Wednesday, 30 April 2014

Accounting for Tastes

Why do we see buildings and in particular houses differently to products of other industrial sectors, such as cars or electronics and white goods?  Does society dictate the mechanics of an industry or do the limits of the industry dictate the accepted choices within society?  Yes, the life cycle of a building is longer than a TV,  but the house is the most widely adapted and altered building type.  Existing houses are altered to meet the changing needs and aspirations of society, so why is building such a messy, expensive, fragmented and often difficult process?  In addition, why do traditional references have such value?

In his book Accounting for Tastes, Gary Becker describes that everyone has a personal capital of values which people surround themselves with.  Changes to these values come as a consequence to or from changes in personal capital.  For example, the reduction of smoking in society, and increase in fitness clubs over the last 30 years have been a result of government efforts to encourage us to live more healthily.  These changes are recognised to have added value to to our personal capital, and our values have changed accordingly.  According to Becker we define our values looking for certainty and assurance of the present, and stability of the future.  He refers to Adam Smith, describing humans as creatures of habit.  Industry recognises this and acknowledges that change in a product or service can be a risk to consumer acceptance and market share, unless the change is a clear consumer requirement or it adds value to their personal capital.  Becker aligns habits to addiction.

Looking at the basic needs of people, there are shelter, food and drink, and recreation.  With food and drink, there has been considerable change since the Second World War.  Grocers were overtaken by the supermarket, then the hypermarket as society became more mobile, and then online shopping as society embraced computer technology.  All these steps were seen to add value to peoples' personal capital, and as Phil McKinney describes, each step offered a more exciting (if not better) experience which people want to explore, and peer pressure encourages.  On the other hand, the products of the grocery store / supermarket / online shop are the same and change incrementally.   They represent the stability within the sector and wholesale changes here might back-fire on sales.  By comparison, it could be argued that the building industry has not had such a dramatic evolution in either product or process / consumer experience.

Many market sectors work hard to fight our cultural urge to look for stability of the future.  Cars, electrical goods etc., become superseded with more advanced products, depreciate and eventually need replacing.  Stability of the future is sidelined by the desire for the best and the latest, and the assurance of an even more exciting future in 18 months or 5 years, depending on the product.  Again, this is about the experience.  How can the building industry capitalise on that?  Building can not really be described as a cutting edge technological process even though houses need flexibility in plan, layout and size to meet changing living patterns, and there are continued environmental performance, energy saving and ecological advances being made.  Resulting from our fragmented industry we largely have traditional procurement processes, materials and construction methods.     If the values surrounding our personal capital are driven by choice and availability on the one hand and habits, social interactions, culture and peer pressure on the other, does that mean that lack of choice from the market has driven us to consider housing in terms of size, location and aesthetics?  Have the choices presented by the building industry compounded the public desire to choose house aesthetics which are traditional or 'in keeping' - the best of an affordable choice - but when considering a car, the latest Land Rover is a popular choice?  Each item makes a statement and says a lot about personal capital, only one looks backwards and the other looks forward.  The building industry appears to have spent a long time reinforcing social norms, rather than challenging them to create a cycle of progress.  Can the building industry find ways to innovate and add value within the market place, based on the ideas given by Becker of experience, technology and explicit cycles of improvement, focused on an assured and positive future?  Its not an easy task.  Apart from tackling the fragmented professional structure of the building industry, Becker says that our public values are stamped in us and can prove difficult to change.  They act as control mechanisms on our living patterns and social behaviour.  Not easy to change but not impossible:  Becker draws on Adam Smith by saying economic processes affect preferences.  Our nature changes as we change the world.

Friday, 25 April 2014

Killer Innovations

I've recently become a fan of Phil McKinney.  For those interested in innovation (and everyone should be), Phil is a key person to know.  His public work focuses on innovation management strategies, and how to bring the best out of any company, with Killer Innovations.  As well as his web site, he also has a blog (included in our blog roll), a pod cast which he has run for almost ten years, and a book.  All of these channels are really worth exploring!  Phil also studied Architecture at college, so his thinking and approach will not be lost to the tired, fragmented mechanics of the building industry.  A starting point for me was Phil's 7 Immutable Laws of Innovation.

Phil McKinney's 7 Immutable Laws of Innovation, assembled in to a suggested work flow cycle

In this post I'd like to take a look at these laws and how they work, and discuss them in relation to previous posts here about innovation within architecture and the building sector.  The intention is to see if Phil's laws raise any areas of opportunity where innovation can be improved in our industrial sector.

