Construction From First Principles

If there ever was an industry in need of first principles thinking, it is the construction industry. When thinking about the immense non-productivity and the potential benefits that await the people seeking to disrupt the ancient industry, one doesn’t wait long before being forced to ascribe this lack of innovation to a form of miracle.

The Importance of the Construction Industry

The construction industry is the single largest industry in the world. It accounts for roughly 13% of the globe’s GDP.

The Productivity Issue

The construction industry’s productivity issue can be broken down into a few major causes, all of which have room for innovation:

  1. Fragmentation
  2. Lack of technology
  3. Bad incentives
  4. Closed markets/non-harmonized standards

1. Fragmentation

Problem:

The construction supply chain consists of many different actors. Between the construction company and the future occupants of a planned building we will find the developer, consultants, architects, structural engineers, sub-contractors, suppliers, manufacturers, sanitary engineers, surveyors, and many other agents. All of these people contribute in some way or the other to the completion of a building, and are therefore in some form also dependent on each other. So how do they work together?

Today; very ineffectively. An analogy will help; construction projects today usually resemble…

Solution:

I. Vertical Integration

Today’s fragmented environment has been able to stay this way for so long, because there haven’t been any strong actors taking on vertical responsibility for housing projects. Each actor stay in their known field and therefore lack the incentive to achieve a more resourceful life-cycle of the project. 

In her doctoral assertion, Theresa Lombardy writes about the effect of so called “modular innovation” on the construction industry. Modular innovation means having a system that innovates in small areas of the supply chain, where 

To achieve meaningful and radical innovation, what is needed is an actor who achieves “vertical innovation”. With vertical innovation, you’re not only innovating in small areas of the system, but you’re also innovating the system itself.

II. Increased Digitalization

The fragmented way of communicating between the different disciplines of the supply chain was once a necessity.

This is not the case anymore. Through technology, we are able to use tools that gather all the different actors into a single Common Data Environment(CDE). This CDE usually consist of a common virtual model of the planned building, where the information increases time progresses. In this way of working, all the disciplines do their work and put it straight into the shared model, and thus all the information needed about the building can be gathered straight from this single source.