Construction as a Mature Technological System

The Construction Industry Technological System – Part 2

When viewing the construction industry as a technological system the age of the system is the most obvious feature. Most of the various elements of the modern industry came together over the nineteenth century, pushed along by ever larger and more complex projects building canals, roads, bridges and tunnels, railways, factories, offices and housing. During the 1800s the world was urbanising as population rapidly increased and major cities attracted migrants and businesses. Heavy industry and manufacturing spread around the world, from England and Western Europe to America then Japan.

The three megatrends in construction in the nineteenth century were industrialisation, mechanisation and organisation:

1. Industrialisation of production methods with standardisation of components and mechanised mass production, and the development of new materials like steel, plate glass and plastics. This led to a new design aesthetic, with more modular components and internal services, and separated the envelope from the structure for the first time. The infrastructure of materials suppliers and equipment producers developed, and scientific R&D joined the industry’s traditional trial and error approach to problem solving.
2. Mechanisation of work based on steam power, with cranes, shovels and excavators common by the mid-1800s. This in turn led to a reorganisation of project management, with the new form based around logistics and site coordination to maximise the efficiency of the machinery and equipment.
3. Organisation of the modern construction technological system was clearly in place by the mid-1800s. Large general contractors had emerged by the 1820s, undertaking projects on a fixed-price contract often won through competitive bidding. This system of procurement was supported by the new professions of architects, engineers and quantity surveyors, which had emerged during the eighteenth century and were institutionalising in early nineteenth century London.

 It’s a remarkable fact that the construction industry we have today is a technological system that is over 150 years old. As a mature technological system, this can be expected to be in many places a quite concentrated industry, run mainly by finance and management types, and having a high degree of technological lock in due to the age of the system. Many of the industry’s global leaders are well-established, Bechtel for example is over 100 years old, and others like Hochtief, Skanska, and AECOMcan trace their origin stories back over a similar period. Shimizu is over 200 years old.

Building and construction as an industry cluster has quite different characteristics to the industries studied by Thomas Hughes, and how the modern form of the industry developed over the twentieth century is another interesting story in its own right. The most obvious difference to the industries used as examples by Hughes is the size and diversity of the building and construction industry, because the industry includes the enormous number of firms and people engaged in the alteration, repair and maintenance of the built environment as well as contractors and suppliers for new builds. The broad base of small firms is a distinctive feature of the overall construction industry as we define it. However, the part of the industry that is engaged in delivering projects (that is part of a problem-solving technological system) is made up of larger firms than these small, typically family-owned, businesses.

The contractors who delivered major projects ended up as the core of the construction technological system at the end of the twentieth century. By this stage the system had a clear outline, and a very clear structure, for bringing together the producers, suppliers and materials needed for building and engineering projects. It’s problem-solving prowess in delivering increasingly challenging and complex projects had never been greater, and the system had stabilised around a very particular form of procuring, financing and managing those projects. In many respects the industry is an exemplar, as with its flexibility in adjusting to changing levels of demand and managing temporary organisations. On the other hand, as a mature system, it is conservative. To quote Thomas Hughes again:

A grievous flaw in the reasoning of enthusiasts for radically new technology, as contrasted with that of the advocates of postmodern architecture, lies in the former’s failure to take into account how deeply organisations, principles, attitudes, and intentions, as well as technical components, are embedded within technological systems. (1989: 459).

With the various combinations found of the complex array of professional institutes and organisations, government regulations and licensing, standards and codes, insurance and finance, the ‘embeddedness’ of the construction technological system is also wide and deep. Nevertheless, towards the end of the second decade of the twenty-first century there are signs that a new wave of technological change is coming to affect the construction industry. Just how radical these new inventions will be remains to be seen, in Hughes’ sense of radical. Despite the extent of technological change expected over the next few decades, it’s unlikely some entirely new industry will appear to take the place of building and construction. There’s no obvious opportunity for a system builder to reinvent an industry as old as time.

What is likely is a series of interconnected technological advances that will fundamentally change many aspects of the current technological system over time. Many of the market niches currently occupied by major manufacturing firms may disappear over the next two decades, replaced by new production technologies, for example. However, because the system is mature the effect of new technology and the changes it brings will happen slowly across the industry as a whole, and unevenly because of the many small and medium size firms. There may, however, be a class of more nimble, faster growing small firms around the frontiers of the technological system.

How firms utilise technological capabilities will increasingly differentiate firms within a diverse, location-based industry. It is widely recognised that there are differences between industries in the way that technology is adopted, adapted and applied, but the differences within industries has generally got less attention. For building and construction this is a far more significant driver of change than many people seem to think. Not only because of the number of small and medium size firms, but also because of the size and reach of the major firms. A global contractor will have 50,000 employees (give or take), suppliers of basic materials and sophisticated components are large industrial firms, many publicly listed, and so on. These firms have the management and financial resources required to invest in twenty-first century technology, if and when they decide to do so.

