CEE New Millennium Colloquium
March 20-21, 2000
Wong Auditorium, Tang Center, MIT Building E51
Creating an Innovative and Entrepreneurial Environment
HARVEY M. BERNSTEIN
President, Civil Engineering Research Foundation
Overview
I would like to begin my talk today by putting the notion of innovation into perspective. Most of you are familiar with Moore's Law that suggests that technical advances in computer technology double approximately every 18 months while prices are halved. If anything, it appears that the pace of Moore's Law is increasing rapidly for the computer and information technology industry. Recently, I heard a senior executive from Proctor and Gamble describe a new household product that is making its way from conception to market in only twelve months. Now ask yourself, how long does it take the design and construction industry to move a new technology or process into the marketplace?
Unfortunately the "innovation timeline" for our industry is far, far longer, something on the order of 10 to 15 years. What can we do to shorten this timeframe? How can we create an environment that is conducive and supportive of innovation? How can we create an environment that attracts the entrepreneurial spirit?
The need to create an environment that is receptive to innovative and entrepreneurial thinking is critical to maintaining and enhancing economic competitiveness and to attracting outstanding students to the civil engineering profession. Currently our ability to move innovation to the marketplace is often viewed as an immovable barrier. In particular, any national innovation strategy must recognize that the quality of the nation's built environment affects all other sectors of the economy. A modern, durable, and flexible physical infrastructure is a necessary precondition for sustained innovation and enhanced competitiveness; a decayed and unresponsive infrastructure will retard development in all other economic sectors. Harvard professor Michael Porter said it best when he said "Innovation is the central issue in economic prosperity."
As we all know, the U.S. design and construction industry is the nation's largest manufacturing activity, contributing 13 percent of the Gross Domestic Product and is the largest economic sector behind health care. In this role, the industry is the nexus for materials flow in the economy and the key to bringing advanced materials and processes into the marketplace. The industry impacts virtually all aspects of the U.S. economy, from the private and public infrastructure such as roads, shipyards, public works, buildings, and housing to environmentally sound development. The transport of goods and services by all industries is directly affected by the quality of the physical infrastructure. We lose billions of dollars in lost wages, wasted fuel, and spoiled food from major traffic delays due to inadequate roads. But the problem is more than just our transportation network. Too many of our nation's schools, for example, are in substandard condition. The 1998 ASCE Report Card on our nation's infrastructure gave schools a failing grade and noted that nearly 60 percent of our schools have at least one major building feature in disrepair, such as leaky roofs and crumbling walls. Nearly half of them lack the most basic of electrical wiring necessary to support computers, modems, and modern communications technology. By working to improve the physical infrastructure, all industries are affected. It is thus no exaggeration to link explicitly the vigor of the design and construction industry with the overall strength of the nation's economy. Simply put, a vigorous and innovative design and construction industry will lead to more jobs and a greater variety of products for all. Moreover, our nation's quality of life directly reflects the quality of our physical infrastructure.
The Design and Construction Industry: Stuck in the Past
Yet despite its unquestioned importance and impact on all other sectors of the economy, the design and construction industry as a whole fails to lead other economic sectors in the development and implementation of innovation. The industry is under considerable competitive pressures without a lot of flexibility in its alternative solutions. It suffers from one of the lowest overall rates of research and development (R&D) investment compared with other industrial sectors. While the mean R&D investment among all mature U.S. industries is approximately 3.5 percent, the level of investment by the design and construction industry is only 0.5 percent.
This very conservative investment strategy is not surprising. Despite its huge size, the U.S. design and construction industry is greatly fragmented, with over 80 percent of all firms consisting of ten employees or less. Profit margins are very low and the industry is often affected by large seasonal cycles, such that most firms consider R&D investment, and innovation in general, a luxury that they cannot afford. The emphasis by many owners on "low bid" provides even less margin for experimentation, and thus serves as a strong disincentive for innovative policies. In practice, innovation may take place in the process of completing a specific contract, but is not seen as an objective in itself. These factors have helped to make the industry "risk-averse," preferring to utilize the proven and known, and eschewing the alternatives that might offer greater productivity, but could also create greater uncertainty and possible economic dislocation.
