The Future of Project Management DCM week #8

Innovation. Innovation seems to be the big buzzword these days. Everyone wants to innovate. Also in the construction industry. And, it is for a reason. The challenges related to climate change, dwindling resources, growing cities and energy transition are big. To solve the lack of houses The Netherlands want to build one million new houses by 2030. The plan is to build them mostly in the existing cities and villages. Not an easy task. The circular challenge for more sustainable construction affects the whole supply chain and innovation in every link of the chain is needed. Besides that, worldwide the challenges are even bigger. All over the world, people move from the countryside to cities making it a huge task for municipalities to build sufficient infrastructure and houses. Nevertheless, most people end up in slums, bidonvilles, townships or favelas, striving for a better life for themselves and their kids.

My opinion is that the world will only be able to cope with these challenges if todays’ economic system changes. We need a more social system that will divide the wealth of this world more equally amongst all living. A system that rewards sustainable development for all and for nature above profit for the happy few at the expense of others and nature. Besides economic change, big innovations are needed to deal with the more technical and managerial side of the challenge. Let us look at this part of the task.

Between 1990 and 2000, I worked at several architects offices. As a draftsman, technical designer, project leader and office manager. During these years, we wanted to experiment with new things. New materials, new structures, new floor plans for apartments, new forms of housing like urban villa’s etc. We aimed for innovation. Soon I discovered that working on innovation is about trial and error over and over again and it takes a lot of time. And time is, – you know it – money. Innovation is not only about a new design, no, it is also about new ways of working, different stakeholders, different technical stuff; it affects the supply chain. Most of the time it also needs a different approach in management and attitude. Not business as usual but the management of change, and flexible approaches. New stuff is more difficult in a legal sense. Will you get a permit? What about insurance, warranties and liabilities? What happens if something fails? The process of innovation is not efficient. if you innovate you will first lose time and money, maybe you even fail, and sometimes you win.

Sometimes an innovative idea was so labour intensive that we could not cover it with our fee, ending up with a financial loss on the project. If you work on too many innovations the office will go bankrupt.

Given the enormous challenges sketched above, I could state that the profit margins in the building industry are too small to cover the expenses for the big-scale innovations needed.

Governments can push innovation forward by changing the law and putting, for instance, the sustainable bar higher. Through tenders, the government is able to challenge the market to come up with innovative ideas, designs and solutions. For instance for government buildings, schools and infrastructure. Public tendering can be advantageous but for innovation, tendering is a challenge. If you do not know what the innovative solution is, are competitors then able to give a reasonable price during competition? Only with a proposal and a price, you are able to select a winner. However, is that possible if the solution, the design, the proposal, the consequences are not ready or unknown?
It is a big risk for the agent but also uncertainty for the client.

Will the agent be able to design and build the innovation for the given price? Or, is the innovation so labour intensive or technically challenging that the price is insufficient to cover all labour, expenses and costs? The last is often the case since the margins in the building industry are narrow. If the price is an important part of rewarding then there is – from my experience – a limited budget left to cover expenses for serious innovation. In the end, the client will not get the stuff wanted……
I do not know a solution but maybe a two-stage selection is a way to go. First, tender for possible solutions and then select the winner on their price.

I am, maybe different from the above, positive about innovation around climate change and the other challenges mentioned. In 2006, Al Gore, the former US vice president published his film An Inconvenient Truth. This film was a kind of turning point for the sustainable debate. It feels like long ago but it is actually not. Since An Inconvenient Truth things changed dramatically. Legislation, especially in Europe has changed, the industry started to improve manufacturing, making products more sustainable. Taking care of the environment. Also the building industry. Back in 2006, we thought was impossible to build energy-neutral houses, apartments or office buildings. Now they are being built in large numbers. We thought it would take decades to introduce the electric car and change the whole infrastructure. Now, Tesla, is the car manufacturer having the highest stock value of all car manufacturers in the world and you can charge your electric car at all petrol stations along the Dutch highways.

To conclude. Innovation is important and needed. But, innovation only will not help us on time. I believe that legislation needs to change too and maybe first, pushing society and the industry forward. It does not work the other way around for the challenges mentioned above. In addition, already stated – we need to change the economic system behind it.