Farsight For Construction

Four Scenarios

In 2016 a scenario analysis for the building and construction industry in Queensland, Australia, was released. Background info and the report are available here. The scenarios describe “four plausible futures for Queensland’s construction industry over the coming two decades, with a focus on impacts for jobs and skills. Each scenario consists of a description of Queensland’s construction industry in the year 2036, a narrative of how the scenario came about, and a commentary on plausibility.” I substituted Australia for Queensland in the graphic, as this is more realistic, but have left the scenario outlines intact.

Scenario 1: The Digital Evolution

This is a future where traditional tradies and operators are in demand and highly paid. High-fidelity training simulators are used to attract a ‘gamer generation’ and fast-track apprenticeships to address skill shortages. A small number of progressive companies are managing capacity constraints through using exosuits to retain older workers and cut costs due to injury. Industry structure and practices have changed little but diffusion of BIM and data analytics has driven improvements in efficiency, customer service, product quality and workplace safety. Such steady improvements are enabling the industry to compete internationally, and to adapt to cost pressures related to scarcity of human capital and raw materials. Manufacturing of buildings and building elements remains niche and relatively expensive, as only a few local companies tap a small low-volume market. Heavy equipment/machinery is still operated by humans with some autonomous functions to improve efficiency.

Industry structure and practices have changed little but diffusion of BIM and data analytics has driven improvements in efficiency, customer service, product quality and workplace safety. Such steady improvements are enabling the industry to compete internationally, and to adapt to cost pressures related to scarcity of human capital and raw materials. Manufacturing of buildings and building elements remains niche and relatively expensive, as only a few local companies tap a small low-volume market. Heavy equipment/machinery is still operated by humans with some autonomous functions to improve efficiency.

Being a cautious innovation culture means that people in the industry, as well as their customers, don’t like surprises and shun failure. Construction companies focus on delivering projects on their books, while the market gives priority to proven products and methods, seeing traditional construction as a ‘safe investment’. There is a lingering problem with waste from construction despite high material costs, and the industry is in the bottom of the OECD in terms of R&D investment and partnerships with the research sector.

Scenario 2: Smart Collaboration

The industry has not yet seen full automation of repetitive, dangerous and physically demanding tasks, but Queensland is at the forefront of experimenting with new solutions to make construction safer, more materials efficient and productive. Living labs have been established to enable R&D and deployment of new materials and tools to cope with an ageing workforce, harsh climate and resource pressures. Queensland is home to a globally renowned and coveted materials and building standards system.

Queensland’s strong early adopter market pushes the industry to continuously improve and experiment with new products, methods and tools. Traditional trades and professions persist but are in decline, with the employment emphasis on new jobs based on digital literacy, agile project management and prefabrication. Working with BIM, along with augmented and virtual reality technologies, is a core skill across the industry (akin to smart device use in 2016). Quality assurance and continuous improvement roles are in demand. Workers develop modular skills and competencies quickly through high-fidelity training simulators.

The workforce has fully embraced advanced exosuits, which allow older workers to continue in physically demanding trades. This technology has also allowed many women to participate in physically demanding site-based work. While assistive technologies have deskilled manual jobs, they have allowed job rotation possibilities for office-based professionals and managers who seek new experiences and insights of the construction process; a practice that fosters natural curiosity among construction workers. New opportunities for improvement and innovation are constantly cropping up; innovation management is a core competency, with most companies maintaining an innovation register, and running trials and experiments across a portfolio of projects.

Wide adoption of online peer-to-peer platforms in the industry with embedded ranking systems has been driven by consumers, and has all but eliminated ‘cowboys’ in the industry and boosted the quality of construction work done, especially in the maintenance sector. Foreign companies have invested in the Queensland industry in an effort to acquire new capabilities and innovations. The state’s industry has a global reputation for operating with integrity and for ‘shared benefits’. Communication skills and collaboration across disciplines and ethnicities is a strength, and foreign partners value the egalitarianism that is widely evident in the state. The industry is at the top of the OECD in terms of R&D investment.

Scenario 3: Globally Challenged

This scenario sees Australia struggling economically. The country has fallen behind the global transformation of construction, characterised by widespread adoption of advanced manufacturing techniques and smart robot technology. Overseas entrants are dominant in the Australian market, which is struggling with a high cost base. An Asian company is Australia’s number one home builder.

 Some Australian companies are outsourcing large components of projects to overseas fabricators to stay competitive with new entrants. This survival strategy, along with a short-term project focus, means that important strategic decisions are overlooked. Many Australian companies are either being bought out or are going out of business. Newspaper headlines tell the story of an industry in decline (much like headlines about the Australian auto industry in 2016). The workforce is a mere 10% of what it was in 2016. High unemployment is being addressed through extensive (albeit reactive) retraining programs to improve job prospects for vast numbers of workers.

