INNOVATION IN CONSTRUCTION: A PROJECT LIFECYCLE

APPROACH
Beliz Ozorhon
University of Salford, Salford, UK
b.ozorhon@salford.ac.uk

Carl Abbott
University of Salford, Salford, UK
c.abbott@salford.ac.uk

Ghassan Aouad
University of Salford, Salford, UK
g.aouad@salford.ac.uk

Innovation is a multidimensional, dynamic, global, and an open activity that increases

competitiveness, generates economic benefits, and improves the quality of living standards
through the creation and adoption of new ideas and technologies. The construction industry is
widely perceived as being among the less innovative sectors, in part due to its project-based
and fragmented nature. However, there is an increasing recognition that to understand and
quantify the extent of innovative activity within a sector, metrics appropriate to the particular
sector must be developed. The patterns of innovation in construction are different in many
ways from those of others, and effective management of innovation is still essential to create
value for construction customers and their clients. Therefore, more research is required to
analyze the different types of innovative activities as well as the role of project stakeholders
in stimulating and implementing construction innovation. The major objective of this study is
to set out a methodology to investigate in detail the particular ways in which innovation
occurs in a project setting and the dynamics between project and firm level innovation. In this
respect, the innovation value chain can be investigated in terms of the parties involved in a
construction project. The proposed lifecycle approach will help observe and measure the
underlying drivers, enablers and the contextual variables related to the whole process and
understand the role of different actors and improve their capability in facilitating innovation.

KEYWORDS: innovation measurement, construction industry, project lifecycle, project

stakeholders.

INTRODUCTION
Innovation has become a central issue for all industries and countries due to its contribution
to national economic growth, competitiveness, and higher living standards. It is a complex
phenomenon with a wide range of inputs and outputs creating diverse impacts on
performance at the company, sector and national level. There is not a single and complete
definition of innovation; it can be technological as well as non-technological including
organisational and marketing aspects. In broad terms, it may be defined as creation and
adoption of new knowledge to improve the value of products, processes, and services.

Innovation can be a key source of competitive advantage for construction companies as well,
offering the means through which a firm can achieve a client’s objectives in a specific project
or its own objectives over a range of projects (Slaughter, 2000). The construction industry

903
provides an example of a sector within which traditional measures do not reflect the true
extent of the innovative activity that is taking place (NESTA, 2006; Barrett et al., 2007).
Construction is often categorised as being among the less innovative sectors. However, as the
Hidden Innovation report (NESTA, 2007) has shown, this perception is perhaps undeserved.
Much of the innovation remains hidden, as it is co-developed at the project level. Being a
project-based and fragmented industry, the patterns of innovation in construction are different
in many ways from those of others. There has been a considerable amount of research that
focuses on investigating the characteristics, significance, and management of innovation in
construction. More research is required to analyze different types of innovative activities that
are carried out throughout the lifecycle of a construction project.

Management of innovation is complicated by the discontinuous nature of project-based

production in which, often, there are broken learning and feedback loops. As Gann and Salter
(2000) stated project-based firms need to manage both project and business processes since
the resources of the firm are embedded at both the project and the firm level; it is the
integration of these two sets of resources that enables the firm to be competitive. In addition,
business processes are ongoing and repetitive, whereas project processes have a tendency to
be temporary and unique (Gann, 1998; Brusoni et al., 1998), therefore firms should integrate
the experiences of projects into their continuous business processes in order to ensure the
coherence of the organisation. The same principle is also valid for the success of innovation
both at the project and firm-level.

The major objective of this study is to obtain an insight as to how innovation occurs
throughout the lifecycle of a construction project including the conceptual phase, planning
and design, procurement, construction, and operation and maintenance. In addition, the role
of project stakeholders including the clients, designers, contractors, suppliers, and external
bodies in stimulating and implementing innovation should be investigated. In this respect,
this study proposes a methodology to investigate the ways in which innovation occurs in a
project setting and the dynamics between project and firm level innovation thereby enabling
the analysis of the innovation value chain in terms of the parties involved in the process. The
proposed methods include the production of case studies, interviews, workshops and a
seminar. The proposed research will increase awareness on the hidden innovation at the
project-level and in doing so aid project stakeholders to better understand and improve their
innovation processes and activities, thereby increasing firm level competitiveness and value
creation at the project level.

