your newsletter!!! Please keep it coming... It so much helps to think of system-level changes needed to drive this great industry forward to productivity and sustainability <3
Brian, you’ve rightly pointed out why adopting innovation can be unattractive when one party carries the risk while another reaps the benefit. We need to look at how those taking the risk can also share in the reward. This connects closely with questions I’ve been exploring around ECI and procurement in Singapore: bringing parties in earlier helps, but the incentives also need to align. We’re fortunate to have BCA looking at the wider system too. The challenge is translating that support into project arrangements that make innovation worthwhile for those delivering it.
I've been in custom residential construction since the early 80's. Homes have become much more energy efficient, structurally efficient and design conscious. In the old days it was a GC and a 4 page set of plans, with maybe 5 inspections. Today everyone is connected via smartphones, and it's a team of architects, engineers, contractors and inspectors building a new custom. Productivity does not take into account this huge leap in quality - It like the difference in a 6 cylinder F-150 & a Tesla - night & day...but they both count as 1 vehicle. So productivity doesn't pick up quality.
Perhaps qualitative differences could be expressed in the new structures extended lifespan..Perhaps the homes of the 80's were only good for 20 year before they need complete gut & rehab. Where as today's wonders are good for 40 - 50 years. Could this count as twice the house, and therefore twice as productive?
I think that it is difficult to get certified and achieve a reputation with other builders. For example, now there are technologies such as drone photogrammetry https://www.propelleraero.com/use-cases/drone-photogrammetry/ but they did not immediately take root, although they showed their effectiveness
Would appreciate if you could look into this startup, they are making some impressive claims and getting lots of funding but do not disclose much in detail about their product: https://www.nexii.com/
Its partially true. Specially the industry has changed gears during pandemic and many clients and contracting companies are now investing in digalitization. Digital Transformation in construction sector is the next big bet. Recent construction tech billion dollar acquisitions is testimony for the same.
Interesting article. My guess is that it reflects modest experience/involvement with actually buildings. Typically software deals with abstractions; physical reality is much more complex. Re: Revit adoption. as an example. Keep in mind that the economics of designers and contractors are totally different. If you want a detailed critique of the article, contact me.
It's interesting to compare this to the software industry, which seems to share a lot of characteristics with construction (high dollar value, each project has unique conditions, many sequential dependencies, mistakes are often difficult to fix though maybe not as difficult as construction). My impression is that people come up with new/better ways of building software much more frequently.
I think this is good evidence for your idea that a less-fragmented construction industry might be more innovative: a lot of new software tools were pioneered inside one of the few largest tech companies.
(A large part of this is also obviously that the construction industry has existed for >100x longer than the software industry, so there's much more low-hanging fruit in software. Another relevant difference might be that it's easier to experiment with new software tools in a low-stakes way via side projects; I'd guess that the minimum practical size for a software project is much smaller than for a construction project?)
"Maybe not as difficult as construction"???? Not close. Enormous life expectancy differences - working in a 50-year old building is not uncommon, working on 50 year old software is not common. I could do a long list of differences. I have experience in both domains.
Building software and buildings are entirely different beasts. In software you are typically delivering something that is intangible, e.g. productivity, user engagement, etc. and can be easily modified, so can rapidly iterate/ modify the processes and products delivered. In addition a product is never really done, whereas a building has to match spec, has a clear spec, is highly regulated and has a clear finish. Unfortunately, companies try applying project-management processes and metrics designed for building physical objects, and as a result fail even more spectacularly.
Great piece.
Robert Gordon finds that the construction industry recorded negative productivity growth from 1995-2005 in both the US and EU-10, owing entirely to declining multi-factor productivity, i.e. the residual that's supposed to capture output from new ideas and innovation.
See: "The Industry Anatomy of the Transatlantic Productivity Growth Slowdown" https://www.nber.org/papers/w25703
Construction productivity is notoriously hard to measure, but stipulate that these estimates are at least directionally correct. What drove the decline in construction MFP? Would you consider doing a post on why and how construction innovation is not just hard, but may even be somehow regressing?
