Seizing opportunity in today’s construction technology ecosystem

A recent analysis of the construction technology ecosystem found that there are many new trends, solutions, and uses cases ...

A recent analysis of the construction technology ecosystem found that there are many new trends, solutions, and uses cases for technology that are changing the way we plan, design, and execute projects.

The engineering and construction sector is making a lot of changes in order to keep up with the times. A few years ago, we did some research on the technology that is being used in the industry. We looked specifically at the solutions that are being used during the construction phase of a project. The research showed us that there are a lot of new technology clusters emerging, and that industry-wide investment in technology has reached over $10 billion in less than a decade. However, we also found that there is still a lack of integrated solutions that span across three main use case clusters: on-site execution, digital collaboration, and back-office and adjacencies.

This year, we studied the entire asset life cycle—concept and feasibility, design and engineering, preconstruction, construction, and operations and maintenance. We then used this data to explore three key topics.

  1. What are the latest trends that have been found from this year's research? We looked at how the landscape has changed over the past year in terms of technology, investment, and how many different ways people are using this technology.
  2. What is the forecast for the market in the next few years? We discuss the changes we expect over the next few years, including continued fragmentation of the industry, which will lead to consolidation. We also predict that the competition for talent will intensify.
  3. How can the industry speed up its transition to a digital future? We have outlined recommendations for AEC firms, technology providers, and owners to help technology have a greater impact.

#1. What are the latest trends that have been found from this year's research?

There are three big trends that are affecting the industry: new solutions that focus on established use cases, faster investment in technology, and a growing number of promising applications.

Solutions are being developed that use established uses as a foundation.

We have been studying the construction technology landscape. We see that different 'constellations' of connected solutions are emerging around certain use cases. These constellations show us which technologies are gaining the most traction and where their impact is likely to be biggest in the near future. The most prominent constellations today include 3-D printing, modularization, and robotics; digital twin technology; artificial intelligence (AI) and analytics; and supply chain optimization and marketplaces (Exhibit 1).


Each constellation has three or more use cases. These use cases are in three different clusters: on-site execution, digital collaboration, and back-office and adjacencies. 

For example, the digital twin technology constellation has drone-enabled yard inspection as an on-site execution use case, as well as laser scanning, virtual learning, and design simulation as digital collaboration use cases. In Exhibit 1, the thickness of the lines connecting various use cases indicates that these use cases are often addressed together. In the digital twin technologies constellation, design simulation and virtual learning are strongly linked because there are more and more solutions that offer these two uses cases in combination.

3-D printing, modularization, and robotics; twin models; and artificial intelligence and analytics are three constellations that will have a big impact on the industry. Another constellation, supply chain optimization and marketplaces, is growing quickly with many new players entering the market in the past year.

In the long term, AI and analytics have a lot of potential uses in the construction industry. Machine learning is gaining some momentum as a general use case. It can be used in many parts of the construction life cycle, like reality capture (taking pictures of things) and comparing what is happening in a building with what was planned. If you use machine learning on a project that is happening now, you could optimize schedules to make sure everything happens on time and catch any differences between the plan and what is really happening sooner.

In the near future, we expect AI to become more common in the E&C sector. Few leaders have the processes, resources, and data strategies in place to use AI effectively. However, the potential impact is so large that companies can't afford to ignore it. AI methods are increasingly able to work across industries, which raises the threat of competition from nontraditional market entrants. A small number of start-ups are already using AI-focused approaches and gaining market traction.

Parts of the construction industry are beginning to use techniques that are similar to those used in manufacturing. This would mean that standardized components would be produced at a factory and then brought to the construction site. Our research finds that if these techniques are used on projects where they are economically feasible, the construction sector's productivity could increase by five- to tenfold.

Such a system would include applications such as automated prefabrication processes that turn a 2-D drawing or 3-D model into a prefabricated building component, or fabrication directly off a 3-D model or shop drawings; construction robotics such as bricklaying or welding robots; self-driving heavy machinery to make construction faster and more affordable; exoskeletons and wearable robotics to improve the mobility of workers with injuries or to harness the strength of robotic arms; and metal 3-D printing of long-lead components such as joints, enabling the production of high-performing components and more efficient, cost effective parts.

The robotics industry is starting to use new hardware innovations that let robots help out with tasks. For example, they can lift heavy objects and put them in specific places. This is important because there is a shortage of workers in many places, and also because human beings have a limit on how much work they can do. Robots can help out with tasks that would be hard for humans to do.

In E&C, productivity is increased through transparency and proactive problem resolution. This is done with the help of digital twin platforms and reality-capture solutions. These allow stakeholders to see how the project is progressing in comparison to the original design, making it easier to adapt as changes inevitably occur. Drones and satellite imagery, as well as LiDAR and photosphere based-solutions are all important parts of capturing reality accurately.