While construction is a mature system and thus a conservative industry, it has also become used to a constant flow of new and upgraded products and services from suppliers. There is a quite efficient system in place to promote and distribute these new products and services, and many have to survive in quite competitive markets. This is an interesting dichotomy, at the system level the industry is in the consolidation and rationalisation phase of Hughes' Cycle 2, but many firms in the system are heavily engaged in Cycle 1 R&D and innovation as they seek growth and competitiveness. As the underlying pace of technological change will continue to increase, due to the constantly expanding range of new scientific discoveries and recombinations of existing knowledge, this type of Cycle 1 churn will be typical of most industries. For both industry majors and frontier firms this ongoing Cycle 1 churn offers many possibilities.

How this will play out is interesting question. The only previous comparable period of disruptive change in the construction industry occurred during the nineteenth century, and if that is any guide we can expect technological changes to operate today over the same three areas of industrialisation of production, mechanisation of work, and organisation of projects that they did then. And, just as in 1800 when no-one knew what the industry would look like in 1900, today we can’t really see the industry in 2100. That is a long way out, and we can only guess at the level of future technology. We can, however, use what we already know from both history and the present in a sensible way, to form a view of what is possible over the next few decades based on what is understood to be technologically feasible. 

 

Hughes, T.P. 1989. American Genesis: A Century of Invention and Technological Enthusiasm 1870-1970. Chicago: University of Chicago Press. New ed. 2003.

The Construction Industry as a Technological System

Reordering the Physical World

When asked what our idea of the construction industry is, the mental picture we have is one of putting up buildings and structures. This is what the industry does, so it is obviously true. A more interesting question is how does the industry do this? To answer that question all the various participants in the project life cycle from conception to operation have to be included. Then there is the vast underpinning of manufacturers, engineers, industrial designers, scientists and technologists. An industry with a deep layer of specialised firms that form a dense network of producers, suppliers and materials is known as a technological system.

Technological systems solve problems or fulfill goals using whatever means are available and appropriate; the problems have to do mostly with reordering the physical world in ways considered useful or desirable, at least by those designing or employing a technological system. (Hughes 1990: 53)

The idea is from Thomas Hughes, an engineer and historian of technology, and his definition of a technological system is a model of clarity that indicates a lot of hard thinking. It recognises that there is an overlap between the idea of a technological system and an industry, but accepts the boundaries between industries and firms are blurred when the task is problem-solving. A technological system draws in suppliers from many industries to deliver solutions to problems, just as the construction industry’s technological system draws in suppliers from many industries to deliver projects. Those projects are themselves solutions to problems.

This is all at a high level of generality, of course, but one of the subtle aspects of the idea is way it is fractal, which means the same features exist at different scales. For example, there is a network of political, legal and financial organisations that facilitate the industry at the scale of the system, and at the level of a sub-sub-sub-supplier in the production chain there is another network of supporting firms. This effect can also be seen with machinery and components, at both the scale of the machine and for parts their design and production involves networks of engineers, managers and technologists.

This allows us to define a technological system based on the relationships between the firms and other organisations involved in reordering the physical world, in this case by delivering buildings and structures. Those firms and organisations make up the ‘industry’ that delivers those products. This is clearly similar to the concept of the broad construction industry discussed earlier. Similar but different, because here membership of the technological system is by participation and linkage, not by SIC codes. Regulatory agencies and professional licensing, for example, are part of a technological system but not found in industry statistics.

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Technological systems are, for Hughes, the key to understanding technological change. He studied the development and evolution of electric light and power between 1870 and 1940, and wrote a history of the industry. He saw these large, modern technological systems evolving in a loose pattern: “The history of evolving, or expanding, systems can be presented in the phases in which the activity named predominates: invention, development, innovation, transfer, and growth, competition, and consolidation. As systems mature, they acquire style and momentum.” (1990: 65)

There are many industry life-cycle models, most based on the idea of stages of development using generic terms like invention (new knowledge) and transfer (to production). Hughes’ version has seven phases that he uses to track the development of what he calls ‘systems of production’. These are the massive industrial complexes that arose in the first half of the twentieth century from major nineteenth century inventions like electricity and the internal combustion engine. Hughes is particularly interested in a small group of people he calls ‘system builders’, men like Henry Ford and Thomas Edison, who conceived and built entirely new and fully integrated supply chains, which became the technological systems used to produce cars and electricity. In Hughes’ book American Genesis, which had the subtitle A Century of Invention and Technological Enthusiasm 1870-1970, these system builders have a central role.

