The Digital Construction Site: How Technology is Reshaping the Industry
The wave of digitization has left no industry untouched, and construction is no exception. Digital tools are reshaping the construction landscape from design to delivery, making processes more efficient, safer, and profitable. As construction companies continue to embrace digital solutions, the industry has begun its transformation from a complex, fragmented, and project-based sector to a more standardized, consolidated, and integrated one 1.
In the early 2010s, digitization in construction began with point solutions that served existing use cases or created new ones. These solutions addressed basic needs like improving design capabilities or digitizing paper-based information. However, as the decade progressed, the industry evolved and began expanding its product portfolios to create suites of integrated solutions 1.
The Shift Towards Platforms
Recent years have seen a shift in the industry toward platforms that provide an integrated suite of solutions. These platforms have begun to dominate the landscape, with about 20% of companies now offering solution suites addressing more than five use cases, compared with just 13% in 2017 1. Platforms are preferred for their ability to increase customer loyalty and profitability, as they become critical to day-to-day operations and increase the cost of switching to other solutions 1.
While platforms are growing in popularity, point solutions play a critical role in the industry. The ability of these solutions to provide specific functionality makes them attractive components for larger platforms or as standalone offerings in particular niches. This fragmentation of the construction technology market offers ample opportunity for integration plays that create new media or serve as component acquisitions for growing incumbent platforms 1.
The Emergence of New Use Cases
The digitization in construction industry has led to several use cases, including field productivity, engineering-design tools, planning and scheduling, and facility management and improvement-focused solutions. Interestingly, nearly 49% of companies addressing these use cases were involved in a transaction between 2014 and 2019, and roughly 14% of companies were founded in the past five years. Notably, use cases based on AI and advanced analytics experienced the highest proportionate share of activity 1.
Looking Ahead: The Future of Digitization in Construction
The trend toward consolidation and platform development is expected to continue. However, there remain opportunities for strategic and financial investors to create value either through distinctive point solutions or investments that help build or scale the construction tech platforms. The role of digitization in construction is, therefore, not just about improving current practices but also about creating new opportunities for growth and innovation in the industry 1.
Conclusion
In conclusion, the digitization of the construction industry has far-reaching implications, not just for construction firms and their customers but also for investors and technology providers. The ongoing shift towards digital platforms and the continued relevance of point solutions provide a complex but fertile ground for innovation and growth. As we move forward, it's clear that the digitization wave in construction is not just a passing trend, but a fundamental shift that will shape the future of the industry.
References:
"The next chapter in construction technology | McKinsey" www.mckinsey.com
