1. Procuring Green Construction Innovations PhD project in New Zealand Anne Staal 1Hobbiton Maori ‘food baskets’ Maori “Gateway” in CBD Understanding Small Enterprises Groningen NL

2. Research questionnon-incremental lightweight impervious polystyrene concrete blocks Incremental Green technology How do innovative New Zealand firms procure non-incremental green-tech innovations for the construction industry? 2 Construction industry

3. Procurement of Green Innovations 3 This is how I would explain the PhD to my mother (73 years)

4. NZ: Complex mix of some new, But mostly old Bespoke housing Traditional procurement Limited in innovations ? Exception: AUT campus ? Exception: suburban Edwardian villa

5. A Dutchman working in New Zealand 5 We live on the Shore near the beach Industry experience (15 years) Large (international) organizations include positions of supply chain manager, B2B account manager, procurement manager, project manager and consultant. Lecturing (7 years) At the Hanze University: to bachelors: management; procurement. Supervising research bachelor theses. At AUT : master programs: Built Asset MGMT; sustainable Enterprise Strategies; Sustainable Procurement MGMT. A wide range of students in different settings. Research (3 years) Started PhD at AUT in NOV13. Specializing in management of innovation & procurement. Research context is SMEs and sustainability from a business & management perspective. Involved in Dutch research on Purchasing in SME. Design ready: MAY15; Field work ready: FEB16; Thesis ready: NOV2016. Background PhD Candidate BEng, MA, DMS, MBA Dutch; married, 2 kids. 5

6. Doing a PhD is not fair weather sailing 6

7. Abstract Construction industries in New Zealand and abroad have a low track record for successful sustainable innovations. This often has a negative impact on private and government spending, and on quality, society and the environment. This paper posits that the construction industry needs step-change (i.e. architectural, system, radical, modular) environmental technical innovations to make drastic improvements. Often entrepreneurial or small to medium-sized firms at the beginning of supply chains or from other industries will introduce such innovations. These firms will use the innovation capacity of suppliers and of their own organisations to transform and commercialise such innovations into the industry. However, after an extensive literature review it remains unclear how innovative New Zealand firms procure environmental step-change technical innovations for the construction industry. The research focuses on procurement activities within such firms who supply the New Zealand construction industry. These procurement activities interact with (internal and external) innovation activities for an optimal firm performance (in economic and environmental terms) and are affected by clusters of internal and external variables. The heart of the research consists of two rounds of case studies alternating with two rounds of collaborative focus studies. The research focus is on New Zealand. It is part of a doctoral project. 7

8. Related publications 8

9. Where: Construction supply chain 9 Adapted from Pryke (2009); Van Weele (2010). 9

10. Where: Construction supply chain (2) 10 Focus: innovative (construction) firms  entrepreneurial, risk taking; autonomy; proactive, competitive. (Based on Miller; Lumpkin & Dess)  Only 8% of construction firms have more than 5 employees. (BRANZ / New Zealand Statistics)  Often SMEs at beginning of supply chains / other industries. (e.g. Priess, Baumol, Gambatese & Hallowell, Johnsen & Philips)  Less than 5 employees probably not interesting. Upper limit 150 employees, as bigger (mature) firms will often be less entrepreneurial. (See Meijaard. See e.g. OECD 2010, Verreynne & Meyer).  Not only informal & centralised organisation; owner large impact; constrained resources, Large impact from external (meso / macro) variables. (See e.g. OECD, Burns, Deakins, Fairweather; Meijaards).  Successful in introducing non-incremental construction innovations. (“Against the odds”). (See e.g. Hardie, Slaughter, Manley; Sheffer & Levitt) Small dataset in NZ context 10 Of course it’s one dollar ! It’s a small business loan.