Within the seven phases of Hughes’ industry life-cycle are two smaller, interior cycles. Cycle 1 is invention, development, innovation and transfer, and clearly applies to emerging industries going through rapid technological change driven by new inventions. But it also describes the ongoing process of refinement of existing technology that underpins modern industry. Because most new inventions are based on some new combination of existing technology, as we accumulate more knowledge, new materials and equipment and so on, the range and number of possible new inventions is increasing exponentially. This means the general pace of underlying technological change can be expected to increase, affecting older, mature industries as much as newer ones.

In a production system as large and diverse as the construction industry technological system there are many entry points for new tech, so the issue here may not be the role of system builders, as in the industries studied by Hughes, who was interested in the way “radical inventions inaugurate new systems”. While radical inventions are significant, he discriminated between them and what he called "conservative" inventions. All inventions need to be tested and extended, expanded and finally put into production, so the great majority of R&D and innovation is done in corporate labs and is incremental, endlessly refining parts of the production system, usually in response to something changing elsewhere in the system. All industries have this push-pull dynamic in their supply chains, as production and distribution methods evolve over time.

Across the construction supply chain there are occasional technological breakthroughs, but they don’t create new industries because they typically come from firms and organisations already within the technological system. As a mature system, many of its sub-markets can be expected to be quite concentrated, with a few large, well established firms exactly like those Schumpeter suggested would be most likely to engage in R&D and invention and innovation. And these firms typically focus on incremental improvement of their product or service, and do so at approximately the same pace as their competitors within the technological system, the ratchet effect in action.

Because this form of invention and innovation is incremental, it should not be dismissed as unimportant. An example is the increasing lifting capacity of cranes over time, another is the new generation of construction chemicals, mainly sealants and concrete additives. These will greatly improve building performance and are the products of long-term industrial R&D, which is how technological change works in most industries most of the time. Another example is the development of computer-aided design software, which went on for decades before building information models were produced in the 1990s. BIM has advanced through 2D and 3D versions to the 4D (schedule) and 5D (cost) iterations today. Software linked to cameras or drones can now provide 4DAR (augmented reality) images from a building site linked to the BIM virtual project.

Cycle 2 in Hughes’ industry life cycle is growth, competition, and consolidation. This is where we get mature technological systems, industries that have moved past early rapid growth, and where the shape of the industrial structure has emerged. In many cases these are oligopolistic, with a few specialised firms dominating market niches or layers in the supply chain. The car industry is the obvious example, where two-thirds of global production is done by eight firms and there are often only two or three suppliers of dashboards, door panels, seats, airbags, brakes and steering and other key components. Construction materials like cement, concrete and glass, and components like building management systems, lifts and elevators are all similarly oligopolistic industries in mature supply chains.

Hughes has different types of system builders in each of his seven phases, based on the kind of system builder who is most active as a maker of critical decisions. “During invention and development inventor-entrepreneurs solve critical problems; during innovation, competition, and growth manager entrepreneurs make crucial decisions; and during consolidation and rationalization financier-entrepreneurs and consulting engineers, especially those with political influence, often solve the critical problems associated with growth and momentum.” (1990: 57). Basically, technological systems evolve through three stages based on a dominant business model and types of people: invention, management and finance.

Momentum is a useful idea too, particularly at the system level, although it can also refer to the well-documented persistence of older technologies despite newer and better versions being available, like the QWERTY keyboard or radio. Hughes thought “Mature systems, have a quality that is analogous ... to inertia of motion. The large mass of a technological system arises especially from the organizations and people committed by various interests to the system.” This highlights the value of a systems approach, because it includes organisations, organisational forms and people in networks of influence. This helps explain the long-run stability shown in a mature technological system.

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The driver of the development trajectory for the construction industry in the the 21^st century will be technologies now emerging, like nanotechnology, machine intelligence, exoskeletons, robots and so on. Possibly human augmentation. These are expected to vastly increase our abilities in hardware, both mechanical and silicon, and software, with new applications and programs and the development of intelligent machines trained in specific tasks. Because the industry’s technological system is so wide and deep this will affect a very large number of firms and people, and through them the wider economy and society.

How firms utilise technological capabilities will increasingly differentiate firms within an industry. It is widely recognised that there are differences between industries in the way that technology is adopted, adapted and applied, but the differences within industries has generally got less attention. For building and construction this is a far more significant driver of change than many people seem to think, it is after all a very conservative industry.

Hughes, T.P. 1990. The evolution of large technological systems, in W.E. Bijker, T.P. Hughes and T. Pinch, eds., The Social Construction of Technological Systems, Cambridge, MA: MIT Press, pp. 51-83.
Hughes, T.P. 1989. American Genesis: A Century of Invention and Technological Enthusiasm 1870-1970. Chicago: University of Chicago Press. New ed. 2003.