The Changing Shape of Building Innovation

Attempts to innovate in construction are not new. Over the past century, there have been many different efforts and approaches, all around the world. But construction is well-known as an industry that is difficult (even resistant) to change. Building 4.0 CRC proposes to bring together two main elements to solve this problem. The first is a continuation and deepening of the processes of industrialisation in the building industry — effectively the transformation of building away from a construction logic towards a manufacturing logic. The second seeks to leverage the new technologies and processes that have been presented by the Fourth Industrial Age, to aid and even accelerate this transformation process.

In this context, it is useful to go back over some of the recent history in building innovation to better understand the nature of the moment in which we find ourselves. Innovation in building is gathering speed; if we are not careful, our future attempts at innovation will be just as susceptible to the pitfalls experienced many times over in the past — lessons learned are easily steam-rolled by the enthusiasm for the new.

The path outlined here documents the changing shape of building innovation, from prefab to industrialised building to platforms and back. It also mirrors the work that I and my colleagues have been undertaking over the last 10 years to better understand these problems, and which have led to the particular calibration of the Building 4.0 approach.

Prefab to Industrialised Building

Thinking back to 10 or 20 years ago, the progressive players in the construction industry were generally in agreement that prefab, and its various synonyms, were the future. Before we get hung up on whether to call it prefab, modular, offsite, MMC or industrialised building (as I prefer),1 it’s worth remembering that it’s not the name that matters: the sense was that if a company was pursuing a prefab or modular initiative, they were doing so in the worthy pursuit of innovation. At the time, some people in the industry displayed more than a little snobbishness towards ventures that didn’t reach full mechanisation or automation: “It’s just normal construction in a shed!”, they would say. This sentiment seemed to disparage any attempt to improve systems because it did not go all the way to the perceived El Dorado that was “offsite building”.

I found this a strange set of circumstances. As I and my colleagues researched and wrote about it, I began to see industrialisation as a spectrum, not some kind of absolute, or worse still, a dichotomy between those enlightened spirits on the true and righteous path and … the rest of us. I tried to get inside the culture and philosophy of this part of the industry that had made prefabrication-at-all-costs a cause rather than simply one of the many options open to companies wishing to build better buildings. This psychology revealed that its ardent supporters thought prefabrication had some kind of intrinsic or moral value, rather than just a means to improve efficiency, safety and quality.

In working with companies, our team practiced an approach that advocated starting at the end and working backwards to find the right means to solve the problem. Writing about this now, it seems almost so simple as to be trivial, but I cannot convey how many companies and ventures we studied around the world that embarked on the complete opposite approach. Such ventures would start with a firm idea of the solution that they wished to pursue and try to sell that into the market. Sometimes this would be driven by a predisposition to a particular material (timber, steel or concrete), a particular level of finish or assembly (flat packed, volumetric, delivered on a truck), and sometimes a particular design motif or a product with which the company was enamoured. I termed this the “solutions in search of problems” approach. It is the very opposite of everything a first-year business student would study about product-market fit and it is endemic in attempts at building innovation.

Having identified this penchant for strong ideology and zealousness in the pursuit of fixed ideas, our book, Prefab Housing the Future of Building, published in 2018, tried to outline the many reasons for these phenomena. Why do so many companies continue to pursue such expensive and risky approaches? Is it driven by desperation to change something, anything? An absence of innovation culture? Or lack of awareness of the techniques and strategies for bringing new products to market?

Long before the book was published, and related to this problem, I had made a key identification on a field trip to a leading modular builder in Brooklyn in 2014. In asking my guide why the company did this or that, or, was one way of doing things better than another, he always answered: “It depends.” It led me to the realisation that, unlike other industries, when building companies were conceiving new industrialised building ventures there was no such thing as “best practice” to fall back on. I admit, this was a fairly shocking realisation at the time and a point that requires some more qualification.

For example, consider the hypothetical case of an industrial conglomerate who wished to launch a new car company 10 years ago.2 Engineers, designers, production specialists and supply chain whizzes would be dispatched to the automotive manufacturing hubs across the world. Multiple cars would be sliced up in anonymous sheds and disgruntled talent would be hired from leading companies. Within six months it is almost certain that a report could be produced documenting every minute detail of best practice.

This would be impossible for a company attempting to innovate in construction. The sheer number of variables and conditions, and the low base of building innovation, data and communication would preclude it.

Learning from this observation, our team embraced and further developed this “it depends” approach. We tried to work with our partners to put this into play. You have a concrete company? Then it makes sense to build your strategy around the use of concrete. You want to sell luxury houses in remote locations? Let’s research the design expectations of people who can afford them. You want to make a building system to replace inefficient and poor quality site-built practices? Let’s narrow down the asset class, building class, height and target market, and then let’s run some prototyping tests with builders most likely to implement your system to get feedback on implementation snags.

Rise of the Platform Approach

More recently, and taking two of my longstanding industry collaborators as examples, some interesting things began to happen. When I first started working with these companies, both were effectively embarking on industrialised building initiatives. They had factories, products, processes, and were focussed on developing and improving the systems behind their people and facilities with a strong emphasis on digital processes. Five years later, both companies have jettisoned the large expensive manufacturing facilities from their core business plans. They have become digital businesses; they are transitioning to become software and technology companies.

