WHY INNOVATE? Q&A with Rick Khan, STO Building Group’s Chief Innovation Officer
Innovation is a driving force behind how STO Building Group operates. To help harness the exploration of new ideas and technologies across the organization—and foster more of this culture of innovation—the company has added a new member of the team: Rick Khan, STOBG’s Chief Innovation Officer. Here Rick shares why innovation is important to the AEC community as a whole and what firms like STOBG can do to help drive it.
How do you define “innovation”?
Innovation, in its simplest form, is to find new ways of creating value. That value can come from creating new business models and service offerings that differentiate STOBG in the marketplace to finding efficiencies that save time, money, or both, or from improvements to productivity or performance.
Innovation is a continuum that starts with incremental or “LEAN” improvements of existing processes to big, transformational ideas. The Harvard Business Review explains innovation through a “70/20/10” rule: Organizations spend 70% on incremental innovation to existing processes, 20% on adjacent or sustaining innovation, and 10% in disruptive innovation. Incremental innovation delivers a 10% ROI, while disruptive innovation has a 70% return on investment. We are focused on the entire spectrum of innovation at STOBG.
What role do you think the GC/CM has in bringing creative ideas to the table on projects?
The jobsite is the incubator of innovation! The CM/GC takes on the highest risk in the design/build process. Our project teams come up with creative ideas every day to solve client and project challenges. The opportunity we have is to harness the creativity of our talent and focus their efforts on solving key challenges we face and scaling that across market sectors, business units, or at the enterprise level.
What are some of those challenges?
The construction industry is one of the most dangerous in terms of injuries, death, and suicide. We are the largest consumer of the planet’s natural resources. We contribute to 50% of landfill waste. The built environment is responsible for 40% of climate change.
Building projects are getting more complicated with growing demands for sustainability and energy performance. To pile on, clients are demanding projects be built faster and cheaper. We are also seeing large tech companies like Google, Facebook, Apple, and Amazon playing a larger role in the construction industry by improving supply chain, sourcing, and industrialized construction methodologies. This is the beginning of a trend of disruption coming from outside our industry.
We are also in a labor crisis. Our senior field leadership is retiring faster than we are attracting, developing, and retaining talent to support construction. Construction is all about people. Robots will never replace humans, but rather augment how we work, so we need to really invest in building the talent pipeline for the future, which is exactly what our Innovation 360⁰ program will address. The growing demands of society depend on innovation.
What are you seeing in our industry right now that’s particularly innovative?
It is a pivotal time in our industry. We are seeing a precedent of construction technology innovation, from ecofriendly and sustainable materials, to artificial intelligence and robotics that eliminate safety risk for our field workers, to modularization and the industrialization of construction. We are also seeing tens of billions of dollars of venture capital pouring into the industry from fueling hundreds of startups in construction tech, clean tech, and property tech. To support the speed of change, we need to invest in our people, processes, and technology to help us pave the path toward a brighter future.
What is your vision for innovation at STOBG?
Innovation is truly critical to making sure our company adapts to the pace of change and remains a leader in the industry. By investing in the capabilities of our talent to actively engage them in the process of innovation, we will develop new ways of working smarter and safer, not only for our organization, but for the industry. It’s exciting to see our industry on the brink of change and to play such an active role in it.
What are you working on now?
We have four key areas of play helping us continue to focus on innovation:
To start, innovation is not new to our organization; we’ve been innovating for the past 50 years to grow and expand our business. Our merger and acquisition strategy is, in fact, innovation at the business model level.
We are founding members of the AEC Angels investor fund, which invests in emerging technology startups from seed through Series B + investments. The AEC Angel member organizations include Thornton Tomasetti, STO Building Group, Syska Hennessy, and SHoP Architects, all recognized industry leaders who bring real-world, deep knowledge and experience in assessing, testing, and accelerating technologies.
These investments allow us to have a stake in driving transformation in our industry through emerging technologies.
We are embarking on a new digital transformation or data strategy to eliminate waste in our manual processes, digitize our work, and develop business insights through the treasure trove of data that exists in our organization. We just brought on a chief data officer to build a team to support this initiative to innovate how we work.
Lastly, but most importantly, we will be implementing a companywide innovation program. This program provides a structure of innovation to engage all of us in the process. People innovate, and technology plays a role in the process.
What do you see as the most exciting/promising innovations to come in our industry?
I see integrating the supply chain as a transformational innovation that will revolutionize construction, just as it did for manufacturing. We are already seeing the vertical integration of designer, engineer, contractor, and supplier. We are learning how to industrialize construction through prefabrication, and modularization is making jobsites safer through assembling building components in a controlled environment with higher quality, greater efficiency, and, frankly, a new way of attracting talent into the industry. As we further adopt manufacturing techniques, we
can also better leverage robotics to automate tedious and dangerous activities so humans can spend more time on higher value work.
Construction is moving towards deeper integration. We are realizing that we can’t solve problems alone—we must collaborate as an industry. We have the expertise and experience to greatly influence technological innovation to make construction work safer, smarter, and more sustainable. Truly transformational innovation will happen only when we partner with our peers, trade contractors, academia, technology, and other industries to drive that change.