INNOVATION IN CONSTRUCTION
There are differing definitions of innovation, but there is an increasing trend to consider a
wider view of innovation that reflects the many ways in which innovation occurs in practice.
A suitably wide definition is that innovation is “the adoption of an idea or behaviour,
whether a system, policy, program, device, process, product or service, that is new to the
adopting organisation” (Damanpour, 1992). It is a complex and multidimensional process
having a number of outcomes including the renewal and enlargement of products and
services, and their associated market; new methods of production, supply and distribution;
and new organisational and work forms and practices (Barrett and Sexton, 1998).

Phillips (1997) distinguishes between technological innovation and non-technological

(including organisational and marketing) innovation. Technological innovations comprise
implemented technologically new products and processes and significant technological

904
improvements in products and processes. Organisational innovation in the firm includes
significant changes in organisational structures; the implementation of advanced management
techniques; and the implementation of new or substantially changed corporate strategic
orientations. Marketing innovation, on the other hand, is the implementation of a new
marketing method involving significant changes in product, price, and promotion strategy
(OECD and Eurostat, 2005).

Slaughter (1998) presented five models of construction innovation categorised as

incremental, modular, architectural, system and radical, which can provide a basis upon
which companies can select and implement the innovations. These models range from
incremental innovation, which is a small change, based upon current knowledge and
experience, to radical innovation is a breakthrough in science or technology that often
changes the character and nature of an industry.

Many studies on how innovation could be implemented in construction projects have been
undertaken (Tatum, 1987; Slaughter, 1998, 2000; Winch, 2003). There have been a number
of case studies of how successful firms have been able to make a range of different
organisational, managerial or technological innovations to overcome the limits of their
environment (Slaughter, 1993; 1998; Veshosky, 1998; Koskela and Vrijhoef, 2001; Sexton
and Barrett, 2003). These studies usually focused on how innovation is managed within one
firm and there is a lack of focus on specific project stages as well as a lack of specific focus
on different construction sectors. Only a small minority of the research articles have
considered innovation at a specific stage of the project lifecycle or from the point of view of
the project lifecycle in general (Dickinson et al., 2005). Moreover, none of these studies
discussed the accurate measurement and proper indicators for construction innovation.

As Blayse and Manley (2004) stated, building and construction is partly manufacturing
(materials, components, equipment) and partly services (engineering, design, surveying,
consulting, management) industry. The characteristics of innovation in the service industries
are different from those in manufacturing industries (OECD and Eurostat, 2005). Therefore,
as Barrett et al. (2001) have suggested, specific research into innovation in construction must
be undertaken and all generic innovation research be “envisioned, embedded and evaluated in
a construction context to form a robust body of construction innovation knowledge in its own
right”. Since construction is also a project-based industry, while measuring construction
innovation, project-level indicators as well as the firm and sector level ones should be
considered.

ANALYSIS OF CONSTRUCTION INNOVATION

As a significant economic variable, the measurement of innovation has attracted a lot of
attention. However, due to the complexities inherent in the whole process, measuring
innovation is not an easy task. Historically, organisations and public bodies have tended to
measure innovation in terms of inputs (e.g. R&D expenditure) and outputs (e.g. patent or
trademark applications) (Archibugi and Pianta, 1996). Much construction innovation is
project-based and unrelated to formal R&D expenditure and many innovations, particularly
organisational or process innovations are neither patented nor trademarked (Slaughter, 1993).
Construction is a very diverse sector and there is not one single way in which innovation
occurs. According to Lansley (1996) the occurrence of innovation within the construction
industry is often characterised by the widespread adoption of new practices as a result of
advances in technological and business processes. Therefore, traditional indicators poorly

905
reflect the true level of innovative activity in construction. This gulf between practice and
measurement is the real innovation gap (NESTA, 2006).

