Foreword: In November 2018, one of Australia’s leading offsite manufacturers in the residential market, Strongbuild, went into voluntary administration. In response, DFC Australia Managing Director Alexia Lidas shares her thoughts on the status of innovation in the market.
Researching and sharing, listening and learning from colleagues over coffee: that’s how I spend a lot of my time as managing director of the Design Futures Council (DFC) Australia. My role is to understand the market position and perception, and to forecast future trends and issues for the benefit of our members in the A/E/C. At times, I’m both excited and distressed by what I’m learning.
As one of the largest sectors in the global economy, our industry could be leading the world in innovation but instead, we just continue with the status quo. Not only have we become one of the slowest to innovate, our sector is also one of the most expensive and least productive when it comes to delivery.
Strangely, in an industry with a currency of risk management, we seem to have forgotten what true risk is: the willingness to step outside of the traditional supply chain and try something new.
Business as usual is not risky. Business as usual is the root cause of our sector’s inflated delivery costs, glacial pace, and general lack of innovation.
Last November, I was discussing with DFC Members Fleetwood Australia my impression of the national state of play in offsite manufacturing (OSM) within the construction industry. I said to them, “This is actually an issue of national importance to the economy. There is no question if offsite manufacturing will grow. It is a matter of when and whether our local market will be able to provide a leading-edge response.”
Then, just two hours later, I received news that Strongbuild had gone into voluntary administration. Voluntary administration is similar to bankruptcy in the United States. An insolvent company is handed over, in this case voluntarily, by its directors to an outside administrator to study all the options and make a recommendation to the creditors about the company’s future.
Regardless of the outcome for Strongbuild, the fact that they had to enter into administration at all just proves my point: our industry must step out of the status quo and into innovation. OSM is an excellent place to start but not everyone sees the need or potential in pursuing it.
While our nation has a major housing supply and affordability problem which OSM could effectively address, millions have been poured into propping up the dying automotive industry instead. Of the $47.5 million Advanced Manufacturing Growth Fund, $10 million was awarded to the Automotive Innovation Labs program. This award makes no sense, given the costs of labour in Australia and of shipping materials. Even more frustrating is the fact that the skills of most automotive workers are transferable to OSM. It doesn’t take long to connect the dots, does it?
While our nation has great homegrown firms in OSM, they require a very large volume of sales to provide the financial backing needed to become internationally competitive and to take their technology to the next level: robotics.
Yet, a significant amount of the total Advanced Manufacturing Growth Fund was given to smaller firms in the form of grants of $100,000 – $400,000. For larger firms, the maximum grant available was $1 million—just a drop in the ocean when we are talking about advanced manufacturing.
Worse, not one of the awarded grants went to advanced manufacturing in construction/OSM. While I believe in opportunities for all and the importance of small firm involvement, I worry whether this funding will have any real impact.
The inadequate funding support seems to indicate a lack of understanding about …
- the real cost of R&D and the backing needed to truly innovate in advanced manufacturing;
- the current status of the (construction) OSM market in Australia;
- the importance of leveraging partnerships with current players in the market to address a real issue—our national housing supply and affordability crisis.
In addition to inadequate funding for OSM innovation, we have to deal with the fact that our industry works in silos. The benefits of OSM are typically lost in silos, however, where dividends are fully realized within vertically integrated business models that embrace it from end to end (design to manufacture to onsite construction).
The world is rapidly changing and so is OSM. Australia is going to fall behind if our industry does not come on board. To develop our OSM capability and see the technology mature, we need to create projects—in fact, whole communities— that these firms can service. We need to give them the volume of work and funding needed to take OSM innovation to the next level.
In addition, to innovate in this rapidly-changing world, our attitudes around competition have to change. There is more incentive than ever to share the risks and learn collaboratively across our industry. We need multiple players within OSM, all of them supporting and learning from one another. They also need to educate the marketplace: if clients don’t understand something, they won’t buy it.
Economics drives manufacturing like most everything else. If a product can be made at a lower cost with higher quality using safe, sustainable methods, it’s only a matter of time before it will be. Doesn’t our nation want to be part of that?
The A/E/C industry has a long way to go to catch up. Let’s speed up the process and work together to better serve our clients, our nation, and our world.
Alexia Lidas is managing director of Design Futures Council Australia. The Design Futures Council (DFC) is a global DesignIntelligence gathering of development, architecture, design, engineering, construction, product, and technology leaders who explore global trends, challenges, and opportunities to advance innovation and shape the future of architecture, engineering, construction (A/E/C) and design.