The construction sector stands on the cusp of a profound transformation, driven by the urgent need for innovation and sustainability. Recent insights from industry leaders underscore the necessity for adaptability in our investments, pushing us to focus on companies that can evolve and innovate rather than static assets. This shift is particularly pertinent to the construction industry, where the convergence of technology and green initiatives is reshaping not just how we build, but what we build and why.
“Investment innovation is broader than just AI and cutting-edge pharmaceuticals,” notes Craig Shepherd, PhD, Chief Investment Officer at First Samuel Limited. “It’s about the adaptation of innovation in companies of all types.” This perspective is especially relevant in construction, where companies must adapt to new technologies, materials, and sustainability standards to remain competitive and meet evolving regulatory demands.
Consider the trajectory of Worley Limited, a company that has successfully pivoted from its traditional role as a leading oil and gas construction firm to a champion of sustainable projects. In just a decade, Worley has redirected its core capabilities—solving complexity—towards sustainability-focused initiatives. As of May 2023, nearly 40% of Worley’s revenue comes from these projects, a figure that continues to grow as the demand for green infrastructure expands. This adaptability is not just about survival; it’s about leveraging core strengths to lead in emerging markets.
The example of Worley underscores a critical point: companies that can adapt will outperform static investments, especially in periods of transition. This principle is evident in other sectors as well. Woolworths, for instance, has evolved from a traditional brick-and-mortar retailer to a leader in online grocery solutions, adapting to changes in consumer preferences and technological advancements. Similarly, SGH (formerly Seven Group) has consistently redirected capital and resources into new, profitable arenas, demonstrating an adaptive streak that has rewarded investors.
However, not all companies are equally adept at adaptation. In the construction sector, large incumbents like BHP and Rio Tinto, while dominant in iron ore and copper, have struggled to pivot towards emerging metals and materials. Their size and legacy systems often hinder quick adaptation, a vulnerability that more agile competitors are exploiting. Fortescue Metals, for example, has shown extraordinary dedication to innovation through Fortescue Future Industries, refusing to stagnate in the face of change.
The pitfalls of adaptation are real, but the potential rewards are substantial. As Shepherd points out, “Complex organic enterprises have the ability (not the certainty) to adapt and respond to pitfalls and mishaps.” This underscores the wisdom of diversification and the importance of investing in companies that can evolve.
So, what does this mean for the construction industry? It signals a clear path forward: embrace innovation and adaptability. Companies that can pivot towards sustainable practices, integrate new technologies, and respond to changing market demands will not only survive but thrive. This adaptability is crucial as governments worldwide impose stricter environmental regulations and consumers demand more eco-friendly buildings.
Looking ahead, the construction sector must focus on green materials, energy-efficient designs, and smart technologies. The integration of AI, robotics, and 3D printing can streamline processes, reduce waste, and enhance safety. But the real challenge lies in scaling these innovations and making them the industry standard.
Investors, too, must be discerning. As Shepherd advises, “The investment opportunities from innovation lie in companies that adapt to changing conditions, not in investments that cannot.” This means looking beyond traditional assets like term deposits or single properties and focusing on equities that can capture the opportunities of innovation.
The future of construction is not just about building more; it’s about building better. It’s about creating structures that are sustainable, resilient, and adaptable to the needs of a changing world. As the industry evolves, so too must our investments. The companies that lead this transformation will be those that embrace innovation, adapt to change, and prioritize sustainability.
This adaptability is not just a business strategy; it’s a human imperative. As urban populations grow and climate challenges intensify, the construction industry has a pivotal role to play in shaping a better future. The question is not whether we will adapt, but how quickly and effectively we can do so. The future of construction—and indeed, the future of our cities and our planet—depends on it.