Based on the review of construction innovation literature by Dickinson et al. (2005), studies
on construction innovation so far lack a specific focus on the level of analysis, stage of
lifecycle, and sector. According to Barrett et al. (2007) innovation can be observed at three
different levels namely the sector, business and project level. Among these, sector-level is the
most visible type of innovation and project level is the most hidden. The firm level has
received most attention in the analysed literature; this might be because the principal drivers
for innovation are often created at the firm level (Seaden and Manseau, 2001).

Innovation value chain at the project level

The innovation value chain view that is developed by Hansen and Birkinshaw (2007)
presents innovation as a sequential, three-phase process that involves idea generation, idea
development, and the diffusion of developed concepts that includes six critical tasks namely,
internal sourcing, cross-unit sourcing, external sourcing, selection, development, and
companywide spread of the idea. Table 1 shows the links of value chain and key questions
and key performance indicators to measure each link.

Table 1: The innovation value chain at firm-level (Hansen and Birkinshaw, 2007)
IDEA GENERATION CONVERSION DIFFUSION
Cross-
In-house External Selection Development Spread
pollination
Collaboration Dissemination
Creation Collaboration with parties Screening and Movement from across the
within a unit across units initial funding idea to first result
outside the firm organisation

Key Do people in Do we create Do we source Are we good Are we good at Are we good at
questions our unit good ideas by enough good at screening turning ideas into diffusing
create good working across ideas from and funding viable products, developed ideas
ideas on their the company? outside the new ideas? businesses, and across the
own? firm? best practices? company?
Key Number of Number of Number of Percentage of Percentage of Percentage of
performance high-quality high-quality high-quality all ideas funded ideas that penetration in
indicators ideas ideas generated ideas generated generated that lead to revenues; desired markets,
generated across units. from outside end up being number of months customer groups;
within a unit. the firm. selected and to first sale. number of
funded. months to full
diffusion.

The first phase is to generate ideas that can happen inside a unit, across units in a company,
or outside the firm; the second phase is to convert or select ideas for funding and developing
them into products or practices; and the third is to diffuse those products and practices. The
innovation value chain offers a tailored and systematic approach to assessing firm-level
innovation performance (Hansen and Birkinshaw, 2007).

Although the innovation value chain stages are sequential the actual process is a “recursive
process through which firms source the knowledge they need to undertake innovation,
transform this knowledge into new products and processes and then exploit their innovations
to generate added value” (Roper et al., 2006). Adopting a similar view, this study proposes
the investigation of innovation value chain of different actors in the construction process at
the project-level.

906
Roles of different actors within the innovation process

The construction sector is viewed as a system involving clients, contractors, sub-contractors

suppliers, consultants, and designers. Technological (product and process) innovation is
driven mainly the suppliers (manufacturers), whereas contractors tend to introduce service
and organisational innovations (Carassus, 2004).

In this view, clients can act as a catalyst to foster innovation by exerting pressure on the
supply chain partners to improve overall performance and by helping them to devise
strategies to cope with unforeseen changes (Gann and Salter, 2000), by demanding high
standards of work (Barlow, 2000), and by identifying specific novel requirements for a
project (Seaden and Manseau, 2001). Knowledge and financial provision, effective
leadership, and dissemination of innovations are among the key roles which clients could
play (Egbu, 2008).

Contractors on the other hand play a mediator role in the interface between the institutions
that develop many of the new products and processes (materials and components suppliers,
specialist consultants and trade contractors) and those which adopt these innovations (clients,
regulators and professional institutions) (Winch, 1998). They introduce different types of
innovations depending on their specialty areas. It is therefore suggested that companies
operating in building, infrastructure, housing, industrial construction should be investigated
as well as the subsectors of construction including architecture, urban planning, surveying,
consultancy, asset/facilities management, and project management that could be better way of
understanding and measuring innovation in different phases including the production,
construction, and marketing.

Manufacturing firms are also key sources for construction innovation; they invest far more in
R&D than contractors or consultants, and are subsequently more likely to develop product
and process innovations (Gann, 1997) and thus they are recognized as key drivers of
technical innovation in the construction industry.