The giants of construction are Japanese, Korean and Chinese corporations that were preeminent car manufacturers of the late 20th and early 21st centuries. While robots are not allowed on site in Australia, most building and infrastructure delivery is carried out remotely by highly automated facilities in Southeast Asia, and then assembled on site by foreign workers with corporate training certifications (e.g. Toyota certified technician). Dramatic cost breakthroughs are enabling home buyers and asset owners in Australia to acquire high-quality buildings and infrastructure within available capital constraints

Wages of the remnant industry have plummeted from the highs of the early 2000s. Automated recycling of old buildings and low cost for new builds has confined renovation activity to heritage-listed buildings. The depressed economy and low-cost real estate and wages in Australia (and Queensland) is attracting some overseas companies to invest in new production facilities as part of a global expansion. This investment is bringing new opportunities for the old construction workforce to pivot into technical jobs for agile manufacturing operations, and reinvigorating domestic expertise in mass customisation. Associated niche industries are emerging in ‘smart’ design to help home buyers and assets owners unlock the potential of advanced manufacturing and digital technology.

Scenario 4: Rise of the Robots

The developing world, particularly Southeast Asia, has been battling major natural hazard events and associated impacts on vast urban populations. Australia has also been impacted by natural disasters, but relatively low government debt has afforded the flow of funds for reconstruction. With one of the world’s highest innovation rankings, Australia is an integral part of a Southeast Asian-Oceania Union (akin to the European Union), which is fostering coordinated responses to the crisis.

AI and robotics has transformed construction globally, and Queensland is at the forefront of developing and using this technology. The state’s construction industry is central to a regional implementation of smart robots to natural disaster hit areas. Living labs are dotted around the state, testing and evaluating new generations of disaster recovery and reconstruction robots, and new sustainable and climate adaptive materials and infrastructure. Queensland’s ‘climate resilience’ standards are globally respected. Know-how in sustainable and climate resilience engineering is a significant export, along with new products and services to support new and reconstructed cities.

Historical trades and jobs have given way to a workforce of technicians and knowledge professionals in robotics engineering and programming. Construction is a science with significant data flows and real-time feedback to construction workers and clients. Enabled by smart sensor technology, AI optimisation is offered throughout the design and construction process, and beyond to the maintenance and operations of buildings and infrastructure. Queenslanders are demanding early adopters, expecting the most advanced, cost-effective, environmentally sustainable and climate-resilient products. Restoration and renovation work is limited to historical buildings; it’s far cheaper to demolish and recycle materials into new, better performing buildings.

Queensland’s proximity to Asia, political stability, strong innovation culture and high-trust environment is attracting foreign investment and world-class scientists and inventors. As a cultural melting pot, the state is also renowned for embracing and benefiting from cultural diversity through an egalitarian approach in the workplace.

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Building a scenario analysis around two key variables to produce two positive and two negative outcomes is a well-known technique. They explain these as two spectrums of uncertainty and impact on construction jobs and skills. “One of these spectrums is the extent to which task automation advances over the coming decades. The other spectrum relates to the extent of the industry’s willingness to embrace new technology – its willingness to adopt a culture of innovation. Once these two spectrums are crossed, they define the scenario space and lead to the development of plausible scenarios in each quadrant.

Initiated by Construction Skills Queensland, a training organization, the project bought CSIRO scientists together with 80 industry representatives to develop the industry profile and technology trends used in the scenarios. Each scenario has a specific political, economic and environmental context. The industry input grounds them in current issues and perspectives but, on the other hand, has limited the extent of possibilities considered to those within the imagination of the participants. If there is a weak point in the analysis it is the focus on trade skills, which of course reflects the project’s sponsors’ concerns. The form and functioning of the materials suppliers, manufacturers and professional services industries is not discussed, except in the broadest of ways, despite the importance of the supply chain in the construction technological system.

Nevertheless, this is an interesting set of scenarios. Scenario analysis is part of the larger field of strategic management, so for firms and organizations thinking about the future of building and construction these would provide good starting material for a planning workshop.

Disruptive Change in Construction

Why the Nineteenth Century is Relevant

The building and construction industry we see today is the outcome of a long development path. The modern industry has its roots in the beginning of industrialization in the early nineteenth century, a period of rapid, disruptive technological development not unlike the present one. Between 1800 and 1900 the building and construction industry was transformed as an industry, driven by the introduction of new technology, in the form of the new materials of iron, glass and concrete. At the same time the industry was restructured by the rise of large, international contractors and, over a series of major projects, by steam powered machinery and equipment. Today technological change in the form of new materials, expanding abilities and new organizational concepts is once again pushing against the custom and practice of an old, mature industry.

