DISRUPTION FOR CONSTRUCTION? Part 1

Jim Fontaine, CEO, Tella Firma Foundations

There are big changes coming that will affect building and construction.  In part one of a two-part series, Jim Fontaine explains some of the trends and factors contributing to disruption in the industry.

Construction_Worker_TellaFirmaOver the past decade, technology has been credited – or blamed – with disrupting any number of industries. While some old-line industries have felt threatened by these new ways, the smart players recognize how to harness new uses of technology to improve processes or to gain a competitive advantage.

I believe we’re about to witness this exact type of change brought about by disruption to the construction industry. Let me explain.

One of the biggest challenges facing our industry today is the shortage of labor. According to some projections, as many as one million new construction workers will be needed over the next five years to meet the demand for building, particularly in housing. But unemployment is already near record lows, and demographic and immigration trends aren’t helping to produce an adequate supply of workers. The result? It will be difficult – if not impossible – to fill the need for construction over the long term.

Where Have All the Construction Workers Gone?

There are almost a third fewer construction workers today than there were 10 years ago. The potential for a stricter immigration policy could reduce the pool of labor even further. Foreign-born workers represent close to 30 percent of all construction employment, and the percentage of foreign-born laborers is even greater for specialists, such as roofers and plasterers, skills that are key for residential construction. Overall, the shortage of labor has already had a negative impact on the rate of new home construction, and is the number one challenge builders face when planning new residential housing projects.

What can this industry do to meet the demand we expect to see in the future? The answer has to come from technology.

In many segments of the economy – manufacturing is a notable example – technology has been used to automate some tasks and improve efficiency. But with few exceptions, we haven’t seen these types of improvements within the construction industry, and certainly not on the residential construction side. Although many people have speculated about what automation might bring, we’re still building homes and apartments pretty much the way we did 50 years ago.

The Technology Tipping Point

I believe the situation is about to change. We may finally be reaching the tipping point where technology can step in and help eliminate some of the challenges we face in construction. This tipping point will come when return-on-investment in technology becomes cost-competitive with existing methods of construction.

Look where venture capital funding is being directed in the construction industry, and you’ll see a clear focus toward technology solutions. Globally, financing of construction technology companies has experienced dramatic growth, registering a fivefold increase from 2010 to 2015. So far, much of this technological innovation has been directed toward the front end of the process – areas such as design, project management and logistics instead of the construction process itself. But there are other areas where technology is poised to make an impact during construction.

Next week:  Jim examines technology trends that will affect construction, including new developments in how foundations are built.