Relationships and knowledge-flows are important for innovation at all levels of economic
activity, including internationally, nationally, inter-sectorally, sectorally, inter-firm, intra-
firm, inter-project and intra-project (Manley, 2008). In a complex systems industry such as
construction, firms must rely on the capabilities of other firms to produce innovations and
this is achieved by the cooperation between those concerned with the development of
products, processes and designs (Blayse and Manley, 2004). More research is needed as the
relationships between designers, contractors and suppliers need better explanation (Gann,
2000).

Project lifecycle approach for analysing construction innovation

Analysis of innovation at the project level is often ignored in the literature mostly due to the
difficulties in monitoring different activities carried out by different parties in each stage of
the project. Management of innovation is complicated by the discontinuous nature of project-
based production in which, often, there are broken learning and feedback loops. Project-based
firms need to manage technological innovation and uncertainty across organisational
boundaries, within networks of interdependent suppliers, customers and regulatory bodies
(Gann and Salter, 2000). However, project-based firms are always innovating; their work is
always unique, always delivered to bespoke designs, always achieving something new
(Keegan and Turner, 2002). Study by Gann and Salter (2000) points out the need for a better

907
conceptual understanding and new management practices to link project and business
processes. Although some strategies are proposed in these studies, they do not address how to
track innovative activities during the lifecycle of a construction project.

It is increasingly accepted that construction innovation encompasses a wide range of

participants within a ‘product system’ (e.g. Marceau et al., 1999). This broad view
incorporates the participants including governments, building materials suppliers, designers,
general contractors, specialist contractors, the labour workforce, owners, professional
associations, private capital providers, end users of public infrastructure, vendors and
distributors, testing services companies, educational institutions, certification bodies, and
others (Blayse and Manley, 2004).

Figure 1 shows the innovation value chain in a construction project. The link between firm
level processes and innovation at the project level should be explored to observe how
different firms contribute to innovation process by developing/implementing strategies,
assigning resources to create ideas and diffuse them.

Figure 1: Innovation Value Chain in a Construction Project

Gann (2001) suggests that project-based construction firms often struggle to learn between
projects, and often have weak internal business processes. Measurement of the dimensions
and elements of construction innovation at the project level is key to improving the
innovation performance of companies. Therefore, specific metrics should be developed to
assess the inputs, implementation (processes/activities), contextual factors (related to the
external environment), and outputs of innovation and different indicators should apply to
different actors of construction industry for an accurate analysis. Possible indicators to
measure the inputs include the necessary resources such as human, capital, IT, etc.;
contextual factors relate to organisation, industry and country-level issues that enable/hinder
innovation such as organisational culture, competitiveness, and economic conditions,
respectively; implementation phase comprises of the tools, techniques, and strategies such as
business process reengineering and building information modelling; and outputs include
metrics such as improvement in the product/service and efficiency of the operations.

908
DISCUSSION AND FURTHER WORK
In construction, much of the innovation remains hidden, as it is co-developed at the project
level. A deeper understanding and analysis of the different types of innovative activities that
are carried out throughout the lifecycle of a construction project is therefore essential to
enable its effective management and so create value for construction companies and clients.
Besides construction firms, suppliers, designers, and service organisations play a large part in
innovation. To carry out such a wider study of innovation, a comprehensive approach of the
construction industry is necessary, specifying the different kinds of firms involved in the
construction and the built environment processes.

Within the context of this study, it is suggested that innovation should be analysed throughout
the project lifecycle and roles of different participants should be explored. Project-based
analysis can be expanded to sector and national-levels as well. Analysis of distinct project
stages and development of proper indicators will allow effectively measuring the different
types of innovative activities. Innovation process in each stage will be identified considering
the inputs, outputs and outcomes of those activities as well as the function of the parties
involved in the project.

