2011 has been another tough year for the Engineering & Construction industry and the challenges ahead for the industry and its clients remain daunting. Project challenges continue to grow, competitive pressures mount and government budgets remain constrained. The Engineering & Construction industry is responding, innovating better solutions, generally incremental in nature. As a new year approaches, it is a good time to reflect on how we can do better by causing breakthrough or systemic innovation to occur. This short Viewpoint piece has just appeared in Engineering News Record and is intended to cause the key players in the E&C industry to think about whether our own industry\'s model is a barrier to systemic innovation. Over the years you have all been most generous in your feedback, thoughts and challenges to the many articles I have written. In many ways this may be the most important. I value your input and encourage you to share your thoughts and suggestions with me. “Reprinted courtesy of Engineering News-Record, copyright The McGraw Hill Companies, Inc., December 19, 2011, All rights reserved.”

1.  Viewpoint Fostering Systemic Innovation By Robert Prieto
where a wide variety of project
E&C Needs a New teams come together, driven by
owner preference to preserve the
Business Model
industrial era’s serial specialization
model or by a sole focus on first
costs.
Rigid trade or corporate struc-
T
he life-cycle costs of the facilities we design and build are under pres- tures, together with limited flexibil-
sure as our clients face more global competition, key resources— ity in redistributing work across the
such as skilled labor, water, energy and materials—grow scarce and project team, also act to limit op-
portunities for systemic innovation
government support dwindles. To address such challenges, engineering
and real productivity improvement.
and construction participants must step outside our day-to-day frame of While we will continue to achieve
reference and question whether process in a coordinated fashion.” meaningful incremental improve-
our current paradigm allows us It differs from so-called incremen- ment, does our model essentially
to develop needed solutions. tal innovation, which can be accom- preclude opportunity for broad and
Is our business model broken? plished within the context of a meaningful systemic improvement?
Engineering and construction single company or project.
(E&C) is one of the world’s largest In fact, we have seen examples Potentials, Not Deliverables
industry sectors. It accounts for 9% of systemic innovation in engineer- Innovation that is systemic and sus-
of U.S. gross domestic product and ing and construction: integrated tainable needs patience. It is about
more than 11% globally. Today’s supply-chain management, prefab- potentials, not deliverables. It will
projects are larger and rication of building systems, build- involve failure, likely multiple fail-
more complex than ever, ing information modeling, public- ures, which are a hallmark of a true
yet, compared to other sec- private partnerships and breakthrough and systemic change.
tors, construction produc- modularization, to name just a few The need for innovation should
tivity has lagged since 1970. that already have delivered huge cause us to reconsider how we con-
Cost overruns, unantici- benefits to firms and their clients. duct our research and rethink how
pated risks and schedule Innovation is critical to the re- products and applications are de-
PRIETO
slippages are still too com- newal of industries, but productiv- veloped. Can the current E&C
mon. Why is this, and what can be ity gains are greatest when that in- model support this transformation
done to change it? novation is systemic. E&C is on par or is it a barrier?
with manufacturing in incremental Engineering and construction is
Systemic Innovation innovation—for example, minor an important industry sector—in
In many ways, the current industry changes in product—but it lags in many ways, it is the foundation of
model was established after World systemic innovation when multiple the global economy. We must reig-
War II. Its structure is industrial in firms must change their processes. nite the creative spirit that defined
nature and based on the “serial spe- Simply put, engineering and the sector’s former master builders.
cialization” that existed in manufac- construction has an innovation Where will that leadership come
turing at that time. deficit. We continue to harvest from? This is a question to an-
But the century we’re now in is largely from past efforts and to sow swer—and soon. 
not the same as the last one. The very few new seeds. Robert Prieto is a senior vice presi-
experiences of other industry sec- Key traits of industries strong in dent of Fluor Corp., Irving, Texas,
tors have shown that significant systemic innovation include rela- responsible for strategy in its indus-
productivity gains are linked to in- tional stability, which is a tendency trial and infrastructure group. He
dustry models that facilitate “sys- to use a small number of firms per focuses on development and delivery
temic” innovation. specialty; networked corporate in- of large, complex global projects and
Construction researchers John terests; boundaries that facilitate can be reached at Bob.Prieto@fluor.
E. Taylor and Raymond Levitt de- redistribution of work; and strong com or at 609-919-6376.
fine systemic innovation as that network-level agents for change.
If you have an idea for a column, please
form of innovation requiring “mul- These are not the hallmarks of contact Viewpoint editor Richard Korman
tiple specialist firms to change their engineering and construction, at richard_korman@mcgraw-hill.com
76  ENR  December 19, 2011 enr.com