Skip to content

Disruption - more than just a buzzword

Michael Chesterman
Michael Chesterman September 28, 2018

I am of the view that in the next 5–10 years the construction industry as we currently know it will not exist as a result of innovation-driven change and disruption. Unfortunately, I am very concerned that current contractors have not adequately prepared themselves for the threats and opportunities that such developments will present.

I have previously written a ‘tongue in cheek’ article entitled “Global Construction giant AIXI posts after tax profit of $1 trillion for 2038 FY” where I fictitiously reported that because local contractors were ‘asleep at the wheel’ when AIXI entered the Australian market in 2018:

for the third straight year global construction giant AIXI dominated the Australian and Asian residential and non residential markets, recording an after tax profit of $1 trillion and in the process performing 50% of all construction work of this nature in Australia and Asia.”

The above article was an attempt to generate a conversation with current contractors and Governments about future industry disruption. Unfortunately, while industry disruption has been foreseen for several years, it has not resonated with many current contractors as either a threat or opportunity.

Why is this the case?

While most industry associations do an excellent job in representing the interests of their members, I am aware that some have found it a challenge to engage with members who have well established business models on the issue of industry disruption.

‘If it ain’t broken it does not need fixing’ appears to be the thinking of some members of industry associations.

Furthermore, no industry association to my knowledge has publicly lead an industry disruption conversation as most did for example in respect to recent Security of Payment (SOP) developments. I am not saying industry associations overplayed their hands regarding SOP, rather in my view they needed to elevate industry disruption to the same level of concern.

The Government must lead

Given the difficulties industry associations have experienced in driving a conversation about industry disruption from the ground upwards, the Government must lead in this regard along the same lines they have done in recent times concerning SOP, WH&S, and Non-Conforming Building Products issues.

Furthermore, in regard to industry disruption trends and possible change scenarios, the Government has the benefit of an excellent joint report published in 2016 by Construction Skills Queensland (CSQ) and CSIRO entitled “Are you ready for change?” (CSQ report).

This thought-provoking and well-researched CSQ report provides the Government with a comprehensive basis for engaging with contractors on this very significant industry issue.

The CSQ report identified such things as:

  • The current workforce is shrinking and getting older.
  • We are living in tighter conditions, building larger projects of smaller dwellings.
  • Climate change is making the construction site more hazardous and less controllable.
  • Foreign companies are penetrating our market, competing with Australian businesses.
  • Our trades are becoming more narrowly focussed and subcontracting is becoming the norm.
  • Training must become continuous and industry-driven.
  • Workers must own their own development.
  • Our skilling frameworks are sound, but new delivery models will be needed.
  • Everything is becoming digitised and connected.
  • New software will harness oceans of data to eliminate information breakdowns and bottlenecks.
  • Robotics, artificial intelligence and virtual reality are here. These technologies promise to reduce manual labour drastically and eliminate physical hazards.
  • Prefabricated and 3D-printed building components are coming to market quickly, delivering better quality and cheaper buildings faster.

To assist readers to comprehend how much the industry is set to be disrupted in the future, the authors of the CSQ report have speculated on four possible scenarios for the industry in 2036. These scenarios describe in detail how the industry would be disrupted relevant to a particular main theme.  I have summarised below the key aspects of each scenario.


Scenario 1. The digital evolution – the rise of software in construction

‘Robot labour’ technologies have not progressed as quickly as expected. Little has changed in the industry, but wide adoption of digital technology (e.g. BIM) has boosted productivity in the face of fierce competition. Parts of the workforce are utilising exosuits to manage the challenges of an aging workforce and extreme weather.

Scenario 2. Smart collaboration – Australian led innovation

Queensland is embracing advanced manufacturing and new tools, making the construction process safer, more productive and less labour intensive. While the promise of smart robots has not yet been fulfilled, the industry has built world-class innovation capacity, attracting international collaborators and investment.

Scenario 3. Globally challenged – offshoring construction

Queensland’s workforce is under pressure due to advanced manufacturing and robotics internationally. Overseas entrants are introducing new construction technologies and methods, and local companies and operations are competing through outsourcing to sophisticated low cost producers in Asia.

Scenario 4. Rise of the robots – machines displacing core tasks

Automation is mature and Queensland has emerged as a global construction hub shaping the transformation. The state is the go-to place for testing and refining exosuit, intelligent robot and advanced manufacturing and materials, attracting massive foreign investment and exciting high tech jobs.

My views

The CSQ report was published in 2016 and two years on I have seen evidence of developments in respect of all four possible scenarios for the industry in 2036. However, I am of firmly of the view that scenario 3, Globally Challenged is presently the most likely scenario to reflect what the industry will look like in 2036.

I say this because offshoring construction is happening, something that at one time was considered highly unlikely because buildings exist at specific places, and to date, it has always been considered that contractors need to be present to build them. This is not the case any longer.

The CSQ report states:

The recently announced plan by construction heavyweight, LendLease, to prefabricate $1 billion worth of building components is a signal that there is some plausibility to this scenario. The purpose-built factory will use cross-laminated timber, or ‘CLT,’ a modern, highly engineered timber product used widely throughout the world, but virtually unknown in Australia. The move to prefabrication is not itself a harbinger of a Globally Challenged future; prefab need not involve offshoring at all. What is striking about LendLease’s initiative is that it has been forged without a local supply chain. Faced with no home-grown capability, the company opted to offshore key elements of the solution — both the CLT itself and the high-tech skills to work with it.”

In an article entitled “Regulation v Innovation” I outlined in considerable detail disruption developments that support this scenario. I also quoted David Chandler, OAM, Adjunct Professor at Western Sydney University, who stated in an article he authored A salutary reality for Australian Construction — get competitive fast that:

“It really is time for our national leaders to get down to the docks and see just how much value added construction is flowing into the country. Every week major projects are importing thousands of containers of building assemblies ready to be lifted straight into their final position. Donovan and Bonney report that the cost of transporting goods from factories and markets halfway around the world is typically one percent or less of the retail price. And no-one should imagine that these factories are all in Asia. There are many ready to assemble construction components coming from Europe and the USA”

Elsewhere he stated:

“It is likely that as much as 40-percent of the on-site fabrication work will move off-site by 2025”.

One thing is for sure — disruption is not just a buzzword and innovation in the industry is not just a phase which will pass and leave business as usual.

Regardless of whatever change scenario eventually takes place, there is no doubt that the Government must urgently engage with current contractors on this most significant industry issue because major disruptive change is coming.

Not intended as legal advice. Read full disclaimer.
Michael Chesterman
Michael Chesterman September 28, 2018

The insight you need, right in your inbox.

Stay up to date with all the important updates - legal and otherwise - plus get exclusive invites to events designed to educate and empower our industry.