‘The crisis is over, but the construction industry is failing to innovate’

It is time for the construction industry to start innovating again. All the ingredients are there on paper, but building firms are still clinging on to the strategy of strict cost-saving that helped them through the crisis. This is the conclusion of Killian McCarthy and Thijs Broekhuizen from the University of Groningen. They spent a year studying the construction industry, and held a survey among four thousand members of Bouwend Nederland.

The financial crisis caused a fierce price war in the construction industry. The strategic consequences of this ‘race-to-the-bottom’ were twofold: increased concentration in the sector as a result of bankruptcy, mergers and take-overs, and an altered investment agenda, whereby cost-saving and outsourcing were preferred to investment in new knowledge and technology. Both developments are damaging to the building sector, and to industry and the Dutch economy as a whole, claim McCarthy and Broekhuizen.

Recommendation: experiment

‘Make innovation a priority’, is McCarthy’s advice to the sector. ‘At the moment, construction firms only seem to be searching for ways to cut costs. Although this is essential during a recession, it will not help a company to grow. The construction industry needs to invest in new knowledge, new technology and new products and services. The current economic recovery is giving building companies room to experiment.’

All the conditions have been met

Strangely enough, the researchers conclude that on paper, all the conditions for successful innovation have been met. McCarthy: ‘All the ingredients are there: building companies have the necessary money and experience. In addition, the construction industry has a culture and tradition of cooperation. We would expect to see more innovation in this sector than we witnessed in our research.’

Five strategies

In their report ‘Strategies for Increasing Profitability’: Insights from the Construction Industry, the researchers weigh up the pros and cons of five strategies for increasing profitability within the sector. The research was funded by NWO and carried out in close collaboration with the sector association Bouwend Nederland, Manen & Zwart Architects BV, the sector association for architects (BNA) and the Economic Affairs Department of the Municipality of Groningen.

More information

• Contact: Killian McCarthy and Thijs Broekhuizen
• Blog: Strategies for Increasing Profitability: Insights from the Construction Industry (no longer available)
• The full research paper: Changing Foundations: A Study of the Challenges and Strategic Opportunities Facing the Dutch Construction Industry (no longer available)

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