In recent years, tech giants have disrupted several industries. Apple transformed how we listen to music and use our phones, Amazon changed the way we read through its Kindle e-book reader, Airbnb disrupted the hospitality industry, Uber the taxi industry and LinkedIn recruiting. From this trend, it is clear that the focus would eventually shift to the construction industry. Some of the adoptions include Alphabet’s (Google) Sidewalk Labs which won a billion-dollar project to transform Toronto’s waterfront area, and Elon Musk’s The Boring Company which won its first billion-dollar contract within 18 months of launching at Chicago’s O’Hare International Airport and Microsoft, which is spending heavily on its Azure Digital Twin concept, where users leverage real-time data to virtually replicate the physical world to enhance operations of buildings across the entire life cycle. It enables increased visibility, safety, and efficiency in and around a building during its design, construction and operation.
The construction industry has over time faced a number of challenges from sustainability, to climate change to lagging productivity and financial pressure. While companies in other industries are often part of a continual race for innovating in tech faster than their competitors, the construction industry is often seen as slow to grasp technology in its processes but prefers to maintain the status quo, provided existing processes are considered satisfactory by clients and management.
Utilising digital technologies to construct, could provide answers to the challenges that the industry faces if proper budgets are allocated to using digital tools for more efficient and higher quality outputs. However, The Annual Contech Report 10th Edition (2021) looks at digital investments and shows that the construction industry has historically underinvested in technology with only 1.2% of its revenue allocated for IT, compared to a 3.5% average across industries.
Among the challenges for companies in the construction industry when it comes to investing in new technology is that there are limited financial gains in the short term, making it difficult to justify making financial commitments when operating margins are tight. This challenge has become even more acute amid the Covid-19 pandemic, which resulted in a severe downturn in construction activity globally.
A panoramic view may easily show that the construction industry is ripe for tech adoption, considering the effects of the Covid-19 pandemic and the resultant ‘new norm’. However, from a close point of view, when it comes to the adoption of technology, construction is different from other sectors because of the significant variation among projects that originates in the way projects are financed, how risks are managed and the factors that drive variation among projects.
This should however not hold investors from backing startups that are bringing robotics, data management, automation and augmented reality into the construction process. A recent study by Deloitte shows that the industry in the US spent up to $1.57 trillion last year. This increase in spending should be a green flag to investors to continue putting their eggs on the IT departments in many construction companies as the profitability and ROI are actually promising.
The ecosystem of construction technology is shifting toward integrated software platforms that better serve customer needs. The industry has continued to grow briskly with venture-capital (VC) activity rising to several billion dollars at the end of 2019 from low levels a decade ago. VC investment in construction tech outpaced the overall VC industry 15-fold through 2019, with clear indicators for continued momentum.
Asked about what limits their adoption of technology, contractors responding to the 2019 Construction Technology survey identified these Top 5:
It is important to realize opportunities for increasing ROI quickly and implement strategic changes. Investing in a dedicated tech team pays for itself by allowing employees to focus on their expertise, or “do less good.” IT will always pay for itself in the long term by improving productivity and reducing human error. Construction companies now need to consider IT as an investment, not an expense.
The impact of the 2020 recession due to the global pandemic continues to be observed across different industries. It is now more apparent than ever before the need to invest in technology tools even through mergers and acquisitions (M&A), in a bid toward connected construction capabilities. The industry landscape is now rapidly evolving as different stakeholders across the value chain realize the benefits of, and increasingly deploy, connected construction technologies. These technologies can help bring assets, people, processes, and job sites onto one platform—making everyone and everything work smarter—reducing downtime, optimizing asset utilization and efficiency, and gaining greater visibility into operations.
At the core of connected construction are emerging technologies and the data and advanced analytics that these new capabilities can enable. As the industry moves toward connected construction, developing data, analytics, and user-based insights capabilities is critical. These technologies can help construction firms support initiatives such as smart cities, urban air mobility, and climate change programs and help enhance internal operational efficiencies, reduce costs, and improve margins.
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