Construction as a Mature Technological System

Technology and industry structure

An industry with a deep layer of specialised firms that form a dense network of producers, suppliers and materials was called a ‘technological system’ by Thomas Hughes:

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 1987: 53).

Hughes was an engineer and historian of technology, who saw technology as “craftsmen, mechanics, inventors, engineers, designers and scientists using tools, machines and knowledge to create and control a human-built world”. 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.” (Hughes 2004: 65).

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. In the second half of the century heavy industry and manufacturing spread around the world, from England and Western Europe to America then Japan. New industries needed new types of buildings, typically larger, higher and stronger than traditional methods and materials could provide. Bowley (1966) for the UK and Fitch (1966) for the US are well known histories.

It’s a remarkable fact that the building and construction industry we have today is a technological system that has been developing for 150 years. 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 AECOM can 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 building and construction, because statistics on 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 this long tail of small, typically family-owned, businesses.

With industrialised production, prices of manufactured goods decline over time as economies of scale and scope kick in, and over time those cheaper prices allow new technologies to spread and find new uses. Moore’s Law and the price/performance relationship of computers is athe best known example. An example of this price effect in building and construction was machine-made nails. Originally nails, like everything else, were hand made, and in fact were more expensive than screws, “but by 1828 the cost was down to 8c per pound [two kilos] and in 1842 to 3c. Dimensioned lumber and cheap nails made possible a whole new order of speed and economy in wood framing.” (Fitch 1966:121). Combining these two innovations a new system of building known as the ‘balloon frame’ came out of Chicago in the 1840s, and with nailed light timber frames two people could do the work of twenty using traditional methods. This very large increase in productivity came from two relatively simple innovations that, together, had a major impact. Balloon frames were sold in catalogues in many styles, and were used to build the new railway towns and suburban housing spreading across America over the following decades. This highlights the importance of understanding how a combination of new innovations within a technological system is often more significant than the individual new technologies themselves.

This also highlights the fact that the single most important factor in technology uptake is the price/performance relationship, or the gain in productivity or other measure (time, quality, safety, choice) the new technology delivers for a given level of investment. To successfully displace an older technology a new technology has to provide an overwhelming economic advantage to overcome the inbuilt conservatism of an existing industry, due to the investment by incumbents in the current system.

Between 1800 and 1900 there were a series of technological shocks to building and construction, as the new materials of iron, glass and concrete opened up opportunity and possibility for designers, for both what was built and how it was done. Iron and steel divorced the building frame from the envelope between the Crystal Palace in 1851 and the rebuilding of Chicago after the Great Fire of 1871, and with the separation of the frame from the envelope came mass produced infill materials to replace load-bearing construction. Then the combination of steel and concrete made possible the development of reinforced concrete and steel skeleton structures. Both ‘building art and the art of building’ were transformed, not once but several times, over these years as the methods of industrialised building with iron, steel and reinforced concrete were refined.

Over the 1800s the increasingly widespread use of concrete had changed its status from hobby or craft to a modern industry, as scientific investigation into its material properties revealed its shear and compressive characteristics. With the development of reinforced concrete there was change in architectural concepts of structures and approaches to building with concrete. The industrial standards of concrete technology influenced ways of thinking based on building systems and standardized building elements, and became identified with what was known as the Hennnebique System, a simple to use system of building with reinforced concrete columns and beams patented in 1892. According to Pfammatter (2008), by 1905 this system had spread across Europe and elsewhere, and Hennnebique’s company employed 380 people in 50 offices and had 10,000 workers. Concrete then set the agenda for the development of the construction industry as a technological system over the next hundred years, driven by the modernist movement in architecture, which explored the possibilities of these materials, and the increasing height and scale of buildings.

In these examples the relationship between technological change, conceptual thinking and organisational form is clear. While the striking thing is the interrelationship of these three aspects, the driver of these changes is technology, or more precisely new technology that fundamentally changes existing industry practices and delivers a shock to the existing system. With the advent of iron-framed and reinforced concrete buildings the construction industry had to not only master the use of these new materials, but also develop the project management skills the new technology required. That organisational change, in turn, was based on the deeper change in the way of thinking about the world that was fundamental to the industrial revolution and the invention of the scientific method (Landes 1972).

So, why would be experience of the industry over 100 years ago be relevant today? There are two parts to the answer. The first is that the nineteenth century is the only other period of disruptive change we have for comparison. The second is that the effects of technological change on industry structure and performance might plausibly again be in the same key areas as the organisation of projects and the mechanisation of processes, but in the twenty-first century these effects will be heightened and quickened by the network effects associated with digital platforms and artificial intelligence. Because industry structure (the number and size of firms) is fundamentally determined by technology (Sutton 1999), the emergence of new technologies and periods of rapid change can lead to new industries, but can also extensively restructure existing industries (Kamien and Schwartz 1982).

