With the rapidly developing technological landscape comes the opportunity to create exponentially cleaner, greener and better buildings. However, the architecture, engineering, and construction (AEC) is struggling to embrace these changes, regardless of the opportunities.
A new report from UNSW has questioned what, from a business perspective, is holding the AEC industry back in its readiness to embrace digital technology and the lessons to be learned from other industries that may help push it forward.
Lead author, Christian Criado-Perez told The Fifth Estate it was not clear exactly what technological changes were on the horizon, but broad consensus suggested the industry was headed for a shake up.
“Nobody really knows how fast this is going to happen. Nobody really knows what technology in particular is going to be incredibly disruptive. But there are fairly good signals that a massive change is on the way,” Dr Criado-Perez said.
“And we find that most big corporations are just sitting and watching.”
“Some exceptional firms are doing great work innovating with digital but most struggle with the paradox of delivering efficiently and developing new digital approaches while meeting financial targets.”
The study involved an industry survey, asking a series of questions including to what degree firms were flexible enough to adapt to the changing environment. The sector received an average score of 59 out of 100.
One respondent suggested, “we don’t really challenge the methodologies or the ways that we do things using technology. And we don’t actually leverage technology as a way to uncover new opportunities.”
The report identified six key points representing major challenges for the AEC industry to increase the role of digital technology:
- The AEC industry is characterised by various field-level barriers for strategic innovation
- The fragmented AEC industry is ill prepared for strategic collective action in the face of novel challenges
- Strategic thinking regarding business models and how digital transformation may radically shift business models is generally nascent in AEC firms
- Investments in a digital transformation are most frequently reactive and fragmented rather than strategically driven
- AEC firms are failing to adopt an orchestrated and common approach to digital technology impeding effective collaboration
- Crucial knowledge and skills required to harness the benefits of a digital transformation are lacking in the sector
A necessary focus on safety and error prevention has left the industry characterised by “conservatism and risk aversion” and “a general scepticism of innovation and change”, the report said.
A senior industry respondent explained, “we are very much entrenched in an industry which spans hundreds of years in construction and building, and in some cases not a lot of that has changed, and I don’t expect it to necessarily change overnight.”
Industrywide routines and expectations can hinder professionals’ ability to propose innovative solutions, when others in the field are busy adhering to existing building codes and norms.
Money is also an issue for the industry which involves large capital investments, comparatively small margins, significant potential for overspend and “limited financial slack”.
According to the report, in Australia average profit margins in the architecture industry are 13 per cent, with annual revenues declining at -5.2 per cent, and in the construction industry just 7.1 per cent, with annual revenues declining at -0.66 per cent.
The competitive, “low-price bidder-wins” environment forces efficiency to be a high priority over flexibility and innovation, the report said.
“There’s a lot of competition. We have been hurting each other by a race to the bottom on fees,” one respondent said.
A fractured industry
The fractured nature of the industry could also be stifling collective action in the face of new challenges, with the separate AEC fields actually occupying very different spaces in terms of tasks, constraints, expertise, as well as client engagement and expectations.
“There’s very little coordination within the industry and implementing many of these technologies requires a coordinated effort,” Dr Criado-Perez explained.
“For example, if you’re using a digital tool that’s going to facilitate the design and development of a building, if it’s just the engineering or the architecture firm that is implementing it doesn’t really work.
“It has to be throughout the whole process and everybody involved in the project to be involved with that technology to be able to really benefit from it.”
Another issue is the non-future focused approach, with analysis suggesting the majority of AEC firms focus their attention on delivering projects and are very reactive regarding digital technology.
In 2018 Dr Criado-Perez found most of the industry does not respond to evidence and where more influenced by what the project down the road was doing.
Things haven’t changed.
“Our interviews and assessments indicate that most AEC firms have limited resources in business foresight and long-term strategic planning,” the report authors said.
“On the surface, this is surprising because AEC firms are designing and constructing facilities that have long lives. However, the focus is on current execution and delivery of projects, not the long-term business health.”
The lack of future planning leaves scarce understanding as to where innovation and change need to happen.
A study respondent said: “We don’t necessarily have a focus for where we invest in terms of research or innovation. There’s no larger ethos to which to attach that, and because of that it makes it very, very hard to put forward proposals for research or technological innovation because you can’t talk to whether this is satisfying some kind of goal for the company as a whole.”
Some of the factors that have been effective at creating change are client demand, clear economic benefit demonstrated or when legacy approaches become too outdated.
For instance, a number of governments have made the use of Building Information Modelling (BIM) mandatory and many industry associations in Australia and around the globe are pushing for similar requirements.
However, reacting to stakeholder demands is limited, particularly when it does not go beyond what is required, and a lack of a clear direction for the future contributes to confusion over what expectations really are.
“There’s a lack of standards established. There’s a perception that, well, who knows when it’s going to happen. Are there going to be more standards coming in for more digital technologies like BIM? It’s a question mark,” one respondent said.
Dealing with the AEC’s predicament means creating structural change, particularly at the management level, and developing strategy road maps to help make deliberate, informed decisions.
Because the AEC is far from alone in facing digital transformation, the study’s authors looked to other industries such as retail and media by way of developing several strategies for success.
The strategies they developed fall under four banners: future thinking, strategic thinking, capability thinking, and experimental thinking.
Future thinking involves envisaging different future scenarios and thinking more broadly about the technological possibilities. It also involves discovering how to play a part in shaping that future, for instance through building an influential network or engaging with industry regulators.
“Organisations that engage in the creation of credible future scenarios and align stakeholders behind these scenarios gain power and control over their environment,” the authors said.
Following on from that is strategic thinking taking into account the transformational environment and planning for several possible pathways at once, based on the available evidence.
“So you’re not only thinking of your current business model and maximising profit and efficiency – you’re keeping an eye on how the sector is morphing and thinking about what your business model might be in the future to adapt to that new environment,” Dr Criado-Perez said.
Capability thinking means accepting not only do you need strategies to prepare for change, but the skills to deal with them, including upskilling staff in digital savviness in general. This extends to the digital competence of management teams.
Finally, experimental thinking, which Dr Criado-Perez described as “incredibly rare” in the AEC industry but has proven highly successful for other sectors.
“There’s small pockets of it,” he said. “But there’s not a general culture of doing this. So when you’re deciding what design to go with a building, it’s what worked in the past, rather than what’s new.”
“What not saying that this is a doomsday scenario and everything is going to go downhill. We’re saying there is going to be change and when that happens some companies thrive and others die. And that just standing still is not necessarily the best strategy.”