Why did the construction industry miss out on the digital revolution?

The construction industry is a giant. In the UK alone it contributed £104 bil. to the countries economy. That makes 6.5% of its GDP while the industry provides 6.2% of the country’s labour. While the UK construction industry is particularly strong, there are similar numbers for other countries. The respective numbers for Germany are: 4.8% of GDP (approx. €70 bil.) and 5.7% of the jobs. With these numbers already being impressive, they are dwarfed by the booming economies of China, India and the USA. In respect to global output, construction has to be regarded as the world’s biggest industry.

Virtually nothing has contributed as strongly to the economy as information technology and the internet. As the average human nowadays, you might be surrounded by tech gadgets every day. Making a while guess, you might even right now be using a computer or a smartphone. After a first wave of digital equipment hit the market in the 80s, mainly targeted to create improved typewriters, a second wave hit the IT departments of corporations. With ERP and CRM systems, resources and business partners could be managed on a digital basis. As we are all aware of, we are currently in a third wave, that completely connects all corporate functions and puts them together in the cloud.

But are we all aware of that? Despite its unsurmountable size, the construction industry seems to stumble adopting even the most basic pieces of software. It is not an exception to see typewriters sitting on desks of construction executives. Of course there are attempts by entrepreneurs and innovators to bring the countless benefits of digitalisation to this industry. Unfortunately, companies that produce software for construction fail within the first 4 years with a probability of 53%.

The problem is not a real estate one though. With smart homes now trending, residents and landlords are eager to adopt to technologies that help them save energy or improve the living experience. An entirely new movement is “smart living”. It tries to create the totally connected home. And there appears to be a market for that. So what are the reasons that the construction industry is lagging behind dramatically?

Reason 1: Trust

The construction industry is analogue for a reason. Much of the business is determined by the network of the market participants. Contracts are often closed on a handshake basis. Moreover, constructors often have a set of subcontractors they already worked with and whom they trust. Those have to be even more reliable than the everyday handyman. Due to the importance of trust and personal connection, there prevails a scepticism towards technological elements that reduce this personal contact.

Reason 2: Requirement for robustness

Construction projects are usually high investments of capital and very risky. Due to the fierce bidding wars prices and deadlines are projected to a bare minimum. Consequently, the project has to work as planned. And in turn all parts of the complex that erects the building must work properly at every moment. It is in the nature of software that the reliability — especially in the beginning — cannot be guaranteed to be 100%. For most use cases in construction this is not acceptable.

Reason 3: Very fragmented market

In order to build a new structure, hundreds of companies have to come together. From architecture and engineering, to pluming and carpeting to name a few. Each can in turn employ subcontractors, leading to an unmanageable conglomerate of companies. To offer a software to one of those funnels is highly unattractive for the users point of view, since he has to manage all possible interfaces to his partners. To offer a software to all funnels on the other hand is almost impossible since all parties had to adopt. Hence, the companies usually stick to pen and paper or spreadsheets.

However, a momentum slowly builds up in the industry. With IT becoming more and more mature, the advantages for any business are just to big to neglect. Building Information Modelling (BIM) in particular becomes an interesting market that some successful companies could tap. Organizations like Building Radar or the BIMserver offer solutions that customers are satisfied with.