Executive Summary
This report presents how Balfour Beatty manages its innovation. For many critics, the construction industry is not innovative. While this claim may be true to some extent, megaprojects developed show that the industry is highly innovative in its practises. For Balfour Beatty, innovation requires a culture change. This experienced company requires incremental innovation to develop new solutions. Culture is extremely important because vital internal practises must change.
For instance, senior executives, HRM practises, employee motivation and organisational structure among others must be transformed to support a culture of innovation. At the same time, the company must assess external factors, such as technologies, consumer needs, and regulations that influence its operations. Changes in these aspects and others will ensure that Balfour Beatty develops a culture that supports innovation.
Background Information
This report explores innovation at Balfour Beatty. The company CEO calls for a culture change after mounting problems.
The Company
Balfour Beatty PLC is recognised a leading global infrastructure company. The company develops, finances, builds, and maintains innovative and competent developments that drive everyday life, support society and advance economic development (Balfour Beatty 2016). Balfour Beatty prides in developing critical infrastructure assets that communities require to operate and manage their daily activities, grow, and thrive. Balfour Beatty is involved in the entire life of infrastructures.
For over a century, Balfour Beatty has gained exceptional experience in delivering highly innovative complex construction projects. The company focuses on highest standards of quality, safety, and technical expertise. In addition, Balfour Beatty also integrates clients and local supply chains while working to support local communities.
The principal markets of Balfour Beatty include the UK and the US. Currently, its expansion strategies target Canada and other emerging economies in the Middle East and South East Asia. Balfour Beatty has developed three distinct business segments. The infrastructure investments have been the leading PPP providers in the UK, the US, and Canada. For the last 18 years, the company has developed and financed projects through its infrastructure investments. The construction services manage construction activities across the US, the UK, the Middle East, and South East Asia. Finally, the support services offer outsource maintenance, upgrade, and management services specifically for power transmission, utility infrastructures, rail, and road (Balfour Beatty 2016).
The Business Environment
The business environment in the construction industry is unique and dynamic. No two projects are the same. However, the industry is not generally considered as innovative and fails to offer an environment that promotes creativity (Dale 2007). Dale (2007) established that the industry was rich in ideas, and innovation was considered a crucial factor for future success of the industry. The diverse nature of different projects is responsible for driving innovation in the construction industry. In addition, the industry must engage in innovative solutions at practical levels to overcome emerging issues associated with sustainability, environmental protection, and regulations.
Generally, stringent regulations, climate change, technical, demographic shift, macroeconomic and consumer preferences will significantly influence every aspect of the industry. It has observed that local, national, regional, and global factors related to changes in population, environmental protection and digital design evolution are shifting current practises and expectations of various stakeholders, including suppliers, regulators, and consumers who put pressure on the industry to adopt and integrate new practises, technologies, and designs into their construction projects (Goodland, Lindberg, & Shorthouse 2015).
As such, any construction firms must change their processes, adapt, and innovate to avoid the risk losing competitive edge. Although most companies now focus on innovative processes and adoption of new technologies, they still have to improve their practises continuously. In addition, they must invest extensively, specifically in research and development (R&D) (Leiponen 2012). Further, construction firms must find the best mechanisms for knowledge sharing and collaboration within and outside organisations.
Fundamentally, Goodland, Lindberg, and Shorthouse (2015) have observed that the construction has generally failed to promote a culture of innovation that accounts for everyday issues and interventions on construction sites. As such, the current gap is a source of concern because innovation is considered as the best approach for future success and competitive advantage for any company. One must recognise that ability to develop new services, solutions, products, and services, to get novel applications for available products and to create new market opportunities would ultimately ensure achievements in the 21st century.
Professionals and academics now want to advocate for changes and innovation in the sector. In fact, both contracting and trading firms, as well as many other stakeholders in the construction sector should promote a culture of innovation and knowledge sharing. Evidence suggests that companies that proactively indulge in innovation and learning usually realise positive business results and eventually succeed. Innovation therefore strives to assist companies to overcome challenges experienced in the construction sector while improving quality of outputs and realising massive cost-saving.
