The construction industry has been lagging behind in productivity due to outdated practices and limited technology adoption, as highlighted in a 2017 McKinsey report. The report identified a potential for $1.6 trillion in productivity gains if the industry could overcome these challenges.
In recent years, construction-specific software tools have been introduced by companies like Trimble, Procore, and Autodesk. However, these tools, often based on a Software-as-a-Service (SaaS) model, are not affordable for smaller industry players, limiting their adoption.
The construction industry needs a base level of digital adoption, similar to how Uber required widespread use of smartphones to disrupt the taxi industry. This digital transformation needs to be driven by the owner/developer level. Companies like Schneider Electric and Ferguson are already investing in this new wave of business model innovation.
One example of this innovation is the adoption of digital marketplaces, like Partstrader in the insurance industry, which helps to identify and eliminate fraudulent practices. The construction industry faces similar challenges with subcontractors and suppliers, often leading to delays and cost overruns.
Emerging technology platforms can help solve these issues, but they require collaboration across the value chain from owners/developers and general contractors. The new procurement process will be based on transaction fees, disrupting the existing SaaS model and forcing interoperability among all participants.
Despite the complexity of the construction industry, technology platforms can help manage this complexity by unbundling the transaction process. This involves separating sales, financing, and fulfillment into its component parts, breaking down distributor exclusivity, and connecting the entire supply chain.
The dominant construction platform will likely stem from one or multiple project management systems, enabling cross-industry priorities in sustainability, traceability, and automation. These platforms operate on a transaction fee, allowing stakeholders of all sizes to participate and capture a large portion of the $1.6 trillion opportunity.
The team at Stelthē is helping industry participants identify the right companies and teams to accomplish this shift. A variety of companies, such as Suffolk Technologies, Tishman Speyer, RXR Realty, Schneider Electric, and Ferguson have already begun investing in companies like Kojo, Payzer, and others in preparation for this transformation.