What Happens When Tech Enters Construction?
In January of 2010, Travis Kalanick posted a tweet looking for an entrepreneurial product manager to help with a location-based startup.
In March of that same year, the rideshare app UberCab launched. Just eight years and a small name change later, Uber appears to be driving taxis into extinction to the tune of over $70 billion valuation.
Though often viewed as the poster child of tech disruption, Uber is certainly not the only company to bring an industry giant to its knees. The examples are everywhere. Netflix has caused a trend of “cord-cutting” that’s seen 1 in 5 households ditch their cable subscription. Flight and hotel aggregator sites like Kayak and Expedia have almost eliminated travel agents. Auto-manufacturer Tesla has completely changed the way people think about electric cars and created a booming business that’s leaving the big names to play catch up.
The running theme is that a small, driven company can take down an industry titan simply by capitalizing on the tech-based opportunities they ignore.
What does this have to do with construction?
In the first part of our series looking at construction’s image problem, we’re going to explore why construction is ripe for disruption and what it might look like.
Why is Construction Ripe for Tech Disruption?
Construction currently faces the perfect storm of events. The industry has:
- $30 trillion in projected spending by 2030
The situation mirrors that of other disrupted industries: there’s a mass of opportunity, dissatisfaction with the status quo, and space for tech to drive progress. Acknowledging these issues helps show why construction verges on disruption, but we want to explore why the industry faces these struggles in the first place.
To find the roots of these problems, we need to focus on construction’s image crisis. We explored why construction's image hinders its ability to recruit younger generations, but how can a lack of youth cause so many issues? To answer that, let's look at what millennials bring to the workplace.
Born between 1980 and 2000, the millennial generation comes with a number of negative stereotypes. General sentiment pegs them as lazy, entitled, and narcissistic. Unfortunately, much like construction, millennials have a bit of an image crisis.
When you dive into the data, you’ll find that millennials are actually more productive and more driven than their elders. Let’s break down some quick facts:
This is the first generation of digital natives, individuals who grew up in the modern tech world. They are hardwired to use and apply technology in ways that drive productivity and innovation. This innate technological understanding is part of what helps industries take advantage of technology's productivity benefits. Youth employment also keeps an industry fresh, thriving, and motivated by challenging the status quo.
In short, millennials are driven, they are completely tech-integrated, they are numerous, and they thrive on productivity. Given that construction only employs 6% of the millennial workforce in the US, it’s no surprise they have struggled to keep pace with tech-driven productivity of other industries.
First, though, we’re going to look at what will happen if construction does not fix this problem.
What Will Disruption of Construction Look Like?
Katerra: changing the construction process
Katerra represents what construction firms could look like if they had a stronger focus on collaboration and technology. CEO Michael Marks moved to the construction industry after an impressive track record with a number of big tech companies, including a period of time as the interim CEO of Tesla. He has led Katerra to raise $220 million at a valuation of over $1 billion.
His inspiration for Katerra came from a developer who mentioned what a headache it was to keep track of project costs. Using his tech background, he swept into the industry with the goal of completely overhauling how multi-family housing construction happens.
Katerra's main innovation is complete control of the building process. A housing developer will come to Katerra looking to complete a project, and Katerra will design it with their software; fabricate the parts in their factory; ship them to the site; and then assemble them.
They cut costs by ordering materials for several projects simultaneously and improve performance by using tech to constantly monitor and improve their processes.
It’s a perfect mirror of the disruption seen in so many other industries. They noticed an industry that had stopped innovating and took the opportunity to turn the status quo on its head. Katerra’s business model could have been a natural progression for tech-forward, collaborative firms. Fortunately, there's still time.
Since we published this piece, the tides have turned for Katerra.
Following the COVID-19 pandemic, high costs for materials, and the bankruptcy of one of their lenders, Katerra shut down. Before this time, stories of poor management, misleading financial reports, and production issues were already circling.
However, this doesn't change Katerra's innovative approach to the building process and the value of emerging tech within the construction industry.
Other companies - like FactoryOS, Blox, Mighty Buildings, and Canvas - offer exciting new opportunities to streamline construction and cut costs.
Though Katerra may be over, AEC innovation is not - it's accelerating.
The Boring Company: cutting out the general contractor
The Boring Company is an Elon Musk venture. Fed up with “soul-destroying traffic,” the famous entrepreneur decided that tunnels were the solution to urban congestion. The one limitation? Current tunnel construction methods are far too slow and expensive to make it practical. Meaning, the construction industry stands in the way of Elon Musk’s progress.
To realize his idea, he's decided to change construction: the Boring Company’s primary mission is to reduce the time and cost involved with building tunnels. And, he’s going to be hiring the best and brightest away from the construction industry to get it done.
The most interesting aspect of The Boring Company's disruption is the inspiration behind the company wasn't related to construction. It was created wholly to enable another idea. To rephrase, Elon Musk wanted to build something, but was so unimpressed with the current state of tunnel construction, that he decided it would be easier to create his own construction company than work with a current contractor.
Already, The Boring Company has completed tunnels domestically and is involved in talks concerning international projects.
While The Boring Company doesn't precisely follow the traditional pattern of industry disruption, it does illustrate the consequences of construction's declining productivity and stagnant innovation. If construction can't meet the needs of the most forward-thinking companies, they will find another way.
How Does Construction Handle Disruption?
With several companies already moving to overturn the industry standard, if current players aren’t feeling the heat, they should be. The next few years are going to be trial-by-fire; if you don't adapt, you will get pushed out.
The next two pieces in our series are about the biggest changes construction can make to catch up to the newly developing standards of tech and innovation.
We look at sharing vs. collaboration to understand how construction does the former without engaging in the latter, and why that creates problems.
Then, we dive into the nuts and bolts of how construction can begin to shift its image to attract talent that will drive the kind of innovation we see at Katerra and The Boring Company.
Be sure to also check out our industry reports for deep dives into tech disruption.