The industry practitioner does not operate in a vacuum, however. For many of the industry's products, the government, on both the federal and state level, is a critical factor. The government is often the sole or primary owner of the structure to be built or repaired. The government frequently participates in the financing of the project or the development of the contract. Perhaps most importantly, the government often assumes part of the risk and liability associated with the physical assets that it owns (bridges, highways, buildings, etc.). In the interest of public safety and open competitiveness, federal and local governments have developed, over time, a variety of policies. While intended for the best of reasons, many of these strategies have had the effect of reinforcing the industry's conservative inclination outlined above, thus making innovative approaches even less likely.
Innovation is often used interchangeably with "new." However, innovation does not necessarily mean state-of-the-art or cutting-edge technologies per se. Innovation often means the process of employing new combinations of existing, demonstrated, and market-ready technologies, processes, and methods to improve the quality of the built environment. Federal policy towards enhancing design and construction industry innovation should be not to champion newness per se, but to help make it easier to commercialize and implement those practices and products whose widespread use would lead to improvement in the built environment.
Innovation is doing something different-breaking tradition-because there is a greater perceived value. In the context of our nation's physical infrastructure, innovation pertains to methods and processes, as well as materials and technologies. For example, new and more efficient design methods, performance standards, or procurement practices may be as beneficial to bridges or schools of the future as advanced plastics or structural systems.
A way to better understand this environment is to take a close look at the cumbersome "Path to moving innovation into practice." This path is often more simply defined or referred to as the Valley of Death.
Disincentives to Innovation
The high cost of insurance, the multitude of regulations, current procurement practices, and industry fragmentation are the primary disincentives that combine to create this valley of death and discourage innovation. Such disincentives are impeding technological advances in infrastructure renewal in the U.S. As a result, global competitors are quickly gaining a market advantage. Estimates are that the cost of the U.S. tort system as a percentage of GDP is more than triple that in other industrial countries. The trend has had a particularly powerful effect in the design and construction industry. A recent American Consulting Engineers Council (ACEC) survey found that private engineering design firms turned down 69 percent more work in 1996 than in 1995 because of concern over liability exposure ($80 million, nationwide). Another ACEC survey revealed that the threat of litigation caused 76 percent of the survey respondents to avoid innovative methods and materials. To overcome these disincentives we must begin to work together to demonstrate how public safety can be balanced with innovative solutions.
We must redefine our notion of "risky" and how it may impede innovation. Of course, anything new is risky, but using obsolete technology that cannot and will not service the public well, is risky also. The question, then, is which kind of risk is compatible with innovation and progress. Do we want to endure the risk of doing nothing and maintain the status quo that we know will fail, or do we risk the unknown and the untested, because we recognize that we must push the technological envelope, even if we do not always succeed?
We must recognize the various benefits of innovation if we are to get others to join with us to overcome these barriers.
Emerging Technologies: Changing Our Future
As we enter the next millenium, the civil engineering community must help to introduce and broadly commercialize a wide range of technological advances that will fundamentally change the way we do our jobs. It must begin to focus on how to better prepare the current workforce to understand and use emerging technologies, and it must develop curriculum that will prepare our future workforce. These emerging technologies will permit us to stay competitive and dramatically reduce adverse environmental consequences of human development. We must be prepared to recognize the challenges these emerging technologies will pose for curriculum and teacher development. Examples of a few important emerging technologies include:
o Innovations in information and telecommunications, such as, satellite global positioning systems (GPS) for precise site measurement and control in real time are reducing the costs of design and construction.
o Construction metrology for infrastructure renewal includes the development and dissemination of integrated sensor, measurement, simulation, and project information systems to increase construction productivity and quality.
o The industry is using scanning, global positioning and trenchless technologies to locate underground cable without resorting to traditional excavation.
o Fiber-reinforced polymer (FRP) composites have led to a new generation of vehicular bridges using modular construction techniques. These bridges are pre-fabricated off site, which strengthens quality control. The modular bridge units may be transported over the road and installed in one eight-hour day.
o Advances in high-performance concrete indicate that for many types of designs, most of the downtime for repairs of bridges, tunnel and pavement overlays could be virtually eliminated by using high-performance concrete that gains high compressive strength within an hour of placement.
o Automated steel erection methodologies promise to reduce construction time greatly, while steel connections with improved energy absorption capability will be a critical asset in structures built in seismic regions.
o "Smart" materials have already become commonplace in such areas as shape memory metal alloy (SMA) eyeglasses, piezoceramic copier devices, viscoelastic brake pads, and active polymeric implants.
o Self-repairing materials may be used to restore a structural component to its original shape, stiffness or orientation, the restoration being a function of the metallic memory selected and incorporated in the alloy during its formation.
o Innovative knowledge systems and novel technology applications may be just as important to our industry's performance as technology itself.
o The development and acceptance of "green" technologies that conserve energy and utilize renewable or recycled resources will become commonplace, both in construction design and execution.