The best applications of twin models can be found in the seamless integration of 3-D models generated by drone imagery, turbocharged by live key performance indicators that are monitored using Internet of Things sensors. This approach creates an exact digital replica of a project’s physical reality, allowing us to rapidly advance data accuracy and incorporate as-built data into 3-D models for automated, real-time progress updates. This software also enables users to interact with "mixed reality" models. This is done by combining 3-D design and as-built configurations. The really exciting part about these applications is that it reduces the decision making cycle for construction projects from a monthly basis to a daily basis. This is done through full automation of the project's scheduling and budgeting updates.

Right now, it can be difficult to get the materials, equipment, and labor you need for your business. However, some startups that offer platforms for buying and selling things as well as hiring people have been growing in popularity. Some of these startups have been bought by big companies, which have quickly spread these platforms to a lot of people. These marketplaces have the potential to make the supply chain more efficient—just like how marketplaces have changed industries like retail—making businesses more productive and profitable. Construction marketplaces can improve transparency on the costs and availability of materials, labor, and equipment for future and ongoing projects. They are becoming increasingly important as more projects use prefabricated components that are made off-site. However, this area is still new and is mostly limited to North America.

Investment in technology is constantly increasing and evolving

We found that investment in construction technology companies has doubled in the past decade. Our updated research showed that between 2008 and 2012, construction technology received $9 billion in cumulative investment. Between 2013 and February 2018, that number doubled to $18 billion, largely driven by mergers and acquisitions (Exhibit 2).


The latest research shows that early-stage venture capital is on the rise. Out of 908 transactions from 2013 to February 2018, three quarters were early-stage VC. This suggests that more solutions will be ready for scaling and that high levels of merger and acquisition activity will continue. M&A activity tends to occur one to two years after late-stage VC.

In addition, the market for late-stage VC financing has been increasing (Exhibit 3). Between 2010 and 2016, there was a small decline in late-stage VC financing, but it has been steadily rising since then. This indicates that certain applications are being backed by the market and are ready for growth investments.


The use cases for this product are expanding

Last year, our research focused on technology in one stage of the life of an asset: construction and commissioning. As we looked at the entire life of an asset, we found that two stages are attracting the most growth: construction and commissioning and operations and maintenance (Exhibit 4). Other stages tend to be already established—for instance, preconstruction and back-office—while others are small or still maturing.

 Construction companies have raised the most money from investors from 2013 to February 2018. This is because they have a lot of different applications and also because they are more developed than other companies. Over time, we expect to see mergers and acquisitions (M&A) as well as late-stage venture capital investments (for example, for expanding sales operations).

The main reason people invest in preconstruction is because of the labor and equipment marketplaces. These marketplaces are very fragmented, so there will be a lot of consolidation in the future. Construction back-office is a more mature solution space, so companies invest in it through mergers and acquisitions or private equity deals. These deals usually have high values.

We put 3-D printing, virtual learning, design simulation, machine learning and deep learning in a category we call "overarching." This is because they can be used in different parts of the life cycle of a product. We found that there were not many transactions for these services compared to construction and commissioning. However, the number of companies that have been founded in this space in the last 5 years is more than any other category. The dollar value of transactions is also quickly catching up to the rest of the categories. The average transaction amount is particularly high for capital-intensive use cases such as 3-D printing.

There are two types of markets that entrepreneurs have not focused on: design/engineering and concept/feasibility. This may be because the majority of project value is found in life cycle stages that have already been explored. Alternatively, the office-based nature of these phases also means that their relevant solutions (such as CAD or BIM) are already relatively mature and sophisticated. We foresee less disruption in these stages and more continuous improvement (for example, new features for existing software).

#2. What is the forecast for the market in the next few years?

Exhibit 5 shows how many companies were started in the past 5 years in each of 38 industries. It also shows how many transactions have taken place in each industry. This data can tell you a lot about the construction market today. Four different types of markets can be seen.

  1. Talent acquisition. In the upper right quadrant, there are many new companies and a lot of machine learning transactions. This is called the "talent grab" because companies are using acquisitions to hire new talent and skills.
  2. Emerging. In the lower right quadrant, we find use cases where there are a lot of new companies but not a lot of transactions. This suggests that these use cases are going to emerge into the tech investment space in the next few years.
  3. Maturing. In the upper left quadrant, we find use cases, such as document management, with a lot of transactions but relatively fewer new companies. This suggests that these use cases are dominated by relatively established companies operating in a fragmented market. These areas may thus be facing consolidation in the near future.
  4. Established or unproven. In the lower left quadrant we find established or unproven use cases, such as enterprise resource planning. Few new companies are working in this area and there are few transactions happening. However, there are some exceptions, like laser scanning, where the use case has not yet become popular.


