The Role of Clients in Driving Innovation 1

Thursday, June 16th, 2016
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The previous Federal Government’s Venturous Australia culture review into Australia’s innovation record is now a distant memory, but it made a very important point for the construction sector.

It noted that while there are many similarities between innovation in manufacturing and service-based industries like construction, what crucially distinguishes the latter is the central important role of customers in the innovation process. In other words, buying a building is not like buying a new car or a Mars Bar. You don’t simply walk into a shop and buy the product off the shelf – you have to get involved in the procurement process.

While some might argue that relying on clients to drive innovation is a cop-out by the construction industry, international evidence clearly shows that clients have a major role to play in driving construction industry reform, improvement and innovation. In Singapore, for example, the Building and Construction Authority has played a major role in driving change and developing an industry innovation strategy, while in the UK, the British Government and major UK client groups such as the British Property Federation and Construction Clients Group have done the same.

In Australia, some leading clients – innovators in their own industries – are playing an important leadership role in driving construction innovation. These companies uncompromisingly demanded the same level of creativity and innovation from their construction supply chains as they do from their own internal business units and other suppliers. Organisations like the Green Building Council of Australia which represent the interests of some construction clients are also driving innovation in niche areas like sustainability.

However, it is unfortunate that those clients who are willing to take the lead are few and far between. Broader client leadership in reforming construction, as seen in other countries, has been rare in Australia. While federal, state and some local governments in Australia have recently been driving social innovation through new Indigenous and social procurement policies, research shows that too many construction clients are driven by low capital price rather than long-term ‘value’ over the life cycle of an asset, do not understand their key role in the innovation process and see it as the construction sector’s responsibility to innovate. Beyond that, many construction clients do not understand the relationship between their buildings and their core business performance and see buildings as a tradable short-term asset rather than a long-term strategic investment.

Other common reasons why clients often stand back from driving innovation in the construction include:

  • Perceived increased risk exposure and fear of controversy by getting involved in innovation
  • A lack of tools for measuring innovation in non-conforming bids
  • Extra resources and workloads involved in managing innovation
  • Internal politics and difficulties in achieving consensus between project stakeholders, especially in large complex buildings which involve multiple stakeholders and complex internal politics
  • Inadequate competence to confidently manage the process, create non-prescriptive briefs and judge net longer-term benefits of innovation.

Experience has also shown that attempts by some construction clients to introduce new initiatives under the guise of innovation have been motivated by selfish rather than positive intentions, destroying the trust which is the necessary bedrock of any innovative industry.

For example, it has been widely reported that many major clients in the UK construction industry who championed partnering during the 1980s as a new ‘collaborative’ way to do business later jettisoned this approach when the market collapsed and it suited them to revert back to lowest price competitive tendering practices.

While there are many different types of clients who procure buildings, ranging from large to small and frequent to infrequent, all play an important role in driving change within our industry, particularly those which build frequently, control large building portfolios and whose core business outcomes are closely dependent on their built environment. All clients should be demanding more innovation and leading by example by creating a positive, competitive, trusting and stable environment for innovation to occur throughout the entire procurement process from design through construction to operational management. The benefits of this leadership will then trickle down through the supply chain to bring about wider change in the industry.

Clearly, there is a legitimate argument that clients should not be expected to pay for some types of innovation, such as those aimed at reducing construction costs or improving industry productivity. All firms should aim to continually improve and clients should have every reason to expect the construction industry to design and build efficiently and effectively. However, it would be a major step forward if more clients were willing to take more of a leadership role in driving innovation in the construction sector. If more clients demand change then change will come.

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  1. Tim Pine

    Well said. Whilst it is true that some of the best innovations can come from the industry itself, what is delivered in the end is ultimately determined by what the market is willing to pay for. Thus if clients drive and demand innovation, that is ultimately what will take place. Where clients are not open to new ways of doing things, however, the ability of the sector to implement new ways of working is obviously constrained.