This chapter begins by explaining the nature of innovation and basic models of innovation, including key stages in the process of innovation. As the construction industry is often regarded as different from other industries given its unique characteristics, innovation in construction is discussed in terms of motivation for the industry’s Small and Medium Enterprises (SME) to innovate, key organizational capabilities required for innovation, and external and internal factors critical to successful innovation. In addition, the common enablers, barriers, motivators, and outcomes of innovation in the construction industry are discussed. Understandably, as the role of clients in the construction industry is vital in many ways in driving to improve performance of projects, the chapter focuses on their role in driving innovation. The different types and categories of clients are described, as well as their roles in different types of innovations, and at different stages of innovation. The chapter also covers the role of technology in innovation and, more specifically, Computer-Aided Design (CAD) as an important technological innovation for the construction industry. At the organizational level, factors that can affect the rate of diffusion of a new technology within construction SMEs are explained. At the project level, factors that impact on innovative IT implementation and diffusion are also explained. Next, innovation and its role in enabling construction businesses to gain competitive advantages are discussed. The need to classify construction innovation and how it can encourage businesses to innovate by adopting appropriate strategies are explained through a case of Singapore’s construction industry. In addition, the need for and application of strategies, policies, and procedures to deal with IT in managing construction site processes are described in a study of UK’s leading construction companies. On achieving continuous improvement as a whole for the industry, issues relating to innovation, including reasons for the lack of it, are discussed and presented. On managing change, focus on the “people” factor of innovation, especially the need to develop capability of staff to use new technologies, is given. The chapter concludes with a summary of the main points covered on change through innovation and customer-orientation.