A key part of this transformation has been the adoption of a platform business model.3 Instead of doing everything themselves, these businesses are in the position of linking up the value chain in new and more productive ways. We are only at the beginning of this approach in building and there is a long way to go in successfully implementing it around the world. Importantly, this new model holds great promise in countries like Australia and the US for a number of reasons — to explain, I have to go back in time again…

Five years ago, my colleagues and I would routinely advocate vertical integration as something that industrialised building companies should definitely consider when they reached a certain scale. While this may still be useful in certain cases, I don’t necessarily believe this anymore. We were taking our cues from the lessons we’d learned in Sweden, Germany and Japan. By vertical integration, I mean that companies would effectively buy up parts of the supply chain, thereby disintermediating, reducing margins, improving reliability and boosting quality control. While this appears to have worked to great effect in those countries we studied, in Australia (and I would add certain parts of the US) there isn’t such a strong tradition and knowledge of manufacturing.4 As anyone who has tried would know, there is an immense amount of experience required in setting up and operating factories; some would say it is a science (or artform) in its own right. On top of this, countries like Sweden, Germany and Japan are all highly regulated, wealthy countries, with extreme climates who place a premium on quality and building performance. In Australia, we found that many (not all) prefab companies were trying to compete in the low-cost bracket, a market segment where almost any volume of capital expenditure to make factories and purchase equipment is prohibitive. Add to this the fragmented structure of the Australian industry and strong cyclic nature of the property market (building generally happens when it is most profitable to do so) and you have much less a healthy, constant pipeline of projects … you have a recipe for financial failure.

This is where platforms come in…

Companies who initially embarked on the platform business model approach5 began their efforts thinking it a more efficient and effective way to manage their suite of products and process. At some point, the realisation was made that such a system was perfectly capable of delivering completely conventional projects, with conventional building methods. That is: it could be systems and materials agnostic. True, it would not be as smooth or efficient, but it is much less risky (less capital intensive), more palatable to clients (I just want a normal building!) and, importantly, attractive to investors (eminently scaleable with higher valuations). As such, I now think it is likely that many projects that will come out of this first wave of new, platform-driven companies will result in buildings that will look exactly the same as conventional buildings, using roughly the same materials and building techniques.

Some may say that this is a retreat from innovation, perhaps like the “construction in a shed” comment above. But this does not go to the real innovation here: what these companies achieve is an extensive reordering of the industry structure and the value chain. It is from this new structure, or what a colleague termed a “new ecology of building”,6 that we think the future industry will emerge.

Before anyone begins to think that all our efforts towards the industrialisation of building were wasted … not so fast.

It is a great irony, and one that is likely to be quickly forgotten in the ensuing stampede towards the platforms, that although these platform businesses may no longer need prefab or industrialised building businesses in their supply chains to get buildings made, this new structure will create optimal conditions for them to flourish. That is: as digital workflows and building companies utilising platform approaches become the norm, the things that will differentiate market players will be those very familiar qualities (indeed the core mission of industrialisation) of improvements to: cost, quality, sustainability, efficiency, waste reduction, design value, customer satisfaction, predictability, et cetera.

As a result, smart companies will definitely keep their eyes (and fingers) in the products and systems space. In addition, over the coming years I expect we will see such companies are much more likely to partner up, expanding their reach across the value chain, but without the expense or potential downsides of true vertical integration.


When I try to imagine what the future of building looks like, I am sure that it will involve a more industrialised approach to building — that is why it is a core component of Building 4.0 CRC’s approach. That it will remain a core element into the foreseeable future strikes me as inevitable, because with ever more systems and data and new organisational techniques, there will be strong tendencies toward optimisation, efficiency and resource conservation. If we are lucky, this “system of systems” will also gather steam because it is the right thing to do, to save the planet and to make buildings more accessible for more people and to inspire dignity and delight in our society. On a more prosaic note, but equally important in the story of building innovation, it may also help to save money and increase profit margins.

In contrast to the orthodoxy that the building industry must industrialise if it is to advance, today, in planning our route toward the future, it no longer seems to me that prefab or industrialisation are the first or even second stations through which the industry must pass to get to its destination. I think it would be good if they did and I hope they do, because there are great gains to be made. However, given the lack of success enjoyed by this orthodoxy previously, I think if companies choose to bypass this model for now it is still a positive step in the right direction.

1 Personally, I’ve preferred to talk about industrialisation, or industrialised building, because it feels more inclusive to a range of other considerations that I find valuable and instructive. In the UK, “Modern Methods of Construction” or MMC seems to have become the popular descendent.

2 10 years to avoid the current transition to EVs.

3 I would like to make a clear distinction between the idea of the “Platform Business Model” and the “Product Platform”. Where the former is an approach that connects producers and consumers in new and valuable ways, (think: Amazon, Uber, Airbnb, etc), the latter is an approach that is very common in manufacturing to manage the design and production of products.

4 This is clearly a huge generalisation. But take Sweden as an example. For a population of around 10 million, consider these internationally known manufacturing brands: Ikea, ABB, Volvo, Saab, Electrolux, Ericsson, Assa Abloy, Atlas, Husqvarna and Hiab.

5 It is an unwieldy term; my former PhD student, Duncan Maxwell, who is expert in these matters, would prefer I termed it “Platform Ecosystems”.

6 Thanks to Prof. Shane Murray for this observation.