Innovation Theory
Traditionally, much of innovation discourse has been different even within a firm. In fact, different approaches to product development, service delivery and entrepreneurship have created more or less approaches to innovation (Toivonen & Tuominen 2009). Consequently, there are multiple definitions, models, and theories of innovation (Twomey & Gaziulusoy 2014). Therefore, while the idea of innovation could be automatically simple to understand by certain professionals and academics, innovation in itself is complex and hard to define exactly because it overlaps and touches on a wide range of concepts and phenomena (Berglund 2004). One theory is the Diffusion of Innovation promoted by Rogers.
Diffusion of Innovation is among the most recognised innovation theories in organisations globally. Moreover, it has continued to receive widespread application as most firms now recognise innovation as the best approach to growth and competitiveness in the dynamic business world. In this report however, incremental innovation has been used to relate theory of innovation and practises in the construction sector.
Incremental Innovation
It is noted that the concept of incremental innovation usually makes experts to quail (Kishore 2013). Modern businesses and organisations are characterised by high, fierce paces of innovation. In addition, the fierce competition between companies for a single market continues to grow each day irrespective of the sector. As a result, business leaders, professionals, and innovators often concentrate on developing advance solutions for consumers and creating new markets to meet their goals.
In these cases, technologies, products, and services become distinct and assist companies to gain competitive advantage over competition. While this is the actual situation, organisations must not dismiss the relevance of incremental innovation (Sen & Ghandforoush 2011). According to Kishore (2013), incremental innovation could have immense impact on organisation even if it is difficult to quantify.
Breakthrough innovations are known to transform practises and life perpetually, and in most instances, they drive clients and other stakeholders into new possibilities. Evidence shows that R&D based competence is imperative for service firms when they engage in radical innovations, but employee driven practises, including idea collaboration and knowledge sharing, are noted to advance incremental innovations (Engen & Holen 2014).
This implies that if Balfour Beatty opts for incremental innovation, then it must promote team learning, knowledge sharing, and collaboration to realise meaningful advancement. Moreover, the company should incorporate client information to promote incremental innovation. Incremental innovation requires managerial inputs for developing and balancing the expertise required based on an innovation type that Balfour Beatty wishes to adopt (Engen & Holen 2014).
Most touted breakthrough discoveries, such as smartphones, emanated from basic ideas, which offered the basic framework for further assessment and improvements. By its nature, innovation often presents unprecedented serious risks to organisations as they strive for solutions that are difficult to create (Palmer & Brookes 2002). Yet, companies face the pressure to provide new solutions through innovation (Dunlap-Hinkler, Kotabe, & Mudambi 2010).
In fact, innovation is responsible for the growth of knowledge economies, such as the UK, the US, and Canada among others. Incremental innovation has been critical by providing the right framework for developing sophisticated processes and models for practical solutions. On this note, an incremental strategy (adaptation) can be used to reduce risks linked to innovation. Palmer and Brookes (2002), however, warned that incremental innovation could lead to low optimisation of possible returns, but it may still advance strategic objectives of senior executives supporting innovation.
For Balfour Beatty, it can improve on current building practises and enhance them to create opportunities for further incremental improvements. Incremental innovation requires improved resource allocation to R&D (Arieh, Grupp, & Maital 1998). In addition, marketing and R&D should be integrated to enhance decision-making in an organisation.
In most instances, the right gap shows minor inconvenience that becomes the driver for incremental innovation. This discontinuity results in the desire for change. Organisations must focus on creativity and supporting technologies to drive innovation.
Boeing, just like Belfour Beatty, is now a century old, but its major innovation is based on incremental improvements to ensure that the company can deliver airlines with advanced reliability and at lower costs fast (Ostrower 2015). On the same note, some construction firms have found incremental innovation to be extremely useful. In fact, Brockmann, Brezinski, and Erbe (2016) have questioned the claim of a lack of innovation in the construction industry because it has delivered multiple megaprojects, which are generally driven by innovation.
Innovative ideas in the construction industry have been realised in product development, construction technology innovations, technical, management, and/or contractual practises (Brockmann, Brezinski, & Erbe 2016). These various aspects of innovation found in megaprojects demonstrate the ability of construction firms to innovation beyond the current claims of a lack of innovation.
