It seems the construction industry has been falling over itself the past couple years trying to inject innovation as a cure all for decades of mediocrity in productivity gains. Since McKinsey published its “Reinventing Construction: A Route to Higher Productivity” report in February 2017 everyone with an MBA has been rushing to provide a solution and take advantage of an apparent need for increased productivity. Housing starts have stagnated due to a lack of labor and pent up demand from the Great Recession is resulting in a modern-day gold rush for the company that figures out productivity gains and delivers more housing units with less labor.
The problem most fail to recognize, is construction doesn’t act, nor react, like other industries to massive injections of investment and unbridled advancements in processes or raw materials. Construction is subject to building codes. The IRC and IBC (International Residential Code and International Building Code) are preventing innovation in construction based on codified uses of materials and processes. How can anyone truly innovate when the product of that innovation is governed by rules developed to ensure the process is conducted in a manner that resembles the way in which one is attempting to innovate away from? Now don’t get me wrong, the building code is a vital necessity for reasons too numerous to mention here. But realize, the building code amounts to what is government regulation, restricting innovation while protecting incumbent processes and materials from robust innovation.
To amplify the problem, there simply isn’t one version of the IRC and one version of the IBC in use. Every state has the option to which version they use and within each state each municipality is free to make amendments as they see fit. While the flexibility each jurisdiction is afforded to make changes that fit its unique set of circumstances is logical; it also creates a huge varying set of hoops for any would-be innovator to jump through if they are looking to operate in multiple jurisdictions. Many of the codes are similar in nature, but beyond this level of complexity in varying codes is the enforcement of said building code variants. Each jurisdiction has multiple code officials who often have varying interpretations of the code and selectively enforce different segments of the code based on their training, current events, and what the “city next door” is enforcing.
A number of large corporations that supply the construction industry understand this regulation quite well. They base their research and development around what is “code accepted” and aggressively attack any competing product that may eat into their market share or drive down their margins. To compound the issue, many of these companies are the ones providing the education to the code officials who both interpret and enforce the codes. Do you see how this circular relationship can quickly become incessant and extremely difficult for an outsider to crack? Again, I don’t disagree with how the construction industry operates with respect to codes, I’m simply attempting to point it out and call it what it is: stagnate.
As a result, the construction industry is going to continue to get what it has always produced. That is slow, consistent, incremental innovation and growth in the form of small enhancements to products that marginally improve individual processes within the construction industry. As a result, all the “smart people” jumping into construction will likely soon become frustrated at the pace of which change occurs, and even more frustrated with the pace at which change is accepted. Perhaps they will realize that innovation in construction doesn’t happen in monumental swings but in incremental advancements and rather than looking to improve the whole industry at once it will identify small, unique processes ripe for disruption and capitalize on opportunities that fall outside the scope of those six little letters.