Expert Commentary

Construction Industry's New Priority: Greater Tech Adoption

If there are any silver linings to emerge out of the current global pandemic, greater technology adoption across industries will be one of them. In fact, an October 2020 survey by McKinsey found that the global pandemic may have pushed tech adoption across industries ahead by as much as 6 years in the last year.


Construction Quality
February 2021

The construction industry will be one of the industries to gain some of the biggest benefits from embracing new technologies. While it has lagged in the past, contractors' tech adoption is showing more progress and promise. According to commercial real estate services firm JLL's recent The State of Construction Tech: 2020 report, in 2020, because of the pandemic, the construction industry adopted more technology in a year than what would have normally taken three. As construction was one of the first industries to get back to essential work after lockdowns, it was imperative for construction companies to adapt quickly to newer ways of working that required social distancing and other precautions. Technology provided very viable options.

Why It's Crucial

The pandemic is not the only issue driving the need for greater tech adoption in construction. Consider that construction is the biggest industry in the world, representing 13 percent of the global gross domestic product. In the last 2 decades, however, it has shown only slim growth, approximately 1 percent, in productivity. That's compared to 2.8 percent productivity growth in the world economy or in comparison to another industry, like manufacturing, which has seen 3.6 percent growth in productivity.

Undoubtedly, construction is an inherently risky business. According to the Bureau of Labor Statistics, some 5,250 workers died on the job in 2018, 20 percent of which were construction workers. In addition to overall work safety issues, contractors have had to contend with labor shortages, aging workers, and new construction delivery methods. After the pandemic, many indicators suggest that labor shortages will worsen.

More businesses have looked at new technologies to become more productive and competitive. While the construction industry has lagged, there is growing interest among contractors to adopt technologies that can help them shorten schedules and use labor more efficiently to address their unique risks and give them a competitive advantage in a highly competitive marketplace. And, if they adopt the right technology, construction firms will have access to more data to help them make better decisions, boost productivity, improve jobsite safety, and reduce risks.

Why Tech Adoption Lags

Even with the knowledge that tech adoption can be incremental along this spectrum, technology adoption in the construction industry meets some resistance. Up until now, overall tech adoption among contractors has remained low. A 2019 FMI-Procore study found that 70 percent of companies have not created a technology roadmap. The survey results indicated that many companies lag in tech adoption because they are not aware of viable technology solutions that address their top concerns in a manner congruent with their business goals. In McKinsey's recent study, when respondents were asked why their organizations didn't implement these changes before the pandemic, a little more than half said tech enhancements weren't a top business priority.

The construction industry has certainly been distracted by other priorities. In many instances, the tech adoption challenge comes down to limited resources—time, investment, and people. More specifically, their tech adoption hurdles include the following.

  • Tight profit margins. Tech implementation generally requires some up-front investment. Many contractors remember the last economic downturn that contributed to their already thinned down profit margins all too well. Even if a new tech solution promises savings down the road, it can still be a hard sell to invest what remains of often single-digit profits.
  • Technology overload. The number of new technologies aimed at the construction industry is overwhelming. Funding in US-based construction technology startups surged by 324 percent, to nearly $3.1 billion in 2018 compared with $731 million in 2017, according to Crunchbase data. The challenge is finding the ones that address a contractor's problems or add value to their operations or create efficiencies.
  • Staff expertise. Vetting technologies to find the right one and then implementing them on the jobsite requires time and resources. Many contractors do not have tech specialists that can do the legwork required to find the technologies that meet their needs.
  • Culture. Change is hard. Some organizational cultures are more resistant to change than others. Much of the construction industry operates just as it has operated for decades; old habits can be tough to break.
  • Jobsite challenges. Inevitably, workers on the jobsite can make or break a technology's effective implementation. Without appropriate frontline buy-in and support, even the best tech tool can fail without ever getting off the ground. In another study—FMI-Plangrid's Construction Disconnected Report 2018—while the top choice of considerations for technology investment was the needs of the field staff with 52 percent of respondents, only 28 percent considered receiving feedback from potential users of new technology before investing in it. This finding suggests that firms are not fully testing the technology with workers who will use it—before it's purchased. If workers do not embrace and buy into using new technology, adoption does not go smoothly or is totally halted.
  • Compatibility. All industries contend with legacy systems that they have come to rely on for years or even decades. As tech tools emerge and look to be added, compatibility with other solutions becomes critical.
  • Complexity. While technologies have a lot of potential to change the way a contractor operates, they will change the way contractors need to operate. Are they ready for that? The more tech implemented, the more complex the environment can become, requiring additional investments in infrastructure, staff, and more.

Best Practices for Tech Adoption

Fortunately, some contractors have been putting more emphasis on tech adoption and are working with their business partners, like their insurers, to find the best solutions. Construction insurers are interested in seeing greater tech adoption because new technology solutions are showing great potential in helping contractors manage enterprise risks. For instance, water damage in the final stages of construction projects all too often leads to costly insurance claims. If available technology could help contractors detect water leaks early, in real-time, costly damage and project delays could be averted, which is a big benefit for all involved.

Partnering with insurers, and even in some cases technology startups directly, many contractors are helping guide and define technology to better suit their needs. This is leading to greater adoption, especially among larger construction companies, and helping lay the groundwork for others to follow.

As a result, we are seeing some best practices emerge that can help in the adoption process. Here are some to consider.

Find the resources.

  • Dedicate. Commit to hiring and training dedicated resources.
  • Upskill. Use your innovation strategy to attract next-generation talent.
  • Commit. Earmark 1-plus percent of your budget to technology.
  • Partner. Leverage research, studies, and testimonials from industry leadership in technology to support your process.

Make tech adoption part of your business strategy.

  • Buy-in. Engage ALL stakeholders (execs and field staff) in the strategy and development.
  • Minimize disruption. Opt for technologies that capitalize on your current processes.
  • Fail fast. Use pilots to validate and scale.
  • Measure. Define metrics for success.
  • Invest. View technology as a future-focused asset, not an expenditure.
  • Roadmap. Develop a long-term strategy for full integration into your business.

Pay close attention to implementation.

  • Crowd-source your tech exploration.
  • Incentivize engagement with competition and gamification.
  • Seek and act on feedback from the users—solicit champions.
  • Benchmark your progress in technology adoption against your peers.

Final Thoughts

Technology is set to change the construction industry. New and emerging technologies are showing the potential to reduce risk, improve productivity, and increase profitability on construction projects. It's not going to happen overnight or without some work. It's a process, and we can all learn from each other.

Tech adoption is a feedback loop. Contractors must ingest technologies, test them, vet them, implement them, and support implementation with feedback from the users and their workers and incorporate that feedback into the process of continuous improvement for the next tech adopted.

Contractors need to be open to tech but not adopt tech for tech's sake. Technologies—from artificial intelligence to sensors to wearables—are offering contractors opportunities to pinpoint, understand, and manage risks on the jobsite and across their entire operation.

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.

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