Increasing consolidation against a backdrop of continued fragmentation

The fragmentation of technology offerings will continue to be a problem. Last year, only 13 percent of the companies we studied had a technology solution that addressed more than one of the three clusters (on-site execution, digital collaboration, and back-office and adjacencies)—meaning that most companies are using solutions that address a very specific, narrow application.

Our research shows that more than half of companies are still using a solution to address just 1 or 2 out of 38 different uses.

Many older companies using legacy systems find it hard to integrate with technology solutions. They have a lot of processes and solutions already in place, and adding another solution seems like it would just make things more complicated. However, technology can actually be used to reduce the number of processes and solutions being used.

One reason why technology adoption hasn't happened at a large scale is because different types of software don't work together well. So more companies are looking for ways to consolidate different software so that they can work together better. While this won't fix every issue with technology adoption, it is definitely a good step forward.

Finding talented employees is difficult

Many executives are concerned about finding talented people to help them digitize their businesses. This is important because research shows that businesses are more likely to be successful if they invest in talent. This involves finding people who have the skills necessary to create a new business unit from scratch, which can be difficult because these people are rare.

#3. How can the industry speed up its transition to a digital future?

Although technology has come a long way in the E&C sector, there is still room for improvement. AEC firms, technology providers, and project owners can all do things to speed up construction technology in the coming years.

AEC firms:

  • You need to invest in talent and skill building. AEC leaders must begin to expand skill sets among existing employees as well as hire new candidates with technical expertise. You can start by looking for talent in digital native companies, even those outside the E&C industry. You can also find candidates in other industries that have undergone a digital transition. These individuals can be paired with the right industry leaders and reach in the organization to integrate new and existing expertise. To upskill current employees, firms should bring in training programs in new technologies—for instance, to train employees in 3-D printing—or set aside funds for capability building.
  • AEC firms can get involved with the start-up ecosystem in a number of ways. One way is to invest money directly into start-ups through their own corporate venture capital arm. This can be challenging, as entrepreneurs may be hesitant to take money from a large player that could conflict with their business relationships with other companies. AEC firms can manage this by exploring other ways to get involved with start-ups, such as investing indirectly through a venture capital fund or partnering selectively for piloting or codeveloping solutions.
  • AEC firms can be successful early adopters of new technology by setting aside money to experiment with different solutions. As pilot solutions prove their value, AEC firms can use a helpful acid test for evaluating the longer-term use of a technology: whether or not the project manager is willing to include the cost of the technology in the project budget. AEC firms can also partner with outside start-up companies to get the help they need. Building an in-house development team can be very time consuming and difficult, so it is often helpful to partner with a company that has specific capabilities, like product development through rapid iteration.

Tech providers:

  • Solutions in the ecosystem are often developed by looking for a problem. Indeed, we find passionate start-up founders looking for an application of their novel solution in the industry, instead of truly understanding the industry’s needs. To that end, start-ups—especially if teams are from outside the AEC industry—must listen closely to the needs of AEC firms and adapt product offerings. This effort will consist of focusing on what customers actually need; in this fragmented landscape, it is imperative to validate the real need (versus a “nice-to-have” application).
  • You will need to plan your journey to integrating and consolidating the technology ecosystem. This means unlocking real value from the technology ecosystem by integrating across multiple use cases and clusters. As the industry evolves, start-ups must forge a “co-opetition” strategy—that is, how to simultaneously collaborate and compete. This is especially true given the multiple pivots that start-ups undergo (for example, starting with one use case and shifting to a new one). Start-ups in the early stage will need to plan on an evolving go-to-market strategy.


  • Work together on a project by using one data system (CDE) that is available to all participants. This will help make sure everyone is on the same page and that no important data is missed.
  • All project participants should agree to use digital tools to participate in the bidding process. This will help improve the outcomes of the project and make sure everyone is held accountable. Having a digital project should be similar to having an integrated project delivery, which can help avoid any conflict that may come from having adversarial contractual relationships.
  • Owners need to think about how their company can use technology to save money or make more money. They should not just buy the latest and most expensive thing. They need to figure out what kinds of things will have a big impact in the long run and in the short run. Only then can they be sure that they are getting good value for their money when they buy new technology.

The construction industry cannot ignore the many technology solutions that are available today. We expect more investment, competition, and consolidation in this industry as new start-ups offer more services. As these predictions come true and new technology capabilities become available, the winners will be those who adapt quickly.

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