Why Construction Technology Adoption is Slow

by | Mar 9, 2023

Reasons for the Construction Productivity Decline

To sum up our analysis, here are some potential causes of construction’s productivity decline over the past fifty years, and why construction technology adoption has been so slow:

  • Ever increasing number of stakeholders (too many “cooks spoil the broth”)
  • Over regulation (OSHA, NIMBYism, permitting, set asides, energy efficiency…)
  • Buildings are over customized negating economies of scale (e.g., prefabrication)
  • Lack of investment by contractors (small, family owned firms dominate)
  • Lack of investment by VCs (an unattractive market of buyers)
  • Limited competition (local firms in an old boys network)
  • Too few skilled workers (poor training programs, anti-immigrant politics)
  • HQ jobsite divide (knowledge workers vs building trades)
  • Automation only in the office, not the field and jobsites (except for smartphones)
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Regulation without paper?

Blame Stakeholders and Regulation?

Repealing regulation or removing stakeholders from projects is highly unlikely. Once their rights as stakeholders are established, they never give up their authority to say “no”. For example, zoning restrictions and “not in my backyard” NIMBYism persist even when everyone agrees there is a housing shortage crisis.

Other regulations are required because of societal impacts — such as worker safety via OSHA and environmental health via the EPA. These cannot be effectively addressed via litigation. Even when bad actors are at fault, even more litigation is required for enforcement, and the whole process can take decades.

Contractors must adapt to regulation. Other regulated industries such as financial services have. Those industries adopted digital data solutions and modern communications and collaboration technology.

Regulatory rules for specific workflows should be built into software. Companies using such software lower their compliance costs and are positioned to satisfy even increased stakeholder requirements.

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Looks complicated

Why Hasn’t Construction Automated Enough?

Construction is notoriously late and slow to adopt technology. In part, it’s because contractors already balance a dozen or more major risks on every project. Most contractor executives know what needs improvement via technology. But technology investments are just one more risk among many.

It is true that the more stakeholders there are, the more complex the data workflow and communications become. Even relatively simple, low impact decisions require a spider-web of links. Multiple stakeholders complicates every aspect of construction management.

The same is true of internal stakeholders. Application integrations inside a firm are also difficult and expensive.

Consider what it takes to integrate bidding, estimating, and accounting with the project management/ERP applications needed to build. Such integrations are very hard to get right. The financial data needs to match on both sides of the integration.

Firms can bet the farm on one vendor’s platform to meet all their needs. But only at great cost, and with long term vendor lock-in. Large project firms can better afford such new technology adoption risks. But there is little trickle-down of such expertise into the vast majority of small to medium sized contractors.

The Cultural Divide: HQ and Jobsite

It’s not that the construction industry doesn’t use software and technology. At headquarters, for back office processes, software is used by most all desk professionals. But getting field operations to change remains a big problem, even for large contractors. We believe the field adoption problem is part cultural and part managerial.

Field professionals are not desk-based knowledge workers. Experience and seniority is gained by building, not book learning. There are fewer shortcuts up the career ladder. Unions form a buffer between workers and management.

Field workers find physical tools are more interesting than data. Data and technology know-it-alls, like myself, are held in suspicion. That’s often deserved, because prior attempts were not suited to field operations and their personnel.

Missing Leadership at HQ

The managerial friction on adoption is more subtle: Field managers are rewarded on completing their projects at a profit. This means that productivity investments for the entire firm need to be made outside of project cost budgets. It shouldn’t matter if the costs are direct or indirect. Manager need to think in terms of investment and ROI, not just cost.

Allowing project personnel to select technology without oversight can make things worse. We’ve talked to some very large firms that have huge portfolios of software. They allowed field managers to select their favorites. Data integration is now hugely expensive. CTO’s become relatively powerless.

Finally, it’s an industry dominated by small firms. Small firms are less likely to learn best practices for digital transformation. In part, they are too small to afford the consultants with such knowledge.

But maybe they also lack the patience to see investments pay off and become business as usual. Maybe there is something always something tactical seen as more important requiring attention.