The innovation process and the roles of different actors throughout the lifecycle of a
construction project can be analysed by adopting a set of research strategies. Through the use
of a framework approach, the details of how, why and when innovation is developed and
measured by individual stakeholders throughout the project lifecycle could be investigated
by:

• The production of case studies documenting innovation within construction projects;

• Semi-structured interviews with key individuals within the above case studies;

• Individual reports on these cases and cross-case analysis;

• Project level workshops bringing together entire supply chains to consider how
innovation occurred and was measured at the project and at the discipline level; and

• A final seminar event that brings together the wider industry and academics with
project participants to summarise and publicise findings and good practice.

The study will investigate recently completed projects that have been commended for their
innovation. Detailed case studies of the innovation process and the measurement of its results
will be produced for each project. Participating firms will be given insights as to their
processes for innovation at the firm level and the effectiveness with which this is translated to
the project level. The project workshops will bring together project participants in a
facilitated manner to consolidate lessons and formulate future good practice. An overall
project report will be produced highlighting the contributions of the project participants.

CONCLUSIONS
Innovation is a dynamic, interactive, open, global, and a multidimensional activity that
increases competitiveness, generates economic benefits, and improves the quality of living
standards through the successful exploitation of new ideas and technologies. Due to its

909
contribution to several performance indicators at firm and national level, management and
accurate measurement of innovative activities in all industries are becoming more important.
Since all sectors have their own unique characteristics, therefore those characteristics should
be taken into account in innovation studies in order to stimulate, foster and control innovation
effectively.

The patterns of innovation in the construction industry are different in many ways from those
of others. The construction industry is largely project based and fragmented, so the majority
of innovation occurs at a project level and it is difficult to capture this hidden innovation by
using conventional measures. Understanding how innovation occurs at this project level is
key to improvement yet most existing research is at the firm level.

This paper has set out a case study approach that employs a case study methodology using an
innovation value chain approach to enable an improved understanding of how innovation
actually occurs at the project level and how this relates to innovation at the firm level. In each
case, the relevant supply-chain members will be fully involved so that the collaborative ways
in which the successful innovations have been generated can be tracked and the consequent
benefits of innovation at the project and company level investigated. Project partners are
expected to participate in the interviews, followed by a workshop and a final seminar.

The proposed lifecycle approach will help observe and measure the underlying drivers,
enablers and the contextual variables related to the whole process and understand the role of
different actors and improve their capability in facilitating innovation. The proposed research
will shed light on hidden innovation and in doing so aid project stakeholders to better
understand and improve their innovation processes and activities, thereby increasing firm
level competitiveness and value creation at the project level. Findings of the case studies and
following activities can lead to a more detailed analysis of different disciplines within the
construction industry and provide guidance to analyse innovations in other project-based
industries as well.

REFERENCES
Archibugi, D. and Pianta, M. (1996) Measuring technological change through patents and
innovation surveys. Technovation, 16(9), 451-468.

Barlow, J. (2000) Innovation and learning in complex offshore construction projects.

Research Policy, 29(7-8), 973-989.

Barrett, P. and Sexton, M.G. (1998) Integrating to innovate: Report for the Construction
Industry Council. London: DETR/CIC.

Barrett, P., Sexton, M.G., Miozzo, M., Wharton, A. and Leho, E. (2001) BaseReport:
Innovation in small construction firms. Salford: University of Salford.

Barrett, P., Abbott, C., Ruddock, L. and Sexton, M. (2007) Hidden innovation in construction
and property sectors. RICS Research Paper Series, 7(20), London: RICS.

Blayse, A.M. and Manley, K. (2004) Key influences on construction innovation.

Construction Innovation, 4, 143-154.

910
Brusoni, S., Precipe, A., Salter, A. (1998) Mapping and measuring innovation in project-
based firms. CoPS Working Paper, Brighton: CENTRIMrSPRU.

Carassus, J. (2004) Construction sector system, innovation and services. CIB Congress
Proceedings, Toronto Canada, available at http://jc-desh.cstb.fr/file/rub49_doc46_1.pdf

Damanpour, F. (1992) Organisational size and innovation. Organisation Studies, 13(3), 375-
402.