The entire construction industry system runs on interdependent innovation based on a series of incremental innovation that leads to extremely significant changes and achievements. Given the nature of the industry and diversity, multiple innovations can be found at different levels. As such, the industry offers outcomes on “a continuum from repetition to innovation, with megaprojects situated at the innovative end” (Brockmann, Brezinski, & Erbe 2016, p. 1).
Incremental innovation demonstrate how organisations develop incrementally from traditional practises to modern practises aimed at improving performances. Innovation requires collaboration across an organisation (Palmer & Brookes 2002).
Innovation Organisation
There are internal factors that relate to innovation management, which drive innovation at Balfour Beatty. It is imperative to recognise that the CEO of Balfour Beatty is interested in a culture change because of mounting problems. Culture is therefore extremely important for innovation, but not many firms are any better at it (Johnson 2014). In fact, organisations that have managed to succeed through invention are considered productive.
Leadership
Academics have demonstrated how organisational structure, technology, culture, strategies and other management practises have ensured that firms remain competitive and adaptive (Agbor 2008). In fact, evidence asserts that creativity and innovation have become extremely important in the 21st century, but the role of leadership is the factor behind some of these achievements (Shalley & Gilson 2004).
Balfour Beatty has recognised that creative, innovative solutions do not emanate from vacuum. Instead, they require leaders to promote and control fundamental changes in “culture, structure, practises, and processes in order to change them into innovative, effective, and meaningful tools” (Agbor 2008, p. 39). While other factors, such as structure, technology, culture, and strategy, are important for innovation, leadership remains a critical force for innovation and competitive advantage.
Senior executives at Balfour Beatty usually make critical decisions on what exactly takes place at the company. They offer vision and strategic direction aimed at success. In this regard, organisational senior executives are the catalysts that develop and manage an organisational environment, culture, and strategies that promote and sustain innovation and ultimate success at the company.
Balfour Beatty leadership structure has ensured that the company has delivered for the last 100 years. These results are driven by creativity and innovation. It is imperative to recognise that not any type of leadership style can result in creating innovation environments.
As such, Balfour Beatty tends to focus on promoting transformative leadership in order to realise the desired results related to creativity and innovation. In addition, the company has noted that shared, collaborative leadership is effective for unlocking creative abilities of employees. Leadership styles, such as command and control, authoritarian, hierarchical and other less desirable models, cannot result into a culture of innovation. In these instances, senior leaders control information, work, decision-making processes, and resource allocation. Consequently, employees are restricted and become less creative and productive due to lack of empowerment. These leadership models advance the notion of leadership as an extension of the entire organisation while displaying heroic tendencies of the 19th century organisations.
Balfour Beatty human management practises concentrate on leadership styles, team creation and strategic innovation. These elements of management are usually responsible for creating a supportive innovation culture. As such, organisational leadership styles and other human resource policies and practises should be flexible; risk and uncertainty tolerant; diversified; and grant autonomy to advance creativity and appreciate innovation processes as major organisational value (Siguaw, Simpson, & Enz 2006).
Balfour Beatty Organisational Structure
Scholars have observed the importance of duffision and adoption of innovation in organisations (Sáenz-Royo, Gracia-Lázaro, & Moreno 2015). Innovation diffusion and adoption however only take place in supportive organisational structures. An agent based model was used to illustrate how various organisational structures can support innovation (Sáenz-Royo, Gracia-Lázaro, & Moreno 2015). Balfour Beatty has strived to develop a community structure to support its innovation practises. In this case, innovative proposals are normally accepted homogenously across the company (Sáenz-Royo, Gracia-Lázaro, & Moreno 2015).
Moreover, the company promotes open learning and information sharing to ensure innovation diffusion. Consequently, heterogeneous elements of the company can function effectively. At the same time, Balfour Beatty strives to eliminate negative social pressure in its structures. As such, it only concentrates on factors that support and promote innovation across the company (Talke 2007).
Balfour Beatty has recognised the relevance of learning organisation and its impacts on job performance and individual adaptive abilities (Kanten, Kanten, & Gurlek 2015). In this case, organisational structure that promotes team learning significantly advances innovation and individual adaptive abilities.