11. South Island – stunningy beautiful 11

12. Where: Construction supply chain (3)  Very fragmented – only 8 % of companies > 8 employees.  Huge amount of one-person firms and micro firms.  Boom – bust cycles; competition on lowest price; quality and productivity issues. Limited trust. High risks.  Not (very) innovative e.g. due to project-nature, complex relationships, make-to- order, culture (See e.g. Hinton, Vrijhoef, Sheffer & Levitt).  Environmentally unsustainable: 40% of resources, 30% of energy consumption & CO2, 25% of timber use (See e.g. UN 2010, EU 2009, NZ Business Council for Sust. Development). 12

13. Why NZ companies innovate DO NOT Why they DO NOT innovate Competitive drive keep customers & profits Expensive and risky Customers do not perceive benefits Traditional procurement systems Fragmented and project-based industry To adhere to regulation & building codes Let others do it Prefer traditional & professional trade Owner with entrepreneurial orientation & ambitions Taking a more holistic approach Firm owners with lifestyle approach (Barbie, Boat, BMW, Bach). Busy in daily business; profits are OK. Informed clients & hence main contractors Companies want standardised & industrialised production Management / employees / procurement do not want it. Too much effort needed in managing (influencing) stakeholders and customers. Sources: BRANZ reports; Accenture; Manley/Hardie (BRITE); Whyte & Sexton; Zortea; Vrijhoef/Bossink; Hinton; Sheffer; Deakins; Abbott & Jeong. Why: Innovate in NZ construction? 13

14. Dutchie Abel Tasman moved on – he did not see a business case (James Cook was the first to map the two islands in greater detail). 14 Lifestyle instead of Entrepreneurship Bungalow BMW Boat Barbeque

15. Why: Green Procurement Vörösmarty: SME research at Budapest University. IPSERA (2015) WHY: Attitude% of responses Avoidance of negative effects (Avoidance)13% Compliance to expectations (Compliance)58% Achievement of positive goals (Positive)28% WHY: MotivationScale 1-5 Regulation & Law4.2 Cost saving targets4.0 Customer demand4.0 Top management support3.9 Procurement value3.9 109 Hungarian SMEs These SME are probably ‘front-runners’ 15

16. 16 Private procurement - more informal (compared to EU) Public procurement – not innovative, limited sustainability targets Often lot of suppliers; tough contract mgmt No whole-of-life costs; focus on short-term outcomes Local: Multi-service contracts vs small specialist supplier? Limited green / social regulation; Suppliers bear risk & liability Averse relationships & low trust (control) Low on maturity (MSU / Batenburg / Johnsen) Not supplier improvement programmes China; spot-buys & short relationships Minimum Order Quantities; thin supply lines European products seen as high quality ZOOMING IN: Current NZ procurement NZCIC, 2006; Hinton 2013; Van Weele 2010; FMANZ Masterclasses; Programmed, 2014; MBA students

17. British influence is waning Referendum about new flag, but not about (e.g.) TIPP or Treaty of Waitangi 17

18. Innovation Innovation: -Non-trivial change & improvement -Market growth -Commercialisation -Exploit change (See e.g. OECD, Slaughter, Drucker). Definitions Sustainable Sustainable: meet the need of the present generations, without having an impact on the needs of future generations. (Brundlandt). Categories of innovation according to Slaughter taxonomy (from Mlecnik, 2013, p. 106) Procurement Procurement: manage external resources so that supply of goods / IP / services / capabilities is secured at favourable conditions, in exchange for NZ$. (Adapted from Van Weele, 1998). impactssourcephase Increm.Improvement of current practice; minimal impact of components & systems Companies with knowledge base (can be all parties in SC) Any time ModularSignificant improvement in concept; no changes in other components or systems Companies responsible for a module, or new entrants Design / selection Archit.Small improvement on concept; major change on other component or systems In the field (eg general or specialty contractors) Design to implement ation SystemComplementary innovations with new attributes Companies with no vested interests; coordinators Conceptual design RadicalCompletely new concept; often renders a previous concept obsolete Outside existing industry; based on R&D; new venture Technical feasibility Focus on environmental aspects 18

19. Gaps in extant research The literature review reveals a lack of knowledge on how innovative firms procure non-incremental green-tech innovations for the construction industry. In more detail it is unclear: 1. How such firms procure non-incremental green-tech innovations. 2. How procurement and innovation activities interact within said firms when procuring said innovations. 3. How such firms use their firm variables (characteristics) in managing these interactions. 4. How such firms react (deal with) or use external variables in managing these interactions. 5. What the procurement performance is as result of these interactions. 6. What the innovation performance is as a result of these interactions. 7. What the ultimate firm performance is as a result of these interactions. 19

