99 Problems But Ideas Ain't One
Challenges with construction industry structure and culture present vast opportunities for entrepreneurs to build construction technology startups.
I was admiring high rise construction in New York City… but also wondering if the leave out on the right tower was intentional or if the glazing was late.
In the previous article, I said “most construction professionals want to be more productive, but are trapped by contracting methods, cultures, or organizations that make it hard to adopt new technology,” and promised to dive into some opportunities in the construction tech space. I am making good on that promise. Understanding the characteristics of the construction industry will help set the stage for challenges and opportunities. Below, I highlight seven of those challenges and offer some ideas for where to start.
Challenge 1: Construction is a low margin (mostly less than 10%), services business
Opportunities: Today, there are still a lot of administrative tasks and double entry in almost every role on a construction project team. A contractor’s job includes a lot of digital paper pushing (ugh emails and PDFs). There are opportunities to build tools that automate workflows such as: drawing review, quantity take-off, bid leveling, RFI and submittal review/processing, contract review, quality control, etc. There are also opportunities for tech-enabled service models or companies that can greatly increase operating margins by building internal software to grow and scale the services business.
Challenge 2: Construction is a competitive business and fees (mostly less than 5%) have continued to trend downwards for architects, engineers, and contractors
Opportunities: Let’s improve the process to better evaluate and choose the vendors that service a construction project. One way to do this is by solving a key pain point in the process today, namely lack of transparency in the bidding and proposal process. Potential solutions include creating a new contracting method or a bid process that includes qualitative components. For example, the owner can score contractors based on technology adoption or take personnel compatibility into consideration. Additionally, technology can assist with analyzing whether bids are accurate and help avoid scope gaps.
Challenge 3: The construction project team is made up of people from all generations, bringing together different cultures and beliefs on site
Opportunities: A successful project requires effective communication and documentation on the construction site. Tools should be built for both people who didn’t grow up around computers and people who grew up around smartphones. There are still many opportunities for tools to replace existing software solutions with new UI/UX that works well for every type of end user on site. Additionally, there are opportunities to understand different communication channels and media that work best for communicating within the office, between the field and office, across an organization, between companies on the same construction project and everything in between. Hint: Slack and Teams don’t work well for construction project teams because it isn’t just about messaging back and forth, it is about communicating about documents - you need the ability to quickly add reference documents and mark them up, not just send a message - and across many different companies, teams and projects.
Challenge 4: Most construction project fees are based on billable hours
Opportunities: We have seen a few companies help track field labor and material. However, most timecard related tools look the same and are still clunky to use–they are purely a digital version of a paper form. There are opportunities to rethink how time is tracked on a construction site ranging from architects to project engineers to field laborers–and whether or not a time card is the solution at all! There are also opportunities to rethink pricing structures for workflow software and/or enterprise software to better accommodate billable hours. For example, looking at performance or utilization rather than per seat. Lastly, there are opportunities to better align incentive structures on a construction site.
Challenge 5: Most construction projects are understaffed to remain competitive during the bid process
Opportunities: There are opportunities for construction projects to leverage historical data or current data to better forecast resources to bid project general conditions more accurately. There are also opportunities to decouple labor and material to better understand productivity and staff workload by task to better allocate construction field resources.
Challenge 6: Most construction sites are in locations lacking power, water or connectivity–basically in the middle of nowhere
Opportunities: There is a massive opportunity to solve the lack of jobsite connectivity. Gmail doesn’t work on a construction site many times because, often, office trailers rely on cellular connectivity (there is no wifi infrastructure built yet!). If you’re out on site, the concrete walls may block all cell service. This problem is still unsolved… and I have been looking for a solution since the early 2010’s when I was tasked with bringing BIM to the field.
Challenge 7: On any given project, there may be up to 200+ different companies working as consultants or contractors all needing access to differing amounts of information — collaboration is a challenge due to different tools that each company may use
Opportunities: Procore, Autodesk BIM360, PlanGrid, Viewpoint, Aconex, etc. have been called “collaboration tools.” There are opportunities to recreate some of these data repositories with a data architecture that allows for individual companies on project teams to access the same database, while owning the data they share, without doing double entry into their own instance of the tool AND the project’s instance of the tool. Additionally, there are opportunities to manage the documentation and handover process between team transitions – primarily during preconstruction and commissioning / turnover. Construction is not just about building the building, it is also about the 80+ years lifetime of maintaining and servicing the building as the tenants and building use change. We need to do better than scans of red-lined PDFs that don’t align with the BIM handed over!
The opportunities in this article are still very high level and may need to be solved for multiple stakeholders in the construction value chain (GCs, subs, architects, etc.). There are some startups already tackling some of the opportunities above, though there is no clear winner and there may be multiple winners. At this moment, I can’t (but maybe I will in the future) write full investment memos on the opportunities, but I would be more than happy to help answer any questions or guide your thinking on any of the topics above. There are some specific pain points that I’m passionate about that I will dive into much more detail in future articles. Stay tuned!