John D. Macomber

Follow the Money: What Really Drives Technology Innovation in Construction

Technology enthusiasts, academics, and software companies remain concerned about the slow pace of innovation in the construction industry. Tools are widely available that seem to provide eminently sensible and glaringly apparent improvement to the process of design and construction of buildings and facilities. Why aren’t they used? Because the monetary implications are not well considered. This paper explores the real business motivations of the construction and design firms who take on risk and reap reward in technology adoption. If they are motivated by enlightened economic self interest, it’s clear why innovation is slow. Interested observers who wish to direct their work to the relevant issues can benefit from considering why and how the economic value of innovations actually flows through the system. Several financial models are proposed for representing those impacts. Innovation will come from other sources following disruptive business models. Four major methodologies promise true innovation – supply chain optimization, knowledge management, 3D design, and wrap-up economic models. These are likely to be adopted by new innovators and not by established firms. Why bother? Who keeps the money? Innovation champions strive to identify process cost savings which should result from adoption of technologies. It’s also important to identify economic motivation: in particular, who benefits from the savings? A construction management firm competing to win negotiated contracts may gravitate to high tech, state of the art tools that complement its self image and the interests of its early adopter employees. However, this construction management firm is also likely to be retained on some form of cost plus a fee contract. Ergo, any savings that it generates are not retained in the firm, but rather are passed on to the Owner. If this is the case, the returns are small; so the investments must be small as well. (This circumstance is represented in Figure 1 as an alternative contractual relationship on an open book payment method).