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Is Truly Disruptive Innovation Imminent?

The following article originally appeared in the February newsletter to clients of FMI Corporation.  Reprinted with permission.

A few years ago, a small group of general and specialty contractors and I attended the World of Business Ideas (WOBI) Innovation Forum in New York City. The theme was “Disruptive Innovation.” One of the most emphatic statements, repeated by most speakers, was disruptive innovation is radically different than incremental innovation. Incremental innovation is part of the “continuing improvement” mindset, taking the existing processes and methods in the current value chain and finding new and better ways to do them. By contrast, disruptive innovation was defined as “creativity purposely applied to explode (disrupt) the current value chain and rearrange it for the benefit of the disruptor.”

Clearly, technology is disrupting many traditional industries. Amazon, Airbnb and Uber are examples. But where does the construction industry stand? Observation suggests three clear camps: Enthusiastic Embracers, seeing it as a source of competitive advantage; Accepting Adapters, realizing it is clearly “the price of poker” for better jobs; and Reluctant Resistors, fighting it, decrying it.

Those who are accepting adapters appear to have all administrative paperwork digitized, plus they have BIM, lots of applications that allow digital input from phones or iPad, drones, and various devices that sense hidden conditions. Most use virtual and augmented reality. Many have BIM-enhanced project management systems, like Assemble, that integrate all contractor models and produce a record file for the facilities manager. The enthusiastic embracers have even more. They use wearables with safety and health sensors, X-O suits for lifting; they have all plans on their phones (Project Atlas) accessible in one interface and able to be manipulated to the finest detail. Both categories also have countless ways for the field and office to communicate visually; crawling drones with 360-degree cameras are increasing in use for this.

While exciting, none of this is truly disruptive. At the same time, prefabrication is growing each year. Most traditional specialty contractors have enlarged their off-site facilities to expand their capacity; many owners, such as hospitals, are specifying multicraft prefabrication, renting warehouses to enable it. Prefabrication allows processes that must happen sequentially at the job site to happen in parallel, positively impacting schedule time and productivity costs.

Other technology trends are gaining momentum. 3-D printing, several years old now, is being used for larger structures. This truly disruptive method was recently used to build a house in Japan, a bridge in the Netherlands, and a building in Europe. The Chinese, with their growing urban population, are leading the exploration of faster construction methods.

Finally, Construction Dive, a respected construction publication that covers technology, reported that Katerra and FullStack Modular recently formed technology companies designed to prefabricate all parts of the building, having attracted major venture and private equity money.

This whole area is moving extremely fast. I am delighted to see FMI start a technology practice headed by tech-savvy, distinguished Air Force veteran Jay Snyder, well-qualified to guide the CEO and senior leaders through the confusing array of options. While no technology has truly been a “disruptive innovator” yet, many are working to become that. We should know soon.