20. more sailing yachts than Greenstar buildings... 20

21. NZ Green Building Council – example GS ranking 21

22. FOUR Examples from Hardie (2011) RADICAL: replacement rapid- hardening concrete mixed on-site SYSTEM: lightweight impervious polystyrene concrete blocks MODULAR:salt-removing render for restoring old brickwork Not from Hardie: INCREMENTAL Improved nail gun ARCHITECTURAL: concrete formwork high none Change in linkages Change in concepts 22

23. Research questions interact 1. Determine how procurement & innovation activities (i.e. related to non-incremental green-tech innovations) interact within focal firms. variables 2. Determine the effect of dominant (internal & external) variables with said interaction. activities 3. Determine dominant procurement activities in economic & environmental terms (within focal firms) when interacting with innovation activities. insights 4. Develop & communicate new insights to firms & other participants involved in this research, and via academic journals & conferences. 23

24. 1a Procurement activities. 1b Innovation activities 2b NZ Construction industry (supplier) environment 4a entrepreneurial NZ construction firm & owner characteristics 4b entrepreneurial NZ construction firm: strategy & business model 5a Procurement performance 5b Innovation performance Pr5b Pr1 Pr5a Pr4b Pr2a 3 non-incremental environmental technology innovations Pr3 6 entrepreneurial firm performance Pr6b Preferred option 22oct14 2a NZ Construction macro environment Pr2b Pr4a Pr6a constructs Pr5c Model Model 24

25. 1a Procurement activities 1.Specify wants/needs 2.Scout & select 3.Negotiate & Contracting 4.Manage relations with supplier(s) 1b Innovation activities 1.Develop Idea 2.Develop Concept 3.Develop Product 4.First use in market 5.Full use in market 2b NZ Construction industry (supplier) environment - Local vs foreign suppliers - New vs existing suppliers - Types of industry networks - Types of clients (Brockhoff) - Types of relationships 4a NZ innovative firm & owner characteristics - Specialised functions and complex organisation or not - Education & experience owner; (family) ownership structure - Size, formalisation / specialisation 4b NZ innovative firm: strategy & business model - Pragmatic or GREEN attitude - Strategy or business model (T&W) - Entrepreneurial orientation - Focus on LT/ShT; initial price/ TCO; high/low turnover, quality 5a Procurement performance Process performance (1a: 1-4) 1. Manage Procurement activities in the four different phases Output performance 2. Realize financial firm results (e.g. cost price as % of sales / ROI) 3. Realize non-financial firm competitive results (e.g. t. t. m. / exclusivity / image) 4. Realize environmental results for customers, suppliers, society, employees, environment 5b Innovation performance Process performance (1b: 1-5) 1. Manage Innovation activities in the five different phases Output performance 2. Realize (non)-financial firm results (e.g. % of (projected) sales or criteria OECD manual 2005, p 108.) 3. Realize environmental results for customers, suppliers, society, employees, environment. Pr5b Pr1 Pr5a Pr4b Pr2a 3 non-incremental sustainable technology innovations - IP/Patented vs IP/non- patented - IP-only or more capabilities - Concept vs proven technology - Innovation type (Slaughter) - R&D based or not. Pr3 6 Innovative firm performance Financial & non- financial firm results Environment results for customers, suppliers, society, employees, environment. Pr6b Preferred option 22oct14; aangepast aug 15 2a NZ Construction macro environment - Regulation - External finance or subsidies - Industry culture - Economy cycle Pr2b Pr4a Pr6a Dominant variables Pr5c 15AUG 2015 25 Model Model