The construction technological system is extraordinarily wide and diverse, and the various parts of the digital construction technological system are in various stages of development. There are very many possible futures that could unfold over the next few decades. However, it is clear that the key technology that underpins these further developments, and upon which new combinations of technology will be based on, is intelligent machines operating in a connected but parallel digital world with varying degrees of autonomy. These are machines that can use data and information to both interact with each other and work with humans, and importantly this digital world will be one designed and built by humans. We are at the point where intelligent machines are moving from operating comfortably in controlled environments, like car manufacturing or social media, to unpredictable environments, like driving a car or truck. In many cases, like remote trucks and trains on mining sites, the operations are run as a partnership between humans and machines, as the saying has it “running with the machines not against them”.

The impacts of new technology on a mature technological system like the construction industry are generally thought to be gradual, changing industry practice over time without significantly affecting industry structure or dynamics. There are good reasons to think this may be wrong because of the current surge in advances in machine learning and the broadening potential of AI. A period of rapid restructuring of the industry similar to the second half of the 1800s may be about to start, when the new materials of glass, steel and reinforced concrete arrived, bringing with them new business models, new entrants and a greatly expanded range of possibilities. In the various forms that AI takes on its way to the construction site it will become central, in one way or another, to all the tasks and activities involved. In this, building and construction is no different from all other industries and activities, but the path of AI in construction will be distinct and different from the path taken in other industries. This path dependence varies not just from industry to industry, but from firm to firm as well.

The full conference paper Construction as a Mature Technological Sysytem can be downloaded here or read on ResearchGate here.

 

Construction's Three Pathways to the Future

Technological Trajectories

Over the last few decades there have been many scenarios for the future of the building and construction industry, often with titles like Construction 2000, 2020 or now 2030 or 2050, usually with a list of major trends expected to impact the industry. The list typically includes more data and associated computing technology, new materials and equipment, more education and training, less carbon and more sustainability and so on. For many of these items there have been a variety of roadmaps produced, providing very specific steps in developing a particular form of technology or process. Many scenarios emphasize the industry’s linkages to the rest of the economy and society. An interesting recent scenario analysis for Australian construction was covered here.

What often seems to be missing from the discussion in those sorts of exercises is an appreciation of how an industry as large and diverse as building and construction actually adopts and implements new technology. While it’s obvious that the industry as a whole is not going to be overwhelmed by some sudden mass movement to adopt some particular technology, whether it be steel reinforced concrete or BIM, the rapid pace of technological change is affecting construction. Like other industries there is potential for new entrants, new business models and great disruption.

It seems that there are three plausible pathways for how industry processes and structures might change over the next few decades, in the sense of technology adoption and implementation pathways. These might be called the business as usual, upgraded and modified, and transformed scenarios. What really differentiates the three is the rate at which new technologies are taken up, which in turn leads to different trajectories of technological development of firms within those three pathways.

The business as usual pathway is the slow accretive method that has been followed by the industry for decades, if not centuries. This is where the industry as a whole is much larger than any given project, and the individual projects reflect a consensus view on what the appropriate technological mix might be for that type of project, in that place at that time. Over time this industry consensus moves to include whatever the most effective or efficient piece of technology is, again for the circumstances of the particular project and those involved.

This is not a static process. I’ve argued elsewhere against the idea that building and construction is a technologically stagnant industry. The reality is that building and construction is the recipient of vast amounts of new technology from its traditional suppliers in the plant and equipment and building materials industries, and is increasingly IT intensive. The extraordinary growth of offsite fabrication in all its forms indicates the industry is quite willing to move to a new technological platform, but that platform has to be well proven before it becomes widespread.

Also, there are a limited number of projects that reward the investment of time and capital needed to develop and implement new technologies and new processes, and to overhaul organizational forms. In this case it is not always sensible, from a business point of view, to try and be on the cutting edge of technological developments. Nevertheless, offsite fabrication has already changed parts of the industry, the return on investment in BIM is generally positive, and the increasing sophistication of project management and integration software is opening up new possibilities and organizational forms.

Pathway 1: Business as Usual - Similar But Smarter

• BIM integrates project development and delivery. Clients get procurement systems right, or at least less wrong, which drives efficiency and productivity improvements.
• Modular and pre-fabricated components become universal and more complex, and many structural elements are standardised. Services become more integrated and building management systems become increasingly capable. 
• Project management becomes much more information intensive and sophisticated, and techniques like target costing, last planner, tiered suppliers and so on become widespread.

The difference between the business as usual and the upgrade and modified pathways is the rate at which firms adopt new tech. There will be a widening divergence between firms that are comfortable with business as usual and firms looking for ways to create or sustain their market position. Again this might be as much about circumstances, where the opportunity presents itself firms would be expected to upgrade. The many YouTube videos of concrete printing and other 3D printed components, or carbon-fibre bridges, girder-laying robots and such, show just how nascent this technology is, with an intriguing mixture of backyard inventors, universities and multinationals involved. Drones are everywhere, and microsats are also offering site monitoring.