The issue of obsolescence cannot be addressed through these emerging high-performance "space-age" materials and structural durability alone. Stewards of the national infrastructure, including the private sector, must push the current and emergent technological envelopes. They must ask themselves not just what new technologies and applications are necessary or probable in the future, but also what new forms will be possible in the next century. What types of infrastructure support will these exciting new systems require?
A recent White House Forum on developing federal policy on innovation for the next millennium identified a series of topics that can help change our operating environment. Some of these topics included: procurement obstacles and ways to overcome them by pre-approving innovation; the educational system; involvement of labor; and the impact of telecommunications and the use of the Internet. Below are a few examples of ways this process can assist us in our task for the next millennium.
Innovation Centers: Helping Entrepreneurs Reach the Marketplace
If we truly want to improve the way we construct new facilities and repair and maintain existing ones, then the purchasers of such services should adopt policies that forcefully support the use of innovative materials and technologies. Currently, the system is biased against the use of innovative approaches, particularly when no standard or specification exists. The government can foster the use of pre-approval, and pre-qualification of materials and technologies in order to reduce risk and liability and ensure public safety. This approach is being increasingly used by Japanese and European competitors with great success. The government should encourage strategies that decrease the approval time for the acceptance, and rapid commercialization of promising new construction materials and technologies. There are a number of areas where leadership by the public sector can improve the approval process.
Government agencies acting as owners should fully support and participate in evaluation strategies for which no recognized standard or specification exists. Federal policy should encourage federal, state, and local governments to utilize honest-broker non-profit institutions that can evaluate new materials and technologies for which no standards exist. Such approaches rely on a peer-reviewed process in cooperation with stakeholders to pre-qualify and pre-approve products. A number of such consensus-based evaluation centers have been developed in the past few years, with federal agencies working closely with non-profit institutions, including FHWA support for the Highway Innovative Technology Evaluation Center (HITEC), EPA support for the Environmental Technology Evaluation Center (EvTEC), among others. These efforts have permitted entrepreneurs to expedite their innovative technologies into practice through a single venue, rather than repeat the process for every state or local approval agency.
Education: A Key Step in the Process
As well intended as our policies might be, innovation will become increasingly difficult as the number of engineering and scientists in the country decline, particularly relative to other countries. While the U.S. leads all countries in the number of college graduates annually, it is well down the list in the number and percentage of science/engineering graduates. If the numbers I have read are correct, less than 5 percent of our graduates are in sciences/engineering (education, liberal arts, etc. are far more popular), whereas in China the percentage is close to 50 percent. There is an increasing trend for fewer and fewer of our nation's students to go into science and engineering. If they do so, they will likely go into industry (which is fine for the immediate needs of industry). But they generally will not go back into teaching, which suggests a major teacher gap for the next generation of students (K-12) who might be inclined to later go into these professions. Among those getting advanced degrees in the sciences and engineering, the trend is clearly in the direction of non-residents. At this time they are about 40% of the graduates, the numbers will climb to 50 or even 60 percent within the next 15-20 years or so. What will this mean for our innovative competitive edge?
One of the greatest criticisms from companies in the construction industry of engineering graduates is that they don't understand how to be a contributor to the project team. Their education doesn't prepare them for a team environment, solving problems as they arise by building upon the expertise and strengths of the various members of the project team. For many of you in this room, such a charge is nothing new and I know that many of you have incorporated real-world engineering practices in a classroom setting. For those that have not done this on a widespread basis, allow me to draw your attention to the In-House Practical Training Program I became aware of a few years ago at Nanyang Technological University (NTU) in Singapore that requires each student to take turns serving as a manager, office engineer, and field engineer in a "company" attempting to design, manage, and complete a specific engineering construction project. Students are required to make presentations and interact with real-world professional engineers, architects, zoning boards, and other groups that would typically be involved over the course of the project.
