Innovation? What innovation?
New York City -- The building materials industry and the distribution channels were described as slow to invest in technology and slow to change during the 2009 Building and Infrastructure Conference, sponsored by Lincoln International and L.E.K. Consulting.
One CEO went as far as to compare the building products industry to the Flintstones, the cartoon Stone Age family.
That CEO was Edwin Hathaway of Oldcastle Glass. "The building products industry is chronically underdeveloped," he said. "There is so little technology being leveraged in our industry, no matter what the product."
As an example, Hathaway pointed to General Motors, a company from which Oldcastle has recruited in recent months. "You may think that's surprising," he said. "But there are actually some very talented people in digital engineering."
Hathaway was speaking during a panel discussion titled, "What the future holds: Major trends in the building and infrastructure industry," in a room packed with mergers-and-acquisitions professionals.
"Building Information Modeling (BIM) is 20 years old in every other industry, digital engineering on a car, an airplane or factory is ubiquitous in many, many, different industries and in the building and construction industry, it's the latest new idea." Hathaway said.
Acouple theories on why innovation is slow to develop came from Golden Gate Capital's Kevin O'Meara, who is also the former president and chief operating officer of Builders FirstSource.
"The problem with building is homeowners, and builders are not willing to pay any more for the product," he said. "Even if it’s a much better product." That leads to a reluctance to invest in new technologies.
"Builders will change where they buy or what they pay for $100 a house," O'Meara added.
Product liability issues, or the concern over potential liabilities, also have a chilling affect on new technologies.
The panel also touched on a similar matter of building product distribution. When asked how the evolution of the distribution of building materials was likely to further change over the next five years, O'Meara essentially answered: not much.
"I don't see it changing much in the next five years, at least on the residential side," he said.
He based that answer on the buying strategy of big builders during the downturn, which presented an opportunity to shift to a national buying strategy, as opposed to a local or regional approach. But that doesn't seem to be happening, O'Meara observed.
During the boom years, those responsible for buying land were the key power brokers within building companies, and their relationships with local suppliers was strong.
"You would think the political winds would shift, and there would be more power going toward the corporate office, and if there was ever an opportunity to have more national purchasing, rather than local and regional, that would be it.
And you just haven't seen that happen.
