Increasing the adoption of new materials and products in New Zealand’s building and construction sector is important for achieving emissions targets and improving productivity. But developing products and making a success of them is not easy – with regulatory barriers often mentioned as a key difficulty.
Third Bearing Limited partnered with Simpli Centre of Excellence to look at how to accelerate the acceptance of new building products. We talked to new product developers, BCAs, product specifiers and technical advisors to get their views on where the issues lie and what solutions are needed.
Our Levy-funded research started with a focus on the regulatory aspects of new product innovation. However, many of the issues have their genesis in earlier stages of the product development life cycle. There is still room for regulatory improvement, but this is only one part of the picture.
Struggling throughout the product life cycle
Product developers experienced difficulties in the first two stages of the product life cycle – development and growth. The development phase is when the product is designed, tested and prepared for introduction to the market. It can be expensive with little revenue to offset development costs. The growth phase is where the race is on to claim enough market share to make the product profitable, with marketing and distribution costs ramping up.
Two common themes emerged in the development stage:
- Limited funding and start-up support for building product and material innovators. Most innovators funded developments themselves, with government and early-stage investment funds favouring high-technology and/or high-growth developments. When funding was available, it often came with limited advice specific to the construction sector, which led to issues later.
- Difficulties in choosing the right compliance pathway. Technical advice could be sourced – although there is limited availability – but often it was not fused with the business model and market growth strategy. This led to slower growth and a need to change either the compliance method or the market strategy.
We heard of some smart approaches to the growth stage. For example, innovators would piggy-back off the market’s existing acceptance of well-known products. This helped mitigate three key issues raised in our research:
- Our market favours face-to-face – Kiwis are very relationship-based, and our trust goes up if we can meet in person.
- There are a lot of players making decisions about the product – there may be only a handful of product retailers, but there are a lot of councils, builders and designers that need to be aware of the product.
- Those players want to see the evidence – they prefer seeing examples of a product in use, taking precious time that new innovations often don’t have.
These issues tip the scales in favour of large, well-established product manufacturers and suppliers who have existing wide networks and resources to invest in face-to-face relationships and deep enough pockets to take the time needed to get a product known. Smaller, independent product and material innovators struggle to match this, resulting in higher costs and longer time to profitability.
Innovators who navigate the growth stage face the question of whether New Zealand’s market is just too small to ever achieve maturity and an exit for their innovation. Niche products and materials, rather than mass usage products, found better prospects in overseas markets where the significantly greater scale made it easier to achieve the sales needed. It is almost as if New Zealand is a testing ground, but real growth and a successful exit for an innovator can only be achieved in larger markets.
Speeding up knowledge diffusion in consenting
We did not find significant regulatory barriers for new products and materials. Most consenting issues occurred when new products were used outside the scope of their chosen compliance pathway. Our analysis of requests for information showed that even tried-and-tested products with CodeMark certification still resulted in occasional questions from BCAs because they were used outside or right on the edge of their certification.
Increasing the speed with which knowl- edge about new products and materials spreads across BCAs would help with growth. Knowledge diffusion is currently slow. BCAs learn about new products or materials only when they appear in a consent application within their jurisdiction.
There is some informal sharing of knowledge across BCAs – for example, phone a friend – but nothing systematic or formal. This can mean the same questions are raised across different BCAs until the product or material becomes commonly known.
Speeding up knowledge diffusion requires improved connections between BCAs. Rather than each BCA having its own product register, a single technology platform used by all would help significantly. However, there is currently little incentive for BCAs to develop this.
There is little cost to BCAs of slow diffusion. Most, if not all, of the cost falls on the product developer and the wider system. Support to speed up knowledge of new products and materials needs to be seen as for the public good and funded centrally.
Where to invest to accelerate acceptance?
Our research made it clear that the construction sector does not support new product innovation by small, independent developers. Higher productivity through increased innovation is potentially more easily achieved by speeding up how the system accepts the incremental developments that occur.
If investment is to support new product and material developments by independent innovators, it should go into:
- more coordinated support of innovators to make sure compliance information, technical specifications, business models and market strategies are comprehensive and aligned
- a pool of construction industry specialists available to start-up or product development incubators and funders when they need support for a construction product innovation
- speeding up the diffusion of knowledge about new products across BCAs, which supports market acceptance of new products and materials.