Dickinson, M., Cooper, R., McDermott, P. and Eaton, D. (2005) An analysis of construction
innovation literature. 5th International Postgraduate Research Conference, April 14-15,
University of Salford, Salford, UK.

Egbu, C. (2008) Clients’ roles and contributions to innovations in the construction industry:
when giants learn to dance, in Clients driving innovation, Brandon, P. and Lu, S.L (eds), UK:
Blackwell Publishing.

Gann, D.M. (1997) Should governments fund construction research? Building Research and
Information, 25(5), 257-267.

Gann, D.M. (1998) New manufacturing for the 21st century. AEGIS Conference Generating
New Wealth for Australia, Sydney, 30 March, Keynote address.

Gann, D.M. (2000). Building innovation: Complex constructs in a changing world. London:
Thomas Telford Publications.

Gann, D.M. (2001) Putting academic ideas into practice: technological progress and the
absorptive capacity of construction organisations. Construction Management and Economics,
19(3), 321-330.

Gann, D.M. and Salter, A. (2000) Innovation in project-based, service-enhanced firms: the
construction of complex products and systems. Research Policy, 29(7–8), 955-972.

Hansen, M.T. and Birkinshaw, J. (2007) The innovation value chain. Harvard Business
Review, 85(6), 121-130.

Keegan, A. and Turner, J.R. (2002) The management of innovation in project based firms.
Long Range Planning, 35, 367-388.

Koskela, L. and Vrijhoef, R. (2001) Is the current theory of construction a hindrance to

innovation? Building Research and Information, 29(3), 197-207.

Lansley, P. (1996) Innovation: the role of research, education and practice, in Harlow, P.
(Ed.), Construction Papers, No. 59, Ascot, UK: CIOB.

Manley, K. (2008) Implementation of innovation by manufacturers subcontracting to

construction projects. Engineering, Construction and Architectural Management, 15(3), 230-
245.

Marceau, J., Houghton, J., Toner, P., Manley, K, Gerasimou, E. and Cook, N. (1999)
Mapping the building and construction product system in Australia. Sydney: Commonwealth
Department of Industry, Science and Resources.

911
NESTA (National Endowment for Science, Technology and the Arts) (2006) The innovation
gap – Why policy needs to reflect the reality of innovation in the UK, London: NESTA.

NESTA (National Endowment for Science, Technology and the Arts) (2007) Hidden
Innovation, London: NESTA.

OECD (Organisation for Economic Co-operation and Development) and Eurostat (2005)
Oslo Manual. 3rd edition, Paris/Luxembourg:OECD/Eurostat.

Phillips, R. (1997) Innovation and firm performance in Australian manufacturing. Industry

Commission, Staff Research Paper, Canberra.

Roper, S., Du, J., Love, J.H. (2006) Knowledge sourcing and innovation. Aston Business
School Research Paper 0605, Birmingham.

Seaden, G. and Manseau, A. (2001) Public policy and construction innovation. Building
Research and Information, 29(3), 182-196.

Sexton, M.G. and Barrett, P.S. (2003) A literature synthesis of innovation in small
construction firms: insights, ambiguities and questions. Construction Management and
Economics, 21, 613-622.

Slaughter, S.E. (1993) Builders as sources of construction innovation, Journal of

Construction Engineering and Management, 119(3), 532-549.

Slaughter, S.E. (1998) Models of construction innovation, Journal of Construction

Engineering and Management, 124(3), 226-231.

Slaughter, S.E. (2000) Implementation of construction innovations. Building Research and

Information, 28(1), 2-17.

Tatum, C.B. (1987) Process of innovation in construction firm. Journal of Construction

Engineering and Management, 113(4), 648-663.

Veshosky, D. (1998) Managing innovation information in engineering and construction

firms. Journal of Management in Engineering, 14(1), 58-66.

Winch, G. (1998) Zephyrs of creative destruction: understanding the management of

innovation in construction. Building Research and Information, 26(5), 268-279.

Winch, G. (2003) How innovative is construction? Comparing aggregate data on construction

innovation and other sectors - a case of apples and pears. Construction Management and
Economics, 21(6), 651-654.

912