STO Building Group — Q&A with Chief Innovation Officer
STO Building Group has recently shot up the ENR rankings , amid a flurry of mergers and acquisitions, to become one of North America’s largest building contractors. The firm’s founding company, Structure Tone, is based in New York City, but the organization has rapidly expanded their footprint since their founding in 1971.
Rick Khan has recently come on as their Chief Innovation Officer and they’re now one of the few construction companies to have a C-suite level executive charged with driving innovation into the business. We talk here about the challenges construction companies face with innovation and how he plans to build towards the future at STO Building Group.
With STO Building Group, you’re coming in as their new Chief Innovation Officer. What do you see as your next steps in the next six months? Next year? And then five to 10 years out? How are you charting that trajectory?
That’s what I’m neck deep in right now. The innovation program is really around developing our people. It’s really around culture.
Over the next six to twelve months, the plan is to build this people-powered engagement process. The innovation process. And it’s not about technology — it’s about teaching people a set of tools to take on challenges, understand the problems, form teams to actually solve the problems, and then get to a solution point where it can be invested in and developed into a real solution.
More long term, in terms of diversifying our innovation portfolio, we have a function called AEC Angels. This is an investment fund made up of Syska Hennesy, Thornton Tomasetti, SHoP Architects, and STO Building Group. It invests in early stage startups from seed to Series A. The other is our M&A strategy, which STO Building Group has been doing for quite a number of years now, that’s focused on innovation at the business model level.
You’ve spent your career in construction. Early on, you were involved in wider acceptance of BIM and able to see how transformative ideas can really change the way we do work. How does that impact your view of construction innovation today?
Well, it’s interesting. I started off in BIM with the last organization that I worked for, and helped build their Virtual Design & Construction (VDC) program. I’ve always viewed VDC as innovation because it’s improving the way our project teams deliver projects. The coordination process gets improved and it’s creating a better way of doing what we do — that is innovation whether it’s incremental or otherwise.
In building the program, it was really around converting people. The technology was there, but it was hard to get people to change their behavior and leverage these new tools. I started in 2005 and now (17 years later) VDC is finally becoming more and more standard practice on large jobs.
What do you think it is about our industry? I always like to ask what the challenges are within construction that makes it unique compared to other industries. I have my own ideas around this and I think finding common ground on these challenges is important for us to drive things forward in the industry.
That’s a good question. There’s multiple levels where you have the project level and the challenges they face; then you have the company level and how we interact with the industry, how we work with trade partners, how we work with vendors and customers and design teams; and then there’s the industry piece.
At the industry level, one of the main challenges is the siloed nature of construction. Most other industries have a handle on their supply chain and logistics, but we stumble on that quite a bit — and it’s because of these silos that exist.
I think one of the things that will help us get past those silos is new forms of collaboration, whether it’s design-build or integrated project delivery (IPD). It’s more than the contract type — it’s about how do you build relationships that are focused around common problems.
A good example is target-value design where you create component teams, and you’re working on a scope of work with a set budget and a common set of goals. It’s not only about cost and it’s not only about schedule. It’s the collaborative nature that will help break down silos.
One of the other challenges, if you look back at our history, is that no one sells the white-collared side of construction. Growing up, my dad was a plumber and construction was just about the field. No one was talking about how do we manage large scale projects? How do we manage multiple trades? How do we drive innovation by solving real problems in the field?
Where we got talent back in the day was through word of mouth or from people really interested in working with their hands. It wasn’t focused on innovation in the industry. It was around replicating labor to teach them how to do a series processes and implement those repeatable processes.
Today, projects are becoming more complicated — schedules are becoming tighter, cost is becoming more of a problem, and supply chain issues have caused a massive disconnect that needs to be reconnected. So as we look at finding new talent, it’s very diverse now. We’re starting to look at talent from different industries in order to bring in diversity of thought. New talent like computer scientists and data scientists.
Building up business competency around new technology is a challenge and having that diversity of thought is super important. I’ve witnessed it firsthand with a number of construction clients implementing digital transformation and finding field influencers interested in new tools & new ways of doing work. What’s your strategy around those type of groups?
We have a really large data strategy and digital transformation initiative that we’re spending tens of millions of dollars on to really push how we digitize our workflows and drive efficiencies. It helps us identify where the key priority business cases are that need to be transformed digitally so we can learn from and leverage A.I. What’s happening is that data strategy is broadly helping to inform what our priority business problems are.
We’re also reaching out to all of our Centers of Excellence & Innovation, which are communities of practice for operations like Preconstruction and VDC, and we’re soliciting main challenges from those communities. These communities of practice are aligned with our strategic objectives and they understand which problems need to be solved and when.
The way innovation is going to play a role is helping these groups really tease out the problem statement, really understand the business process, where the gaps are, where the opportunities to bridge those gaps are and where the opportunities are to rethink our processes.
When it boils down and when you analyze the challenges, it’s really around communication, collaboration, and decision making. This is a marathon that we’re running. This innovation program and diversifying our portfolio is a marathon. We are building the foundation and infrastructure to make sure that our people will be prepared for the future.
Nate Fuller is Managing Director of Placer Construction Solutions, advising leadership teams to transform their organizations in ways that improve performance and agility at the field level.
He provides construction companies with a field assessment that delivers transformative information about their field operations and is proven to accelerate innovation & technology adoption for Top ENR contractors.
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