Other trends that will influence our educational progress include: design-build, turnkey projects, joint ventures, privatization and other similar professional developments which are affecting the way the industry must conduct its business. We must incorporate these changes into our education of students or they will not be adequately prepared to serve as practicing engineers. More focus is needed in the classroom on computer skills, technology development, financial knowledge, management practices, and design talents. We need to see these focus areas incorporated into the classroom from the practitioners' perspective. As rapidly as the industry is changing, the educational process can become obsolete within five years unless it is designed to adapt and change with the business-operating environment. Therefore we must re-rethink our approaches to continuing education, adult education, etc., recognizing that in the new century, learning will truly be a continual process. Sustainability, energy efficiency, and global climate change will significantly impact how construction in the future is being approached; curriculum will need to focus more attention on these themes.
Our global competitors have already initiated programs and incentives to introduce innovation into practice. This is one of the reasons CERF created its innovation centers; to help reduce the risk and increase the knowledge about what innovation can do to deliver projects "faster, better, and cheaper." To do that we have to begin educating and training our students to use the latest industry innovations, long before they are adapted as standards in practice. We must work together to change the mind-set of the industry.
Labor: A Vital Collaborative Partner
Recently at a White House Forum at which I participated, a senior official from the AFL-CIO made the point that globalization is beneficial if the increased trade is a result of innovative products/processes, not just cheap (foreign) labor. He made a strong pitch for (1) increasing training for workers (on a relatively continual basis) and (2) making certain to tap the capabilities of workers during every phase of the production system. In light of his colleagues' strong demonstrations against WTO that took place later that day (in Seattle), his comments had particular resonance. We cannot implement innovative solutions without the labor force being an integral part of the solution.
What about labors' input into this process? Isn't it workers that often first identify a problem or opportunity at the job site? Next to good market information, workers provide the best information. How do we tap the capabilities of workers during every phase of production?
To meet the infrastructure demands of the next century, the workforce of the future will require a greater focus on automation, prefabricated components, use of robotics, and other new technologies. Future labor requirements will be different; the workforce will need to be computer literate; we can already see a shortage of skilled labor developing in the industry. The Japanese have already been working on this problem-they already have a shortage of skilled labor, so they have explored automated construction through robotics. For instance, a number of Japanese construction firms set up the Super Construction Floor concept, a 24-hour a day construction process that is fully enclosed as a safe environment. It uses an assembly line approach, robotics, and construction control systems that become the control system for the building operation at end of project. Though it is still not cost effective, the education and training being derived from these construction methods is positioning Japanese construction companies as strong future competitors. Another example is Caterpillar, which is developing earth moving equipment that is being linked to GPS, with the controls designed to be more "joy stick" video game oriented to appeal to the youth of today.
Telecommunications: Changing the Environment in Which We Work
The pace of Internet usage is staggering. Some estimates offer the statistic that 6,500 web sites are created every hour. That works out to nearly 57M/year. How will we be able to absorb and integrate the sheer volume of information presented on these sites into our industry? For some in other industries, the deployment phase is not much more than a couple of beta tests and then full-scale market penetration.
Estimates are that a "web year" is probably down to 2-3 months at this time. How does government policy keep up with such a fast pace? Should it even try? Does it mean that the policy will always be reactive? I would argue, additionally, that in our industry most innovation, given the huge safety and liability considerations, must be incremental, though it may nevertheless have fundamental and revolutionary impacts.
Globalization and innovation are linked together by the impact of the telecommunications movement. Other nations are becoming far more savvy in global competition. I have been struck by the fact that trade/approval barriers (whether self-imposed or not) have resulted in some very interesting market niches. For example, Finland is now recognized as the worldwide leader in cellular phone technology. The U.S. has ceded this niche, almost like it ceded most of the consumer electronic market to Japan, Korea, etc.
Future Trends
According to a new McGraw-Hill report, they estimate that "the civil engineering market worldwide will grow an average of 6.1% a year through 2003. The world nonresidential building market will grow 5.1% a year and the world residential market will 4.4% annual during this period." To sustain this continual growth in light of the industry labor shortages, technology will have to play a major role in helping the industry to meet market demands. Demonstration projects will show the benefits of innovative technology and may make the case for application broadly throughout the US. High-performance construction materials and systems will become mainstream. Design and construction standards will be performance-based rather than prescriptive and will reflect a new era of technological innovation and asset management. The cycle of infrastructure deterioration and decay will begin a reversal as whole new systems are put in place, thereby "advancing" the state-of-the-art of public infrastructure.
Demonstration projects that clearly show the application of innovative and appropriate technologies are the key to making the public aware that the physical infrastructure is a national asset that requires attention. The promotion of high-visibility demonstration projects is essential to increasing the public's awareness of the benefits of innovative technologies to the nation's infrastructure revitalization efforts. Public sector support will be essential in identifying and securing appropriate demonstration sites.