26. 1a Procurement activities 1.Specify wants/needs 2.Scout & select 3.Negotiate & Contracting 4.Manage relations with supplier(s) 1b Innovation activities 1.Develop Idea 2.Develop Concept 3.Develop Product 4.First use in market 5.Full use in market 2b NZ Construction industry (supplier) environment - Local vs foreign suppliers - New vs existing suppliers - Types of industry networks - Types of clients (Brockhoff) - Types of relationships 4a NZ innovative firm & owner characteristics - Specialised functions and complex organisation or not - Education & experience owner; (family) ownership structure - Size, formalisation / specialisation 4b NZ innovative firm: strategy & business model - Pragmatic or GREEN attitude - Strategy or business model (T&W) - Entrepreneurial orientation - Focus on LT/ShT; initial price/ TCO; high/low turnover, quality 5a Procurement performance Process performance (1a: 1-4) 1. Manage Procurement activities in the four different phases Output performance 2. Realize financial firm results (e.g. cost price as % of sales / ROI) 3. Realize non-financial firm competitive results (e.g. t. t. m. / exclusivity / image) 4. Realize environmental results for customers, suppliers, society, employees, environment 5b Innovation performance Process performance (1b: 1-5) 1. Manage Innovation activities in the five different phases Output performance 2. Realize (non)-financial firm results (e.g. % of (projected) sales or criteria OECD manual 2005, p 108.) 3. Realize environmental results for customers, suppliers, society, employees, environment. Pr5b Pr1 Pr5a Pr4b Pr2a 3 non-incremental sustainable technology innovations - IP/Patented vs IP/non- patented - IP-only or more capabilities - Concept vs proven technology - Innovation type (Slaughter) - R&D based or not. Pr3 6 Innovative firm performance Financial & non- financial firm results Environment results for customers, suppliers, society, employees, environment. Pr6b Preferred option 22oct14; aangepast aug 15 2a NZ Construction macro environment - Regulation - External finance or subsidies - Industry culture - Economy cycle Pr2b Pr4a Pr6a Dominant variables Pr5c 15AUG 2015 26 Model Model variables results 26

27. The core of the research – role of procurement Specify wants or needs Scout & Select suppliers Negotiate contracts Manage supplier relations Ideation (fuzzy) Develop Concept Develop product First use in market (testing) Full use in market (full adoption) What are the dominant procurement activities in these cells? What are the dominant variables that affect these activities? 27

28. Dominant variables & key literature 28 Hardie (2011): small entrepreneurial construction firms with successful non- incremental innovations Bos (2010): on sustainable innovation from (construction) SMEs: money, quality, environment, society and orientation towards environment. (Brundtlandt) Foerstl (2007) in general. Paik (2009) for SMEs. This will vary with Inno. Actv. (In construction industry): Rogers (1970, 1995) as used by Hardie (2011, 2013), and Cooper (2001) as used by Gambatese & Hallowell (2011). Van Weele (1988, 2010) in general; Pressey (2009) procurement activities within SMEs Hardie, Rose & Manley use several performance measures. Cooper & Kleinschmidt (1995). OECD manual (2005) Pullen open innovation in high tech SMEs. Chessbrough, Wynstra, Priess, Johnsen, Calvi, Schiele: suppliers play important role - Entrepreneurial orientation or not Several sources 28

29. Amended PGR-9 Ethical Approval Protocols Work on 2 papers Work with 3 Master students case studies 1 st case studies Journal article & writing round table 1st round table 2 nd case studies or survey 2 nd round table Write & conclude research 1 st draft ready Revised ready MAR16AUG151NOV16NOV15 Planning per 1 October 2015 (PGR-8 OCT2015) Planning per 1 May 2015 (PGR-8 APR2015) 15FEB 16MAY1515APR16 Analysis empirical research & writing Empirical research with on-going literature review MAY16 15DEC15 Progress Hanze (OCT15)PGR-8 AUT/Hanze (APR16) Acere USE PGR-8 AUT/Hanze (OCT16) PGR9 approvedConditional EA C.abstracts approved C.paper submitted Ethics Approval JUL15 SEP15OCT15 J.paper submitted? Lecturing (MBUS, MBA, MCM) C.paper submitted? No funding supervision and interaction with allied research Writing conference papers & articles JUL16OCT16JUN15 29 22 Alternating: 2 multiple case studies & 2 round-table discussions

30. Many a Road will lead to New Dilemmas 30

31. Current dilemmas on chosen methodology 1.How to use / incorporate master research? eg Bos (does mention); Harink (does not mention) Paradoxes: independent vs replication & high quality 2.How to benefit from parallel Dutch research E.g. with article “How to define effective mgmt tools” -> amend RQ4 3.How to cope with the wide variety of firms Currently: 8 – 10 case studies; 2 round-table discussions Either no saturation; or very, very narrow focus? After 1 st round of case studies -> survey? [Van Aken (2014): also depends on maturity of field] 31 Between 13:30 – 15:30 Discussion in E2.26

32. Next week – back to NZ Xmas on the Beach Finalize thesis in 2016 TXS! Questions welcome 32