While the specific trends and issues the industry faces today are obviously different, this is the only comparison we have to the disruptive technological changes that are affecting the contemporary building and construction industry. The similarities are significant. It was the beginning of urbanization, and one of the great challenges to the building industry in the nineteenth century was housing for the rapidly growing population of cities. Infrastructure needed to be built on a scale never before attempted, and emerging industries were demanding new types of buildings.

Preindustrial building was similar at the beginning of the nineteenth century to that of the Romans, and many of the hand tools in use then have also been found in excavations of ancient cities in Mesopotamia and Asia. During the preindustrial age, building was seen as a practice rather than a process. Their projects were built manually by large numbers of workers, with a few skilled craftsmen supervised by a small elite. Two hundred years later construction sites at the beginning of the twentieth century were still labour-intensive, with many workers and supervisors on-site, but there was also an impressive range of machinery, plant and equipment in common use. This transition began with the building of the first canals in England, and eventually led to the modern industrialized building industry, and with it the professions of surveyors, engineers and architects who managed these projects.

The canals built in Britain from the early 1700s are the first recognizably modern construction projects, and drew on the expertise of military engineers with experience in embankments and fortifications. Canals, and their associated cuttings, tunnels, bridges, locks, lifts, gates, aqueducts and viaducts, led to technological developments in both materials and organization. In 1781 the first cast iron bridge was opened over the Severn near Coalbrookdale, called Iron Bridge, afterwards iron became widely used as a structural material by engineers like Thomas Telford in Britain (Ellesmere Canal 1805) and Albert Gallatin in America (Erie Canal 1825). The methods used by the engineers who tested these materials, and designed and built the projects, began to be carried over to building projects in the nineteenth century.

In 1800 building and construction used three basic methods, known since the Romans. Work was done by craftsmen using hand tools working under a master builder who was also usually the architect. In American Building James Marston Fitch says two related factors determined the character of building and construction at that time:

1. Aesthetic standards were determined by what was possible, the technological level of building. Neither the building materials of stone, brick and wood, nor the structural theories of post and lintel, load-bearing wall and arch-and-dome, differed in any important respect from those used by the Greeks and Romans.
2. Building types required by the economy were relatively few and simple, and could be readily fabricated with these traditional materials along traditional lines.

 When change came to building and construction, it came rapidly. Fitch goes on to describe how, after the Civil War ended in 1860, “the building process began to be industrialized, independent artisans became skilled wage workers, and specialization set in” He says:

 New tools, new materials, and new processes appeared with staggering rapidity to serve as new media for the builders. The metallurgical industries, enormously accelerated by the exigencies of war … Portland cement manufacture … wide development in ceramics and clay products - necessary for fireproofing the new steel skeletons. Production of glass was industrialized, and the huge plate-glass windows of the Victorians were possible.

While the idea of technological disruption is well-known and we are familiar with sunrise and sunset industries, the idea of a technological trajectory, or direction, is also important. Over time industries and products evolve and develop as their underlying knowledge base and technological capabilities increase. The starting point for a cycle of development is typically a new invention, something that is significant enough to lead to fundamental changes in demand (type and number of buildings), design (opportunities materials offer), or delivery (project management). This sort of invention gives a ‘technological shock’ to an existing system of production, and leads to a transition period where the firms involved have to adjust to a new business environment, which in turn usually leads to a restructuring and consolidation of the industry. This is what happened in the second half of the nineteenth century.

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. Both ‘building art and the art of building’ were transformed, not once but several times, over these years as the methods of industrialized building with iron and reinforced concrete were refined. 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 as well as steel skeleton structures.

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 Ulrich Pfammatter, by1905 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.

So, here we see the relationship between technological change, conceptual thinking and organizational form. 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. In both cases, 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 organizational 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.

So, it’s interesting question whether there is anything to be learnt from these previous periods of disruptive change in building technology, materials and processes. As the Industrial Revolution gathered momentum canals were followed by new roads and buildings, leading eventually to the railway boom of the mid-1800s that spread industrialized construction around the world. At the same time, the new materials of iron, glass and concrete were being introduced and steam powered machinery was being used to manufacture tools and components. In America, where there was a shortage of labour, steam powered excavators and earth movers were appearing on construction sites by mid-century. By then, steam powered hoists were widely used in both the US and UK. Over the last few decades of the nineteenth century the construction industry was transformed.

But 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 organization of projects and the mechanization 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.

Fitch, J. M. 1966. American Building: The Historical Forces That Shaped It. New York: Shocken Books.

Pfammatter, U. 2008. Building the Future: Building Technology and Cultural History from the Industrial Revolution until Today. Munich: Prestel Verlag.

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.