In the upgraded and modified pathway firms invest considerably more in technological development. In the course of upgrading to these new technologies firms might need to make significant changes to the way they are organized and the way they organize their projects. To really leverage the investment and get an advantage from the technology, whatever it is, usually requires modification of existing business processes, and depending on how the business approaches the task these modifications could be extreme or could be at the margin. Some businesses are much better at this than others.

There are many different firms in the industry, and many big firms have clearly developed technological areas of expertise, that they build their business around, such as tunneling, or remote sites or bridge building. Chinese firms like Win Sun (3D printed components) and Broad Group (prefab high rise) call themselves technology companies not construction companies. Australian company Hickory Group also has its own factories producing modular components for its projects, going back to the integrated model of nineteenth century general contractors. Sekisui and Ikea have been doing this for a while.

Pathway 2: Upgraded and Modified - Manufactured Mass Customization

• Disruptive new entrants appear, with no historical baggage, who do not care about the traditional roles of industry professionals or suppliers. These firms do not work for clients but make products for their customers, in a vertically integrated supply chain.
• Their buildings are standardized platforms, built repeatedly and thus can be quick and cheap. Designed to be produced in a factory (which may be onsite) and assembled by a trained workforce, with a range of finishes and decorative elements to allow mass customization.
• New materials and production processes allow current boundaries of performance, size, function and design to be greatly extended. 
• Incumbent firms respond by moving up the value chain, developing their integration and PM capabilities and concentrating on larger and more complex projects that incorporate new tech like high performance materials, systems and services.

The transformational model is the extreme high-tech version of rapid and sustained advances across a broad front of key items. This is far more speculative, because the future is inherently unpredictable, of course, but the potential is there for some serious disruption. The two primary drivers of change are expected to be IT (both software and hardware, i.e. AI, automation and robotics) and new materials and production processes. At present, new tech is rapidly spreading across larger firms in the industry, but generally at the boundary of pathways one and two. However, in the near future breakthroughs are possible in digital mapping and surveying and 5D BIM, production process automation, advanced analytics, and the Internet of Things. Continued progress in molecular engineering and high performance materials, 3-D printing, real-time site data, communications, advanced robotics, roller press printing of smart materials and fabrics and many more technologies will feed into the industry over coming decades.

Pathway 3: Transformational - Faster, Higher, Stronger

• Science transforms building materials and production technology. The new products and materials are significantly stronger and lighter than existing ones. They create new opportunities for buildings that can be more distinctive, larger or higher than currently possible.
• The new production technology automates many tasks and processes and creates new machines that are far more capable than existing ones. Materials and machinery become smart, with embedded processors, are networked and communicate with each other. Components are location and condition aware.
• Humans partner with machine intelligence to accomplish many tasks, and use robots or exoskeletons for most physical work. Remote control of automated heavy plant and equipment becomes standard, while fabricated and modular components combine with automated systems and onsite robots to transform the building process.

What’s missing from the discussion here is any sense of the time-frame, however this too is entirely speculative. We’ve currently got elements of all three of these pathways in play, and the three will coexist across the industry as a whole for a long time. Because of the localized nature of building and construction there will still be large numbers of small firms in the industry for the foreseeable future, and those firms will generally follow pathway one.

One important issue will be how the broad mass of companies in the middle of the industry, the small and medium-size contractors of every sort, actually cope with the tsunami of new technology likely to descend over the next couple of decades. In every other industry which has become more capital intensive as technology develops, that industry has become more concentrated and the largest firms expand at the expense of mid-sized firms. This doesn’t mean we end up with a few giant construction companies, but it does mean that we are likely to see a far smaller number of, on average, larger firms across the industry. The effect of this change in industry structure should be fatter tails in the size distribution of firms.

The transformational pathway, by definition, does not have any current examples. The characteristics of the transformed industry might best be seen in what the industry produces, which would be smart and responsive buildings and structures. These are made of smart materials, which know their location, purpose and condition, run by smart operating systems that constantly monitor and control the building’s internal environment and systems, and have an energy efficient, self-repairing external skin. And the whole thing would have been delivered through some massively integrated management and manufacturing process that was entirely underpinned by digital data.

A recent publication on the Future of Construction page on advanced buildings shows how this trajectory is developing. This research by the Boston Consulting Group, a management consultancy, and the World Economic Forum, a multinational think-tank, is an ongoing project to promote cutting edge building technology in all it's forms. This new report  is Inspiring innovators Redefine the Industry, with six buildings and four flagship projects that demonstrate innovation in construction. As William Gibson pointed out (at a 1992 demonstration of the first clunky VR systems) “The future is already here, it’s just not very evenly distributed”.

 

https://www.weforum.org/agenda/2017/03/buildings-construction-industry-innovation