What a Survey of Technology Programs Tells Us About Construction
These are the results of a survey that examined technology programs at the Top 500 construction companies in the United States.
There’s hopefully something in here for building contractors looking to form a new technology group as well as startups looking to approach what can be an opaque and often unwieldy market.
As someone who’s helped form innovation groups at a number of ENR Top 25 companies, this survey was an informative look at just how far the construction world has come.
There’s many challenges and opportunities in an industry that’s ranked among the least digitized in the world. The encouraging news is that there’s been a lot of progress towards embracing emerging technologies in construction over the past several years.
This survey provides a baseline for where we are in 2020–2021. Everything from digital twins to augmented field inspections are at a point where they’re becoming integral to the building process. And we now see certain contractors being systematic about evaluating, selecting, and implementing new technologies.
But let’s not bury the lead here: a majority of construction companies still don’t have a well-defined technology program. There’s a lot of unclaimed ground left by mid-sized building contractors. And even among the Top 100 building contractors, there’s a significant percentage of them (around 30%) who haven’t yet formed a standalone technology department.
These technology departments are crucial to making technology work across the building process — they focus on embracing new technologies, they actively advocate digital in all phases of the project lifecycle, and they work with startups to foster a win-win relationship that can benefit not only the building contractor but also the wider construction technology ecosystem.
These technology departments will be instrumental in the next decade of construction.
A few intro notes.
Historically, technology programs in construction weren’t really a thing. New technology would be driven by a handful of entrenched vendors who sold into specific functions or parts of the business. For reasons unique to how construction traditionally got delivered, this arrangement didn’t serve interoperability or innovation very well at all.
The industry is also notorious for testing out emerging technologies only to have them die on the vine from disinterested colleagues or lack of organizational support. Finding your change agents to fend off these business-as-usual tendencies is crucial in this respect.
Fast forward to the modern day and it’s obvious that the incentive structures are changing: owners are asking for more efficient project delivery and the rapid rise in digital technologies is “eating the world”.
Not surprisingly, construction companies are starting to wake up and answer the call.
They’re hiring more people whose job it is to explore and implement emerging technologies beyond any one specific function. These employees are being brought into teams that actively improve the entire project lifecycle from preliminary design through handover, up and down the supply-chain.
All indications are that these standalone technology programs are finally growing in number and size.
Because of this newness, the presentation of technology programs is far from standardized. So for purposes of this survey, I started by measuring broad characteristics in a company’s posted job titles and I looked at the ways that Top 500 building contractors are implementing their programs.
In general, I grouped what the industry has only recently begun to generalize around into two categories:
- Virtual design & construction (VDC)
- Innovation and/or digital transformation
The former contains departments that have grown out of traditional BIM expertise and into more mature delivery functions. Examples here include positions like Virtual Preconstruction Manager or VDC Project Manager.
The latter is a broad category that includes everything from innovation specialists to in-house data analysts. Examples here include positions like Construction Technology Manager or Director of Innovation & New Technology.
As you’ll see, which company has which (and the majority that have neither) is a reflection of where they sit in the wider industry and what the market incentives are saying.
#1. The technology gap widens.
The survey shows that while a majority of construction companies don’t have defined technology programs, those that do are more likely to be among the Top 100 contractors.
This is partly an observation of the fact that top building contractors had the resources early and began investing in technology sooner than others — this was seen in the late aughts when early-BIM groups began making a presence and then into the late 2010s when broader innovation programs started to focus on transformation.
Most construction companies don’t have a well-defined technology department.
Among mid-sized building contractors, there are a number of standouts with defined (if not sizeable) programs.
Oftentimes, these departments are comprised of a virtual construction group. Other times, they’re a one or two person team devoted to identifying digital opportunities and helping integrate new solutions.
The composition of these groups is very much related to the sector that they work in (such as transportation, general building, oil & gas, etc.) In nearly every case, they have defined positions in the organizational chart with support at a programmatic level to work solely on new technology adoption.
#2. Technology departments don’t hurt the bottom line.
The next couple of takeaways have to do with the performance and nature of building contractors with technology programs.
Among top contractors, contracting revenue increased an average of 8.2% from 2018 to 2019. However, the survey data shows that it was nearly 2% higher for those with a dedicated technology department — each circle on this infographic represents one of those contractors.
Revenue data shows that construction companies with technology departments have better year-over-year revenue compared to those that don’t.
In an industry with notoriously slim margins, some building contractors question whether they should spend on internal technology programs in an effort to save costs. They assume that the traditional approach to letting operational teams or specific functions handle these new technologies will work out in the end (it doesn’t).
But while this data doesn’t necessarily show that bets are paying off, it does show that companies investing in standalone technology functions are performing just fine. The bottom line is that dedicated departments don’t need to break the bank.
#3. Innovative delivery methods.
Another insight was to look at the nature of work for building contractors with technology or innovation departments.
The design-bid-build method of project delivery continues to be a majority of construction work (around 60% for Top 400 contractors). This is the traditional approach to building where an owner employs an independent designer and then puts the design out to bid to multiple builders.
However, this is being rapidly replaced by more integrated project delivery methods where the building contractor has a stake in the design by either consulting during the design process or owning the design entirely.
Top building contractors that perform a lot of construction management at-risk work are 1.5X more likely to have a dedicated technology department.
These alternative procurements are increasingly the norm for large and complex projects, and building contractors with dedicated technology departments appear to be winning an outsized share of this work.
The contractors that are competitive with innovative project deliveries are also ones that are more focused on technologies like VDC and who can deliver projects in a more integrated manner. They also tend to be concentrated in specific sectors where these type of alternative procurements are already more common.
In a certain sense, this isn’t surprising — the promise of much virtual design & construction is its ability to drive efficiencies up and down the construction supply-chain. Having a single owner of that process makes these technologies that much more powerful.
The above are just a few insights into the nature of how technology programs are becoming the norm in construction. It also provides additional insights into the ways that the broader industry is changing.
The motivation for this survey was driven by hope — the industry is getting a much better understanding of what works, what doesn’t, and what else. These technology departments are a source of institutional knowledge and they help companies “do” innovation when implemented well.
This survey also provides an early roadmap for construction leadership looking to start the discovery process for themselves — if you’re hesitant, know that others have jumped in the water and that the water’s fine. Also know that there are resources available to get you started.
And if you’re a startup, this shows that companies combining data from VDC with innovations that address the entire bid-to-handover lifecycle will be positioned to dominate the market in years to come — and as a welcomed tailwind, owners appear to be increasingly encouraging this trend as well.
But ultimately, when it comes to making life easier for the designers and builders on the frontlines of construction, the industry is making good progress.
Nate Fuller is Managing Director of Placer Construction Solutions, advising leadership teams to transform their organizations in ways that improve performance and agility at the field level.
He provides construction companies with a field assessment that delivers transformative information about their field operations and is proven to accelerate innovation & technology adoption for Top ENR contractors.
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