I very much agree with your conclusion:
To achieve significant change (and risk reduction!) you need to vertically integrate and internalize. SpaceX is my favorite example of getting a stagnant industry into innovation mode. I think the problems of the Space Industry before SpaceX are similar to Construction now. And it's also massive, bold and complicated undertaking to establish a successful "BuildX". But the upside should be even more massive than in Space.
How were the problems of the Space Industry similar to the ones in Construction?
Isn't it true that manufacturing and agriculture also had innovations that were incremental and slow? After all, the processes of agriculture also basically stayed the same for hundreds of years. Before mechanized vehicles came into use. A great book on the topic of innovation itself is the excellent book How Innovation Works, by Matt Ridley. Using dozens of examples, Ridley shows how in most cases innovation is incremental and slow. The major exceptions being the rapid pace of technological evolution in the past 50 years or so. So I think that the construction industry having slow and incremental innovation isn't a bad thing. As long as innovation is there and continues to be there.
You might enjoy https://philpapers.org/rec/SCHGEA, which looks at a very similar set of constraints and processes in evolutionary biology. Under that model, I would anticipate the most innovative areas of the construction industry to either be, as you said, ones that improve something without changing other parts, or to be "finishing touches": how plumbing gets installed should change rarely, but the quality of tile in bathrooms could improve at a reasonable clip, because it is harder for failures at the end of a process to cascade substantially.
I LOVE your newsletter!!! Please keep it coming... It so much helps to think of system-level changes needed to drive this great industry forward to productivity and sustainability <3
Great article. I am always trying to think of non-normal distributions in real life and the nail example is such a good one!
Brian, you’ve rightly pointed out why adopting innovation can be unattractive when one party carries the risk while another reaps the benefit. We need to look at how those taking the risk can also share in the reward. This connects closely with questions I’ve been exploring around ECI and procurement in Singapore: bringing parties in earlier helps, but the incentives also need to align. We’re fortunate to have BCA looking at the wider system too. The challenge is translating that support into project arrangements that make innovation worthwhile for those delivering it.
I've been in custom residential construction since the early 80's. Homes have become much more energy efficient, structurally efficient and design conscious. In the old days it was a GC and a 4 page set of plans, with maybe 5 inspections. Today everyone is connected via smartphones, and it's a team of architects, engineers, contractors and inspectors building a new custom. Productivity does not take into account this huge leap in quality - It like the difference in a 6 cylinder F-150 & a Tesla - night & day...but they both count as 1 vehicle. So productivity doesn't pick up quality.
Perhaps qualitative differences could be expressed in the new structures extended lifespan..Perhaps the homes of the 80's were only good for 20 year before they need complete gut & rehab. Where as today's wonders are good for 40 - 50 years. Could this count as twice the house, and therefore twice as productive?
I think that it is difficult to get certified and achieve a reputation with other builders. For example, now there are technologies such as drone photogrammetry https://www.propelleraero.com/use-cases/drone-photogrammetry/ but they did not immediately take root, although they showed their effectiveness
Would appreciate if you could look into this startup, they are making some impressive claims and getting lots of funding but do not disclose much in detail about their product: https://www.nexii.com/
having built the first BIM systems, I can only agree
Its partially true. Specially the industry has changed gears during pandemic and many clients and contracting companies are now investing in digalitization. Digital Transformation in construction sector is the next big bet. Recent construction tech billion dollar acquisitions is testimony for the same.
I couldn't help but think about this in the context of Katerra
Interesting article. My guess is that it reflects modest experience/involvement with actually buildings. Typically software deals with abstractions; physical reality is much more complex. Re: Revit adoption. as an example. Keep in mind that the economics of designers and contractors are totally different. If you want a detailed critique of the article, contact me.
Nice piece!