Industry Characteristics Influencing Adoption of Innovation

Hassell et al. (2003) note that many of the challenges to increasing innovation within the housing industry are industry-wide, which often makes it difficult for individual home owners or home builders, and even significant portions of the industry, to be innovative.

The characteristics of the housing industry were discussed in Chapter 3. A number of these characteristics have been attributed to reducing innovation within this industry.

Koebel & Cavell (2006) consider the dominant factors impacting on innovation in the volume housing sector to be the:

 Degree of fragmentation – vertically and horizontally within firms as well as geographically, professionally and from a regulatory sense, is widely blamed for negatively impacting on innovation (Hassell et al., 2003). This is not only because of the challenges it poses for knowledge sharing, but because the intellectual property associated with any innovation is difficult to capture, protect and profit from, given that sub-contractors typically work for a range of builders (Hassell et al., 2003;

 Concentration of the industry – as outlined in Chapter 3, the industry is typified by a large number of very small organisations, and a small number of very large

organisations. As mentioned earlier in this chapter, it has been suggested by a

number of scholars that smaller firms have less resources/capacity to experiment with innovation;

 Nature of the supply chain – despite the importance of the supply chain (outlined in Chapter 3) to the construction process, there is limited data about its impact on adoption of innovation, and much of the information that exists is anecdotal (Koebel &

Cavell, 2006). However, the influence it has on builders’ practices is significant, and can strongly positively or negatively impact on innovation, discussed further below;

and

 Industry/trade associations – the degree to which these associations support or impede innovations will have flow-on effects for individual organisations operating within the industry.

The residential construction supply chain, which includes developers, manufacturers, suppliers, consultants, sub-contractors and real estate agents, significantly influences uptake of innovation by builders. Despite this, Koebel & Cavell (2006) note that there is little data available on the topic of the influence of the supply chain and innovation, and much of the evidence is anecdotal.

Volume builders surveyed about innovation by Koebel & Cavell (2006) rated suppliers as most important for cooperation, followed by subcontractors and manufacturers.

Cooperation by internal architects or engineers, regional managers and project/construction managers was rated much less highly.

Generally speaking, the supply chain is a trusted source of information on innovation for volume builders (Koebel et al., 2003 cited in Koebel and Cavell, 2006) and “…innovators relied on established companies that stand behind their products” (Koebel & Cavell, 2006, pp 6-7). However, barriers may include concern about dealing with unfamiliar suppliers for whom there may be lower confidence about timely deliveries and reliability of contractors.

Manufacturers and suppliers, while not opposed to innovation, will not necessarily create or promote innovative products unless there appears to be customer demand. Slaughter (1993a, 1993b, cited in Koebel & Cavell, 2006, p.7) noted that although field testing to reduce uncertainties about new building products is critical, manufacturers tended to rely on builders who were “willing to absorb first-mover risks”. She also noted that

manufacturers tended to ignore opportunities to commercialise homebuilder-originated innovations, and although there are limited examples of partnership between

manufacturers and builders, this is starting to happen with larger building companies (Koebel & Cavell, 2006).

Koebel & Cavell (2006), noted that volume builders generally felt that subcontractors, that is trade contractors providing a narrow set of services to a construction project, were resistant to using new products. Support for this position came from Hassell et al. (2003) who note that this is particularly likely to be true if the innovation could reduce demand for their services. The skills and experiences of skilled labourers may help innovation if they can apply it to new ways of doing things, but in other cases they can simply accept traditional approaches without question.

To add to the inertia associated with change, Hassell et al. 2003 note that consultants such as architects and engineers are typically quite risk-averse, in part because of their professional obligation to understand innovations thoroughly, and be able to justify them to regulators, before specifying them in relation to building projects. They may also have limited resources to obtain information about innovations, especially if the costs are unlikely to be able to be absorbed by one client or able to be spread across a range of them. Further, consultants are less likely to have contact with housing customers given the relatively simpler nature of construction of housing as opposed to commercial or industrial construction.

Others in the construction supply chain include real estate agents, who match buyers, sellers and homes but who are unlikely to promote innovation unless they understand the innovation, its costs and benefits, and perceived value. These observations further

highlight that seriously tackling sustainability in housing will be difficult to achieve without engaging this diverse group of stakeholders in aligned activities and goals (Hassell et al., 2003).

In addition to supply chain issues, other industry characteristics claimed to adversely influencing rates of innovation include the project-based nature of the industry, with temporary organisations or ‘coalitions’ of firms formed for relatively short periods of time and then disbanding (Hassell et al., 2003; Manley, 2008); the highly competitive nature of the industry (Hassell et al., 2003); the adversarial culture (Barlow, 1999; Barlow, 2000) and the dominance of the industry by small and medium-size companies (Blackley &

Shephard, 2006).

It could also be speculated that the high stress levels experienced in the industry,

described in Chapter 3, could also reduce the likelihood of innovation, as when people are already struggling to control their workload they are unlikely to experiment with changes to processes or products which could cause problems or delays. Surprisingly, this potential correlation is not commonly addressed in the literature and would be worthy of future research.