Why is the construction industry so backwards? There is no doubt the construction industry underperforms when it comes to technology. Other industries have undergone dramatic transformations and have left construction as an industry floundering. In fact the 2020 Australian Bureau of Statistics figures show construction being leapfrogged by forestry and transport to be dead last on the ABS innovation index. Some would say it is inevitable and just the way it is but I would argue that it doesn’t have to be this way and that flawed perceptions and misguided thinking are setting the construction industry back.
Here are 7 reasons why Construction is so backwards when it comes to innovation.
1. Lack of Good Solutions
A widely held view is that - construction companies simply don't know how to use technology, and that this is why the industry is lagging behind other sectors in terms of digital adoption. However, this couldn't be further from the truth. In reality, construction companies are well aware of the benefits that technology can bring to their operations, but the quality of solutions is just not there. In the coming points we’ll unpack the factors that lead to poor technology outcomes.
2. Misguided Perceptions and self defeating prophecy
The construction industry and its workers are perceived from the outset as being behind in terms of technology. The industry is often associated with manual labour, uneducated workforce and an ingrained popular perception that builders and -tradespeople are technologically backwards as a user group. This is just plain wrong and there is no evidence that construction workers are any less capable of using technology than any other group save the tech industry. While it is certainly true that some builders and -tradespeople are severely limited in their abilities in tech - so are some lawyers, doctors and accountants who can barely use email and there is no evidence that the average construction worker is disengaged or incapable when it comes to technology. I will argue that it is the quality of the tech solutions available that is the problem.
3. Failure to attract talented software engineers and developers
The construction industry still has a long way to go when it comes to technology creation and one of the main challenges is the lack of tech talent and investment committed to the industry. Because the construction industry is not seen as "sexy" enough, it is often difficult to attract the best and brightest software engineers, architects and product developers to work on tech projects for construction. Construction is not a fashionable industry to invest in either and as far as i can tell never really has been in the same way as say green-tech, Crypto, AI, ridesharing or anything else that took off as a sector.
4. Lack of understanding of construction market
The big miss by technology companies and product developers is understanding that most construction businesses are small. In fact by turnover 56% of construction businesses in Australia are Small (medium and large account for the other44%). Compare this to Retail - 65% are large companies, Mining - 80% are large companies and yet most construction related innovation to date has focussed on enterprise level. This means that the most important sector where the greatest productivity gains are possible remains dormant.
5. Lack of understanding of small project businesses
Coupled - with the fact that the tech and consulting industry doesn’t understand the market dynamics it also doesn't understand the production dynamics. For a start small projects are not like shrunk down versions of bigger projects. On a small project a significant element is improvised and there is limited return in some of the functions a big project would need like detailed resource planning and detailed programming. Building sites also tend to operate to a large extent as satellite business units separated by geography. What does this mean to software development? - Shrinking down enterprise level software and adapting it to smaller businesses is like shrinking down a cruise ship designed to carry 2000 passengers to one one hundredth so it can carry 20 passengers - when you shrink it down it becomes a nice scale model but is not suited to carrying anything.
6. Incumbents constraining competition
This is particularly true of accounting software where MYOB and Xero enjoy a virtual duopoly in Australia. They are both amazing sales businesses but have been over the years slow to innovate as they have captured market share and aimed to establish an ecosystem. Both are great products but neither are particularly suited to modern project accounting and yet most software products need to adapt to their standard.
7. Ineffective and backwards industry bodies
I’m a member of the Master Builders Association of NSW - the biggest industry body in Australia representing the construction industry. I tried to engage Master Builders NSW on technology, I started by asking who is the responsible person for innovation within the organisation. Not only wasn’t there one but I got a few messages back along the lines of - “we don’t do that sort of thing” - like I’ve asked about something really really odd. This is not an uncommon experience. Industry bodies are rusted on, static organisations, they have failed to lead on innovation.
The future of construction is digital and the industry is due for a seismic shift. Construction companies are aware of the benefits that technology can bring to their operations, but the industry just isn't seen as fertile ground to attract the necessary tech talent and investment……..yet.
Therefore, it is important to change the perception of the construction industry as a whole to attract the best and brightest engineers, developers and investors to work on tech projects for construction. Only then, the construction industry will be able to fully realise the benefits of technology.
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