Between 2013 and February 2018, cumulative investment in construction technology totaled $18 billion, or double the amount invested during the previous five years.
A new analysis of the construction technology ecosystem by McKinsey & Co., the global management consulting firm, identifies where that investment is being directed, how the market is likely to evolve in the next few years, and how the construction and engineering industries can accelerate their transitions into a digital future.
McKinsey has expanded its study to include the entire asset life cycle across more than 2,400 technology solutions companies—from concept and feasibility, to design and engineering, preconstruction, construction, and operations and maintenance. In doing so, McKinsey identifies 38 “use cases” that are spurring the creation of new companies and attracting investment capital.
Among the key trends has been the emergence of constellations of solutions around established use cases. The most prominent include 3D printing, modularization, and robotics; digital twin technology; artificial intelligence (AI) and analytics; and supply chain optimization and marketplaces.
McKinsey sees all of these are being “poised to be transformational for the industry.” AI, in the form of machine learning, is gaining momentum as an overarching use case, particularly in reality capture. “Indeed, by applying machine learning to an ongoing project, schedules could be optimized to sequence tasks and hit target deadlines, and divergences from blueprints could be caught closer to real time and corrected,” the report’s authors write.
While the report foresees only modest market penetration in the immediate future, “the potential impact [of AI] is so large that the industry can no long afford to ignore it.”
As for 3D printing, modularization and robotics, McKinsey’s research finds that consistent use of these techniques, on projects where they are economically feasible, “could boost the sector’s productivity by five- to tenfold.”
In fact, one of the “most exciting” applications of digital twin technology invnolve the seamless integration of 3D models generated by drone imagery.
McKinsey is less sanguine about the near-term growth of supply-chain optimization and marketplaces, observing that it’s still “nascent and limited to North America.”
‘Cross-cutting’ technologies could soar
Over the past five years, investments into construction technology have fallen into four quadrants (see chart above), which McKinsey further breaks down by user cases to suggest where future opportunities might be most fertile. Image: McKinsey & Co.
From 2013 to early 2018, there were 908 investment transitions for construction technology, 75% of which involved early-stage venture capital. Late-stage VC was also on the rise, which McKinsey suggests indicated that certain use cases were ready for growth financing.
Construction remains the highest invested phase of the asset life cycle. It is also relatively mature; only one-third of companies in this phase are newcomers. Preconstruction and back-office phases are also garnering large investments.
McKinsey notes that “cross-cutting technologies” are gaining momentum because of their applicability across different stages of the life cycle. These include 3D printing, virtual learning, design simulation, machine learning, and deep learning. “The number of companies founded in this space over the past five years exceeds any other category, and the dollar value of transactions is quickly catching up with the rest of the categories,” the report states.
The report also cites two untapped markets: design/engineering, and concept/feasibility. There are various explanations for this, one being the office-based nature of these phases “means their relevant solutions (such as CAD or BIM) may already be relatively mature and sophisticated.”
Consolidation could spur investment
The report states that industry fragmentation is one of the biggest challenges for companies that want to engage with technology solutions. And the lack of use-case integration “is one of the drags on technology adoption at scale.” Consequently, more companies are exploring the potential to consolidation solutions that address multiple use cases.
The field of construction technology is still highly fragmented, and integration of technologies that can be integrated across different uses will present investment opportunities. Image: McKinsey & Co.
McKinsey offers its prescriptions for moving the industry quicker into a digital future, starting with investing in talent, which can increase the odds of digitization success by 2.5 times, the report estimates. Actively engaging with the start-up ecosystem and establishing conditions that make piloting and scaling more likely to succeed can also accelerate the industry’s transformation.
Tech providers need to listen closer to end users and adapt, and proactively plan for integration and consolidation. Owners should enforce a strong and sharable data foundation, align on supportive contract strategies, and identify and focus on critical user cases.
“Gone are the days when the construction industry can ignore the burgeoning set of technology solutions across the asset life cycle,” the report concludes. “We expect investment, competition, and consolidation to continue to accelerate, as use cases and start-ups serving the industry proliferate. As predictions come to life and new capabilities infiltrate the field, team, and office, the winners will be the ones that adapt—sooner rather than later.”
Related Stories
| Dec 2, 2011
What are you waiting for? BD+C's 2012 40 Under 40 nominations are due Friday, Jan. 20
Nominate a colleague, peer, or even yourself. Applications available here.
| Dec 2, 2011
Legrand joins White House initiative to spur energy efficiency in commercial buildings
Company agrees to aggressive energy savings and reporting.
| Dec 1, 2011
Ground broken on first LEED Platinum designed school house built by volunteers
Phoenix public school receives the generous gift of a state-of-the-art building for student and community use.
| Nov 29, 2011
Report finds credit crunch accounts for 20% of nation’s stalled projects
Persistent financing crunch continues to plague design and construction sector.
| Nov 22, 2011
Report finds that L.A. lags on solar energy, offers policy solutions
Despite robust training programs, L.A. lacks solar jobs; lost opportunity for workers in high-need communities.
| Nov 22, 2011
Saskatchewan's $1.24 billion carbon-capture project
The government of Saskatchewan has approved construction of the Boundary Dam Integrated Carbon Capture and Storage Demonstration Project.
| Nov 18, 2011
Centre for Interactive Research on Sustainability opens
Designed to exceed LEED Platinum, the Centre for Interactive Research on Sustainability (CIRS) is one of the most innovative and high performance buildings in North America today, demonstrating leading-edge green building design products, technologies, and systems.
| Nov 15, 2011
Suffolk Construction breaks ground on the Victor housing development in Boston
Project team to manage construction of $92 million, 377,000 square-foot residential tower.
| Nov 14, 2011
303 East 33rd Street building achieves LEED-NC
The 165,000 sf 12-story residential building is the first green development to be LEED certified in the Murray Hill neighborhood of Manhattan.
| Nov 11, 2011
Streamline Design-build with BIM
How construction manager Barton Malow utilized BIM and design-build to deliver a quick turnaround for Georgia Tech’s new practice facility.