Skip to Content
Subcontractor Performance Risk

Challenges of Construction Tech Adoption

Cheri Hanes | November 13, 2023

On This Page
A laptop and orange hard hat sitting next to each other on a wooden table at a worksite

For most of my career in construction, no one had an Innovation and Technology department; we barely had IT support. When I look back at that time, it's easy to see how much has changed and how far we've come as an industry. Now the pace continues to accelerate, and keeping up can be a major challenge.

Why Has Construction Been Slow To Adopt Technology?

There is an impression out there that construction is stagnant when it comes to innovation. And, if you look at historical information, that appears to be true. However, the data used to support that assumption is old—it's from 2010. The biggest problem in tech adoption in 2010 was that there WAS very little tech, so it's no wonder we were stuck. That has changed in a BIG way.

If we look at what is currently happening, a different picture emerges. Projected funding raised by construction startups in 2022 topped $8.8 billion. That's quite a change. One of the biggest problems now is having too many potential solutions to sort through; it's important that construction firms begin this journey with the right focus.

In some ways, innovation is counterintuitive for construction. This industry is really good at figuring out processes—finding the best way to build a thing—and then formalizing it so they can be repeated. That's been key to success in construction, and we're good at it. So, we're conditioned to believe that construction is all about perfecting and repeating a process forever, with no deviation.

Innovation is not that: it is a constant, iterative, and disruptive change. Innovation starts with the desire to change, to break things, and to fail fast and learn from it. It's quite a different perspective.

Challenges of Tech and Innovation

It is important that the construction industry, which is so good at doing one thing—building great things of all sorts—think about things a little differently. To do that, let's look at two of the challenges of tech adoption and innovation in construction.

  • Too many options, not enough solutions. Which techs could really make a difference, and which are just noise?
  • Making the business case. What's the return on investment (ROI) on innovation and technology? This is interesting because there is not just one type of ROI, and it isn't immediate.

To help answer some of those questions, we developed our "Construction Ecosystem" with a goal to offer solutions. It includes the following.

  • A preferred partners portfolio. This portfolio includes curated technologies that we believe can help our clients reduce risk, promote sustainability, and grow their businesses.
  • Risk benchmarking services. These are designed to help clients advance risk management through comparative assessments and personalized recommendations.
  • Thought leadership. This promotes a culture of innovation in construction through educational content, peer knowledge networks, and knowledge-sharing workshops with a goal to elevate the industry.

The ecosystem was developed with a mission to advance construction risk management through partnership, innovation, and invention. From all these efforts, we have a wide view of the challenges related to technology adoption in the industry, and we love to share what we've learned as a result of these efforts. Today, based on what we've learned over the last 4 years doing this, we're going to try to answer some of those questions.

How To Find Your Technology Adoption Focus

I'd suggest the first and most critical step is to understand why a tech makes sense for your organization and start from there. This requires some organizational soul-searching but is very worthwhile.

This focus does a couple of things: it helps make it clear why you are adding the technology to your process (which will also be compelling to the people who are actually in charge of making the tech work for you) and it ensures the outcomes and data you get from the tech will be meaningful to you. So, start with the problem. Start with why.

Understanding the ROI of Technology

Once you understand why a tech solution makes sense for you, it's time to look at the two pieces of the ROI of technology: the value proposition and the way in which it affects risk.

The Value Proposition

The value proposition can in turn be broken down into two discrete parts: the core value proposition (what the tech does) and the data value proposition (what you can learn from the data produced by the tech).

The core value proposition is tied up in how a technology improves an actual risk through its function. This is the more important of these two because, if the technology solves an actual problem you have, the data you get from the technology will necessarily be useful to you. If not, it probably won't. There are many technologies and technology adoptions that put the cart before the horse by focusing on the data first, but that is backward. Technology needs to solve a real problem first, and then the data that follows will necessarily be valuable.

How Tech Affects Your Risk

The second piece of the ROI is the size of the risk and how technology impacts it. There are two theoretical ways in which technology does this: through loss prevention and loss reduction.

  • Loss prevention. These are technologies that prevent an incident. As an example, consider water mitigation technologies: there are technologies that detect unusual activity in the flow of water in systems and shut off a valve if something is not right, which prevents a loss. That's real loss prevention.
  • Loss reduction tools. These are water technologies that identify that there is water somewhere it shouldn't be by using a sensor, which, when it gets wet, lets someone know. Someone still has to go to the site, find the valve, and turn it off. Clearly, it's better finding out on Friday night rather than Monday morning that you have a leak, but in the time it takes for a human to respond, damage still occurs. This reduces risk but doesn't prevent it.

Each has its place, and risk managers, together with their Innovation and Technology departments, must decide which risks are big enough to spend money on and how much should be spent. If a firm starts with these considerations in mind, works to understand why a technology is valuable to them, and then looks at the value proposition to understand just how great that value may be, the decisions they make will be well fitted to the risk tolerance and needs of the organization. And that is the genius at the intersection of risk management and innovation.

Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.