Human Resource Management Practises
The modern business environment has shown that the role of human resource management is an indispensable tool for excellence performance (Agarwala 2003).
Balfour Beatty recognises the importance of creative and innovative individuals for its growth and success. The company encourages employees to be flexible, tolerate uncertainty and ambuigity while taking meaningful risks to develop innovative solutions (Siguaw, Simpson, & Enz 2006).
The company therefore strives to adopt supportive human resource management practises to ensure that employees are motivated and encouraged to be creative and innovative. It now considers employee knowledge, skills, and behaviours as imperative components for nurturing a culture of innovation (Diaz-Fernandez, Bornay-Barrachina, & Lopez-Cabrales 2015).
Besides, the company has observed that employee innovation capabilities are noted in their competencies and when they are motivated. Motivation is an important aspect for innovation. Motivated employees are normally engaged in their roles and get personal fulfillment as they aim to find new solutions than existing ones (Shirahada & Niwa 2007). Employee knowledge, training, and motivation are the main ingredients for innovation (Beugelsdijk 2008). By considering the resource-based theory, employee knowledge is therefore an important resource for creativity and innovation at Balfour Beatty. In this case, innovation has ensured the development of important and scarce resources in the company – knowledge and creativity.
Human resource management still plays critical roles in all these processes, and it is therefore a determinant of innovation in the company. HR practises are responsible for innovation inputs, implementation and sustainability in an organisation. The basis of this notion is that innovative abilities are found in employee intelligence, thoughts, and creativity. Likewise, developing a culture of innovation (innovation occurrence and sustainability) needs HR practises that are focused on innovation. Balfour Beatty has realised that various policies, procedures, and practises should be developed to support innovation.
Innovation Strategy
Various external factors related to innovation management influence the company innovative practises (Chesbrough 2007).
Balfour Beatty has noted that the traditional construction industry is fragmented and driven by sequential processes, such as “brief, estimate, tender, re-design, re-tender, create work packages, and build” (Lerner 2013, p. 1). These traditional practises are however wasteful and not sustainable in the current business environment. The company’s innovative strategies include integrated project delivery and a supply chain supported by strong partners, including suppliers, project sponsors, consumers, and communities (Balfour Beatty 2012). These stakeholders with diverse interests have to work together to deliver better solutions for sustainable practises.
Balfour Beatty Innovation Strategies
Balfour Beatty innovation strategies are mainly concentrated on sustainable innovation that focuses on new products, operational efficiency, and social performance (Balfour Beatty 2012). New technologies, regulators, consumer demands, and demographic shifts influence these practises.
The company has based its sustainable innovation on stakeholder engagement, knowledge sharing, leadership support, and collaboration with external stakeholders, including customers and communities.
Balfour Beatty depends on information exchange and knowledge sharing in which senior leaders engage other external stakeholders at macro and operational levels to assess and understand emerging issues and develop possible innovative solutions.
The company must therefore overcome real enduring issues associated with developing workable solutions, which must also account for complexity of and actual business environments (Damanpour & Gopalakrishnan 1998).
Recommendation and Conclusion
Balfour Beatty recognises that innovation is an ongoing process that requires improvement and sustained efforts. As the CEO focuses on a culture change, he must acknowledge that innovation has no rigid formula, but some specific aspects are considered vital for creating a culture change to promote innovation and overcome mounting problems. Culture is extremely important specifically for creativity and innovation. The following recommendations will assist the company to create a culture that supports innovation across various business divisions.
- The company should acquire the right talent because creative employees are required if any novel practises are to be realised in construction practises. It must therefore recruit and retain right talents.
- A continuous improvement is preferred to reduce risks associated with radical approaches. Bottom-up suggestions will assist the company. Moreover, collaboration is important for these processes even in the absence of a large R&D department and huge budgets.
- No need to focus on immediate, big breakthroughs, but rather iterations supported with incremental practises should be adopted.
- Openness to suggestions is important to encourage employee contribution and participation.
- HR, leadership, training and employee motivation practises are vital components for advancing innovation in the company.
- Assess both internal and external factors that influence its operations regularly.
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