If we are going to make changes, we must consider new learning and marketing strategies. CERF is involved in two major efforts to move us into the next millenium.
o Preparing and publishing handbooks for moving innovation into practice. CERF plans to start this process by producing a handbook as a product of our international research symposium on moving innovation into practice to be held in August of this year in Washington, DC. Because we are looking at attendance from over 30 countries and over 1000 participants working to create this handbook through a consensus process, we believe this should help increase public awareness of the types of technology available and steps for getting them into practice. Initially, the handbooks will reflect experience with the high-visibility demonstration projects, but later handbooks may reflect the insight and practices gleaned from other sources as well.
o Defining a clearinghouse development strategy. Another national initiative comes under the newly established Partnership for Advancing the Infrastructure and its Renewal, known as PAIR of which CERF serves as the Secretariat. The goal of a PAIR clearinghouse will be to provide a "portal" to the wealth of information available regarding innovative technology, research, and related activities. The knowledge center/clearinghouse will become a full-service resource center, with a physical location. Access could be both electronic (through the World Wide Web), as well as through telephone or mail. Under the current agreements with NIST and FHWA, CERF has developed a PAIR page that is posted on the CERF Web site. The PAIR clearinghouse activity will build on that accomplishment, but is intended to go far beyond that effort in creating the clearinghouse for infrastructure renewal technologies. This will mark the first time that such a comprehensive clearinghouse becomes available to industry practitioners and the public.
Moreover, PAIR provides an excellent platform for the selection and promotion of the innovative technology demonstrations I discussed earlier. While the clearinghouse development strategy may well be PAIR's most important contribution/legacy, the demonstrations under the PAIR banner are critical as well. By marketing these demonstrations, PAIR can serve as a bully pulpit to inform and rally the public about the value of innovative materials and technologies.
Conclusion
When our grandparents and great-grandparents developed marvels such as the vast subway system in New York City, the great water supply and sewer systems in Chicago, and the complex irrigation projects in the Southwest, these remarkable achievements were unprecedented in their scope. The impact on the way we travel, where we live, and how we earn our living was profound. Years later the development of our nation's interstate highway system was equally epochal. In many ways, we are still living off the legacy of those far-sighted engineers and planners who perceived a need to change fundamentally the structure of our built environment.
These achievements are 50, 75, even 100 years old. Deterioration is inevitable, even without the pressures of a larger, more mobile population. Many of these facilities are in desperate need of repair or replacement. They are clearly inadequate for the demands of the 21st century. Ever increasing demands on the infrastructure are causing systems built even 15 or 20 years ago to become obsolete. What do we want to do? Do we want to be the leaders to new markets in the next century?
As a nation we are ever more dependent on an effective and robust infrastructure for an enhanced quality of life.
What legacy shall we leave future generations?
We must look at the "impossible" and try to figure out how to make it possible. We are good at problem solving and looking for innovative solutions. The challenge for the US is to strengthen our engineering and science skills, while not loosing the creative skills. Here are some challenges to consider during our discussions today.
How can we incorporate the results of research and innovation into the educational process?
Should you [or "we"] incorporate more team project experiences and training into the curriculum; and if so, how?
Can more practitioners be introduced into the classroom environment to ensure that the future workforce is kept current with the continuous changes in the work environment?
Should curriculums be structured so that students can participate directly in the field evaluation of innovative products to better understand practical ways to use a new technology?
Should more innovation demonstration projects be created to serve as a training ground for our future educators and workforce?
How can we prepare the future workforce and modify college curriculum to be aware of and prepared to use the latest in emerging technology?
The design and construction industry has demonstrated in recent years that it has the imagination and intellectual resources to change fundamentally the way we construct and repair our built environment in a sustainable manner. But it cannot do so in a vacuum. The private and public sectors must develop effective partnerships to create a climate more conducive to innovation. Universities and labor must be key players in the process. Public policies that discourage innovation must be changed. Various factions of the design and construction industry need to collaborate and work together to prepare our students to enter the workforce of the future. It is only through increased communication, cooperation, and coordination that the currently segmented industry can work as one unified powerful force. This Colloquium is a step in this direction.
Remember, "The best way to predict the future is to create it."
Our job today is to find a way to the marketplace. This means we must link all the forces: industry, academia, government, and labor.
Thank you.