1 Leadership
The MD or CEO of any business has to set the culture of the organisation to be focused on innovation, and allow a mechanism to develop where by innovation can become a core activity of the company.

2 Culture
Phil says 'Culture eats strategy for lunch!'  The culture within the business needs to be right for a strategy of innovation to develop.  Employees need to buy in to the common focus and goals of the company, engage with and take ownership of the strategy and collectively nurture ideas.

The organisational framework by which this can happen is critical.  Phil discusses several strategies in his blogs and pod-casts, and expands on how they work in his book.  These first two laws have parallels with our earlier blog post on the importance of people to innovation.  Without the right people in the right roles, working in a common direction, innovation will not happen.  What Phil offers is that all important road-map to plan your route to success.

Another point to make here is 'what is meant by innovation?'  It is a buzz-word used over and over in the Architectural press without clear definition.  Phil McKinney is very clear on what innovation is, and what a company needs to do to make incremental or breakthrough changes.  Key to this process are the Killer Questions the company needs to ask of itself.

Phil notes that departments and disciplines across any company (or collection of companies) needs to be aligned with clear lines of communication and transparent working methods, to enable innovation strategies to remain focused, effective and efficient.  This is perhaps where the Building industry struggles the most as there is not one clear instigator of innovation.  Producers, suppliers, design consultants, client organisations and governmental bodies are all focused on different priorities.  Arguably, the fragmented nature of the industry means companies innovate within their own parameters, with larger, breakthrough innovations proving difficult.  The result is that the Building Industry sits in the traditionalist innovation camp, as noted earlier.

3 Resources
Phil notes the resources vital to developing innovations are time, people and costs, with teams working with autonomy to prescribed goals and delivery gate-posts.

In architecture, by contrast work is driven by projects and innovation normally has to fit in to budget restrictions, Client requirements, risk assessments and statutory legislation.  By comparison to other industrial sectors, the incentive for innovation in building design is not as high as it could be.  The situation with producers, suppliers and some large contracting companies is different, but could it benefit from greater alignment with design professionals or with a number of strategically selected companies across the industry?

4 Patience
Phil says R&D is a risk, a bet, but it needs to be given time and the patience to allow it to happen.

Within the design side of the Building Industry, project programmes and the Client's brief with tight deadlines often dictate.  As a result, innovation normally gives way to tried and tested methods which prevent new thinking.

5 Process
Phil describes innovation as a continual process.  What you are looking for is not 'in the last place you look'.  The goal requires a process of continued searching and investigation.  This process needs to capture the full innovation sequence from idea to execution and he has many strategies to establish and manage this.  Phil adds that without innovation, a business (or industrial sector) stagnates.  This a danger for the building industry.  There is a lot of talk in the press about innovation in building design and construction but I think we are missing many key opportunities to do better.  Why can't innovation within the building industry be as dynamic as other, faster moving, industrial sectors?  It has a lot to do with its large fragmented professional structure, poor communication links, lack of alignment and, as Phil points out here, the lack of an effective (killer) innovation strategy at the heart of each company's management system.  This law reinforces points 1 and 2 above, where innovation needs to be an integral part of the culture of a company: The process provides the road-map to achieve this.

Most design practices have a QA system.  Gearing it up to take advantage of a comprehensive innovation strategy could prove very effective.  If the critical mass of practices adopted this approach, it could start to shake up the sector.

6 The BHAG
The Big Hairy Audacious Goal! Phil encourages that we should go for the long shot!  Do stuff never been done before!  With the impossible task to complete we need to find new ways of hitting the targets.  Its an inspiring and encouraging message and often the BHAG causes the innovation process (law 5) and the culture of innovation (laws 1 and 2) to be set in place.  Clear targets and goals need to align with a clear innovation strategy.

This is what architecture and the building industry needs more of.  Sometimes the architectural practice can set the BHAG by taking a competition brief and turning it on its head.  Sometimes the Client sets the BHAG with a set of goals that sends a spark through the industry.  Examples include the London Millennium Bridge and the Halley VI Antarctic Research Station.

Phil's message is like a shot of confidence: Establish the culture, set the strategy and take a leap of faith.

7 Execution
This is the translation of idea to impact.  Execution is the delivery of something of value in to the market place.  From what we currently produce compared to his laws (above), Phil asks us to rank ourselves as innovators.  He doesn't sound like the kind of guy to be too impressed with stylistic or aesthetic developments or cost reductions.   He's looking for more radical, far reaching developments, perhaps of the type listed in our 6 P's of innovation.

Take a look at Phil's work.  Establish a framework to make it as easy as possible to set these 7 laws in place, to travel from ground breaking idea to the execution of killer innovations!